OPEC FUND QUARTERLY 2 2024 The OPEC Fund for International Development
STRONGER TOGETHER The 3 rd OPEC Fund Development Forum
Breaking free
How to unleash the power of the private sector to spur sustainable development
CELEBRATIONS Marking 25 years of private sector engagement
Be flexible, listen to your clients and adapt to their needs
The OPEC Fund Quarterly is published four times a year by the OPEC Fund for International Development. The OPEC Fund works in cooperation with developing country partners and the international development community to stimulate economic growth and social progress in low- and middle-income countries around the world. The organization was established by the member countries of OPEC in 1976 with a distinct purpose: to drive development, strengthen communities and empower people. The OPEC Fund Quarterly is available free. If you wish to be included on the digital distribution list, please contact us via opecfund.org . Back issues of the magazine can be found on our website. The contents of this publication do not necessarily reflect the o ffi cial views of the OPEC Fund or its Member Countries. Any maps are for illustration purposes only and are not to be taken as accurate representations of borders. Editorial material may be freely reproduced, providing the OPEC Fund Quarterly is credited.
EXECUTIVE EDITOR Nadia Benamara EDITOR Axel Reiserer
PUBLISHERS The OPEC Fund for International Development Parkring 8, A-1010 Vienna, Austria Tel: (+43-1) 51564-0 Fax: (+43-1) 51392-38 www.opecfund.org
EDITORIAL TEAM Angus Downie, Howard Hudson, Basak Pamir, Nicholas K. Smith PHOTOGRAPHS Abdullah Alipour Jeddi, Carlos Opitz (unless otherwise credited) PRODUCTION Iris Vittini Encarnacion DESIGN Robin Turton, More Tea Design Ltd PRINTED IN AUSTRIA Print Alliance HAV Produktions Gmbh This publication is printed on paper produced from responsibly managed forests.
FRONT COVER ILLUSTRATION: Robin Turton; elenabsl/Shutterstock.com; Golden Sikorka/Shutterstock.com
CONTENTS
THE PRIVATE SECTOR Special Feature: How the private sector can help finance a brighter future for the developing world 5-49
6-13 How the private sector can advance development 14-17 The OPEC Fund and the private sector: 25 years of successful cooperation 18-23 Interview Tareq Alnassar: Delivering services – with and through the market 24-27 Interview Malcolm Bricknell: The OPEC Fund – punching above its weight 28-30 Trading places: Going beyond trade finance to maximize growth and opportunity 31-33 Interview Samer Judeh: “Today everything has to be energy e ffi cient,
The OPEC Fund marks 25 years of private sector engagement 14-17 & 62
green and renewable. It’s not an option, it’s a must” 34-37 Interview Guido Bichisao: Data for decision making – EIB on the record 38-41 Interview Marife
IN OTHER SECTIONS...
In the Field 50-51 The OPEC Fund in Uzbekistan Connecting people, business and culture along the Silk Road
Spotlight 54-57
OPEC Fund Development Forum Gathering partners and friends, the institution announces ambitious plans to increase its activities and boost its investments massively Events 58-61 58-59 Climate Solutions Week in Vienna 60-61 Annual meetings and anniversaries The Back Page 62 Marking 25 years of the OPEC Fund Private Sector Department
Apilado: Appetite for action – ADB on the record 42-45 Interview Hande
I ş lak: Stoking the green economy – EBRD on the record
Development News 52-53 New OPEC Fund projects in Bangladesh, Bosnia and Herzegovina, the Dominican Republic, Senegal, Seychelles, Tanzania and Türkiye
46-49 Interview Admassu Tadesse: “We are all
trying to rebound” – TDB on the record
EDITORIAL
THE FINAL COUNTDOWN
Dear Reader, T he saying “Rome wasn’t built in a day” is often used to emphasize the idea that great things cannot be achieved overnight. It took the mighty Roman Empire more than seven years to raise the Colosseum. This is considerably less than what humankind has left to deliver the 2030 Sustainable Development Goals (SDGs), for which little more than five years remain. Time is one big concern. Funding is the other. In his opening speech at the latest OPEC Fund Development Forum in Vienna in late June President Abdulhamid Alkhalifa said: “We need an estimated US$3.9 trillion per year to achieve the SDGs.” Consequently, he announced a significant increase in OPEC Fund spending in the coming years. Although other development partners have similar ambitions, it is an accepted fact that sovereign spending alone will not be su ffi cient to close the funding gap. That is why in this issue of the OPEC Fund Quarterly we examine what more the private sector could do to support sustainable development and strengthen economic resilience – in terms of financing and beyond. The funds, at least, are available. According to the World Economic Forum, the private sector currently manages an estimated US$210 trillion in assets. Mobilizing a mere 2 percent of this treasure would bridge the SDG gap. The big question however is how to make it happen. OPEC Fund Senior Economist Angus Downie examines di ff erent ways to engage the dynamic
powers of the private sector in the pursuit of development (pp 6-13). He concludes: “By aligning their business interests with broader development goals, private companies can act as engines of economic development and make significant contributions.” Turning (this) theory into practice is what the OPEC Fund has been doing in its dedicated Private Sector Department, which marked its 25 th anniversary this June. Our issue looks back at what has been achieved in the first quarter-century, profiles selected showcase projects and ventures to look into the proverbial crystal ball (pp 14- 34). A celebratory event with partners in June gave cause for confidence: “Winning is always a team e ff ort,” said Tareq Alnassar, Vice President, Private Sector. Then it is all the better to know how others do it. Our magazine o ff ers a series of fascinating interviews with development partner institutions and clients. Guido Bichisao, Senior Advisor at the European Investment Bank (EIB), takes us on a deep dive into how data management is transforming financial institutions (pp 34-37): “Innovation can be a game changer,” he says. The Asian Development Bank’s (ADB) Portfolio Management Director Marife Apilado says (pp 38-41) about development finance institutions: “I think we’re well- placed to influence policy frameworks toward sustainable and resilient solutions.” When it comes to adapting to new challenges, the European Bank for
