DRAFT

Feasibility Study of an ACP Investment Bank Project

2012/290369/1

March, 2013

This project is funded by A project implemented by

The European Union ACE International Consultants
 DRAFT
Feasibility Study of an ACP Investment Bank Project
2012/290369/1

Prepared by:

OUMAR SECK
Team Leader
Don Jacobson (Expert for the Pacific region),
Agnes Cishek (Expert for the Caribbean region),
Bernard Spinoit (Legal Expert)

Ma r c h 2 0 1 3

Presented by: ACE, International Consultants In Consortium with: HCL Consultants Limited
2 LIST OF ACRONYMS AND ABBREVIATIONS
AACCSA Addis Ababa Chamber of Commerce & Sectoral Associations
AADFI Association of African Development Finance Institutions
ACP African, Caribbean and Pacific
ACPIF ACP Investment Facility
ADB Asian Development Bank
ADFIAP Association of Development Financing Institutions in Asia and the Pacific
ADIA Abu Dhabi Investment Authority
ADPME ŐĞŶĐĞĚĞĠǀĞůŽƉƉĞŵĞŶƚĚĞƐWD
AFC Africa Finance Corporation (Nigeria)
AfDB African Development Bank
AFP African Financing Partnership
AFREXIM African Export-Import Bank
AfT Aid for Trade
AGF African Guarantee Fund for SMEs
AGOA African Growth and Opportunity Act
AIC African Infrastructure Consortium
AICD Africa Infrastructure Country Diagnostic
AITF Africa Infrastructure Trust Fund
ALADI Asociacion Latino Americana de IntegraciſŶ
AMC Asset Management Company (of IFC)
AMSCO African Management Service Company
ANGT Agence Nationale des Grands Travaux (Gabon)
ANU Australian National University
APBEF Association des Professionnels de Banque et Etablissements Financiers (Senegal)
API Agence de Promotion des Investissements (Cameroon)
APIL Association of Pacific Island Legislatures
APIEX Agence de Promotion des Investissements et des Exportations (Gabon)
APIX Agence de Promotion des Investissements et des Grands Travaux (Senegal)
ASEAN Association of South East Asian Nations
ASEPEX ŐĞŶĐĞ^ĠŶĠŐĂůĂŝƐĞĚĞWƌŽŵŽƚŝŽŶĚĞƐdžƉŽƌƚĂƚŝŽŶƐ
ATI Africa Trade Insurance Agency
ATMS African Training & Management Services
AU African Union
AusAID Australian Agency for International Development
BCEAO Central Bank of West African States
BDF Business Development Fund
BDC Botswana Development Corporation
BDEAC Development Bank of Central African States
BDG ĂŶƋƵĞ'ĂďŽŶĂŝƐĞĚĞĠǀĞůŽƉƉĞŵĞŶƚ
BEAC ĂŶƋƵĞĚĞƐƚĂƚƐĚĞů͛ĨƌŝƋƵĞĞŶƚƌĂůĞ;ĞŶƚƌĂůĂŶŬͿ
BEDIA Botswana Export Development and Investment Authority
BEMA Botswana Exporters & Manufacturers Association
BIH Botswana Innovation Hub
BITI Bank for International Trade and Investment
BIO Belgian Investment Company for Developing Countries
BMN ƵƌĞĂƵĚĞDŝƐĞăEŝǀĞĂƵ
BNDES Development Bank of Brazil
BOAD Development Bank of West Africa
BOCCIM Botswana Confederation of Commerce, Industry & Mines
BOI Board of Investment (Mauritius)
BRICS Brazil, Russia, India, China, South Africa
BSP Bank South Pacific
BSTP Bourse de Sous-Traitance et de Partenariat (Subcontracting Development Project)
CAAD Comprehensive African Agriculture Action Programme
CAE ŽŶƚƌĂĐƚŽƌƐ͛ƐƐŽĐŝĂƚŝŽŶŽĨƚŚŝŽƉŝĂ
CAF Latin American Development Bank
CARICOM Caribbean Community and Common Market
CARIBCAN Caribbean-Canada Free Trade Agreement
 CARIFORUM CARICOM and the Dominican Republic
CARIFTA The Caribbean Free Trade Association
CARPA ŽŶƐĞŝůĚ͛ƉƉƵŝăůĂZĠĂůŝƐĂƚŝŽŶĚĞƐŽŶƚƌĂƚƐĚĞWĂƌƚĞŶĂƌŝĂƚWƵďůŝĐ-WƌŝǀĠ;ĂŵĞƌŽƵŶͿ
CB Central Bank
CBA Central Bank of Angola
CBK Central Bank of Kenya
CBT Central Bank of Tanzania
CBI Caribbean Basin Initiative
CCAA The Caribbean Central American Action
CCAIM ŚĂŵďƌĞĚĞŽŵŵĞƌĐĞ͕ĚĞů͛ƌƚŝƐĂŶĂƚ͕ĚĞů͛/ŶĚƵƐƚƌŝĞĞƚĚĞƐDŝŶĞƐ;'ĂďŽŶͿ
CCI Chamber of Commerce and Industry (Senegal)
CCIA Chamber of Commerce, Industry and Agriculture
CCIMA ŚĂŵďƌĞĚĞŽŵŵĞƌĐĞ͕Ě͛ŝŶĚƵƐƚƌŝĞ͕ĚĞƐDŝŶĞƐĞƚĚĞů͛ƌƚŝƐĂŶĂƚ;ĂŵĞƌŽŽŶͿ
CEMAC (EMCCA in English) ŽŵŵŝƐƐŝŽŶĐŽŶŽŵŝƋƵĞĞƚDŽŶĠƚĂŝƌĞĚĞůΖĨƌŝƋƵĞĞŶƚƌĂůĞ
CENSAD Community of Sahel-Saharan States
CEPLG ŽŵŵƵŶĂƵƚĠĐŽŶŽŵŝƋƵĞĚĞƐ'ƌĂŶĚƐ>ĂĐƐ;ĐŽŶŽŵŝĐŽŵŵƵŶŝƚLJŽĨ'ƌĞĂƚ>ĂƋƵĞƐͿ
CEPOD ĞŶƚƌĞĚ͛ƚƵĚĞƐĚĞWŽůŝƚŝƋƵĞƐƉŽƵƌůĞĠǀĞůŽƉƉĞŵĞŶƚ;^ĞŶĞŐĂůͿ
C-EXIM China EXIM Bank (C-EXIM)
CBERA Caribbean Basin Economic Recovery Act 2000
CBTPA US Caribbean Basin Trade partnership Act
CDB Caribbean Development Bank
CBC Commercial Bank of Cameroun
CDE Centre for Development of Enterprise (EU)
CDE - Gabon ĞŶƚƌĞĚĞĠǀĞůŽƉƉĞŵĞŶƚĚĞƐŶƚƌĞƉƌŝƐĞƐ;'ĂŶŽŶŽŶĞ-stop-shop SME Agency)
China DB China Development Bank
CDC Commonwealth Development Corporation (UK)
CEDA Citizen Entrepreneurial Development Agency (Botswana)
CIDA Canadian International Development Agency
CGA ĞŶƚƌĞĚĞ'ĞƐƚŝŽŶŐƌĠĠĞ;^DƐƵƉƉŽƌƚĂŐĞŶĐLJŽĨĐŚĂŵďĞƌƐŽĨĐŽŵŵĞƌĐĞͿ
CIF Caribbean Investment Fund
CNP Conseil National du Patronat (Senegal)
CNES ŽŶƐĞŝůEĂƚŝŽŶĂůĚĞƐŵƉůŽLJĞƵƌƐĚƵ^ĠŶĠŐĂů
CoC Chamber of Commerce
COFIDES Spanish Development Finance Institution
COMESA Common Market for Eastern & Southern Africa
COS-SCA ŽŵŝƚĠĚ͛KƌŝĞŶƚĂƚŝŽŶĞƚĚĞ^ƵŝǀŝĚĞůĂ^ƚƌĂƚĠŐŝĞĚĞƌŽŝƐƐĂŶĐĞĐĐĠůĠƌĠĞ;^ĞŶĞŐĂůͿ
CPI Consumer Price Index
CPG ŽŶĨĠĚĠƌĂƚŝŽŶWĂƚƌŽŶĂůĞĚƵ'ĂďŽŶ
CREDP Caribbean Renewable Energy Development Program
CSME Caricom Single Market Economy
CZI Confederation of Zimbabwe Industries in Harare
DBB Development Bank of Botswana
DBC Development Bank of China
DBE Development Bank of Ethiopia
DBR Doing Business Report
DBSA Development Bank of South Africa
DEG Deutsche Investitions und Entwicklungsgeselleschaft(German DFI)
DevCo Directorate-General Development of the European Commission
DFC Development Finance Cooperation Committee
DFI Development Finance Institution
DfID Department for International Development (UK)
DUA Single Customs Declaration for the Dominican Republic
DUE ĠůĠŐĂƚŝŽŶĚĞů͛hŶŝŽŶƵƌŽƉĠĞŶŶĞ;hĞůĞŐĂƚŝŽŶͿ
DR-CAFTA Dominican Republic ʹ Central American Free Trade Agreement with the USA
EAC East African Community
EBA Ethiopian Bankers Association
EBID ECOWAS Bank for Investment & Development
EBRD European Bank for Reconstruction and Development
EC European Commission
ECA Export Credit Agency
e-CAM Entreprise Cameroun (SME Association)
ECCAS (CEEAC in French) Economic Community of Central African States
ECCB Eastern Caribbean Central Bank
