ADB Urged to Expand Political Risk and Credit Guarantees to Support Projects at the Frontier

JEJU, REPUBLIC OF KOREA (17 May 2004) - ADB should use its political risk and credit guarantee products more aggressively in pioneering new financing solutions for public and private sector projects in Asia, a distinguished panel of experts told a seminar in Jeju at the weekend.

They were speaking at a seminar on the role of ADB guarantee products in promoting trade and investment in Asia, held on the sidelines of ADB's 37th Annual General Meeting of the Board of Governors.

The seminar, on "Guarantee Products and Risk Sharing Partnerships - Directions for the Future," brought together investors, financiers and project sponsors, many of whom are showing renewed interest in structured trade and project finance transactions throughout Asia utilizing credit enhancement products offered by ADB and other public and private sector insurance providers.

In its commercial cofinancing operations, ADB tries to help its developing member countries and private sector borrowers in securing commercial funds on suitable terms for ADB-assisted development projects.

"The fact is that the importance of ADB and other multilaterals to the private sector and our commercial cofinancing partners is not so much in our role as investors, but in our role as facilitators of investment through our ability to support our DMCs in good times - and bad times", ADB Managing Director General Young-Hoi Lee said in opening remarks to the seminar.

The seminar provided an opportunity to examine various recent initiatives undertaken by ADB in expanding the utilization of its guarantee products. These products are actively promoted by ADB as tools to encourage capital flows into the Asian region and to further deepen its relationships with cofinancing partners.

Martin Endelman, of ADB's Office of Cofinancing Operations, provided a detailed analysis of ADB's new Trade Finance Facilitation Program (TFFP), as well as recent power sector transactions in the Mekong region that benefited from ADB guarantee support.

"The $150 million TFFP is an innovative transaction developed by ADB's Private Sector Operations Department in partnership with the Office of Cofinancing Operations," he said. "Modeled on the highly successful Trade Facilitation Program of the European Bank for Reconstruction and Development, the TFFP introduces a mechanism for ensuring the stable flow of trade transactions in both normal periods and crisis situations.

Panel participants discussed the need for greater cooperation among regional export credit agencies in sharing risk and the growing interdependence between public and private sector credit and political risk insurers in short-term trade and long-term project finance.

The panel also highlighted the growing need for breach of contract, regulatory change and sovereign risk cover needed to support sub-sovereign projects and the role of the multilateral development banks and export credit agencies in supporting economic growth in Asia through their various guarantee and insurance products.

The panel consisted of T.C. Subramanian, Chairman and Managing Director of the Export-Import Bank of India; John Salinger, President of AIG Global Trade & Political Risk Insurance Co.; Eric Siegel, Executive Vice-President of Export Development Canada; Philippe Valahu, Regional Manager for Asia, MIGA; and Diana Smallridge, President of International Financial Consulting.

Nicholas Robson, a Partner at Jardine Fleming Thompson Risk Solutions Limited, moderated the panel discussion.