Reconstruction and Development (EBRD) has often been a frontrunner. Founded in 1991 to support the transition to a private sector-based economy after the fall of communism in Europe, the bank has in recent years reinvented itself as a trailblazer of the green transition. Hande I ş lak, Director of Corporate Debt Portfolio, told us (pp 42-45): “Our role is to catalyze systemic change so that climate investments become economically viable.” Admassu Tadesse, Group President and Managing Director of the Eastern and Southern African Trade and Development Bank (TDB) (pp 46-49) warns against su ff ocating growth: “The regulatory environment has become very strict and onerous in many ways.” In addition to o ff ering food for thought, the new issue of the OPEC Fund Quarterly also celebrates a series of successful events such as the Development Forum, the new Climate Solutions Week, high-level missions and more. They illustrate the institution’s growing influence as a convener, attracting governments, development partners, business leaders and civil society organizations with the goal of mobilizing investment, inspiring dialogue and providing thought leadership. This magazine is written with the ambition to make a small, but valuable contribution to this goal. We wish you a satisfying read.
Axel Reiserer, Editor
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SPECIAL FEATURE
Growth engine, job machine, value creator – is the private sector really the economic jack of all trades? In this issue we examine what the private sector can do in development and how peer institutions are leveraging the sector’s potential PRIVATE SECTOR
5
THE PRIVATE SECTOR
HOW THE PRIVATE SECTOR CAN ADVANCE DEVELOPMENT
Neoliberal concerns about state interference in the economy have long since been replaced by the realization that the state’s resources are limited, and not just financially. But the private sector can only become a white knight in times of need if the conditions are right By Angus Downie, Senior Economist, OPEC Fund
O ne of the most famous quotes by the late US President Ronald Reagan (1981-1989) encapsulates neoliberal doctrine like a grain of sand cast in amber: “The nine most terrifying words in the English language are: ‘I’m from the Government, and I’m here to help,’” he said in 1986. Since then, the role of the state in the economy has changed dramatically. This also had a profound impact on development. The World Bank and IMF Spring Meetings in mid-April 2024 contemplated how more funds can be allocated to debt-strapped nations and their development goals as global crises stretch aid budgets. Unique to 2024, a record number of development organizations and programs, including the World Health Organization, the vaccine alliance Gavi and the Global Partnership for Education, are also aiming to replenish contributions from advanced countries. Hard already at peaceful times, this task is even harder at times of global geopolitical tensions, open war, constrained public finances in the aftermath of the COVID-19 pandemic,
political uncertainty around the US presidential election and slowing global growth. Meanwhile, lending by China, the biggest bilateral creditor to developing countries over the past decade, has slowed: over 40 low- and middle-
income countries are now repaying more compared to what China is lending. While some of the development organizations and programs can tap alternative sources of funding, such as philanthropies and charities, most legally cannot. Additionally, relatively few development organizations and programs have records (or knowledge) of tapping capital markets to raise money. This leaves the private sector as an important source of funds to support sustainable economic development. World Bank Group President Ajay Banga summed up the challenge pointedly: “No amount of money from just multilateral development banks (MDBs) can cover all
“No amount of money from just multilateral development banks can cover all of the anticipated costs of adapting to climate change and slowing global warming.” Ajay Banga, President, World Bank Group
of the anticipated costs of adapting to climate change and slowing global warming. The reality is that government money and multilateral bank money alone will not get to those trillions of dollars… that’s
why the private sector is really important.”
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Photo: World Bank
SPECIAL FEATURE
How can the private sector help support sustainable economic development in developing countries?
T ypically, when thinking of sustainable economic development, the main organizations that come to mind are the government-funded multilateral development banks (MDBs)/development finance institutions (DFIs), bilateral agencies, and other publicly supported bodies such as development organizations, non-governmental organizations, civil society organizations and charities. However, a core partner to developing countries is the private sector, which plays a crucial role in supporting sustainable economic development through various means.
Investing in sustainable infrastructure projects that support the Sustainable Development Goals (SDGs), such as renewable energy, clean water, sanitation and transportation, can drive economic growth while also promoting environmental sustainability and social inclusion. These investments create employment opportunities, improve productivity and enhance quality of life for communities.
