In its just-published review of the Asia-Pacific infrastructure sector, Fitch Ratings says that 2004 was a unique year when many countries in the region were able to successfully access their domestic debt markets for infrastructure needs, and also one in which many new financing solutions emerged or, in the case of Australia, matured into a sustainable supply of capital for infrastructure projects.

This broadening of the infrastructure finance tool box in 2004, says the report, is illustrative, allowing countries throughout the region to compare financing solutions, and find new ways to engage private domestic capital in order to better meet their substantial infrastructure investment needs.

The scope of infrastructure requirements throughout the region is significant, with many of these countries facing new infrastructure investment needs in order to keep up with population growth, or sustain economic development. Other countries need to reinvest in infrastructure in order to remain competitive, and in the case of Japan to find ways to successfully restructure and retire a sizable outstanding public sector debt load.

According to William Streeter, lead author of the report, and Fitch's managing director of International Public Finance, Japan & Asia-Pacific, "There is now steady momentum to decentralise the provision of public services and the financing of infrastructure requirements throughout the Asia-Pacific region. States, municipalities, public sector enterprises and private concessions are emerging as debt issuers as institutional investors struggle to understand the debt repayment capacity of their revenue streams."

These are still the early days of private sector financing for public sector infrastructure, the report notes, since many of these innovations have yet to be institutionalised, and even more tools will be needed in order to meet the region's needs.

For Australia, 2004 demonstrated the maturity of its concession-based financing and the acceptance of its dedicated infrastructure investment funds. Its success is based upon the economic viability of the projects that were financed, Australia's favourable macroeconomic and legal environment for project concessions, as well as the merging of public and private sector interests to develop this market.

Hong Kong demonstrated how an ABS (asset backed securitisation) style transaction was particularly suited to the established revenue stream of its toll bridges and tunnels, and how assigning rights to that revenue stream was a viable means to raise capital for other government requirements. "This was the first real transfer of the US revenue bond finance model to Asia," according to William Streeter.

Best financial management practices are beginning to emerge in Japan and Korea that demonstrate to the region how a public entity or publicly regulated corporation can best prepare its way toward the financial markets. Old stereotypes within the region about what constitutes sovereign risk and how to value government support for government owned corporations are slowly giving way to an investor driven requirement for debt mechanics that emphasise the full-and-timely payment of principal and interest. The Maharashtra debt issues last year are perhaps the most sophisticated examples of this, says the study.

Finally, the quest to finance infrastructure improvements without incurring direct government debt, or even government financial support, took its next evolutionary step in New Zealand for parking facilities; an asset class that is difficult to finance anywhere.