1. Diaspora bonds Georges Sassine December, 2011 A new funding vehicle for Lebanon

2. 2 Georges Sassine Lebanese diaspora funds are a massive untapped potential … Lebanon could raise on average more than $1 billion a year. Diaspora bonds have been successfully used by other countries. A strategy for Lebanon can be developed by drawing on others’ experiences. Many countries are exploring the possibility of issuing diaspora bonds including: Morocco, Greece, Ghana, Liberia, and the Philippines. Diaspora bonds … One way to tap Lebanon’s diaspora

3. 3 Georges Sassine Israel India Ethiopia SuccessFailure Timing Objective Target investors Performance Structure Incentives Annual Issuance Since 1951 Opportunistic Issuance In times of crisis 1991; 1998; 2000 Opportunistic Issuance 2008 Economic developmentSupport balance of payments Electricity development Limited to diaspora NOT limited to diaspora Fixed rate bonds Fixed, floating rate bonds and notes 5 yr bullet maturity $2,000 minimum 1 to 20 yr maturity + bullet repayment Success Raised $31 BillionRaised $11.3 BillionRaised $200,000 5,7, and 10 yr maturity $500 minimum Different diaspora bond structures and performances Diaspora bond background and structure: Israel vs. India vs. Ethiopia Patriotism; Slightly high interest rates Patriotism; high interest rates High interest rates

4. 4 Georges Sassine Israel IndiaEthiopia Diaspora patriotism Drivers of success for raising diaspora bonds Diaspora context varies by country Lebanon Diaspora networks 7.5M Jewish diaspora – 6M reside in the US. Unified American Jewish community but recently segregated and slightly weakened organization Jewish diaspora unique in several ways. Strong attachment to Israel driven by religious, political and emotional motivations. 20M Indian diaspora. Majority in Southeast Asia, but wealthiest in US and EU. Strong networks: large political, professional, and religious/cultural organizations 2M Ethiopian diaspora. 40% in North America, 30% in Asia, and 22% in ME & EU. Median household income in US is $43,460. Diaspora- govt relationship Significant share of current diaspora left Ethiopia in opposition of the political system 4M-15M Lebanese diaspora. Strong networks: large political, professional, and religious organizations Low diaspora trust in govt: perceived red tape and high corruption Democratic state of govt provides sense of stability and security Divided and fragmented diaspora. Weak national identity. Deep sense of patriotism part of the collective norms of Indian society. Right of Israeli citizenship to any Jew. Israel proved its commitment to defend the Jewish Diaspora (rescuing Jews from countries of distress and re-settlements). High perceived corruption Trust in few institutions including Central Bank Divided and fragmented diaspora.

5. 5 Georges Sassine IsraelIndiaEthiopia Diaspora-govt relationship Diaspora patriotism Summary of drivers of success for raising diaspora bonds Diaspora context varies by country Lebanon HighMedLow Legend: Diaspora networks

6. 6 Georges Sassine IsraelIndia Diaspora engagement strategy Financial Incentives Context drives diaspora bond strategy Diaspora bond strategy by country Marketing Strategy Other Incentives Created institutions to strengthen its connection to the Diaspora Established a selling agency within US and other countries. Used religious appeal to boost sales of bonds (influence of rabbis among Jewish community) Changed its policy of selling discounted bonds and increased interest rates slightly above US T-bills Attractive financial incentives: Interest rates 2% higher than US T-bills Exemption from Indian income and wealth taxes Created govt body focusing on liaison with the Diaspora Used informal Indian diaspora networks and organizations Adopted market reforms to encourage Diaspora investments (improved bureaucracy and corruption)

7. 7 Georges Sassine Diaspora engagement strategy Diaspora bond strategy for Lebanon Issued for infrastructure project investments or in times of crisis Marketing Strategy Timing Objective Target investors Structure Incentives Opportunistic Issuance Project specific or in times of crisis Economic development Or Support balance of payments Limited to diaspora Patriotism Deposit guarantee High interest rates Tax exemptions (Lebanon and host countries) Investments Financing should benefit the whole society without preference to specific regions or religious groups. Example: National infrastructure projects – operated by trustworthy institutions: South-North Railway project Oil & Gas pipeline Refinery plants Fixed rate bonds 5-10 yr maturity $1,000 minimum Establish institution that focuses on strengthening Diaspora connection Introduce reforms oriented towards engaging Diaspora (i.e. voting rights) Tap into existing Diaspora networks: Political organizations; professional organizations (Lebanese-US Chamber of Commerce); academic organizations (AUB Alumni Chapters); religious organizations Establish selling agencies in key geographies

8. 8 Georges Sassine Actions required to successfully raise diaspora bonds Tailor strategy to the Lebanese context Data gathering & analysis Need to better understand the norms that shape the Lebanese Govt-Diaspora relationship. Need better statistics on the volume, wealth and location of the Diaspora. Engage Diaspora A state can successfully and sustainably extract obligations from its Diaspora only if it extends rights to that Diaspora. Strengthen diaspora links Need to establish institutions focused on Govt-Diaspora liaison; build allies with existing informal diaspora networks; establish selling agency in key geographies. Identify projects to invest in Identify projects that would benefit the whole society without preference to specific regions or religious groups; governing institutions should be perceived as trustworthy and non-corrupt.

9. 9 Georges Sassine References Leveraging Migration For Africa Remittances, Skills, and Investments, World Bank 2011 Dilip Ratha, Sonia Plaza, Harnessing Diasporas, Finance and Development, September 2011 Ayah Mahgoub, Amr Abdelrazik, Sinafikeh Gemessa, Avnish Gungadurdoss, Diaspora Bonds: The Next Development Miracle, or a Tool with Context-Specific Potential? Harvard Kennedy School - Institutions and Development Course, December 15, 2010 Suhas Ketkar, Dilip Ratha, Diaspora Bonds As a New Funding Vehicle for Developing Countries, Privatization of Development Finance Conference at NYU, December, 2009 Suhas L. Ketkar, Dilip Ratha, Development Finance via Diaspora Bonds Track Record and Potential, Migration and Development Conference at the World Bank, May 23, 2007

10. 10 Georges Sassine End