Investment in sustainable infrastructure
Private sector firms often bring advanced technologies, innovation and know-how to developing countries, facilitating innovation and productivity gains across sectors. This technology transfer can help bridge the development gap, driving economic growth through the development of new products, services and business models, while also promoting sustainable industrialization. Large corporations can support SMEs through supply chain partnerships, mentorship programs and access to finance. By fostering the growth of small businesses, the private sector can stimulate entrepreneurship, create value chains and spur local economic development.
Technology transfer
Supporting small and medium-sized enterprises
Private businesses create jobs, which are vital for reducing poverty and fostering inclusive economic growth. By providing jobs, they empower individuals and communities to improve their living standards and contribute to the economy. Moreover, the private sector is the main provider of employment in developing (and developed) economies. Therefore, governments must create supportive environments that enable businesses to thrive: respect for the rule of law, guaranteed property rights and robust banking sectors that can lend to businesses.
Job creation
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THE PRIVATE SECTOR
Private companies can adopt environmentally sustainable and socially responsible practices such as reducing carbon emissions, promoting fair labor standards and respecting human rights. By integrating sustainability into their operations, they can contribute to environmental conservation and social welfare while also enhancing their long- term viability. Collaboration between the private sector, government agencies and NGOs can leverage resources and expertise to address development challenges e ff ectively. Public-private partnerships (PPPs) can mobilize investment capital, share risks and deliver essential services such as healthcare, education and infrastructure. Private sector banks, venture capital firms and microfinance institutions can provide access to financial services for individuals and businesses in developing countries. The private sector also mobilizes investment capital, both domestic and foreign, to fund business expansion, infrastructure projects and technological advancements – through an e ffi cient allocation of resources based on market demand, investment opportunities and profit potential. By providing capital for investment and entrepreneurship they enable economic empowerment, stimulate investment, create jobs and spur economic development. Private companies respond to consumer demand and market signals, driving innovation and e ffi ciency in the delivery of goods and services. Private companies can help develop local markets by investing in distribution networks, market research and product adaptation. By understanding and catering to the needs of consumers in developing countries, they can create sustainable demand for goods and services, driving economic expansion. At the same time, their focus on meeting customer needs fosters competition, lowers prices, improves quality and expands consumer choice, enhancing overall welfare and economic development.
Responsible business practices
Private companies, typically driven by market forces, operate e ffi ciently to maximize productivity. Their focus on profitability incentivizes them to optimize resources, streamline processes and innovate, leading to increased competitiveness, better use of finite resources and enhanced economic output. Private companies have the flexibility to respond quickly to changing market conditions, regulatory environments and consumer preferences. Their ability to adapt to evolving circumstances allows them to seize opportunities, mitigate risks and sustain long-term growth in dynamic economic environments. The private sector is also characterized by a culture of risk-taking and experimentation, which is essential for driving innovation and progress. By investing in new ventures, exploring uncharted markets and testing novel ideas, private firms push the boundaries of economic development and drive positive change.
Parnerships with governments and NGOs
E ffi ciency and productivity
Access to finance and capital formation
Flexibility, agility and adaptability
Risk-taking and experimentation
Market development
In conclusion Overall, the private sector’s engagement in sustainable economic development involves a combination of investment, innovation, market-driven solutions, job creation, responsible practices, entrepreneurship, e ffi ciency, resource allocation, technological advancement, flexibility, risk-taking and collaboration with other stakeholders. By aligning their business interests with broader development goals, private companies can act as engines of economic development and make significant contributions to building prosperous and resilient societies in developing countries.
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SPECIAL FEATURE
How can the private sector connect the SDGs with economic growth, social inclusion and environmental protection?
T he SDGs provide a comprehensive framework for addressing global challenges and achieving sustainable development. By using the SDG framework, the private sector can play a critical role in helping to deliver economic growth, social inclusion and environmental protection by integrating each SDG into business strategies and operations:
Collaboration with other stakeholders, including governments, NGOs, academia and civil society can amplify the impact of private sector e ff orts to deliver the SDGs. PPPs can leverage resources, expertise and networks to address complex challenges such as poverty alleviation, education, healthcare and climate action. The Climate Finance and Energy Innovation Hub, co-launched in March 2023 by the OPEC Fund and UN Capital Development Fund, is one such successful partnership. Private sector financial institutions can promote financial inclusion by expanding access to banking services, credit and insurance for underserved populations. This empowers individuals and businesses to participate in the formal economy, build assets and improve their livelihoods, thereby contributing to social and economic development. Transparent reporting on sustainability performance, including progress towards SDG targets, enables stakeholders to hold private sector companies accountable for their actions and impacts. This fosters trust, builds credibility and encourages continuous improvement in sustainability practices.
Partnerships for impact
Private sector companies can align their business strategies with the SDGs by identifying areas where their operations can contribute to achieving specific goals. This could involve focusing on sustainable production practices, renewable energy, inclusive supply chains or products and services that address societal needs.
Alignment of business strategies
Promotion of financial inclusion
Reporting and transparency
In conclusion By integrating the SDGs into business strategies and operations, the private sector can contribute to economic
growth, social inclusion and environmental protection, while also creating long-term value for shareholders, employees, customers and society at large.