ECLAC Economic Commission for Latin American and the Caribbean
 ECOWAS Economic Community of West African States
EDF European Development Fund
EIB European Investment Bank
EIA Ethiopian Investment Agency
EMPRETEC ZIMBABWE Zimbabwe SME Development Agency
EPA Economic Partnership Agreement
EU European Union
Exp Ass džƉŽƌƚĞƌƐ͛ Association
Exp PA Export Promotion Agency
FEFISOL European Solidarity Financing Fund for Africa
FemSEDA Federal Micro & Small Enterprise Development Agency (Ethiopia)
FFA Forum Fisheries Agency
FFM Federated States of Micronesia
Finnfund Finnish Fund for Industrial Cooperation (Finnfund)
FMO Entrepreneurial Development Bank of the Netherlands
FTA Free Trade Area
GCC Gulf Cooperation Council
GEX 'ƌŽƵƉĞŵĞŶƚĚĞƐdžƉŽƌƚĂƚĞƵƌƐĚĞĂĨĠĂĐĂŽ;ĂŵĞƌŽŽŶͿ
GEF Global Environment Facility
GICAM Groupement Inter-patronal du Cameroun
GIF Global Infrastructure Fund
GTLP Global Trade Liquidity Program (IFC, AfDB and other)
HDI Human Development Index
HDR Human Development Report
IDB or IADB Inter-American Development Bank
ICA Infrastructure Consortium for Africa
ICBC Industrial and Commercial Bank of China (ICBC)
ICD Islamic Corporation for Development of the Private Sector
ICD ʹ South Africa Industrial Development Corporation (South Africa)
ICF Investment Climate Facility
IDB Industrial Development Bank (South Africa)
IDBZ Infrastructures Development Bank of Zimbabwe
IGAD Intergovernmental Authority on Development (East Africa)
IsDB Islamic development Bank
IFC International Finance Corporation
IFP Investment Facility for the Pacific
IFU Danish Industrialization Fund for Developing Countries
IIC Inter-American Investment Corporation
I-EXIM India EXIM Bank (I-EXIM)
Infr DA Infrastructure Development Agency
IOC Idian Ocean Commission
IPA Investment Promotion Agency
JBIC Japan Bank for International Cooperation
JICA Japan International Cooperation Agency
KF Kuwait Fund
LCCI Lagos Chamber of Commerce and Industry
LDCs Least Developed Countries
LEA Local Enterprise Authority (SMME Development Agency of Botswana)
LPI Logistics Performance Index
MCBP Microfinance Capacity Building Program
MAN Manufacturers Association of Nigeria
MCC Millennium Challenge Corporation (USA)
MDGs Millennium Development Goals
MEBF DĂŝƐŽŶĚĞů͛ŶƚƌĞƉƌŝƐĞƵƌŬŝŶĂ&ĂƐŽ
MEDS DŽƵǀĞŵĞŶƚĚĞƐŶƚƌĞƉƌŝƐĞƐĚƵ^ĠŶĠŐĂů
MIF Multilateral Investment Fund
Min Ind & Inf Ministry of Industry and Infrastructure
MINPESA DŝŶŝƐƚğƌĞĚĞƐWD͕ĚĞů͛ĐŽŶŽŵŝĞ^ŽĐŝĂůĞĞƚĚĞů͛ƌƚŝƐĂŶĂƚ(Cameroon)
MOF Ministry of Finance
MRU DĂŶŽZŝǀĞƌhŶŝŽŶ;^ŝĞƌƌĂ>ĞŽŶĞ͕>ŝďĞƌŝĂ͕ZĞŽŽĨ'ƵŝŶĞĂ͕ƀƚĞĚ͛/ǀŽŝƌĞͿ
NOAEP National Organic Agriculture Enhancement Project
NEPAD New Partnership for African Development
NIB Nordic Investment Bank
Norfund Norwegian Investment Fund for Developing Countries (Norfund)
 NPSO National Private Sector Organisations
NZ AID New Zealand Agency for International Development
ODA Overseas Development Assistance
OECD Organization for Economic Cooperation and Development
OECS Organization of Eastern Caribbean States
OeEB Development Bank of Austria (OeEB)
OFID OPEC Fund for International Development
ONZFI Office National des Zones Franches Industrielles (Cameroun)
OTN Office of Trade Negotiations
PFIP Pacific Financial Inclusion Programme
PFTA Pacific Forum Technical Assistance
PFTAC Pacific Financial Technical Assistance Centre
PICs Pacific Island Countries
PIF Pacific Island Forum
PIFS Pacific Islands Forum Secretariat
PIPP Pacific Institute of Public Policy
PIPSO Pacific Islands Private Sector Organisation
PNG Papua New Guinea
PPIAF Public-Private Infrastructure Advisory Facility
PRIF Pacific Regional Infrastructure Facility
PSF Private Sector Federation (Rwanda)
PSD Private Sector Development
PSO Private Sector Operation
PRIF Pacific Regional Infrastructure Facility
PROPARCO French Investment and Promotion Company for Economic Cooperation
PTA Bank Eastern & Southern Africa Development Bank (initiated by COMESA)
QIA Qatar Investment Authority
RBSA Reserve Bank of South Africa
RDB Rwanda Development Board
REC Regional Inegration Community
SADC Southern Africa Development Community
SBI-BMI Belgian Corporation for International Investment
SECO Small Enterprises Development Corporation - Swiss State Secretariat for Economic Affairs
SICA Sistema de IntegraciſŶ Centro Americana
SIDA Swedish Agency for International Development Cooperation
SIFEM Swiss Investment Fund for Emerging Markets
SISs Small Island States
SME Small and Medium Enterprise
SIMTEST SIMEST (Italian Development Finance Institution)
SOFID Portuguese Development Finance Institution
SPC South Pacific Community
SSA Sub-Saharan Africa
Swedfund Sweddish Investment Fund for Emerging Market
SYNDUSTRICAM Syndicat des Industriels du Cameroun
ToR Terms of Reference
TFFP Trade Finance Facilitation Program
TFRP Trade Finance Reactivation Program
UAE United Arab Emirates
UMA Union du Maghreb Arabe (Arab Maghreb Union)
UN United Nations
UNCDF United Nations Capital Development Fund
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNECA UN Economic Commission for Africa
VC Value Chain
VIPA Vanuatu Investment Promotion Agency
WAEMU (UEMOA in West African Economic and Monetary Union
French)
WBG World Bank Group
WTO World Trade Organization
ZIA Zimbabwe Investment Authority
ZNCC ZNCC ʹ Zimbabwe National Chamber of Commerce
3 EXECUTIVE SUMMARY
The ACP group is a grouping of 79 developing countries that span three continents: Africa, the
Americas (for the Caribbean), Asia/Pacific (for the Pacific). With a population of 932 million people
in 2011 (14% of world population), the ACP group of states stands as the largest concentration of
low-income countries and small island states in the world. However, the region contributes only
1.9% to global GDP and some 4.7% to global trade. With their rich natural resources endowment,
the ACP countries have the potential to become significant players in the world economy; they are
increasingly becoming a highly attractive market and investment destination.

