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 n Funding n Sub-National Programs n Integration to specific country contexte n Cluster / Product markets n Post-conflict

The “Limitant Factor” Theory Regulatory policies 1 Macro- economic conditions 23 Taxation… 4 n We can try to improve 1 & 2 (but democracy – ex Tchad) n But more modestly, as a bilateral agency, our role could simple be to foster 3 with new stakeholders + with feed back on Risk mitigation & Financial instruments

A new paradigm of Aid N/S poverty gap & Inequalities - MDG Development through Growth Global Public Goods Multiple Stakeholders (public & private) Multiple Financing 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 GoalsStakeholders Tools

A new paradigm of Aid : New Stakeholders Country program Investment climate Governance 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 n Local Governments: soon to be the first line of development  Growing mandate  Huge financial gap  Important institutional weakness n Businesses: a new take at them  As agents of growth  As agents of public policy  As issue of public policy

A new paradygm of Aid Risk sharing, tailored concessionality & financial engineering Widen Financing offer n LT loans (incl. PTC) n More important volumes (cf.Proparco) n Equity n Locale currency (incl. ODA =Additional subsidies) Access to LT fundings Share / Cover risks Adapted solutions AFD’s partners needs Financial Engineering & Concessionality to the service of dévelopment Develop guarantees and covering risks 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 n Eduloan, a private company, assists more than poor students annually, giving them access to education and training n 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 n Integration of low income household to the program (revenue below 3000 Rands) n Training of low income borrowers n Loan of 40 million euros to a bank (RMB) to refinance of important social housing programme n Included concessionality equivalent to 3,4M€

Local authorities access to finance in intermediation Municipal Financing in Cap Vert n 5 M€ credit line to three main banks for loans to the municipalities n 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 n Amount: 500M KES (5,52M € 03/12/03) n Maturity: 5 years n 25% of the risk supported by the subscribers (commercial banks and institutional investors) n 75 % garanteed by AFD n 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 Hypothesis Results Reimbursement duration reduced to 8 years thanks to anticipated reimbursements during 4 years

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 ?

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