Private sector firms can drive innovation to develop and scale up sustainable technologies, products and services that address the SDGs. This includes initiatives such as renewable energy technologies, green buildings, waste management solutions and a ff ordable healthcare innovations that improve access for marginalized populations. Adopting sustainable and ethical practices throughout the supply chain can contribute to social inclusion and environmental protection. Private companies can work with suppliers to ensure fair labor practices, promote gender equality, reduce carbon
Innovation for sustainable solutions
Responsible supply chain management
emissions and minimize environmental impact.
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THE PRIVATE SECTOR
How can the private sector align its profit motive with economic development which often has to serve “good”, yet loss-making causes?
A ligning the profit motive of the private sector with economic development goals that may involve “good”, but initially loss-making, causes requires innovative approaches and a shift in mindsets. There are several strategies that businesses can employ to reconcile profit motives with serving broader societal interests:
Collaborate with governments, NGOs, academia and other stakeholders to pool resources, share risks and leverage complementary expertise. PPPs and multi-stakeholder initiatives can mobilize collective action to address complex development challenges more e ff ectively. Explore impact investing opportunities that generate financial returns alongside measurable social or environmental impact. By allocating capital to projects or ventures that advance economic development objectives, investors can achieve both financial and social goals simultaneously. Integrate Corporate Social Responsibility into business strategies and practices, aligning profit-making activities with
Partnerships and collaboration
Impact investment
ethical, social and environmental considerations. CSR initiatives can
enhance brand reputation, attract socially conscious consumers and foster long- term stakeholder relationships. Assess and mitigate risks associated with pursuing economic development initiatives such as regulatory, financial, operational and reputational risks. Implement robust risk management strategies to minimize potential losses and safeguard company interests while pursuing socially beneficial objectives.
Corporate Social Responsibility
Emphasize the long-term value creation potential of investing in
economic development initiatives, even if they result in short-term losses. By considering the broader impacts on society, environment and reputation, businesses can recognize the potential for sustainable profitability. Adopt a “shared value” approach that seeks to simultaneously generate economic value for the company and social value for the community. Identify opportunities where addressing societal needs aligns with core business activities, creating win-win outcomes for both the business and society. Develop innovative business models that integrate economic development goals into core operations. This could involve o ff ering products and services tailored to underserved markets, implementing inclusive supply chain practices or leveraging technology to address social challenges profitably.
Risk management and mitigation
Long-term value creation
Shared value creation
Innovative business models
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SPECIAL FEATURE
In conclusion Overall, aligning profit motives with economic development requires a holistic approach that considers the interconnect- edness of business success and societal well-being. By embracing innovation, collaboration, responsible business practices and a long-term perspective, the private sector can play a catalytic role in driving sustainable and inclusive economic development.
Develop metrics and frameworks to measure and report the social, environmental and economic impact of business activities. By transparently communicating the outcomes and benefits of investing in economic development, businesses can demonstrate accountability and build trust with stakeholders.
Measuring and reporting impact
Engage employees in initiatives that support economic development goals, fostering a sense of purpose and commitment to creating positive change. Invest in talent development programs that equip employees with the skills and knowledge to contribute e ff ectively to both business success and societal progress.
“Aligning profit motives with economic development requires a holistic approach.”
Employee engagement and talent development
Market opportunities in sustainable development: Recognize the growing market opportunities in sectors related to sustainable development such as renewable energy, clean technology, healthcare, education and inclusive finance. By tapping into these emerging markets, businesses can capitalize on consumer demand while advancing economic development objectives.
Market opportunities in sustainable development
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THE PRIVATE SECTOR
T here are several core reasons why, underlining the importance of promoting rules, regulations and certainty for encouraging private sector investment. At the same time, public interests are also best served by having certainty linked with respect for the rule of law to help foster an environment that can develop economies sustainably while providing employment and supporting livelihoods: Why is it important to set up clear regulatory frameworks to incentivize private sector investment, while also safeguarding public interests?
Clear regulatory frameworks provide certainty and stability for private sector investors by establishing predictable rules and guidelines for conducting business. Investors are more likely to commit capital to development projects when they have confidence in the regulatory environment, reducing uncertainty and risk. Transparent and investor-friendly regulations attract investment capital from domestic and foreign sources, facilitating the financing of development projects. By creating an enabling environment for private sector participation, governments can leverage private investment to supplement public funds and address funding gaps in infrastructure, healthcare, education and other critical sectors. Well-designed regulatory frameworks promote competition and e ffi ciency in markets, driving innovation, productivity and quality improvement. Competition encourages private companies to strive for excellence, optimize resources and deliver better value for consumers, leading to economic growth and development.
