CDP Blog - Responses

Re: What benefits do LDCs get

Anonymous — Fri, 13 Jun 2008 13:41:22 GMT

The purpose of FMO's LDC Infrastructure Fund (the Fund) is to contribute towards the construction and improvement of social and economic infrastructure in Least Developed Countries by providing financing through loans, equity, grants and credit guarantees which meet Official Development Aid (ODA) criteria. Financing is intended to facilitate commercially managed, private-public infrastructure investments which are both sustainable and socially responsible. Investments should serve as a catalyst to other sources of financing.

Amount:
Total Fund capital €208 million.

Starting principles:
• The focus is on infrastructure investments:
- Energy production and distribution
- Telecommunications
- Water supply and distribution
- Fixed infrastructure (ports, airports, railways, roads)
- Mobile infrastructure (ships, trucks, wharfs)
- Environmental infrastructure (waste processing, water purification, dumpsites)
- Social infrastructure (health care and education)
• The Fund is only applicable to LDC’s published annually in the OECD’s DAC-I list;
• Investments must fit in with the infrastructure policy plans of the countries concerned;
• Investments must contribute positively to combating poverty (employment opportunities, development and involvement of local business community);
• Investments can be either equity, subordinated/senior loans, grants, guarantees and combinations of these;
• The risk/return profile of the financial instrument must be on market terms;
• Grants may be used to finance non-commercial aspects which have significant development relevance in projects which are otherwise profitable (post-grant);
• The Fund can invest in profitable international/multilateral funds which promote infrastructure financing in the targeted sector(s), in the target markets relevant to the Fund;

Minimum conditions for LDC Fund financing:

Equity Participations:
• Maximum €21 million per transaction (10% of Fund capital) in the case of project finance.
• Maximum €10 million per transaction (5% of Fund capital) in the case of companies.
• All equity participations must incorporate exit agreements.

Subordinated and Senior loans:
• Maximum €21 million per transaction (10% of Fund capital).
• Term up to 20 years, repayment-free (grace) period possible up to 10 years.
• Currency USD, EUR or local currency.

Grants:
• Intended for non-commercial elements of infrastructure investments.

Re: International cooperation and middle income countries

Cristian Ossa — Thu, 05 Jun 2008 19:18:47 GMT

Largely agree with the arguments of Professor Alonso, in particular building a partnership with donor countries to make economic gains in MICs irreversible and to support MICs that can generate growth impulses that have substantial positive effects in neighbouring countries. The idea to adjust aid to “each recipient development phase” is interesting, but only as long as the “development phase” is not defined exclusively by the per capita GDP level. Other factors such as education levels, extent of poverty, fiscal and financial stability, productive structure and export dynamics are important to consider. Still, this should only constitute a first step in the consideration of donors’ aid to MICs.

The other is the eventual use of the aid (concessional financial flows or funding technical assistance); here, ownership is crucial. Aid to MICs cannot be large and will never be a determinant factor in their development. Yet, if the government of a MIC (with limited resources) is proposing funding reasonable-size projects or programmes with a likely major economic or social impact, such as projects leading to significant and sustained employment gains in rural areas or substantial increases in the education of girls, donors should certainly assist. Projects in institutional reform such as reform of the tax system and enhancing tax collection, projects that lift a constraint to business investments – including foreign direct investment, projects to improve public health or educational policies, all might have an enormous long-term impact on development and poverty eradication. In other words aid could play a very important catalytic role if the recipient country government plays its role in partnership with donors.

Aid oriented to experimentation with pilot projects in MICs might also have a high rate of return. Many MICs depend on tropical agriculture and have significant extensions of tropical forests. Pilot projects leading to an eventual green revolution in tropical agriculture (new techniques and processes that will probably be easily transferred to low-income countries) or that facilitate ensuring the protection of the tropical forest also merit the granting of aid as their character is more of a global good. Yet, experimentation does not have to be limited to agriculture related areas. Other socio-economic areas could be contemplated such as testing approaches to effective and efficient provision of basic services in the slums.

Re: Cape Verde - transition from LDC category

Anonymous — Fri, 23 May 2008 02:43:15 GMT

...... and Cape Verde is one of the Luxembourg Development Cooperation's 10 privileged partner countries. Austria is also among the most important bilateral donors for Cape Verde.

Germany has been an important donor country. But, since Cape Verde no longer belongs to the group of LDCs, development cooperation has been phased out.
The EU cooperation strategy for Cape Verde (for the years 2008-2013) will be centered on support to combat poverty through general budgetary support operations and support for the special EU/Cape Verde development partnership. 51 million EURO has been set aside for the period 2008-2013.