Contemporary Modalities

Transcription

1 Contemporary Modalities Prabodh Saxena

2 1. Soft side of Bilateral assistance The Lines of Credit (LOCs) 2. A Backgrounder 3. Changing Profile 4. Africa All Over 5. Where, how and what we lack (only at institutional /policy level) 6. Conclusion

3 The Backgrounder G to G LOCs ( ) 83 Lines of USD million (31 L0Cs in dollars) and Rs. 5,862.1 million (52 LOCs in Indian Rupees) to 23 countries. Budget Speech of International Development Initiative (IDI). Rechristened as Indian Development and Economic Assistance Scheme (IDEAS) in July, 2005 LOCs now through Exim Bank in USD GOI obligations Interest Equalization Support (IES), Counter Guarantee by GOI and Sovereign Guarantee by Borrowing Government.

4 Why IDEAS boost to India s export, especially of industrial goods open new markets for Indian companies establish India s reputation as an exporter of high quality goods and services secure India s political influence and to gain goodwill Of late, India s requirements of natural resources, food and energy security, etc. Difference of opinion between MEA and MOF LOC a financial product or a diplomatic tool

5 The Guidelines Administered under Guidelines issued by DEA in 2004, Revised Guidelines in Separate Operational Guidelines and Bidding and Procurement Procedure. Heavily Indebted Poor Countries (HIPC), Low Income Countries(LIC)/Least Developed Countries (LDC) and Middle Income Countries (MIC). In accordance with World Bank Classification of Economies (July, 2009). LDC Countries as per UN Office of the High Representative For the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States. (UN-OHRLLS). Project selection priorities -economic and infrastructural projects, for specific sectors to create bridgeheads for bilateral trade, export of goods and services required in the markets of the borrowing country, in which India does not have a presence and for setting up adequate network of servicing facilities by exporters.

6 Terms and Conditions of LOCs HIPC LIC/ LDC MIC Rate of Interest (%) LIBOR Maturity (yrs.) Moratorium (yrs.) Grant Element (%) To Exim Bank Commitment fee 0.50 % per annum on undisbursed amount for all countries, and One time Management Fee of 0.50 % for Non HIPC countries to Exim Bank

7 The Tied Part Goods and services for minimum 75% value of the contracts must be sourced from India. Suitable relaxation not exceeding 10% may be considered on a case to case basis for exceptional reasons, especially in civil construction projects.

8 Operating the LOC Borrowing country has total independence to identify and choose the project. as per its local laws and procurement policies provided that such selection is fair and transparent and is not in contravention of the Guidelines. Implementation with Exim Bank - through the stages of setting up of LOC, loan documentation, contract approval, disbursements, project monitoring and project completion and to ensure that the disbursements are according to the parameters defined in the project report.

9 LOCs at a Glance (31th March,2014) *Figures in parenthesis are for 31 st Dec,2014 NO. OF LOC COUNTRIES COVERED LOC AMOUNT in USD billion CONTRACTS APPROVED in USD billion AMOUNT DISBURSED in USD billion Signed 176(188) (11.7) 6.2(6.65) 4.8(5.28) Pipeline 19(25) 4 (2) (additional) 10 (17) (existing) 0.8(1.5) Total 195(213) 66(64) 11(13.23)

10 LOCs The Bird s Eye View

11 The Expanding Profile Over the last couple of years, LOC Portfolio has grown exponentially in all directions in term of sheer amount, as a percentage of the entire bilateral assistance basket share in the Balance Sheet of Exim Bank. More than 99% of Exim Bank LOC portfolio

12 The Loan Portfolio Growth Over Years 4, , , , , , , , , , , , , , ,

13 LOC Portfolio as Percentage of Exim Bank Loan Portfolio 100% 90% 80% 70% 60% 50% 40% 30% 14% 15% 22% 25% 24% 28% 31% 39% 20% 10% 0%

14 Sector-Wise Distribution of LOCs as of 31 March 2014 Others, 9% Petroleum Products, 4% Power, 23% Irrigation, 6% Engineering, 8% Construction, 4% Cement Plant, 1% Railways, 20% Agriculture, 4% Other Infrastructure, 2% Technology and Communication, 2% Sugar Plant, 9% Rural Electrification, 3% Roads & Transport, 5%

15 Percentage of LOCs to different categories (numbers and amount) Number Amount HIPC LIC&LDC MIC N.C

16 Top 10 Recipient of LOCs as of 31 March Approvals by GOI Amount (USD Million) Outstanding Amount (USD Million) Sri Lanka Ethiopia Bangladesh Sudan Mozambiqu e Myanmar Ecowas Bank Nepal D.R. Congo Tanzania

17 Africa Portfolio Last 6 years, Africa has collected 74.38% of total LOCs cornering 60.67% of the credit amount Addis Ababa announcement- 70.5% of 8500 USD million (6000 USD million). In the FY , almost the entire allocation went to Africa.