Providing certainty and stability
Regulatory frameworks play a crucial role in safeguarding public interests, including consumer rights, environmental conservation, labor standards and social equity. Regulations can establish minimum standards, enforce compliance and mitigate negative externalities associated with private sector activities, ensuring that development projects benefit society as a whole. E ff ective regulatory frameworks strike a balance between risk and reward for private sector investors, aligning incentives with broader development objectives. Regulations can provide incentives such as tax breaks, subsidies, guarantees or preferential treatment for projects that generate positive social or environmental outcomes, while managing risks through oversight, enforcement and accountability mechanisms. Regulatory frameworks can promote sustainable development by integrating environmental, social and governance (ESG) considerations into decision- making processes. Regulations can encourage responsible business practices, environmental stewardship, community engagement and long-term value creation, ensuring that development projects contribute to lasting prosperity without compromising future generations’ needs.
Attracting investment capital
Protecting public interests
Fostering competition and e ffi ciency
Balancing risks and rewards
Promoting sustainable development
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SPECIAL FEATURE
A dissenting voice: “The ‘Billions to Trillions’ Charade” The Indian economist Jayati Ghosh argues that successful crowding-in of the private
mechanisms, and regulations to curb monopolistic and anticompetitive behaviour.” The economist acknowledges the power of the private sector: Redirecting just one percent of the privately held worldwide financial assets worth US$470 trillion toward climate and development initiatives would be more than enough to meet even the highest estimates. But to avoid a situation where the public sector takes all the risk, the taxpayer becomes the lender of last resort and the private sector has the option to rake in the profits when things go well and to walk away when things go wrong, Ghosh advocates a “carrot and stick”-approach. “It is time to move beyond the hollow ‘billions to trillions’ mindset and ensure that the billions we do have are spent wisely,” she writes.
sector largely depends on creating a conducive environment: “Historically, private investors have relied on the public sector to finance infrastructure projects and riskier, less profitable ventures. If governments and international institutions remain resource-constrained, it is highly unlikely that private entities will step in to bridge the gap,” she writes in an opinion piece published on the “Project Syndicate”-platform in May. Ghosh, who is Professor of Economics at the University of Massachusetts Amherst, USA, also sees a second issue: “The problem is compounded by the di ffi culty of ensuring that private entities fulfil their commitments. The prevailing approach involves o ff ering incentives, such as subsidies and risk underwriting, but not at the same time establishing clear conditions, enforcement
Jayati Ghosh
Jayati Ghosh, Professor of Economics at the University of Massachusetts Amherst, USA, is a member of the Club of Rome’s Transformational Economics Commission and Co-Chair of the Independent Commission for the Reform of International Corporate Taxation. Learn more here: https:// www.umass.edu/social-sciences/ about/directory/jayati-ghosh
In conclusion
Transparent and accountable regulatory processes enhance governance and transparency, reducing opportunities for corruption, rent-seeking and regulatory capture. Open and inclusive decision- making processes build trust among stakeholders, foster public confidence and facilitate constructive dialogue between governments, businesses, civil society groups and communities a ff ected by development projects. Regulatory frameworks provide legal certainty and mechanisms for resolving disputes between private investors, government agencies and other stakeholders. Clear rules, property rights, contract enforcement and access to impartial judiciary or arbitration mechanisms mitigate investment risks, protect investor rights and uphold the rule of law, fostering a conducive environment for sustainable economic development.
Establishing clear regulatory frameworks that incentivize private sector investment while safeguarding public interests is crucial for unlocking the potential of private capital to drive inclusive and sustainable development. By creating an enabling environment that promotes investment, fosters competition, protects rights and promotes responsible business conduct, governments can harness the power
Enhancing governance and transparency
of the private sector to address development challenges and achieve shared prosperity.
Ensuring legal certainty and dispute resolution
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THE PRIVATE SECTOR IN NUMBERS
Photo: kleberpicui – stock.adobe.com
PRIVATE SECTOR
THE OPEC FUND AND THE
PRIVATE SECTOR
T The OPEC Fund launched its private sector operations in 1998, with its first transaction in 1999, complementing its long-standing engagement with the public sector in its partner countries. While public sector operations often aim to create the infrastructure and enable an environment for a successful economy, it is the private sector that produces and trades essential goods and services. The private sector drives economic growth, the generation of employment and the creation of wealth. Support to the private sector perfectly complements the OPEC Fund’s development mandate. Trade finance provides essential funding to keep the
wheels of the global economy turning and allows importers and exporters to benefit from the advantages of mutual exchange and burden-sharing. To date, the OPEC Fund’s investments in the private sector have directly boosted the economies of more than 70 countries globally through funding. The OPEC Fund has committed over US$10 billion to over 600 transactions across multiple sectors and geographies. Since the start of the trade finance window in 2006, the OPEC Fund has
provided over 11,000 unfunded guarantees globally for more than US$12 billion.
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Photo: BullRun – stock.adobe.com
SPECIAL FEATURE
The OPEC Fund has committed more than
US$10 billion to over 600 private sector transactions across multiple sectors.
Photo: vic josh/ Shutterstock
The OPEC Fund has provided over 11,000 trade finance guarantees globally, for more than US$12 billion .
The economies of more than 70 countries have
been boosted directly by OPEC Fund private sector funding.