The list and typology of ACP countries are presented in Annex 1.

The relative socio-economic importance of the three regions that compose the ACP group is
presented in Table 1 below.

Table 1 Relative Socio-economic Weight of the three ACP Regions ʹ 2010/2011

GDP 2010
Population 2011 Constant 2005 Price FDI 2010
Total Share of ACP Value Share of ACP Value (US $ Share of ACP
(000) % (US$ million) % million) %
Africa (SSA) 883 309 94.78 831 962 83.23 39 714 87.94
Caribbean 38 282 4.10 155 159 15.52 4 690 10.38
Pacific 11 068 1.12 12 498 1.25 760 1.68
Total 932 659 100.00 999 619 100.00 45 164 100.00

Source: ACP Secretariat. 2012. Concept Note on the Establishment of the ACP Bank for International Trade and Investment (BITI). Brussels,
May 2012.

The ACP group of countries has had a long-standing partnership with the European Union covering
trade, development cooperation, and political dialogue. As an intergovernmental body, the ACP
stands for South-South solidarity and the pursuit of international social justice through North-South
cooperation and the dialogue of civilisations.

Standing as they are today at the crossroads of history, the ACP are embarking on a project to create
a knowledge-based and efficiency-driven Financing Vehicle that will help rejuvenate growth through
trade and investment and ensure their full integration into the global economy. This Financing
Vehicle is being considered in the context of increased challenges brought about by: the
intensification of global competition, the rise of regional trading blocks and the so-called BRICS, and
the end of asymmetric trade privileges, namely the EPA-generated ones with their major trading
partners e.g., the EU.

ACP countries suffer from both limited and inconsistent access to trade finance, SMME finance, large
project finance and infrastructure finance; due to a combination of their higher country risk profile,
weak financial infrastructure, and high dependency on volatile external public and private financial
flows.

To address these multi-level challenges, a feasibility study for the structuring and implementation of
an ACP Financing Vehicle is being prepared to assess the project demand, ascertain its financial
viability and validate the extent to which Trade Finance, SME Finance, Large Industrial Project
Finance and Infrastructure Finance and relevant Advisory and Technical Assistance services should
be part of the services portfolio of the proposed vehicle.

Feasibility Study of an ACP Investment Bank Project | 2012/290369/1 10

In addition, the feasibility study will determine the most relevant structure and business model for
the new Financing Vehicle and propose its innovation areas, value addition and synergy areas with
regard to the existing financial infrastructure.

3.1 Project Summary

This Feasibility study establishes the viability of an ACP Investment Bank. The study also articulates
an implementation plan for the proposed ACP Bank along with the key success factors in its planning
and its operations. Furthermore, the feasibility study and implementation framework defines the
key value proposition of the planned ACP Bank in relation to existing financial infrastructure and the
private sector of the ACP countries in the targeted service areas.

However, the study also proposes ƚǁŽ ŽƚŚĞƌ ͞&ŝŶĂŶĐŝŶŐ sĞŚŝĐůĞ͟ ŽƉƚŝŽŶƐ which are for the
consideration of the project sponsors.

3.2 Demand and Supply Gaps in Trade Finance, SMME Finance, Large
Industrial Project Finance & Infrastructure Finance in ACP Countries

A combination of desk research, expert opinion, field missions across the six geographic regions of
the ACP (Caribbean, Pacific, West Africa, Central Africa, East Africa, Southern Africa) and feedback
received from private and public sector stakeholders through direct interviews and questionnaires
have constituted the basis for a quantitative and qualitative assessment of demand, supply and
related gaps in the four areas the feasibility study will investigate, these are: (i) infrastructure
finance, (ii) trade finance, (iii) SMME finance, and (iv) large industrial projects finance in oil, gas,
mining, manufacturing, agribusiness and services.

Despite the apparent diversity of players in the development finance space of ACP countries,
significant financing gaps exist. These are in the areas of SMME finance, infrastructure finance, long-
term industrial and specialized financial services such as specialized investment banking/corporate
finance services and technical advisory services; though on different scales depending on the region
concerned as well as the windows of finance considered.

