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THE
Philippines has expressed interest in tapping additional
financing for various projects through the Asian
Development Bank’s (ADB) Multitranche Financing Facility
(MFF) this year.
In an
ADB policy paper, titled “Mainstreaming the MFF,” the
bank said the demand for the MFF among developing
member-countries, particularly large borrowers like the
Philippines, is quite high.
As of
April his year, the paper stated that 19 MFFs have
already been approved with a total facility that amounts
to $10.30 billion.
The bank
said two were processed in 2005, eight in 2006, seven in
2007 and two in 2008. The average size of the MFFs is
$542 million, while the average availability period is
seven to eight years.
“Most of
the MFFs have been approved for India and Pakistan.
Azerbaijan, Bangladesh, the People’s Republic of China (PRC)
and Vietnam are also clients. Afghanistan, Armenia,
Georgia, Indonesia, the Philippines, Sri Lanka,
Tajikistan and Uzbekistan have also expressed interest
in the MFF,” the ADB paper said.
“The two
largest MFF users (by number of investment programs and
overall facility amounts) are India and Pakistan. Of the
19 approved MFFs, 10 are for India (totaling $4.51
billion) and five are for Pakistan ($3.88 billion).
MFFs
have also been approved for Azerbaijan ($500 million),
Bangladesh ($430 million), PRC ($50 million) and Vietnam
($930.7 million).
“Afghanistan, Indonesia and the Philippines are likely
to become clients in 2008,” the paper stated.
In
August 2005 the ADB board approved new financing
instruments and modalities, which included, among
others, the MFF. An MFF establishes a partnership
between the ADB and a client for the purposes of working
in a sector or sectors.
The MFF
features a standby letter of credit which can be used to
extend debt finance and advice for large standalone
projects with interrelated components, investment
programs with interconnected components in a sector or
sectors, and credit lines for small- and medium-sized
enterprises and local governments.
An
important feature of the MFF, the ADB said, is that the
overall facility amount is not recorded as a formal,
legally binding commitment on the part of the ADB or its
clients; only the converted loan, guarantee, or portion
of a credit line is.
The MFF
provides the ADB and its clients multiple-entry points
for policy dialogue. Policies can be refined, governance
risks corrected, and safeguard frameworks adjusted to
take into account specific issues.
The ADB
said MFFs on average finance about 23 percent of an
investment program and about $2.14 billion in 23 loans
from 16 MFFs have been declared effective. Contracts
totaling $671.71 million have been awarded under nine
MFFs and $221.18 million has been disbursed.
The
bank, however, said that eight approved loans under
seven MFFs are not yet effective. The ADB said some
countries prefer to have a substantial number of
contract packages ready for awarding before drawing upon
financing from an MFF.
The MFF
has been used mainly to finance infrastructure and
utilities such as transport, irrigation infrastructure,
electricity transmission and selected urban devices.
These
sectors usually require large and long-term investments,
as well as account for the bulk of the ADB’s business
volume.
Of the
19 MFFs approved on April 30, 2008, six are in the
transport sector, worth $3.90 billion in ADB financing;
seven went to the power sector, $3.81 billion; four in
the urban sector, $1.9 billion; one in irrigation
infrastructure, $900 million; and one in financial
intermediation, $500 million.
However,
the MFF can be used in any sector. Thus far, MFFs have
been converted only into loans, including a financial
intermediation loan; none has been converted into
guarantees. All resulting financing has been made
exclusively on a recourse basis (sovereign-backed). The
terms and conditions for each loan have also been
traditional. |