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THE PRIVATE SECTOR
Behind the wheel: Over the past 25 years, the OPEC Fund’s private sector operations have supported over 70 countries worldwide across key development themes
Jordan Tafila Wind Power Plant
The OPEC Fund co-financed the construction of a 117 MW wind power plant and associated facilities on a build-own-operate basis. See pages 31-33
1
2
El Salvador Banco Promerica
Since 2014, the OPEC Fund has provided the bank with three loans totalling US$48 million, supporting job creation and
LAC
MULTI- REGIONAL
bolstering economic growth. See page 17
ASIA
AFRICA
2
Mauritania Banque Populaire de Mauritanie
Multiregional Supporting the Microfinance Enhancement Facility The OPEC Fund invested US$20 million in 2009, followed by an additional US$20 million in 2014. See page 23
Since 1999, the OPEC Fund has approved four credit lines to BPM for on-lending to SMEs, supporting the development of new businesses and helping to create over 25,000 permanent jobs. See page 27
Pan-Africa Export Trading Group (ETC Group) Since 2009, the OPEC Fund has provided several loans to ETC Group to support its working capital, capital expenditure and trade. See page 30
1 Trade 2 Financial Inclusion
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SPECIAL FEATURE
Sector spread: A quarter century of the OPEC Fund’s private sector financing has stimulated development across key economic sectors
On the following pages we highlight selected case studies where the OPEC Fund’s private sector operations have boosted economic growth, supported the creation of jobs and strengthened economic resilience.
PRIVATE SECTOR
Trade Finance US$4.13BN
Banco Promerica El Salvador
Country: El Salvador Type: Financial Institution First transaction: 2014 The OPEC Fund has supported Banco Promerica’s activities, particularly focusing on on- lending to small and medium- sized enterprises and addressing the demand for short-, medium- and long-term financing. The OPEC Fund has provided the bank with three loans totalling US$48 million, supporting job creation and bolstering economic growth. Banco Promerica has extended its support to SMEs in various economic sectors, including manufacturing, agribusiness and commercial services.
Banking and Financial Services US$2.98BN
Agriculture US$875MN
Energy US$760MN
Industry US$205MN
Communications US$148MN
Transport and Storage US$227MN
OPEC Fund total commitment: US$48 million Implementation Status: Completed
Health US$49MN
Multisector/Other US$56MN
The OPEC Fund provided us with much needed financing after the COVID-19 pandemic. The funds were especially helpful to support women and small enterprises, the backbone of our economy. We want to congratulate the OPEC Fund on its 25 year anniversary and thank you for your continued commitment to your mission of driving development, strengthening communities and empowering people. Thank you, OPEC Fund, for being an ally in the progress of El Salvador.
Over the first 25 years of OPEC Fund financing, trade finance has been the single biggest area of funding.
Mauricio Guirola, Commercial and Small Business Director, Banco Promerica
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THE PRIVATE SECTOR INTERVIEW
OPEC Fund Vice President, Private Sector, Tareq Alnassar on the sector’s role as the engine of growth, job creation and innovation, the first 25 years of private sector operations – and looking forward to the next 25 By Axel Reiserer, OPEC Fund DRIVING GROWTH AND DELIVERING SERVICES – WITH AND THROUGH THE MARKET
OPEC Fund Quarterly : Initially dedicated solely to public sector operations, at the turn of the century the OPEC Fund decided to add private sector and trade finance operations to its portfolio. Why? Tareq Alnassar: The OPEC Fund realized that to achieve its vision of creating a world where sustainable development is a reality for all, partner country governments cannot do this alone. To fill that gap, we wanted to create a new financing window for privately- or state-owned, yet commercially-run companies in partner countries, enabling the private sector to operate in areas where there were amplified economic and social development gains for the partner countries. The private sector is the engine of growth and job creation, so the OPEC Fund really had to open a dedicated financing window to complement its public sector o ff ering.
OFQ : How did our work with the private sector develop?
privately or state-owned, commercially- run entities. We o ff er a diverse array of financial products, including debt, equity, quasi-equity, risk sharing arrangements and Islamic finance products, making the OPEC Fund an attractive lender to clients. Financing solutions need to be adaptable and innovative to serve the private sector’s needs. We focus on sectors closely aligned with the OPEC Fund’s mandate and delivery of the Sustainable Development Goals (SDGs). This includes the financial sector, infrastructure and agribusiness, among others. The business landscape changes frequently and has changed substantially in the recent past with a rise in interest rates, soaring inflation and currency fluctuations. We have been working closely with our partners to navigate this dynamic landscape.
TA: The OPEC Fund’s private sector engagement has directly boosted the economies of more than 70 countries globally through its funding channels. We have committed over US$10 billion to over 600 transactions across multiple sectors and geographies. Since the start of our trade finance window in 2006, we have provided over 11,000 unfunded guarantees globally for over US$12 billion.
OFQ : Where do we want to go from here?
TA: The Private Sector Department is well-recognized and respected in the market. Now we would like to enhance our pipeline generation capabilities, i.e. structure our own real economy transactions, foster the OPEC Fund's catalytic impact by adding syndications to our o ff ering and further enhance our product o ff ering, for instance with local currency loans. With our recently established syndications function we aim to attract more partners to finance themes such as climate action [or adaptation and mitigation], micro, small and medium- sized enterprises (MSMEs), women-led or women-owned enterprises and food security.