Over the last decades following independence of most ACP countries, the supply of financial services
in the four proposed areas the study intends to investigate have been largely ensured by three
groups of financial institutions with varying degrees of financial capacity, local market and industry
knowledge, procedural efficiency, and relevance of business/program model. These include: (i)
Multilateral development finance institutions, investment banks of OECD countries, and bilateral
cooperation agencies of G8 countries (ii) DFI of BDICS countries and regional Development banks of
ACP countries; (iii) locally-based financial institutions (commercial banks, specialized banks and
development banks) of ACP countries.

Successes have been recorded over the years by some of the financial institutions; and the volume
of financing supplied has been considerable. However, the variations on the key drivers of success in
investment and development financing have not enabled them to originate, develop and finance
programs and projects that resulted decisively in meaningful industry development, firm start-up
and growth, and export performance targets across the ACP region. Indeed, transactional
approaches and services gap in terms of availability and adaptability to local challenges have
prevailed over a relationship approach, a customized product offering, and a sustained focus on
long-term results and impact.

Feasibility Study of an ACP Investment Bank Project | 2012/290369/1 11

 The table below gives the profile of the main DFIs and other investment banks serving the ACP space.

Table 2 Profile of Selected Investment Banks and Development Finance Institutions Serving the ACP Countries (all figures in million of US Dollars)

TOTAL YEARLY
TOTAL ACP PRIVATE
AUTHORIZED PAID-IN SHAREHOLDER TOTAL TOTAL LOAN SECTOR
RATING CAPITAL CAPITAL EQUITY ASSETS BOOK OPERATIONS NET INCOME

IFC - International Finance Corporation ʹJun 2011 AAA/Stable/A-1+ 2,580 2,369 20,279 68,490 19,762 2,100 (2011) 1,579
EIB ʹ European Investment Bank ʹ Dec 2011 AAA/Negative/A-1+ 290,000 14,500 53,472 589,810 530,388 1,600 (2010) 2,291
AsDB ʹ Asian Development Bank ʹ Dec 2011 AAA/Stable/A-1+ 162,486 8,150 16,533 113,310 49,759 unknown 609
IADB ʹ Inter-American Development Bank ʹ Dec 2011 AAA/Stable/A-1+ 104,980 4,339 19,794 89,432 7,898 unknown 20
AfDB ʹ African Development Bank ʹ Dec 2010 AAA/Stable/A-1+ 100,000 3,628 7,269 29,483 12,771 1,900 (2011) 104
AFREXIMBANK ʹ Dec 2010 BBB-/Stable/F3 750 166 457 1,900 1,670 2,370 (2011) 44
CDB ʹ Caribbean Development Bank ʹ Dec 2011 AA+/Stable/A-1 712 157 637 794 448 89 (2011) 0.9
DBSA ʹ Development Bank of South Africa ʹ Dec 2011 BBB-/Negative/A3 - 532 2,388 6,319 5,046 935 (2011) 10
IDC ʹ Industrial Development Corporation ʹ March 2012 BBB-/Negative:A3 - 185 12,250 14,440 12,830 1,120 (2011) 404
AFC ʹ Africa Finance Corporation ʹ Dec 2011 Not yet rated 2,000 1,089 1,168 1,255 940 755 (2011) 35
PTA Bank ʹ Eastern & Souther Afri Devpt Bank ʹ Dec 2011 Ba1/ Stable 2,000 99 179 1,370 1,099 222 (2010) 34
EADB ʹ East African Development Bank ʹ Dec 2010 B-/Stable 1,000 102 93 237 104 17 (2010) 2
BOAD ʹ West African Development Bank ʹ Dec 2007 Not rated 1,400 142 240 2,195 600 556 (2011) 3
BDEAC ʹ Central African Development Bank ʹ Dec 2007 Not rated 188 48 80 145 263 318 (2011) -1.4
EIBD- ECOWAS Invest. & Development Bank ʹ Dec 2009 Not rated 940 192 238 323 1,058 300 (plan) 2
Total 12,282*
Source: Author compilation based on respective annual and rating reports

EIB figures converted from Euro to US Dollars at 1Euro = 1.25 US$; DBSA figures converted from South African Rand to US$ at 1 US$ = 7.5 Rand; figures rounded

(*) This figure can be rounded to $13 billion to include the unaccounted Caribbean & Pacific private sector operations from respectively the AsDB and the IADB. A further
$2billion to 3 billion can be added to account for financing from sources such as China, India, GCC and other sources bringing the total to $16 billion per year (oil, gas &
mining, and other FDI-based private sector financing excluded).

Feasibility Study of an ACP Investment Bank Project | 2012/290369/1 12

From a demand for financing services point of view, the large majority of ACP countries suffer from
availability together with cost and access problems both for infrastructure finance, trade finance,
SMME finance and large industrial project finance.

A summary of the quantitative and qualitative demand and supply gap assessment for the proposed
4 areas of focus of the planned ACP Bank is presented in Table 3 below respectively for SSA, the
Caribbean and the Pacific. For further details on demand/supply/gap assessment, please refer to
Annex 4.

Table 3 Summary ʹ Financial Services Gaps in ACP Countries

Level of Level of
Quantitative Qualitative Comments
Gap Gap (qualification of gaps or key factors affecting gaps)

Gaps significant across all sub-sectors

Infrastructure Large Large
Capacity building of local governments needed

Availability/cost/tenors of facilities a problem in crisis time

Trade Large Large Strong external dependency, vulnerability to crisis, high costs
Capacity of local players a constraint

Availability, cost, access issues

AFRICA SMME Large Large Equity and alternative financial services gaps
SME readiness challenges

Local availability, and access issues

Access to international capital market
Large Projects Large Large
Equity and project development issues
>ŽĐĂůƐƉŽŶƐŽƌ͛ƐĨŝŶĂŶĐŝĂůĐĂƉĂĐŝƚLJŝƐƐƵĞƐ

Variable; fair ODA/DFI support (US, CDB, IADB, EIB, IFC)

Infrastructure Fair Fair
Needs for regional projects in ICT namely

Strong IADB support;

Trade Small Fair
Access problems for SMEs

Availability, access and cost issues

CARIBBEAN SMME Large Large
SME access to finance readiness issues

Potential yet to be realized in key sectors: tourism /

hospitality, mining, agriculture, fishing.
Large Projects Large Large
>ŽĐĂůƐƉŽŶƐŽƌƐ͛ capacity issues
Availability, cost, equity, project development challenges

Strong ODA support + regional facilities (ADB, EIB, IFC); yet

weak Government financial/technical capacity.
Infrastructure Fair Fair
Gaps in energy & roads.
Demand for renewable energy investments

