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TRADE BANK OF IRAQ. Presentation to: Baltimore Middle Business Forum November 29 2004. Jo Morrison JPMorgan Chase Bank. Operational - November 2003. Created by CPA Order 20.

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TRADE BANK OF IRAQ

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TRADE BANK OF IRAQ

Presentation to:

Baltimore Middle Business Forum

November 29 2004

Jo Morrison

JPMorgan Chase Bank


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Operational - November 2003. Created by CPA Order 20.

Iraq’s only creditworthy financial institution. Facilitates imports for the reconstruction of Iraq with funding from the Development Fund for Iraq (DFI).

Owned by the Government of Iraq and supported by the JPMorgan Consortium. Separate capitalization of $100 million ($5 million paid-in capital, $95 million callable capital)

Currently employs 60 experienced Iraqi bankers who work with Iraqi buyers to develop LC’s that will meet contractual requirements


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Development Fund for Iraq

  • Establishment sanctioned by UN Resolution 1483

    (21 May 2003)

  • Held in the name of the Central Bank of Iraq at the Federal Reserve Bank of NY

  • holds the proceeds of petroleum export sales from Iraq, remaining balances from the UN Oil-for-Food Program and other frozen Iraqi funds.

  • Disbursements must be used for the benefitof the Iraqi people


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TBI Background

  • Initial LC’s issued for imports of medicines and medical equipment

  • Now all Ministries that import use the Trade Bank

  • Each Ministry has an operating budget agreed with the Ministry of Finance

  • Ministries can enter into contracts and issue Letters of Credit through Trade Bank of Iraq

  • Suppliers are assured they will be paid provided that they submit documents in accordance with the LC.


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    TBI Available Trade Products

    • Commercial Letters of credit

    • Bid bonds

    • Performance guarantees

    • Payment guarantees

    • Export Credit Agency support

    • Payments mechanism planned

    5


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    Procedures For Using TBI

    • Contract agreed with Iraqi importer

    • Importer secures approval from Ministry of Finance

    • Importer approaches TBI

    • TBI collaborates with the applicant to develop, validate, and submit LC request to the Coordinator

    • One of the Operating Consortium Bank issues LC

    • Documents sent to Issuing Bank and funds paid to Exporter


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    TBI LC issuance

    Current volume of L/Cs issued

    Distribution of L/Cs by region

    • 700 letters of credit issued totaling approximately $2.5 billion

    • 250 transactions in the pipeline worth $600 million

    • TBI letters of credit have financed imports from 58 countries

    Middle East/

    Africa

    28%


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    Export Credit Agency Support

    • TBI has built partnerships with Export Credit Agencies (ECA’s) across the globe

    • US Export-Import Bank led the way

    • $2.4 billion committed in December 2003

    • All support lapsed at June 30, 2004

    • Ex-Im has again led the way with renewal of a $500 million facility to the Interim Iraqi government but only for 180 days


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    Transition – Post June 28th

    • Need for a private sector led economy to develop.

    • Financial Management Law outlines use of the Development Fund for Iraq

    • Ministry of Finance has replaced the CPA in dealings with the Trade Bank and overseeing the Iraqi budget.

    • Consortium Contract to provide support extended an additional year.

    • LC issuance is subject to delays because of communications problems.


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    Observations

    • Economic activity and growth are taking place despite adverse conditions and uncertainties.

    • Iraq is a Ready Market with significant pent-up demand.

    • Huge demand for goods and services needed for infrastructure and repair of damage from the war.

    • Knowledgeable of international practices but sheltered for a decade, so not always up to date

    • Legacy of Oil for Food bad habits

      • Desire to inspect before paying


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    Trade Bank of Iraq

    www.tbiraq.com

    Jo Morrison

    JPMorgan Chase Bank

    Trade Bank of Iraq Project

    E-mail: jo.morrison@jpmorgan.com

    Tel: 212-552-1298


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