International workshop on PublicPrivate Dialogue Paris February 1
International workshop on Public-Private Dialogue Paris, February 1 & 2, 2006 _________ « What future for Public-Private Dialogue » Luc Rigouzzo, Director Financial and Private Sector Department
The way forward n Funding n Sub-National Programs n Integration to specific country contexte n Cluster / Product markets n Post-conflict
The “Limitant Factor” Theory 1 Regulatory policies 2 Macroeconomic conditions 3 Risk mitigation & Financial instruments 4 Taxation … We can try to improve 1 & 2 (but democracy – ex Tchad) n But more modestly, as a bilateral agency, our role could simple be to foster 3 with new stakeholders + with feed back on 1 + 2 n
A new paradigm of Aid Competition + New Stakeholders + More risk AFD=1% Goals • N/S poverty gap & Inequalities - MDG • Development through Growth • Global Public Goods Stakeholders Multiple Stakeholders (public & private) Tools Multiple Financing Sources NGOs (8) ODA (58) Trade Balance (150) FDI (148) Migrants Transfers (100) Internal Savings (? ) Bonds 11 2002, Rogerson 2004, Global Development Finance 2003 (World Bank), in $Bn
A new paradigm of Aid : New Stakeholders Borrowers / Beneficiaries Sovereign Objectives Country program Investment climate Governance • Overal economic efficiency Non Sovereign, PPPs, Big Corporates, • Cost of goods, competitivity Civil society • Financial sector, efficiency Classical corporates • Growth • Employment • MDGs Agencies Multilaterals Bilaterals EDFIs bi-multis
Zooming in two Emerging Stakeholders essential for PPD n Local Governments: soon to be the first line of development Ø Growing mandate Ø Huge financial gap Ø Important institutional weakness n Businesses: a new take at them Ø As agents of growth Ø As agents of public policy Ø As issue of public policy
A new paradygm of Aid Risk sharing, tailored concessionality & financial engineering Widen Financing offer n LT loans (incl. PTC) n More important volumes (cf. Proparco) n Equity n Locale currency Access to LT fundings Develop guarantees and covering risks tools Share / Cover risks ARIZ, PRG, bond issuance guarantee EDFI Partnerships / cofinancing AFD’s partners needs Adapted solutions (incl. ODA =Additional subsidies ) Financial Engineering & Concessionality to the service of dévelopment - Environmental outputs participating loans - Commodity based participating loans - Tailored concessionality - Advisory, mandates
Examples of private sector contributions to public policy
EDULOAN (South Africa) Microfinance for the training of disadvantaged population groups n Eduloan, a private company, assists more than 142 000 poor students annually, giving them access to education and training n AFD project : a guarantee on the loan (granted in Rands) by a South African bank to Eduloan
Housing sector in South Africa Rand Merchant Bank Low/Middle Income Housing Programme Promotion through Local Banking System n Integration of low income household to the program (revenue below 3000 Rands) n Training of low income borrowers n Loan of 40 million euros to a bank (RMB) to refinance of important social housing programme n Included concessionality equivalent to 3, 4 M€
Local authorities access to finance in intermediation Municipal Financing in Cap Vert n 5 M€ credit line to three main banks for loans to the municipalities n 0. 2 M€ grant for a technical support to municipalities
The potential of guarantees with Faulu Kenya: The first financial bond emission by an MFI in Africa n Amount: 500 M KES (5, 52 M € 03/12/03) n Maturity: 5 years n 25% of the risk supported by the subscribers (commercial banks and institutional investors) n 75 % garanteed by AFD n 24 000 beneficiaries Conclusion: how catalyse access of local authorities to the local financial market ? The guarantee issue (DAC/OECD)
Covering the risks with a mix of various instruments Commodity price based loan- SODECOTON Cameroun Hypothesis Results Reimbursement duration reduced to 8 years thanks to anticipated reimbursements during 4 years
Conclusion: How donnors can follow-up the charter with concrete actions Back to the « limitant factor theory » : What is in the « hand » of the donors community ? 1. 2. 3. 4. 5. Shifting from Government to Goverment to multistakeholders approaches Accepting the discipline of taking/sharing risks specially at the sub-sovereign and private level Putting the promotion of private investment and PPPs as central to their mission Enhancing the « financial toolbox » , providing bridges to private sector financing, designing tailored solution, mixing financial engineering and concessionality Reorienting culture, capital & skills
THANK YOU
- Slides: 15