Upcoming Global/IFC SME Initiative & on-going ones fill gap

Trade Small Small
considerably; some BEE & demand side support needed

Gap was significant but there is an upcoming massive

PACIFIC Global/IFC SMME Initiative & on-going ones (AsDB, AusAID,
SMME Small Fair
etc.) that fills gaps considerably; some BEE & demand side
support needed (i.e. capacity building)

Potential yet to be realized in key sectors: tourism,

hospitality, mining, fishing; ůŽĐĂůƐƉŽŶƐŽƌƐ͛ĐĂƉĂĐŝƚLJ
Large Projects Large Large
>ŽĐĂůƐƉŽŶƐŽƌƐ͛ĐĂƉĂĐŝƚLJŝƐƐƵĞƐ
Availability, cost, equity, project development challenges

Feasibility Study of an ACP Investment Bank Project | 2012/290369/1 13

Infrastructure finance gap assessment in the ACP
Africa: SSA yearly infrastructure finance needs are immense. Current level of infrastructure
spending stands at US$ 45 billion a year while yearly demand for infrastructure finance is estimated
at a staggering US$ 93.4 billion per year over the next 10 years if the sub-Continent is to meet
international standards in this field. This excess demand which stand at around US$ 40 billion per
year stems from: (i) growth-induced demand in basic and social infrastructure (water, sanitation,
roads, health infrastructure, education and training infrastructure, social housing) and economic
infrastructure (energy, telecommunications, roads, industrial zones and business parks, ports,
airports, etc.), (ii) unmet demand in modern economic infrastructure imposed by globalization and
international competition and standards, and (iii) maintenance and upgrading requirements of
existing infrastructure.

If the inefficiencies in infrastructure project planning, execution and maintenance are properly
managed, the yearly infrastructure finance need would be reduced to around US$ 20 billion per
year. If those inefficiencies remain, the yearly financing requirements will stand at US$ 40 billion per
LJĞĂƌ͘,ĞŶĐĞ͕ŐĂƉƐŝŶƚŚĞĨŝŶĂŶĐŝŶŐŽĨĨƌŝĐĂ͛ƐŝŶĨƌĂƐƚƌƵĐƚƵƌĞĂƌĞĞƐƚŝŵĂƚĞĚƚŽďĞŝŶƚŚĞƌĂŶŐĞŽĨUS $
20 billion to 40 billion per year based on estimates from the World Bank and the Economic
Commission for Africa (ECA) and confirmed through a detailed study by the multi-stakeholder
mechanism, the Africa Infrastructure Country Diagnosis (AICD).

Table 4 Infrastructure Finance in SSA ʹ Demand/Supply/Gap Analysis

Quantitative Gap Assessment Qualitative Gap Assessment, Additional Demand, Innovation

1/. Enhanced PPP-based Funding Mobilization

Project Development:
ƒ Early stage risk capital
ƒ Project co-ordination: Conception to operations
ƒ Engineering and technical advisory services
Financial Advisory:
ƒ Project structuring/planning
Demand: US$ 93.4 billion/year (till 2022) ƒ Consulting/policy advisory
Supply: US$ 45 billion/year ƒ Corporate finance
Financing gaps (rounded): 40 billion (US $) ƒ Syndications (Debt/Equity)
Reallocate spending across categories: -8 Principal Investing:
Raise capital budget execution: -3 ƒ Co-investment with sponsors, private equity
Reduce operating inefficiencies: -3 ƒ Project finance: debt, equity, mezzanine
ƒ Structured products, trade & equipment finance
Improve cost recovery: -4
Advisory & Technical Assistance:
---------------------------------------------------------
ƒ Legal and regulatory reform for PPP in infrastructure
Remaining gaps: 22 billion (US $) ƒ Industry-specific technical expertise development
per year till 2012
ƒ ĂƉĂĐŝƚLJďƵŝůĚŝŶŐŝŶ͞/ŶĨƌĂƐƚƌƵĐƚƵƌĞWWW&ŝŶĂŶĐĞ͟ĂŶĚŵĂŶĂŐĞŵĞŶƚ
ƒ Knowledge resources sharing in PPP projects (financing opportunities,
partnership opportunities, technical expertise, expert database)
2/. Promotion of investment in green technology and energy-efficient
solutions
3/. Promotion of integrated regional projects to lower unit costs and pool
scarce resources in some of the poorest developing regions
4/. Promotion of smaller, more modular technologies to decrease the capital
cost of power plants and the time needed to plan and build them.
5/. Attracting IPP (Independent Power Producers)

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The quantitative gap assessment is complemented by a qualitative one that specifies the types of
services the SSA private sector and potential project sponsors are expecting from a potential partner
financial institutions. These include: (i) enhancing and scaling-up the PPP model in infrastructure
project finance and operations, (ii) further promoting IPP (independent power production), (iii)
taking advantage of sustainable and resource-efficient technology, including small and modular
solutions that can serve remote areas, (iv) considering regional solutions that result in meagre
resources pooling while allowing economies of scale that are critical to the viability of many capital
intensive infrastructure projects especially for poor small countries. Yet, the overriding priority
remains developing the capacity of policy-makers as well as the private sector with the view to
maximizing their regulatory capacity, their capacity to articulate and package their PPP needs in
ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ƚŚĞŝƌĐĂƉĂĐŝƚLJƚŽĚĞǀĞůŽƉƐƵĐĐĞƐƐĨƵůůLJWWWƉƌŽũĞĐƚƐƚŽƚŚĞŝƌ͞ŝŶǀĞƐƚŵĞŶƚƌĞĂĚŝŶĞƐƐ͟Žƌ
͞ďĂŶŬĂďŝůŝƚLJ͟ ƐƚĂŐĞ, and ultimately to derive value for money from their portfolio of PPP and IPP
projects in infrastructure

Caribbean: There is little quantitative information on the classification of funding gaps affecting the
Caribbean. Access to funding sources for infrastructure projects are restricted to international
cooperation agencies such as World Bank, IADB, IFC and the European Union, although some private
funds with knowledge and experience in project finance have started to show interest in the region
but with a low exposure.

The Caribbean is currently improving its business-friendly environment by strengthening its legal
institutions and raising the standards on regulatory process and cost efficiency. Globally the region
ranks 95 out of 183 countries and though improvements in trade processes are evident, the same
does not apply to infrastructure where, costs, time and uncertainty drive away private sector
enthusiasm. Excessive bureaucracy and regulations are drivers for promoting informal markets
hence lack of transparency and information are constant gaps on access to funding. Other gaps are
the long standing monopolies of utilities, poor oversight of bodies and standards in some countries.

In general terms, over the last decade there have been improvements in the coverage and
quality of many infrastructure services, but gaps remain. The Caribbean lags in electricity, roads and
technology while access to safe water and sanitation facilities performing relatively well
compared to other middle income countries. Coverage is even lower in rural areas with large gaps
between urban and rural still remaining.

