The gap between what the Australian government wants and what investors want is only widening. While the Australian government can do little to improve the fundamental attractiveness of tricky markets in Southeast Asia, it can do plenty to help give Australian businesses the best chance to invest there.
Government plays an important countercyclical role – to step up with funding and practical support to keep economic wheels turning in times when private sector investment is languishing. One recommendation, buried in the 2040 strategy against which there has been no discernible (public) progress, is increasing government support for early-stage project preparation and advisory work, to help grow the pipeline of bankable projects in the region. Big players like Macquarie have advised (Opens in new window) this is where government assistance would be most productively directed.
Investor caution combined with local skill gaps can mean credible projects miss out on investment simply because they aren’t strong on paper. But more funding for technical upskilling and advisory support to help demonstrate project feasibility can help overcome this barrier – at a minimum, this could be done by expanding existing Department of Foreign Affairs and Trade programs such as Partnerships for Infrastructure (Opens in new window) (P4I), and by ensuring others like KINETIK, a $600 million program to support sustainable infrastructure investment in Indonesia, are being put to direct use in facilitating new investment.
Another potentially fruitful avenue would be for government to extend grant funding to suitable project preparation and advisory firms, to cover their up-front costs for feasibility studies (they would then likely take a clip of successful investments in the project down the track).
Both paths mean more good projects scoped, their investment cases developed at low cost, and their value communicated clearly to investors.
The benefits to government would be multiple – the opportunity to invest first if needed, de-risking the project, such as through EFA’s Southeast Asia Infrastructure Financing Facility, and attracting other investors. It could then pat itself on the back for helping bring bankable new opportunities to market. While this mechanism is likely to yield relatively smaller projects, as the Indonesians say, “sedikit sedikit lama-lama menjadi bukit” – little efforts over time can become a big hill.
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