International workshop onPublic-Private DialogueParis, 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 Integration to specific country contexte Cluster / Product markets Post-conflict

The “Limitant Factor” Theory

Regulatory policies

1

Macro-economic conditions

2 3

Taxation…

4

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

Risk mitigation &

Financial instruments

A new paradigm of Aid

• N/S poverty gap & Inequalities - MDG

• Development through Growth

• Global Public Goods

MultipleStakeholders

(public & private)

MultipleFinancing Sources

Competition + New Stakeholders + More risk

ODA (58)

Trade Balance (150)

FDI (148)

Migrants Transfers

(100)

NGOs (8)

Internal Savings (?)

Bonds 11

AFD=1%

2002, Rogerson 2004, Global Development Finance 2003 (World Bank), in $Bn

Goals Stakeholders Tools

A new paradigm of Aid : New Stakeholders

Country program

Investment climateGovernance

Objectives

• Overal economic efficiency

• Cost of goods, competitivity

• Financial sector, efficiency

• Growth

• Employment

• MDGs

Multilaterals

Bilaterals

EDFIs bi-multis

Sovereign

Non Sovereign, PPPs, Big Corporates,

Civil society

Classical corporates

Borrowers / Beneficiaries Agencies

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

A new paradygm of AidRisk sharing, tailored concessionality & financial engineering

Widen Financing offer LT loans (incl. PTC)

More important volumes(cf. Proparco)

Equity

Locale currency(incl. ODA = Additional subsidies)

Access to LT fundings

Share /Cover risks

Adaptedsolutions

AFD’s partners needs

FinancialEngineering &

Concessionality tothe service of

dévelopment

Developguaranteesand coveringrisks tools

ARIZ, PRG, bond issuance guarantee

EDFI Partnerships / cofinancing

- 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

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

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€

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

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)

Covering the risks with a mix of various instruments Commodity price based loan- SODECOTON Cameroun

0

200

400

600

800

1000

1200

1400

1 2 3 4 5 6 7 8 9 10 11 12

En

MF

CFA

500

550

600

650

700

750

800

850

900

950

1000

En

FC

FA /

kg d

e fi

bre

Rembts minimums Rembts anticipés Cours fibre FOB (éch. droite)

Hypothesis

ResultsReimbursement duration reduced to 8 years thanks to anticipated reimbursements during 4 years

Année 1 2 3 4 5 6 7 8 9 10 11 12Indice A CAF (FCFA/kg) 623 694 810 717 752 833 822 787 775 694 798 764Cours FCFA/USD 505 525 525 525 525 525 525 525 525 525 525 525Cours Euro/USD 1,30 1,25 1,25 1,25 1,25 1,25 1,25 1,25 1,25 1,25 1,25 1,25Indice COTLOOK "A" 56 60 70 62 65 72 71 68 67 60 69 66

Conclusion: How donnors can follow-up the charter with concrete actions

1. Shifting from Government to Goverment to multi-stakeholders approaches

2. Accepting the discipline of taking/sharing risks specially at the sub-sovereign and private level

3. Putting the promotion of private investment and PPPs as central to their mission

4. Enhancing the « financial toolbox », providing bridges to private sector financing, designing tailored solution, mixing financial engineering and concessionality

5. Reorienting culture, capital & skills

Back to the « limitant factor theory »: What is in the « hand » of the donors community ?

THANK YOU