ADB, IDB to set up $500 mln Islamic infrastructure fund

KUALA LUMPUR, June 2 (Reuters) - Asian Development Bank and the Islamic Development Bank will set up a $500 million sharia fund to help plug a gap in infrastructure needs in Asian economies, ADB said on Tuesday.

The fund, which would be Asia's first major multi-country sharia infrastructure fund, would invest in the 12 countries that are borrowing members of both banks including Afghanistan, Bangladesh, Indonesia, Kazakhstan, Malaysia, Pakistan and Uzbekistan.

It would also be ADB's first Islamic fund, the Manila-based lender said.

"Investors in the Middle East are looking for Islamically structured investment opportunities," said Johanna Klein, investment specialist at ADB's private sector capital markets division.

"In order to unlock some of that capital in the Gulf region, we needed to offer them a vehicle that would be an attractive investment."

ADB estimated that sovereign wealth funds in Gulf Cooperation Council countries totaled $1.2 trillion at end-2008.

"In Indonesia, only 39 percent of urban dwellers have access to piped water, only 9.5 percent of roads in Afghanistan are paved and only 42 percent of Bangladesh's population has access to electricity," said Robert van Zwieten, Director of ADB's Capital Markets and Financial Sectors Division.

"Without added investment to change that, economic growth and poverty reduction will be held back." ADB estimates infrastructure needs in Asia to be around $250 billion a year for the next decade.

Klein said the fund would be launched in a month.

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(Reporting by Liau Y-Sing; Editing by Kim Coghill)