Transcript Introduction of JBIC & Overseas Economic Cooperation

USAID and JBIC
Collaboration in the Water
Sector
Megumi MUTO
Planning Division
Development Assistance Strategy Department
October 1, 2004
Outline of the Presentation
1.
2.
3.
4.
What is JBIC?
What are JBIC ODA Loans?
JBIC ODA for the Water Sector
USAID-JBIC Water Collaboration
in the Philippines
1
What is JBIC? (1)
Result of Merger between JEXIM &
OECF


JBIC: Japan Bank for International
Cooperation-Established on October 1,
1999, as a result of merger between JEXIM
and OECF
Two Kinds of Operations:
 International Financial Operations
(former JEXIM Operations)
 Overseas Economic Cooperation
Operations (former OECF Operations)
2
What is JBIC?(2)
Two Types of Operations

International Financial Operations





Export Loans
Import Loans
Overseas Investment Loans
Untied Loans, Etc
Overseas Economic Cooperation
Operations


Official Development Assistance (ODA) Loans
to/through Sovereign Governments
Private Sector Investment Finance
3
What are JBIC ODA Loans?(1)
Priority Areas for ODA Loans
1.
2.
3.
4.
5.
6.
7.
Poverty Reduction
Infrastructure for Economic Growth
Anti-Pollution Measures
Global Issues
Human Resource Development
IT
Regional Development
4
What are JBIC ODA Loans?(2)
Characteristics of ODA Loans
To support projects with low returns but
high development significance
 To finance large investments with less
burden on the Japanese tax payers by
leveraging
 To transfer technology and knowledge
with financial assistance
⇒ Revolving Fund for Development

5
What are JBIC ODA Loans?(3)
Types of ODA Loans
Budget
Support Loans
Project Loans
Structural
Adjustment
Loans (SAL)
Engineering
Services (E/S)
Loans
Project-type Loans
ODA Loans
Non-project-type Loans
(Yen)
Sector
Program
Loans
Sector Loans
Financial*
Intermediary Loans
(Two-Step Loans)
* Tapped for initial collaboration
with USAID
6
What are JBIC ODA Loans?(4)
Volume of Commitments
Billion Yen
1111. 6
1200
1028. 6
1053. 7
1000
800
667. 4
687. 8
553. 6
587. 7
600
400
200
0
FY
1997
1998
1999
2000
2001
2002
2003
From FY 97 to 99, JBIC increased the commitments to assist restoration from Asian
currency crisis. In FY2003, 89.9% of commitments were for Asia.
7
What is JBIC’s ODA Loan?(5)
Terms and Conditions (i)
<General Terms>
Interest rate:
 0.75% - 2.00% per annum based on Per
Capita GNP of the borrowing country
 Repayment period:
 30 - 15 years (including 10 - 5 years grace
period)

8
What are ODA Loans? (6)
Terms & Conditions (ii)
<Preferential Terms>
(For Forest Conservation, Pollution Prevention, Human
Resource Development, SMEs, among others)
Interest rate:
 0.50% - 1.20% per annum based on Per
Capita GNP of the borrowing country
 Repayment period:
 40 - 15 years (including 10 - 5 years grace
period)

9
What are ODA Loans? (7)
Terms & Conditions (iii)
<Special Terms for Economic Partnership>
Interest rate:
 0.30% - 0.40% per annum based upon Per
Capita GNP of the borrowing country
 Repayment period:
 40 - 30 years (including 10 years grace
period)

10
JBIC ODA Loans in the Water Sector (1)
Cumulative Commitments & Policy
Cumulative commitments in the world
Water Supply : 80 billion Yen
130 projects
Sewerage
： 50 billion yen
50 projects
Long time experience of assistance in Asian
Countries (China, Thailand, Indonesia,
Philippines, etc.)
 Water supply and sewerage have been
considered as the priority sector in both poverty
reduction and infrastructure development. JBIC will
steadily increase its assistance in the water sector.
11
JBIC ODA Loans in the Water Sector (2)
Assistance In the Philippines
JBIC assistance to water sector in PH started in 1978. To date,
total commitment amount is 58.7 billion yen (29.4 billion
pesos). The total number of projects is fifteen (15). Ten(10)
projects are completed and five(5) are on-going.
JBIC-funded water supply facilities constructed and repaired
nationwide benefit 13 million people or 21% of Philippines
population.
The purposes and types of JBIC assistance in water sector in PH
>water supply and sanitation in rural areas
>water supply in provincial cities
>Water Supply in Metro Manila
>Water supply in other areas (Boracay Tourism area, Subic Bay
Free Port, Special Economic Zones, Cebu Reclamation Area)
Future strategy:
(1) Enhancement of water supply in poor areas and provincial LGUs
(2) Promotion of private financing
12
USAID-JBIC Water Collaboration (1)

