developing rising inequality in asia and country...
TRANSCRIPT
Australian Aid Conference, Canberra
13 February 2015
Prabodh Saxena
Contemporary Modalities
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
Australian Aid Conference, Canberra
13 February 2015
The Backgrounder
G to G LOCs (1966-2003)
83 Lines of USD 498.56 million (31 L0Cs in dollars) and Rs.
5,862.1 million (52 LOCs in Indian Rupees) to 23 countries.
Budget Speech of 2003-2004
• 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.
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
The Guidelines Administered under Guidelines issued by DEA in 2004, Revised
Guidelines in 2010. 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. Australian Aid Conference, Canberra
13 February 2015
Terms and Conditions of LOCs
Australian Aid Conference, Canberra
13 February 2015
HIPC LIC/ LDC MIC
Rate of Interest (%) 1.75 2.00 LIBOR + 0.5
Maturity (yrs.) 20 10 8
Moratorium (yrs.) 5 3 2
Grant Element (%) 56.4 37.3 34.4
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
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.
Australian Aid Conference, Canberra
13 February 2015
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.
Australian Aid Conference, Canberra
13 February 2015
LOCs at a Glance (31th March,2014)
*Figures in parenthesis are for 31st Dec,2014
Australian Aid Conference, Canberra
13 February 2015
NO. OF LOC COUNTRIES
COVERED
LOC AMOUNT
in USD billion
CONTRACTS
APPROVED in
USD billion
AMOUNT
DISBURSED
in USD billion
Signed 176(188) 62 10.29(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)
LOCs – The Bird’s Eye View
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
The Loan Portfolio Growth Over Years
Australian Aid Conference, Canberra
13 February 2015
-
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
57.94 339.83
576.23
1,033.92 1,311.70
1,714.94
2,293.23
2,940.95
3,747.93
4,428.76
LOC Portfolio as Percentage of Exim Bank Loan
Portfolio
Australian Aid Conference, Canberra
13 February 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
14% 15%
22% 25% 24%
28%
31%
39%
Power, 23%
Railways, 20%
Roads &
Transport, 5%
Rural
Electrification, 3% Sugar Plant, 9%
Technology and
Communication,
2%
Other
Infrastructure, 2%
Agriculture, 4%
Cement Plant, 1%
Construction, 4%
Engineering, 8%
Irrigation, 6%
Others, 9%
Petroleum
Products, 4%
Sector-Wise Distribution of LOCs as of 31 March 2014
Australian Aid Conference, Canberra
13 February 2015
Percentage of LOCs to different categories
(numbers and amount)
64.2
17.05
14.77
3.98
52.99
11.47
17.42 18.12
0
10
20
30
40
50
60
70
HIPC LIC&LDC MIC N.C
Number
Amount
Australian Aid Conference, Canberra
13 February 2015
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
1400.00
Sri Lanka Ethiopia Bangladesh Sudan Mozambique
Myanmar EcowasBank
Nepal D.R. Congo Tanzania
Approvals by GOIAmount (USD Million)
1216.16 1004.54 800.00 739.20 639.44 601.39 500.00 350.00 268.50 254.69
OutstandingAmount (USD Million)
721.59 504.85 128.70 541.40 159.30 194.87 198.24 51.87 160.29 76.23
Top 10 Recipient of LOCs as of 31 March 2014
Australian Aid Conference, Canberra
13 February 2015
Africa Portfolio
Last 6 years, Africa has collected 74.38% of total LOCs
cornering 60.67% of the credit amount.
2011 Addis Ababa announcement- 70.5% of 8500 USD million
(6000 USD million).
In the FY 2012-13, almost the entire allocation went to Africa.
Australian Aid Conference, Canberra
13 February 2015
Region No. of LOCs Credit Amount
(USD Million)
Africa 127 6,270
Asia 33 3,663
Latin America and the Caribbean 14 170
Commonwealth of Independent
States 1 56
Oceania 1 50
TOTAL 176 10,209
Region-Wise Breakup of LOCs-Number and Value
Australian Aid Conference, Canberra
13 February 2015
Africa, 61%
Asia, 47%
Oceania, 0% LAC, 2%
CIS, 1%
Allocation of LOC Value Across Regions
Australian Aid Conference, Canberra
13 February 2015
North, 12%
East, 42%
South, 5%
West, 30%
Central, 7%
LOCs Distribution within the Continent
Australian Aid Conference, Canberra
13 February 2015
Financial
Year
LOCs Signed
Total Africa Percentage Total Africa Percentage
No. No. USD Mn USD Mn
2008-09 23 14 60.87% 760.53 466.23 61.30%
2009-10 20 16 80.00% 638.31 450.15 70.52%
2010-11 21 15 71.43% 2,152.23 788.69 36.65%
2011-12 17 13 76.47% 1,478.98 786.61 53.19%
2012-13 16 14 87.50% 833.59 809.59 97.12%
2013-14 24 18 75.00% 1,771.75 1,330.85 75.11%
Total : 121 90 74.38% 7,635.39 4,632.12 60.67%
Share of Africa in Total LOCs
Australian Aid Conference, Canberra
13 February 2015
Total LOCs since 2008-09: Share of Africa
(in USD million)
760.53 638.31
2,152.23
1,478.98
833.59
1771.75
466.23 450.15
788.69 786.61 809.59
1330.85
0
500
1000
1500
2000
2500
FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14
Total
Africa
Australian Aid Conference, Canberra
13 February 2015
Total LOCs since 2008-09: Share of Africa in numbers
23
20 21
17 16
24
14
16 15
13
14
18
0
5
10
15
20
25
30
FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14
Total
Africa
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
Financial Year Principal in USD
million
Interest in USD
million
Total in USD
million
2008-09 0.65 2.85 3.5
2009-10 9.54 4.5 14.04
2010-11 80.02 17.69 97.71
2011-12 119.52 37.77 157.29
2012-13 161.97 39.99 201.96
2013-14 30.78 3.72 34.50
The Mounting Overdues
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
6. Monitoring
In Host Country
In India
Inter- Ministerial Visits -Tanzania, Mozambique , Sudan,
CAR,DRC and Gabon
Negotiations/Consultations
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
Percentage of LOCs to different categories
(numbers and amount)
64.2
17.05
14.77
3.98
52.99
11.47
17.42 18.12
0
10
20
30
40
50
60
70
HIPC LIC&LDC MIC N.C
Number
Amount
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
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
Australian Aid Conference, Canberra
13 February 2015
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.
Australian Aid Conference, Canberra
13 February 2015
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.
Australian Aid Conference, Canberra
13 February 2015
A product which emerges from the
teeth of fierce competition will
certainly be the most effective and
visible envoy of the country
Thanks
Australian Aid Conference, Canberra
13 February 2015