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USAID and JBIC Collaboration in the Water Sector. Megumi MUTO Planning Division Development Assistance Strategy Department October 1, 2004. Outline of the Presentation. What is JBIC? What are JBIC ODA Loans? JBIC ODA for the Water Sector USAID-JBIC Water Collaboration in the Philippines.

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USAID and JBIC Collaboration in the Water Sector

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Usaid and jbic collaboration in the water sector l.jpg

USAID and JBICCollaboration in the Water Sector

Megumi MUTO

Planning Division

Development Assistance Strategy Department

October 1, 2004


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Outline of the Presentation

  • What is JBIC?

  • What are JBIC ODA Loans?

  • JBIC ODA for the Water Sector

  • USAID-JBIC Water Collaboration

    in the Philippines


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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)


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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


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What are JBIC ODA Loans?(1)Priority Areas for ODA Loans

1. Poverty Reduction

2. Infrastructure for Economic Growth

3. Anti-Pollution Measures

4. Global Issues

5. Human Resource Development

6. IT

7. Regional Development


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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


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Budget

Support Loans

Project Loans

Structural Adjustment Loans (SAL)

Engineering Services (E/S) Loans

Non-project-type Loans

Project-type Loans

ODA Loans

Sector Program Loans

Sector Loans

Financial-Intermediary Loans (Two-Step Loans)

What are JBIC ODA Loans?(3)Types of ODA Loans

(Yen)

*

* Tapped for initial collaboration with USAID


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What are JBIC ODA Loans?(4)Volumeof Commitments

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.


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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)


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What are ODA Loans? (6)Terms & Conditions (ii)

<Preferential Terms>

(For Forest Conservation, PollutionPrevention, 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)


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What are ODA Loans? (7)Terms & Conditions (iii)

  • 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)

<Special Terms for Economic Partnership>


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JBIC ODA Loans in the Water Sector (1)

Cumulative Commitments & Policy

  • Cumulativecommitments in the world

Water Supply : 80 billion Yen

130 projects

50 billion yen

50 projects

Sewerage :

  • Long time experience of assistance in Asian Countries (China, Thailand, Indonesia, Philippines, etc.)

  • Water supply and sewerage have beenconsidered as the priority sector in both poverty reduction and infrastructuredevelopment. JBIC will steadily increase its assistance in the water sector.


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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


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USAID-JBIC Water Collaboration (1)

  • Background History

  • Sep. 2002Powell-Kawaguchi announcement of US-JAPAN Water Initiative at WSSD

  • Nov. 2002First Discussion between USAID

    & JBIC in Washington & Tokyo

  • Jan. 2003JBIC joined USAID’s Workshop in Bangkok

  • Mar. 2003Pilot Countries Approach Agreed for

    Philippines, Indonesia & Jamaica

  • June 2003Meeting between USAID’s Deputy Administrator

    & JBIC’s Deputy Governor

  • July 2003Evian Summit/G8 Water Action Plan

  • Oct. 20031st Outreach Monitoring Meeting in Washington

  • Mar. 2004Consultation on Cofinancing Operation in PH

  • Apr. 20042nd Outreach Monitoring Meeting in Tokyo


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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)

  • 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


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USAID-JBIC Water Collaboration (3)JBIC Projects - a typical case

ODA Loan finances 60-70% of the total project costs

JBIC

ODA Loan

National Budget

Implementing Agency

(Local Government)

Private Financial Institution

Local Cost

Issuing Bond. etc.

・Borrower needs to be a government

・G-G basis sovereign loan

Usually 30-40% of the total cost


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USAID-JBIC Water Collaboration (4)Co-Financing model I: Local Government /Public Corporation

JBIC

USAID

DCA

ODA Loan

Private Bank

Implementing Agency

(Local Government), Public Corporation

Local Cost

Issuing Bond. etc.

70%:JBIC ODA Loan

30%:Private Bank with DCA guarantee


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USAID-JBIC Water Collaboration (5)Co-Financing model II: Two Step Loans /Microfinance

JBIC

USAID

ODA Loan

Guarantee

DCA

Government (Ministry of Finance)

Sub-Projects

Farmers/ Ventures

Loan

Loan

Farmers /Ventures

Private / Public Bank

Farmers/Ventures

DCA Guarantee could be limited for the poorest beneficiaries.


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USAID-JBIC Water Collaboration (6)Co-Financing model III: Up streaming- Down streaming co-financing

JBIC

JBIC

USAID

Guarantee

ODA Loan

Implementing Agency

Private sector

Loan

Infrastructure Project

e.g. Water Resource Development (Dams, Pipelines etc.)

Private Projects e.g. treatment facilities, distribution systems


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USAID-JBIC Water Collaboration (7)

Simple Prototype of WRF

Private

Sector

JBIC

GOP

WRF

DCA

LGU

LGU

LGU


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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.


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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!


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