In alignment with the OPEC Fund Food Security Action Plan, the Private Sector Department supported the agricultural and livestock business in Paraguay,
OFQ : What are the main characteristics of the Private Sector Department in your experience? TA: The Private
through one of our financial institution partners, Banco Sudameris.
Sector Department focuses on providing financing solutions to
Tareq Alnassar, Vice President, Private Sector, OPEC Fund
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SPECIAL FEATURE
“The private sector is the engine of growth and job creation, so the OPEC Fund opened a dedicated financing window to complement its public sector o ff ering.”
Tareq Alnassar, Vice President, Private Sector, OPEC Fund
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INTERVI EW
OFQ : How has the introduction of the Private Sector Department changed the OPEC Fund? TA: The Private Sector Department has been instrumental in contributing to the mandate of the OPEC Fund by providing much-needed financing for private sector borrowers in partner countries, which in most cases are not available through traditional commercial banks or the capital markets, complementing the scarce public sector resources in those countries.
financial institutions, which support microfinance and micro enterprises globally. As of December 2022, MEF had deployed over US$2.9 billion to 312 microfinance institutions in 64 countries. Similarly, MDBs including the OPEC Fund established the African Recapitalization Fund to inject equity into local African banks following the 2008 financial crisis to address the capital and liquidity needs of banks. Also, at the onset of the COVID-19 pandemic, we provided financing through Bank of Maldives to local SMEs severely impacted by the pandemic under our COVID-19 response initiative. We also assist in the OPEC Fund’s strategic initiatives, while contributing to the sustainability of the OPEC Fund. The private sector is contributing to the operational milestones, representing 30 percent of the resources and more than 40 percent of gross revenue of the OPEC Fund.
Photo: Mazur Travel/Shutterstock
OFQ : What role does the private sector play in the OPEC Fund’s Strategic Framework 2030? TA: Supporting the private sector and trade are operational priorities for us. We have deployed this support across several key concerns such as infrastructure and human capacity building, as well as cross-cutting themes including food security and climate action. We aim to be a catalyst for sustainable economic growth with a focus on projects that not only provide financial returns but also have a substantial positive impact on local communities. We have also supported greenfield industries in our beneficiary countries; i.e. the establishment of leasing companies in Sudan and Mauritania to provide access to financial products for this untapped segment. Several Private Sector Department projects have won global awards and we have been able to become partners in truly impressive success stories. One outstanding example was the financing of a small leasing company in Mauritania, which the OPEC Fund has supported with equity and loans. The leasing company subsequently evolved into the commercial bank Banque Populaire de Mauritanie, which is now one of the largest banks in Mauritania.
“Several Private Sector Department projects have won global awards and we have been able to become partners in truly impressive success stories.” Tareq Alnassar, Vice President, Private Sector, OPEC Fund
The Private Sector Department has also played a critical role in providing complementary financing in syndications of landmark projects globally. Our e ffi ciency and value added have made us a trusted co-financer of other multilateral development banks (MDBs) and major commercial banks. In times of global crises, such as pandemics or financial crises, the private sector has been quick to respond with financial assistance to a ff ected partners. This rapid response capacity underscores the OPEC Fund’s commitment to solidarity and support for its partners in times of need. Following the 2008 financial crises, the OPEC Fund 1 invested in the Microfinance Enhancement Facility (MEF) with other partners (IFC, KfW, OeEB) in response to the liquidity challenges faced by microfinance institutions to provide financing to
1 The OPEC Fund exited MEF in December 31, 2022 having achieved excellent development outcomes over a 13-year period.
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SPECIAL FEATURE
The private sector, through financial institutions, is adept at providing a range of financial services, e ffi ciently allocating capital and managing risk. For real economy projects there are cases where a blend of private and public sector resources is required – for example in public-private partnership (PPP) structures. The OPEC Fund has experience in this respect too: In the case of the Central Térmica de Temane power plant in Mozambique the Private Sector Department financed a 450 MW power generating facility, while the Public Sector Department funded the related transmission infrastructure. While the private sector is pivotal in driving innovation and e ffi ciency in many areas of the economy, the public sector plays an indispensable role in ensuring access, equity and provision of public goods. The best outcomes often emerge from leveraging the strengths of both segments to complement each other. OFQ : Trade is an important part of the Private Sector Department’s o ff ering. How can the OPEC Fund further enhance and expand its activities at a time when global trade is increasingly under threat? TA: We see our role as integral in facilitating trade and its importance. Understanding the bottlenecks for global and regional trade in partner countries allows us to o ff er bespoke solutions, thus boosting trade. To date, we have facilitated over US$12 billion in support for international trade. The OPEC Fund is facilitating trade flows through several mechanisms, including direct financing of corporate entities and collaborating with commercial banks and other development finance institutions. The OPEC Fund shares in the risks of various trade finance products. The OPEC Fund has also supported its partners in short-term financing either directly or through regional and local commercial banks. We were among the first to finance the African agricultural trader, Export Trading Group (ETC Group), which also supports over 600,000 smallholder farmers in the region. We have also partnered with the International Islamic Trade Finance
OFQ : The OPEC Fund has financed projects in more than 125 countries worldwide. Do you see di ff erent approaches to the private sector and its role in the national economy among the main regions Africa, Asia and Latin America & the Caribbean? TA: Most private sector companies that we work with are focused on solving challenges by providing financial inclusion, building infrastructure and facilitating trade. They create value and employment, generate tax revenue for the government, earn foreign currency through their export activities and act as engines of economic growth. While landscapes and operating environments di ff er, our approach remains always: Finding solutions for our clients.
