An OECD report released this spring warns that rapidly growing cities across Southeast Asia face a funding gap for green, resilient and inclusive urban development unless governments diversify financing instruments, strengthen subnational creditworthiness and crowd in private investment through targeted risk-sharing tools and project pipelines. The report, Financing Sustainable Cities in Southeast Asia: Diversifying Instruments and Leveraging Private Investment, focuses on the ASEAN‑5 — Indonesia, Malaysia, the Philippines, Thailand and Viet Nam — and argues that existing public budgets and traditional bank lending will not be enough to deliver mass transit, flood defences, clean water, affordable housing and low‑carbon energy at the speed cities need. The analysis, issued by the OECD and presented at regional events in April–May 2025, lays out practical steps for national and local policymakers to mobilise a broader mix of instruments — municipal bonds, green and sustainability bonds, blended finance facilities, public‑private partnerships with stronger safeguards, and value‑capture tools — while improving governance and transparency to make urban projects bankable for institutional investors (OECD report).
The issue matters to Thai readers because Thailand’s own urban centres — Bangkok and secondary cities across the Central Plains, North and Northeast — confront mounting climate risks, aging and inadequate infrastructure, and growing social needs at a time when central government resources are constrained. Bangkok in particular is highly vulnerable to floods, sea‑level rise and subsidence, highlighting the urgency of financing adaptation and resilient infrastructure now so damages and social costs are not locked in for decades (World Bank country climate profile for Thailand). The OECD report puts the fiscal and institutional reform agenda for city finance into sharper relief for Thai policymakers, city administrators, investors and civil society.
The OECD’s core findings echo recurring themes in international sustainable‑finance research. First, public budgets and grants — while essential — are insufficient. The report recommends diversifying instruments so cities can access long‑term finance matched to the lifetime of infrastructure assets. That includes developing municipal bond markets and sustainability‑linked or labelled instruments where feasible, but also creating blended finance facilities that use concessional or public money to de‑risk private participation and mobilise commercial capital. These recommendations are consistent with broader OECD work on mobilising sustainable finance for regions and cities and previous policy toolkits that stress the need for a stable pipeline, clear project standards and credit enhancements to reduce perceived risks for institutional investors (OECD: Mobilising sustainable finance for regions and cities; G20‑OECD policy toolkit).
Second, the report flags capacity gaps at the local level. Many municipal governments in the ASEAN‑5 lack standardised accounting systems, reliable revenue streams, credit records and project preparation units able to package bankable investments. In Thailand, subnational finance still depends heavily on central transfers, limiting local authorities’ fiscal autonomy and borrowing capacity; international assessments have repeatedly noted the opportunity to strengthen local public‑finance management and municipal creditworthiness to open access to capital markets (UNDP Development Finance Assessment for Thailand; City Creditworthiness Initiative materials on Thailand). The OECD urges national governments to standardise financial reporting, provide transparent debt rules and, where necessary, offer credit guarantees or pooled municipal finance platforms to reduce transaction costs for smaller cities (City Creditworthiness Initiative — Thailand brief).
Third, the report emphasises the central role of project preparation. Cities struggle to attract investors because many projects are too small, lack revenue models, or are not prepared to international standards. Creating dedicated project‑preparation facilities — staffed with technical, financial and environmental expertise — is vital to aggregate projects, standardise contracts, and reduce due‑diligence costs for investors. This approach mirrors the recommendations in the World Bank and ADB literature on supporting municipal green bonds and scaling up climate finance across Southeast Asia (World Bank: Unleashing Sustainable Finance in Southeast Asia; ADB: Accelerating Green Bonds for Municipalities in Southeast Asia).
Key facts and developments from the OECD report and related work show both challenges and openings. Urbanisation across ASEAN is ongoing and rapid: Indonesia’s urban share has crossed the majority mark in recent years, and secondary cities across the region are expanding fast, creating demand for housing, transport and services that must be financed over decades (World Bank urban population data for Indonesia). At the same time, sustainable‑debt markets in Southeast Asia remain relatively shallow: while sustainable bond issuance has grown significantly, outstanding volumes and the diversity of instruments are still small compared with advanced markets, limiting the ability to rotate capital into urban resilience and low‑carbon infrastructure (World Bank SFSEA report; Climate Bonds Initiative — Global State of the Market 2025). Thailand has taken steps, including sovereign sustainability‑linked issuance and increasing GSS (green, social, sustainability) activity, but municipal green bonds are still rare and local governments often lack the prerequisites to issue directly into capital markets (ThaiBMA bond market highlights 2024).
Regional development banks and donor‑supported technical assistance can bridge early gaps. Blended finance mechanisms, pooled municipal finance platforms and regional project‑preparation facilities have been shown to mobilise follow‑on finance where they lower first‑loss risks and simplify investor entry. The ADB and World Bank have piloted such instruments and published guidance on structuring green bond programmes and municipal finance vehicles. The OECD report builds on these lessons, arguing for a regionally coordinated push to scale instruments that work (ADB green bonds for municipalities; OECD report PDF listing recommendations).
Expert perspectives in the report and surrounding literature stress pragmatism: institutional investors need clear, investable pipelines; public actors must reduce policy and regulatory uncertainty; and social safeguards must be embedded to ensure projects are inclusive. International organisations argue that mobilising private capital does not absolve governments of responsibility — rather, it requires better governance, transparent procurement, and accountability to avoid fiscal risks from poorly structured PPPs. The OECD’s wider work on mobilising finance for regions and cities reiterates these themes and provides a practical framework for national governments to enable subnational access to markets while maintaining macro‑fiscal discipline (OECD — Mobilising sustainable finance for regions and cities).