18 Region-Wise Breakup of LOCs-Number and Value Region No. of LOCs Credit Amount (USD Million) Africa 127 6,270 Asia 33 3,663 Latin America and the Caribbean Commonwealth of Independent States 1 56 Oceania 1 50 TOTAL ,209

19 Allocation of LOC Value Across Regions Asia, 47% Oceania, 0% LAC, 2% CIS, 1% Africa, 61%

20 LOCs Distribution within the Continent Central, 7% North, 12% West, 30% East, 42% South, 5%

21 Share of Africa in Total LOCs LOCs Signed Financial Year Total Africa Percentage Total Africa Percentage No. No. USD Mn USD Mn % % % % % 2, % % 1, % % % % 1, , % Total : % 7, , %

22 Total LOCs since : Share of Africa (in USD million) , , Total Africa FY FY FY FY FY FY

23 Total LOCs since : Share of Africa in numbers Total Africa FY FY FY FY FY FY

24 Why are LOCs Constrained? Changing profile of LOCs- emphasis on capacity creation and knowledge Successful south-south cooperation tool, served Indian interest well By and large Effective and Successful-Plentiful Success Stories Structural/ Policy Issues Implementation Blues( Pre selection to post evaluation) Guidelines- revision called for

25 The Lingering Debate Irresistible comparison with Chinese Lines and clamor for relaxations threatening predictability and uniformity USP of Indian Projects Lack of a Professional Agency India Development Cooperation Agency (2007), Indian Agency for Partnership in Development ( 2011)-DPA- January 1, 2012 Honeymoon period coming to an end

26 The Mounting Overdues Financial Year Principal in USD million Interest in USD million Total in USD million

27 The Implementation Blues Much Reputed Companies not very enthused Lacking professionalism Standing Committee of 2011 Calling for more professionalism from pre-approval to post evaluation

28 The ill Prepared Projects Lack of project development capabities -Cement Plant at CAR Low quality report based on minimal data and investigations designed to support the desired outcome or outdated report is rehashed. Much time is wasted in reconciling the ground reality with the DPR and for revalidating approvals. Lack of Integrity 1. Solution- funding DPRs as part of LOC cost or grant Exim Bank initiative Tool to facilitate, not obstruct

29 Selection Diligence 2. Selection Country system for procurement- Touch with Caution Credible DPR should be a non-negotiable must PG/ withholding of 5% of Invoice/ Retention money Less liberal Advance payments

30 Improvement needed 3. Reducing the Time lag and preventing information pilferage 4. PMC before the bidding starts 5. TA Transferring AAA and venturing into legal, policy, management, governance and regulatory space

31 6. Monitoring In Host Country In India Inter- Ministerial Visits -Tanzania, Mozambique, Sudan, CAR,DRC and Gabon Negotiations/Consultations

32 Ensuring Sustainability 7. Post Evaluation- All major projects 8. Sustainability is a issue clamor for soft projects ( 6 LOCs of 106 million) LOC Agreement now have details of sustainability and operational viability of the project during their life cycle Transfer Organizational capacity Adequate budgetary support Fully Funded High Visibility Projects 9. TAs to harness AAA advantage

33 Supply LOCs Easiest but are they so? Supply of Buses to DRC and CAR Cement Plant at DRC Tractors in Tanzania Traders are doing maximum harm, manufactures only Only complete package with forward and backward linkages should be encouraged

34 Percentage of LOCs to different categories (numbers and amount) Number Amount HIPC LIC&LDC MIC N.C

35 Guiding the Guidelines 1. HIPC paying more, Graduation unfair 2. Weak country procurement systems must be intrusively monitored, threshold recommended 3. Defining Indian content and relaxing the threshold 4. Grant element to be calculated in accordance with prevailing interest rates -need for immediate revision as it is hurting badly the poor clients 5. Statutory oversight by Indian Embassies 6. Mandatory vetting of DPRs

36 Stock Taking India soon to be net exporter of development assistance LOCs have given the contextual background to build relationships with key resource rich countries Hard to discern the directly attributable influence of the LOCs on building / deepening partnerships, it has definitely generated vibrancy and feel good factor Indian LOCs are demand driven, enable inclusive growth, employment generation and creation of new markets for goods and services. Provider of high technology goods and knowledge

37 The Corporate Side LOCs have provided Indian companies access to new countries and markets India has come to be recognized as a producer of high technology goods Unlike China, private sector has benefitted more. Indian companies have demonstrated a plethora of project execution capabilities in a variety of sectors across the globe without undertaking the country risk attached to such countries. The ultimate success, on the commercial side, is obviously the incremental business secured on commercial terms by Indian companies after initial market entry through LOCs. Hopefully it will be researched sooner than later.

38 Suggesting the Course Needed: Professional, transparent and appropriate platform ranging from pre-approval to post-evaluation. Real success of the Scheme will be the graduation when we remove the tied component of the aid.

39 A product which emerges from the teeth of fierce competition will certainly be the most effective and visible envoy of the country Thanks