“We were among the first to finance the African agricultural trader Export Trading Group, which supports over 600,000 smallholder farmers in the region.”
Tareq Alnassar, Vice President, Private Sector, OPEC Fund
Corporation (ITFC) in financing strategic commodities into and from our beneficiary countries.
The European Bank for Reconstruction and Development (EBRD) has been an inspiration for us with its Trade Facilitation Programme and a strong partner for rolling out our own trade financing activities.
Photo: Ivan Bruno de M/Shutterstock
OFQ : Are there sectors where the private sector is particularly well-placed to deliver and – in reverse – do you see activities better served by the public sector? TA: The delineation between sectors where the private and public sectors are best suited to lead is crucial for e ffi cient and sustainable development. The private sector, with its agility, innovation and capital, is particularly well-placed in areas where market mechanisms can e ffi ciently drive growth and deliver services. Conversely, the public sector is essential in areas where public goods, equity and long-term societal welfare are the primary concerns.
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INTERVI EW
Wadi Azraq solar panel farm, Jordan
OFQ : What role can the private sector play in addressing global challenges such as climate change? How can we attract and crowd in the private sector? TA: We have seen an increased role of the private sector in the financing of renewable energy projects in emerging markets. Private sector financing is also
driving the technological advancement required to tackle climate change such as the reduction of the production cost of solar and wind power facilities, the proliferation of e-mobility solutions, driving energy e ffi ciency across sectors, financing electric vehicle battery storage systems and supporting hydrogen-based solutions. The private sector has a crucial role in developing local and regional capital markets and providing other forms of innovative financing structures to address climate change and other global development challenges. Together with other MDBs and led by the International Finance Corporation (IFC) we co-financed the first commercial utility-scale wind power plant in the Middle East. The 117 MW Tafila wind power plant helped Jordan diversify its energy mix and enabled the country to attract additional investments in the renewable energy sector. In 2023, we financed the first non-state wind farm in Azerbaijan sponsored by ACWA Power of Saudi Arabia.
“MDBs’ private sector financing is driving the technological advancement required to tackle climate change.” Tareq Alnassar, Vice President, Private Sector, OPEC Fund
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SPECIAL FEATURE
PRIVATE SECTOR
Photo: Karol Moraes/ Shutterstock
Supporting microfinance investments globally
“Our main lessons are: Be flexible, listen to your clients and adapt to their needs.” Tareq Alnassar, Vice President, Private Sector, OPEC Fund
Country: Global Type: Equity First transaction: 2009
The Microfinance Enhancement Facility (MEF) was created in 2009 by the International Finance Corporation, KfW Development Bank and the Development Bank of Austria in response to the financial crisis and liquidity challenges faced by microfinance institutions worldwide. The OPEC Fund invested US$20 million in 2009, followed by an additional US$20 million in 2014. Between 2009 and 2022, MEF invested US$2.9 billion across 312 microfinance institutions in 64 countries, reaching 740,000 end borrowers – of which 78 percent were women and 69 percent were living in rural areas.
OPEC Fund total commitment: US$40 million Implementation Status: Completed
As chair of the Supervisory Board of the Microfinance Enhancement Facility I would like to warmly congratulate the OPEC Fund for International Development on its 25 th anniversary and would like to thank you for the support you have provided to MEF since the start, when our fund was set up to protect microfinance institutions against the e ff ects of the global financial crisis. We leveraged your investment, providing nearly US$3 billion of financing to more than 300 financial institutions in over 60 countries. We thank you for enabling us to create such a positive impact, and we wish you a very happy 25 th anniversary. Thank you.
OFQ : What are the three main lessons learned in 25 years and what is your outlook for the next 25 years? TA: Our main lessons are: Be flexible, listen to your clients and adapt to their needs. Work with partners and try to align requirements as much as possible in order to increase operational e ffi ciency and amplify development impact. Our goal is to help bridge the financing gap faced by private sector entities in partner countries, especially in regions where access to traditional banking and capital markets is limited. This involves providing both direct financing and encouraging other investors to contribute through resource mobilization or de-risking. We aim to further expand our geographic reach in Africa and to smaller size economies. The world has changed dramatically
Ruurd Brouwer, Supervisory Board Chair, MEF
in recent years, so we need to continue to adapt to the changing business landscape. Risk, be it perceived or actual, is the main constraint to private investment in our partner countries. We need to continue working with our partners on providing solutions to manage these. We foresee our Private Sector Department operations further increasing in relevance, serving as an engine of growth and job creation across our partner countries.
To date, the OPEC Fund has facilitated over US$12 billion in support for international trade.
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