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Luc Rigouzzo, Director Financial and Private Sector Department

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. Funding Sub-National Programs

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Luc Rigouzzo, Director Financial and Private Sector Department

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  1. International workshop onPublic-Private DialogueParis, February 1 & 2, 2006__________________« What future for Public-Private Dialogue » Luc Rigouzzo, Director Financial and Private Sector Department

  2. The way forward • Funding • Sub-National Programs • Integration to specific country contexte • Cluster / Product markets • Post-conflict

  3. The “Limitant Factor” Theory • We can try to improve 1 & 2 (but democracy – ex Tchad) • But more modestly, as a bilateral agency, our role could simple be to foster 3 with new stakeholders + with feed back on 1 + 2 1 2 3 4 Regulatory policies Macro-economic conditions Taxation… Risk mitigation & Financial instruments

  4. A new paradigm of Aid Competition + New Stakeholders + More risk AFD=1% NGOs (8) ODA (58) Goals Stakeholders Tools Trade Balance (150) • N/S poverty gap & Inequalities - MDG • Development through Growth • Global Public Goods Multiple Stakeholders (public & private) Multiple Financing Sources FDI (148) Migrants Transfers (100) Internal Savings (?) Bonds 11 2002, Rogerson 2004, Global Development Finance 2003 (World Bank), in $Bn

  5. A new paradigm of Aid : New Stakeholders Agencies Borrowers / Beneficiaries Objectives Country program Investment climate Governance Sovereign Multilaterals Non Sovereign, PPPs, Big Corporates, Civil society • Overal economic efficiency • Cost of goods, competitivity • Financial sector, efficiency Bilaterals Classical corporates • Growth • Employment • MDGs EDFIs bi-multis

  6. Zooming in two Emerging Stakeholders essential for PPD • Local Governments: soon to be the first line of development • Growing mandate • Huge financial gap • Important institutional weakness • Businesses: a new take at them • As agents of growth • As agents of public policy • As issue of public policy

  7. LT loans (incl. PTC) n Widen Financing offer More important volumes n ( cf . Proparco ) Equity n Locale currency n (incl. ODA = Additional subsidies ) Access to LT fundings AFD’s partners Develop Financial needs Engineering & guarantees Share / Concessionality to Adapted and covering Cover risks the service of solutions risks tools dévelopment - Environmental outputs participating loans ARIZ, PRG, bond issuance guarantee - Commodity based participating loans EDFI Partnerships / cofinancing - Tailored concessionality - Advisory, mandates A new paradygm of AidRisk sharing, tailored concessionality & financial engineering

  8. Examples of private sector contributions to public policy

  9. EDULOAN (South Africa) Microfinance for the training of disadvantaged population groups • Eduloan, a private company, assists more than 142 000 poor students annually, giving them access to education and training • AFD project : a guarantee on the loan (granted in Rands) by a South African bank to Eduloan

  10. Housing sector in South Africa Rand Merchant Bank Low/Middle Income Housing Programme Promotion through Local Banking System • Integration of low income household to the program (revenue below 3000 Rands) • Training of low income borrowers • Loan of 40 million euros to a bank (RMB) to refinance of important social housing programme • Included concessionality equivalent to 3,4M€

  11. Local authorities access to finance in intermediation Municipal Financing in Cap Vert • 5 M€ credit line to three main banks for loans to the municipalities • 0.2 M€ grant for a technical support to municipalities

  12. The potential of guarantees with Faulu Kenya: The first financial bond emission by an MFI in Africa • Amount: 500M KES (5,52M € 03/12/03) • Maturity: 5 years • 25% of the risk supported by the subscribers (commercial banks and institutional investors) • 75 % garanteed by AFD • 24 000 beneficiaries Conclusion: how catalyse access of local authorities to the local financial market ? The guarantee issue (DAC/OECD)

  13. 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

  14. 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 ? • Shifting from Government to Goverment to multi-stakeholders 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

  15. THANK YOU

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