For Thailand specifically, the report’s implications are varied and actionable. Bangkok and provincial municipalities will need to accelerate reforms to public finance management, improve revenue mobilisation (for example through property tax reform and better collection), and strengthen accounting and debt recording to meet investor due diligence standards. Thailand’s central government can support city finance by enabling pooled issuance vehicles, credit enhancements for small municipalities, and project preparation funding targeted at resilient infrastructure and affordable housing. Domestic capital markets are large enough to absorb more municipal debt if instruments are standardised and risk is properly priced; the Thai bond market is sizable and active, and sovereign sustainability issuance in 2024 indicates growing investor appetite for labelled instruments that can be linked to urban projects (ThaiBMA 2024 bond market summary; Climate Bonds Initiative global state of market).
Thailand’s cultural and institutional context shapes how reforms can succeed. Thai policymakers operate within a centrally coordinated administrative culture with strong expectations about national control over major investments; decentralisation has proceeded unevenly. Any move to expand local borrowing and private participation must be accompanied by capacity building in provincial administrations and channels that respect local priorities and social cohesion. Thai civil society and community networks have significant stake in urban outcomes — from Bangkok’s canal communities to provincial market towns — and inclusive project design will be crucial to maintaining social licence for major infrastructure works. Historical experiences with large projects show that poorly consulted or unfairly compensated communities can lead to long delays and reputational risk, undermining investor confidence and increasing costs.
Looking ahead, several potential developments could reshape how Southeast Asian cities, including Thailand’s, finance sustainable development. First, deeper regional cooperation or pooled facilities — perhaps supported by ADB, World Bank and bilateral partners — could standardise project preparation and offer credit enhancements to help mid‑sized cities access capital markets. Second, domestic institutional investors (pension funds, insurers) will increasingly seek long‑dated, inflation‑linked assets to match liabilities, creating demand for well‑structured municipal green bonds if legal and disclosure frameworks are improved. Third, digital platforms and standardised contracts may reduce transaction costs and lower entry barriers for private investors to fund many small‑scale urban projects rather than few mega‑projects. Finally, the climate agenda will push adaptation into urgent status: as floods, heat and drought affect Thai cities, the cost of inaction will shift political calculus in favour of financing resilience now rather than paying higher recovery bills later (World Bank Thailand climate vulnerability).
For Thai readers — policymakers, municipal officials, investors, and citizens — the OECD report offers several practical, evidence‑based recommendations. National policymakers should adopt clear frameworks that allow municipal borrowing under predictable rules, support pooled or tiered credit enhancement instruments for small municipalities, and fund national project‑preparation facilities that bundle bankable projects. Municipal authorities should prioritise improving financial reporting, build project pipelines with defined revenue models (tariffs, dedicated taxes, PPP structures), and consider phased approaches to issuing green or sustainability bonds once domestic accounting and procurement standards are in place. Domestic investors and pension funds should engage with city governments and development banks to define risk‑sharing instruments tailored to local contexts. Civil society and local communities should insist on participatory planning and transparent contracting to ensure that private finance supports inclusive outcomes rather than displacing low‑income residents. Technical guidance from multilaterals — including the OECD, World Bank and ADB — and initiatives like the City Creditworthiness Initiative provide toolkits and diagnostic support that Thai cities can draw on (OECD financing report page; ADB green bonds guidance; City Creditworthiness Initiative).
In short, the OECD’s analysis is a call to action: Southeast Asian cities are at a crossroads where decisions made now on finance architecture, institutional reform and investor engagement will determine whether urbanisation becomes a platform for green growth and resilience or a source of mounting fiscal and social fragility. For Thailand, the option to act is tangible — active domestic capital markets, development bank partners and an engaged civic sector form the ingredients needed to pivot from a reliance on central transfers to a diversified urban‑finance model that mobilises private capital for public benefit. The challenge is sequencing reforms and building trust: transparent accounting, credible project pipelines, and safeguards to protect low‑income communities will be essential to converting OECD recommendations into real investments in resilient, liveable Thai cities.
For readers who want to follow up: the OECD report and its companion materials are available online and include country‑level diagnostics and policy toolkits; the World Bank and ADB have detailed guidance on municipal green bonds and blended finance tools; and local reports on Thailand’s subnational finance and climate vulnerability provide context for national reform. Practical next steps for Thai stakeholders are to (1) assess municipal creditworthiness gaps and prepare a phased municipal finance strategy; (2) fund and staff project‑preparation units that can produce bankable, climate‑resilient projects; (3) pilot pooled financing or credit enhancement vehicles for small cities; and (4) engage domestic institutional investors in dialogue about long‑term municipal instruments. The choices Thai cities make over the next five to ten years will shape the nation’s resilience and prosperity for decades to come.
Sources cited in this report include the OECD’s Financing Sustainable Cities in Southeast Asia report and related OECD publications (OECD — Financing Sustainable Cities in Southeast Asia; OECD — Mobilising sustainable finance for regions and cities), the World Bank’s regional sustainable‑finance diagnostics (World Bank — Unleashing Sustainable Finance in Southeast Asia), ADB guidance on municipal green bonds (ADB — Accelerating Green Bonds for Municipalities in Southeast Asia), analysis of Thailand’s bond markets (ThaiBMA — 2024 Bond Market Highlights), Climate Bonds Initiative market data (Climate Bonds Initiative — Global State of the Market 2025), and country‑level studies on climate vulnerability and subnational finance in Thailand (World Bank — Thailand country climate vulnerability; UNDP — Development Finance Assessment for Thailand; City Creditworthiness Initiative — Thailand brief).