In terms of renewable energy sources CARICOM has been driving the GEF 13-country CREDP, an
educational program on how usage of renewable energy sources can reduce the dependence on
fossil-fuel oil and greenhouse gas emission. Among the infrastructure projects areas of infrastructure
were financial vehicles are needed are:

ƒ Expansion of investments into bio-fuels, hydropower, wind farms, geothermal and

photovoltaic systems.
ƒ Solar energy equipment for the health centers and hotel sector; particular focus on
rural areas
ƒ Energy efficiency in the public sector
ƒ Energy projects targeting the transportation sector.
ƒ Energy projects with environmental protection strategies to mitigate the effects of climate
change.
Pacific: Feedback received from most stakeholders in the area of infrastructure finance concerned
the need to provide support (capacity building) to governments to allow them to better plan and
manage infrastructure projects. The ability of governments to manage and service loans for large
infrastructure projects severely restricts the ability of external agencies to bridge any funding gap
that might exist.

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China has become a significant lender. This has led in some cases to projects being undertaken that
would not have been considered viable by commercial or development banks and would have
resulted in high levels of public debt.

A country like Papua New Guinea (PNG) is undergoing a period of substantial economic growth
based largely on mineral and petroleum resource development with real GDP growth above 6% for
the last five years. This has created both the need for new and improved infrastructure and the
ability of the government to pay for it.

Overall, persistent demand and therefore gaps in terms of infrastructure finance present as follows:

In general: Most Pacific island countries are infrastructure-poor, particularly in remote regions and
outlying islands, resulting in reduced delivery of development outcomes and a severe impediment to
private sector development.

Energy: Some of the larger countries such as PNG have a significant proportion of their populations
without a reliable source of electricity. A similar situation exists in remote regions and outlying
islands of other countries. Fuel storage and distribution also requires further infrastructure
development in most countries.

Telecommunications: Internet connectivity is an issue where the major international fibre optic
cables are not available.

Land transport: Land transport is less of an issue in the smaller island countries than it is in the
larger countries such as PNG where there is a massive need for improved road (and possibly rail)
infrastructure.

Sea transport: All Pacific countries rely on international and inter-island sea transportation to a high
degree. Inter-island trade and passenger transport is provided by government and/or private sector
owned ships. These are often unreliable and expensive. The main ports and harbours are generally
adequate, albeit often inefficient and costly. A considerable demand exists for funding to improve
these services. This includes access for tourist ships, redevelopment of existing facilities, e.g.
relocation of Port Moresby port, and improvements to facilities.

Air transport: With tourism being one of the main business sectors in most Pacific island countries
air transport needs to be efficient and reliable. Despite considerable past efforts, there is still a
demand for funding to improve existing facilities and to extend the reach of air transport to
locations other than the capital cities to increase tourism.

Waste management, water and sanitation: Waste management, water and sanitation have been
the focus of development agencies for a long time and, although there is room for improvement,
would not be considered a priority for the proposed ACP bank.

Trade finance gap assessment in ACP countries

Africa: The existence of trade finance gaps, in the case of SSA, has been confirmed by G20 leaders,
the AfDB, and commercial banks consulted during the field mission, namely, the network bank
Ecobank and by some African importers met in the course of the field mission.

The gap for Trade Finance in SSA has been quantitatively estimated at US$ 225 billion per year,
based on reports from various sources (ICC ʹ International Chamber of Commerce; AfDB ʹAfrican
Development Bank; and UN-ECA ʹ Economic Commission for Africa). Qualitatively the gap is
articulated in terms of the need for the regional DFI (the AfDB) to enhance its capacity in the
management of trade facilitation facilities like IFC and its sister regional DFI such as AsDB and IADB;
the availability of specific financial facilities for SSA to meet normal demand and reduce constraints

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in time of crisis; technical assistance and advisory services in favour of partner financial institutions
and SMEs. Capacity building in complex and large value Structured Commodity Finance and
Structured Trade Finance; as well as in Islamic Finance that offers competitive solutions has already
been identified as a gap. Last, increased financial and technical capacity in export credit risk
insurance/guarantee and political risk insurance is also required to support FDI and trade finance
transaction across the region. In that respect the need to enhance the financial and technical
capacity of ATI (African Trade Insurance Corporation) has been recognized by many stakeholders
including ATI itself.

Table 5 below summarises the profile of trade finance related gaps in SSA.

Table 5 Trade Finance in SSA ʹ Demand/Supply/Gap Analysis

Quantitative Gap Assessment Qualitative Gap Assessment, Additional Demand, Innovation

Demand Assessment for 2012 Finance:

going forward: US$ 475 billion
approximately/year
Supply Assessment:
US$ 44 billion
Gap Assessment:
US$ 225 billion
NB: The 2009 London G20
Summit identified the
withdrawal of trade credit as one
of the factors that triggered the
Great Recession.
dŚĞůĞĂĚĞƌƐŽĨƚŚĞǁŽƌůĚ͚ƐƌŝĐŚĞƐƚ
nations committed themselves
to providing at least US$250
billion over the next years to
redress the situation prevailing
then (we assume 20% for SSA;
i.e. $50 billion potentially for
SSA)
ƒ Additional trade finance supply capacity (risk sharing, liquidity)
ƒ Trade finance supply capacity maintenance in crisis time
ƒ Additional capacity in political risk insurance/reinsurance ( additional
capitalization of ATI is strongly suggested)
ƒ Export development and diversification funds
Advisory & Technical Assistance for Financial institutions:
ƒ Capacity building of FI in Trade Finance
ƒ Capacity building of FI in Structured Trade Finance
ƒ Capacity building of FI in Structured Commodity Finance
ƒ Capacity building of FI in Commodity Finance using Islamic Finance
ƒ Capacity building in generic export credit risk insurance (ECI ) and political risk
insurance (PRI)
ƒ Capacity building of insurance/reinsurance companies in insurance and
reinsurance for new risks - oil, gas, mining, infrastructure, political risk
ƒ Best practice sharing in trade finance in favour of ACP FIs
Advisory & Technical Assistance for Large Firms and SMEs
ƒ Leveraging of Islamic Finance in major agriculture projects
ƒ Capacity building of SME in trade finance readiness
ƒ Export capacity building and export readiness support to SME

Caribbean: The Caribbean region lacks adequate trade financing vehicles that can provide the
resources needed to complement the work already in progress through international cooperation
agencies and other institutions. Financial gaps are not in the volume of available resources but in
accessibility of those resources for some activities.

An even greater gap is comprehensible information from these financial sources on access
procedures for submission of proposals. Most countries lack adequate institutional mechanisms as
well as the knowledge and experience to submit successful applications to international
donors. For decades, trade in the Caribbean region has been constricted to traditional markets
and based only preferential trade agreements. This dependency has crippled not only new market
awareness but innovation and development in general.

The Caribbean region needs to move beyond decades of reliance on traditional markets and trade
preferences to swiftly adapt to diversify into new sources of growth, exploiting its natural
advantages of location, environment, political stability and democratic traditions.

