The Hungarian Water Diplomacy and OECD Tied Aid Credit program

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1 The Hungarian Water Diplomacy and OECD Tied Aid Credit program Dr Istvan GRAFJODI Commercial Counsellor

Hungary and water management 93 000 km² 9.

2 Hungary and water management km² 9.3 million inhabitants Located in the Danube river basin 95% of our water flows into the country from abroad. Outstanding water infrastructure system Proportion of wastewater treated 97.4% Degree of IWRM implementation 80% Water diplomacy is a priority for the Ministry of Foreign Affairs and Trade of Hungary

services digital water management (IT services) operation-related services mobile water purification systems Dozens of internationally

3 The Hungarian water sector Covers the whole of the water management field drinking water management wastewater management urban water management and smart city planning metering technologies pipeline management (construction, cleaning) water pump management consultancy services digital water management (IT services) operation-related services mobile water purification systems Dozens of internationally competitive companies with international references Two larger "umbrella organisations Hungarian Water Utility Association Hungarian Water Cluster

4 Global water diplomacy initiatives 2nd Budapest Water Summit (2013 and 2016) A most successful international conference with more than 2,200 participants from 105 countries Pakistan Mr. Muzammil Hussain (Chairman WAPDA) Mr. Zohair Ashir and Ms. Simi Kamal (Hisaar Foundation) President of Hungary János Áder UN President of the General Assembly requested Hungary, together with Tajikistan, to co-moderate the UN Water Dialogues in 2017 Hungary is a donor member of the 2030 Water Resources Group (IFC)

19-Sep- 2017 The main purpose of the Arrangement on Officially Supported Export

5 The Organisation for Economic Co-operation and Development (OECD) Tied Aid Legal base: ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDIT Approved on 19-Sep The main purpose of the Arrangement on Officially Supported Export Credit is providing a framework for the orderly use of officially supported export credits.

6 Tied Aid finance Loans, grants, mixed financing packages tied to the procurement of goods from the donor country with preferential conditions: lower interest, grant element, longer repayment term + grace period Eligibility rules: concessionality level country eligibility project eligibility

Minimum concessionality level Exemptions from country or project eligibility for

7 OECD Tied Aid Main elements of the Arrangement General principles Forms of tied aid Associated financing Country eligibility for tied aid Project eligibility Minimum concessionality level Exemptions from country or project eligibility for tied aid Calculation of concessionality level of tied aid Validity period for tied aid

8 OECD Country Classification 2017 as of 19 July 2017

9 Tied Aid Credit - basic aspects At the same time, it is recognized that each project should be considered on a case-by-case basis in relation to its particular circumstances. The project should fit into the recipient's economic and development plans, that the project is of priority for the recipient and that it is an appropriate use of scarce donor resources. The tied aid loan program provides financing for the implementation of state investments, where the loan debtor is the government agency embodying the beneficiary country s sovereign risk

10 Tied Aid Credit Fund - Hungary 100% of the foreign trade contract/main contractor s agreement can be financed, with 100% MEHIB (Hungarian Export Credit Insurance Plc.) insurance. The required Hungarian content is a minimum of 50% of the foreign trade contract/main contractor s agreement. In Hungary, tied aid credit programs are run by the Ministry of Foreign Affairs and Trade. The Hungarian Export-Import Bank Plc. (Eximbank) is the bank that arranges the provision of the tied aid loan on the basis of the intergovernmental agreement. COUNTRY PROJECT M EUR OECD COUNTRY CLASSIFICATION Minimum Concessionality OECD COUNTRY Risk Classificatio ns Srí Lanka Kalatuwawa Waste water treatment 16,7 35% 6 Srí Lanka Labugama Waste water treatment 17,3 35% 6 Vietnam Quang binh Waste water treatment 10 35% 5 Indonézia Potable water project 50 35% 3

Country risk - credit line Pakistan EXIMBANK: 24.61m which is in 100% available. MEHIB (Hungarian export credit insurance): 76.65 m which is in 100% available.

11 Country risk - credit line Pakistan EXIMBANK: 24.61m which is in 100% available. MEHIB (Hungarian export credit insurance): m which is in 100% available. The MEHIB is the insurer, providing cover (of 100%, with no self-retention) for the (political and commercial) risks of default by the loan debtor. Limits are calculated for each country reflecting the sovereign risk amount.

12 Procedural steps of the tied aid credit projects (1.) Official request to grant tied aid credit. Indicates some preliminary basic information (name and a short description of the project, the amount of the requested credit Credited country Donor country Tied Aid Credit Committee introduces its official proposal to the Government to initiate negotiations with the credit Expert and political level negotiations the amount financial conditions, concessionality level credit, interest rate Credited country

13 Procedural steps of the tied aid credit projects (2.) Finalization and signing of the intergovernmental agreement, (construction contract, financial contract). Credited country Donor &Credited country Both Parties have to fulfill its domestic legal requirements to enter the agreement into force. preparation of a feasibility study disclose the technical factors selection process of the planning and construction tender of the project. Credited country

14 Procedural steps of the tied aid credit projects (3.) execution of the tendering process select the constructing companies (local & from donor country) Credited country Credited country The government negotiates and signs the construction contract with the selected companies(local & from donor country) The government of the credited country and the Eximbank of Donor negotiate and sign the financial contract on the tied aid credit. Donor & Credited country

15 Thank you for your kind attention! Dr Istvan GRAFJODI Commercial Counsellor

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