INVESTMENT PROMOTION AND FINANCING FACILITY Marghoob Bin Hussein Proc Specialist, The World Bank Dhaka March 26 and 28, 2008

Key Topics Types of Selection of Entrepreneurs (Options 1 and 2) Option 1 – Process Option 2 – Process Documents requiring World Bank review and Entrepreneur’s basic responsibilities Timeline for Procurement Note: Entrepreneurs also mean project promoters / investors / concessionaire Competition for resources., Contestability at each level. Key functions can be provided by multiple parties simultaneously. Open architecture allowing for variation and ease of entry and exit. Responsibilities are shared amongst multiple parties governed by contracts which may be terminated. The structure allows for innovation and evolution over time, ideally towards a solely private sector outcome. Transparency protected by clear contractual arrangements. A separation is established between those controlling resources and those allocating resources. The relationship is governed by contracts which are open to public scrutiny. Flexibility which allows for a number of outcomes. Not hard wired for a certain outcome which is heavily constrained by institutional design and may well be inappropriate for changing circumstances, the design is one which lends itself to a range of PPP arrangements.

Selection of Entrepreneurs – Provisions under the Financing Agreement Principle: Economy, Efficiency & Transparency of the system Selection of the entrepreneur: Option 1: The entrepreneur is selected by a GoB authority (i.e. a Line Ministry) through international competitive bidding (ICB) procedures of The World Bank (WB). All subsequent procurement will follow applicable rules of said entrepreneur. Para 3.13.a of WB’s Procurement Guidelines (PG) Option 2: If the entrepreneur is not selected through a competitive process, but the project is of importance in meeting GoB’s utility (i.e. power, water etc.) obligation to the public. All downstream procurement by that entrepreneur will follow WB-PG. Para 3.13.b of WB’s PG

Other Financial Institutions Cash Flow Example 10 years, 100 Million, market Interest rate, Government bond 10% Key Issues: 1. PFI is bearing 100% risk of debt financing. 2. 56% of investment cost is the maximum IPFF (BB) can finance. This may reduce subject to financial viability on a project-by-project basis. Bangladesh Bank (BB) 56 Million 10.25% Private Financial Institution (PFI) Other Financial Institutions or Private Investors Competition for resources., Contestability at each level. Key functions can be provided by multiple parties simultaneously. Open architecture allowing for variation and ease of entry and exit. Responsibilities are shared amongst multiple parties governed by contracts which may be terminated. The structure allows for innovation and evolution over time, ideally towards a solely private sector outcome. Transparency protected by clear contractual arrangements. A separation is established between those controlling resources and those allocating resources. The relationship is governed by contracts which are open to public scrutiny. Flexibility which allows for a number of outcomes. Not hard wired for a certain outcome which is heavily constrained by institutional design and may well be inappropriate for changing circumstances, the design is one which lends itself to a range of PPP arrangements. 14 Million Debt or other funding 56 Million Debt Market % Private Infrastructure Project 30 Million Equity Project Promoter / Entrepreneur

Entrepreneur’s responsibilities World Bank Review Procurement Plan Bidding Documents Bid Evaluation Reports Entrepreneur’s responsibilities Preparation of the above three documents and timely submission to PFI for further forwarding to WB for clearance, with a copy sent to BB in each case. Adhering to approved procurement plan. Timely submission of copy of conformed signed contract documents to WB. Close interaction with WB for clarification and consultation (except at evaluation stage) Competition for resources., Contestability at each level. Key functions can be provided by multiple parties simultaneously. Open architecture allowing for variation and ease of entry and exit. Responsibilities are shared amongst multiple parties governed by contracts which may be terminated. The structure allows for innovation and evolution over time, ideally towards a solely private sector outcome. Transparency protected by clear contractual arrangements. A separation is established between those controlling resources and those allocating resources. The relationship is governed by contracts which are open to public scrutiny. Flexibility which allows for a number of outcomes. Not hard wired for a certain outcome which is heavily constrained by institutional design and may well be inappropriate for changing circumstances, the design is one which lends itself to a range of PPP arrangements.

Bidding Timeline from Advertisement to Award of Contract IFB Advertised Contract signing Bid Submission Notification of Award > 6 weeks Bidding Bid Evaluation < 4 weeks 4 - 8 weeks

Project Rationale Why IPFF? Local investors do not have access to long-term taka loan, typical infrastructure loan tenure is 5-7 years, whereas IPFF provides for 12-15 years. Projects with belated return benefits from long tenure. The risk is borne totally by PFI, but PFI hedges this risk by obtaining 80% of debt financing through low-interest government rates.

Project Pipeline During the last nine months, the following type of projects have approached IPFF: Small Power Plants (11-22-33 and 66 MW) Captive Power Plants (4-8 MW) Inland Container Terminal Currently the bag has only US$ 50 million, with a possible additional financing of US$ 75 million, if the current amount finishes by August 2009.

Thank You Q & A