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Finally, there might be a gap/demand for integrated export development support (i.e. advisory and
export) for the Caribbean:

1/. For the Caribbean, trade growth is not only tied to access to financial resources, but
improvements in logistic and value chain management for small and medium-size enterprises must
be geared up for the integration of ͞axis-based͟ regional infrastructure development criteria.

2/. The geographical location of the Caribbean presents a unique opportunity for supplying hub
facilities and logistic services for the recurrent trade flow between the North and South
hemispheres. Out of the 16 CARIFORUM states only the Dominican Republic, Trinidad and Tobago
and Jamaica already have basic solutions and are focusing on improving port and airport facilities
and logistics services to take advantage of their location and increase their offer of trade logistics
services.

3/. A particular feature in Caribbean trade patterns have been the level of concentration on specific
markets. Trade structure is still based in low-priced commodities while new market players are
demanding value added products, an opportunity that the Caribbean has not taking advantage of.

Pacific: Quality of trade finance varies from an excellent rating by some for large businesses and for
international payment services, to fair or poor for the remainder. Most said that it was expensive.
Comment was made about the need for regulatory reform and for improved customer education.
dŚĞ ͛Ɛ dƌĂĚĞ &ŝŶĂŶĐĞ WƌŽŐƌĂŵ ;d&WͿ ĂŝŵƐ ƚŽ Ĩŝůů ŵĂƌŬĞƚ ŐĂƉƐ ĨŽƌ ƚƌĂĚĞ ĨŝŶĂŶĐĞ ďLJ ƉƌŽǀŝĚŝŶŐ
guarantees and loans to banks to support trade.

One of the major banks supplied the below data. Considering the source of these data (a bank) the
figures are probably reasonably accurate.

Papua New Guinea (PNG)

(Figures in million of US$)

Large businesses USD1,500+

Demand for Trade Finance (see note below)
SMEs USD250+

Large businesses USD500

Supply of Trade Finance
SMEs USD125
Gap in Trade Finance All businesses USD1,125+

Note: ĞŵĂŶĚŝƐƐŚŽǁŶĂƐƉĞƌĐĞŝǀĞĚĂŵŽƵŶƚƚŚĂƚŵĂƌŬĞƚƐŚŽƵůĚďĞƵƐŝŶŐďƵƚŝƐŶ͛ƚ͘dŚĞƌĞŝƐŶŽƚĂ
gap in ability to provide Trade Finance in PNG by the domestic banks. Client education will increase
Trade Finance usage.
Pacific Region
(Figures in million of US$)

Large businesses 1,875

Demand for Trade Finance SMEs 312
Supply of Trade Finance Large businesses 625
SMEs 156
Gap in Trade Finance All businesses 1,406
Note: As PNG is the largest economy in the Pacific 25% has been added to PNG figures to account for
rest of Pacific

Areas where an ACP bank might potentially add value include:

Feasibility Study of an ACP Investment Bank Project | 2012/290369/1 18

 ƒ reducing the cost of trade finance;
ƒ improving the availability of trade finance to the smaller, less experienced businesses that
currently ĚŽŶ͛ƚŵĞĞƚƚŚĞĐŽŵŵĞƌĐŝĂůďĂŶŬƐ͛ĐƌŝƚĞƌŝĂ͖
ƒ improving access to trade finance for women in business and for businesses operating in
outlying regions;
ƒ providing further education for businesses to help them access trade finance;
ƒ advising and assisting in improving the regulatory environment.

SMME Finance Gap Assessment:

Africa: The gap in SMME finance in SSA is very significant. Indeed, IFC reported that there are 30
million to 37 million of underserved or un-served SME and around 398 million adults that do not
have access to financial services in SSA. This results in an estimated SMME finance gap of around
US$ 199 billion for the entire SSA region.

From that perspective, it is worth mentioning that of all the 60 private sector intermediaries
(including business associations mainly, but also SMME development agencies and public
administration bodies in charge of SMME promotion) consulted during the field mission in 7
countries in West, Central, East and Southern Africa; all but two in Botswana confirmed that SMME
finance is the major issue they are facing. Indeed, only in Botswana did we have a feedback that
SMME have a fair chance of getting funding if they approach the national SMME support agencies
(Botswana LEA and Botswana CEDA).

The qualitative assessment points to the need for filling the gap in financial services for SMME life
cycle capital (seed/venture capital, equity capital, working capital, growth capital, export
development funds where applicable) and sector-specific financing (export, manufacturing,
agribusiness, etc.). The assessment also suggests the need to address the challenges of SMME access
to finance at policy-ŵĂŬĞƌƐůĞǀĞů͕ĨŝŶĂŶĐŝĂůŵĂƌŬĞƚůĞǀĞů͕ĨŝŶĂŶĐŝĂůŝŶƐƚŝƚƵƚŝŽŶƐ͛ůĞǀĞůĂŶĚ^DDůĞǀĞů
through relevant advisory and technical assistance support. Last, the qualitative assessment stresses
the need to develop alternative SME financing solutions (e.g. leasing, private and public equity,
franchising, SME sale & acquisition, factoring & forfaiting, etc.) while shariŶŐŬŶŽǁůĞĚŐĞĂŶĚ͞ŐŽŽĚ
ƉƌĂĐƚŝĐĞƐ͟ŝŶ^D finance/SME banking and sustainable MFI Growth Model.

Table 6 summarizes the qualitative and quantitative assessment of SMME finance gaps in SSA.

Feasibility Study of an ACP Investment Bank Project | 2012/290369/1 19

Table 6 SMME Finance ʹ Demand/Supply/Gap Analysis

Quantitative Gap Assessment Qualitative Gap Assessment or Additional Demand

Finance:
SME:30 to 37 million SMEs are
underserved or un-served (mid-number:
33.5 million SMEs) (McKinsey/IFC, 2010)
Assumptions: Average SME loan size: $
50 000 per SME; 10% of the SMEs are
looking for financing
Total demand for additional SME funding:
$50 000/SME x 33.5 million SMEs x 0.10 =
$167.5 billion
Micro-enterprises:398 million adults that
do not have access to financial services
(McKinsey/IFC, 2010)
Across SSA, the actual ratio of borrowing
clients to total population is at less than
2% except in few countries such as Malawi
and Togo.
Assumptions: For the purpose of our gap
assessment, we assume that 8% of the
unbanked adults are looking to access
microfinance credit facilities; average
microfinance loan size: $1000 per adult.
Total demand for additional microfinance
loan: $ 1000/adult x 398 million adults x
8% = $31.8 billion.
Gap for SMME Finance = $167.5 billion +
$ 31.8 billion = 199.3 billion1
ƒ Additional credit capacity
ƒ Credit supply capacity maintenance in crisis time
ƒ Local currency loans/lines of credit to local FI
ƒ Local currency risk sharing facilities with local FI
ƒ Equity/Venture Capital Fund of Funds
ƒ Public and private equity funding to SME
ƒ SME sale & acquisition intermediation services
ƒ Leasing services
ƒ Factoring & forfaiting services
ƒ Trade finance and working capital finance
Advisory & Technical Assistance:
ƒ Enabling environment reforms for SME access to finance
ƒ Capacity building of FI in SME Banking, SME Investment
ƒ Direct finance market development for SMEs (i.e. SMEs as issuers)
ƒ Market for SME sale & acquisition
ƒ ^D͞ĂŶŬŝŶŐZĞĂĚŝŶĞƐƐ͟Θ͞/ŶǀĞƐƚŵĞŶƚZĞĂĚŝŶĞƐƐ͟ƐƵƉƉŽƌƚ
ƒ Promotion of stock exchange listing for SMEs
ƒ Leasing development
ƒ Franchising market development
ƒ Private & public equity market development for SME
ƒ Consultant capacity building and knowledge upgrading
ƒ Best practice sharing in SME Finance/SME Banking in favour of ACP FIs
ƒ Best practice sharing in MFI Growth Model in favour of ACP MFIs