Background History

Sep. 2002

Nov. 2002
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Jan. 2003
Mar. 2003
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June 2003
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July 2003
Oct. 2003
Mar. 2004
Apr. 2004
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Powell-Kawaguchi announcement of US-JAPAN
Water Initiative at WSSD
First Discussion between USAID
& JBIC in Washington & Tokyo
JBIC joined USAID’s Workshop in Bangkok
Pilot Countries Approach Agreed for
Philippines, Indonesia & Jamaica
Meeting between USAID’s Deputy Administrator
& JBIC’s Deputy Governor
Evian Summit/G8 Water Action Plan
1st Outreach Monitoring Meeting in Washington
Consultation on Cofinancing Operation in PH
2nd Outreach Monitoring Meeting in Tokyo
13
USAID-JBIC Water Collaboration (2)

Basic Agreements between USAID & JBIC


To continue to discuss promotion of cofinancing in 3 pilot
countries
USAID initiates the ideas/concepts of the Project
JBIC assists the Project formation

What to do in PH (start with existing mechanisms)
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

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To promote project collaboration in the water sector
through frequent consultation and exchange of information on aid
policies and operations
To study the feasibility of Pilot Municipal Water Loans and a
Water Revolving Fund (WRF) in collaboration with PH side
To strengthen institutions/regulatory & policy frameworks
14
USAID-JBIC Water Collaboration (3)
JBIC Projects - a typical case
JBIC
ODA Loan finances 60-70%
of the total project costs
ODA
Loan
Implementing
Agency
(Local Government)
National Budget
Local
Cost
・Borrower needs to be a
government
・G-G basis sovereign loan
Private Financial
Institution
Issuing Bond. etc.
Usually 30-40% of
the total cost
15
USAID-JBIC Water Collaboration (4)
Co-Financing model I: Local
Government /Public Corporation
JBIC
USAID
DCA
ODA
Loan
Implementing
Agency
(Local Government),
Public Corporation
Private Bank
Local
Cost
Issuing Bond. etc.
70%：JBIC ODA Loan
30%：Private Bank with DCA guarantee
16
USAID-JBIC Water Collaboration (5)
Co-Financing model II: Two Step
Loans /Microfinance
JBIC
USAID
ODA
Loan
Government
(Ministry of Finance)
Loan
Private / Public Bank
DCA
Guarantee
Sub-Projects
Loan
Farmers/ Ventures
Farmers /Ventures
Farmers/Ventures
DCA Guarantee could be limited for the poorest beneficiaries.
17
USAID-JBIC Water Collaboration (6)
Co-Financing model III: Up streamingDown streaming co-financing
JBIC
JBIC
ODA
Loan
Implementing
Agency
USAID
Guarantee
Private sector
Loan
Infrastructure Project
e.g. Water Resource
Development (Dams,
Pipelines etc.)
Private Projects e.g.
treatment facilities,
distribution systems
18
USAID-JBIC Water Collaboration (7)
Simple Prototype of WRF
Private
Sector
WRF
GOP
JBIC
DCA
LGU
LGU
LGU
19
USAID-JBIC Water Collaboration (8)
Why are we aiming at cofinancing with USAID
For WRF?
 The significance: frontier of sustainable water financing,
mobilizing private funds for water infrastructure
in developing countries.
 ODA funds cannot meet the vast needs for water
infrastructure. Private funds less able to shape
regulatory/policy environment. Need both.
 Complement strengths of each institution –
USAID: extensive knowledge of WRF based upon US
State Funds.
JBIC: long time experience and knowledge of water sector
in PH.
 Key: how to strike balance between private-led financing VS
sovereign hook.
20
Thank you for your
attention!
Megumi MUTO
Deputy Director
Planning Division, Development
Strategy Department, JBIC Head
Office
[email protected]
Any comments and any questions are welcomed anytime!