Caribbean: Hardly, any bank, local or foreign, is addressing the financial needs of SMEs, thus
financing for local projects, market expansion and exports are dependent on programs for private
sector initiatives from international cooperation agencies whose resources are geared mostly
to capacity building, market research and other areas.

A major deficiency of SMEs is their inability to comply with accounting standards such as book-
keeping, product costing, management of personnel etc. IFC is one of the agencies supporting
financial markets development by helping micro, small and medium enterprise (MSME) owners gain
better access to finance, and advising banks to help them reach these underserved segments.

Other challenges constraining SMEs access to funds are:

ƒ Absence of national policies on SME development

ƒ Lack of access to adequate sources of financing
ƒ High cost of SME financing
ƒ Length of onerous loan application process
ƒ Lack of funding to carry out training programs

1
This assessment is close to the 2010 assessment in the McKinsey/IFC report that estimated this gap to be in the range $140 billion to 170
billion for Sub-Saharan Africa

Feasibility Study of an ACP Investment Bank Project | 2012/290369/1 20

Capacity building programs have not been effective enough in addressing operations management
for most SMEs, thus financing of technical assistance on making SMEs creditworthy is a regional
cross border gap. SMEs have difficulties with financial management in general and marketing,
taxation, book keeping and administration in general.

Pacific: Anecdotal evidence and the considerable feedback received suggest that there is a
significant funding gap for the SMME sector of the Pacific island countries. But the gap
mostly lies in the provision of advisory services which is an area that most commercial banks
and even development banks would consider to hold too much risk and to be costly for
them. Overall, the challenges for SMEs include:
ƒ ďƵƐŝŶĞƐƐĞƐƚŚĂƚĐĂŶ͛ƚƉƌŽǀŝĚĞĂĚĞƋƵĂƚĞcollateral for a loan;
ƒ ďƵƐŝŶĞƐƐĞƐƚŚĂƚĚŽŶ͛ƚŚĂǀĞĂƐƵĨĨŝĐŝĞŶƚůLJǁĞůů-developed business plan to demonstrate the
viability of the business;
ƒ businesses that lack sufficient capital of their own;
ƒ ďƵƐŝŶĞƐƐǀĞŶƚƵƌĞƐƚŚĂƚĐĂŶ͛ƚĐĂƌƌLJƚŚĞŚŝŐŚĐŽƐƚŽĨďŽƌƌŽǁŝŶŐ͖
ƒ ďƵƐŝŶĞƐƐĞƐ ƚŚĂƚ ĐĂŶ͛ƚ ĚĞŵŽŶƐƚƌĂƚĞ ƐƵĨĨŝĐŝĞŶƚ ĞdžƉĞƌŝĞŶĐĞ ĂŶĚ ĞdžƉĞƌƚŝƐĞ ŝŶ ƚŚĞŝƌ ĐŚŽƐĞŶ
field;
ƒ Businesses based on flawed concepts.

The total lending portfolio of the banks in three large countries of the region as estimated by one
IMF study was put at USD973 million of which the SME lending portfolio was estimated at USD200-
300 million. A broader SME facility rather than a sector-focused one for tourism connected
businesses is expected to enable better scalability. Based on the survey of SMEs and discussions with
banks, the total additional demand for SME finance was estimated at USD25-40M (Samoa
USD14M, Tonga USD6M, Vanuatu USD20M).

Based on these findings, key components to improve access to finance for SMEs include:

a) Advisory Services: Capacity building programs for SMEs in business planning, accounting and
other necessary management services to improve their bankability and parallel programs to support
banks/FIs where relevant in accessing market information, product development, improvements to
internal processes (credit scoring, reporting, monitoring) and staff skills.

b) Risk Sharing Facility: A potential facility through which WBG and other donors could share a
portion of losses (up to 50%) on newly booked SME lending portfolio with the originating partner
banks thus encouraging banks to lend to this sector. Based on the survey, the potential funding gap
across the three countries is estimated at US$25-40 million. On this basis, a risk share facility could
cover up to USD12.5-20M.

NB: ƚƚŝŵĞŽĨĚƌĂĨƚŝŶŐƚŚŝƐƐƚƵĚLJ͕ƚŚĞ/&ƵŶǀĞŝůĞĚƚŚĞ͞'ůŽďĂů^D&ŝŶĂŶĐĞ&ĂĐŝůŝƚLJĨŽƌƚŚĞWĂĐŝĨŝĐ
Islands͘͟ dŚŝƐ ŝƐ Ă h^Ψ ϭ ďŝůůŝŽŶ multi-donor initiative that intends to deal with the entire service
spectrum needs (finance ʹ debt, equity, risk sharing facilities; business development services; policy
and business environment reforms, sector development, SME & micro-enterprise, etc.) of the sector.
This large program is expected to fill substantially the large SMME finance gaps identified for the
region.

Large Project Finance Gap Assessment

Africa: In the absence of any comprehensive assessment, the financing gap assessment for large
industrial projects has been evaluated at US $67 billion for every 3-year period (i.e. US$ 22 billion
per year on average) based on a databank of 240 projects from four investment promotion agencies
ŝŶ'ŚĂŶĂ͕ŽƚĞĚ͛/ǀŽŝƌĞ͕^ĞŶĞŐĂůĂŶĚŝŵďĂďǁĞ͘

Feasibility Study of an ACP Investment Bank Project | 2012/290369/1 21

The qualitative assessment of the gap leads to a comprehensive offer of both wholesale and retail
financing services (direct equity participation, mezzanine finance, credit risk guarantee, co-financing,
local currency financing, proactive partnership with ATI, MIGA and other political risk insurance
agencies); but also specialised advisory services namely in the area of complex project
development, and technical and financial resources mobilization/brokerage namely from the three
growth poles with which ACP countries transact mostly; i.e. Asia/Pacific, Americas/Caribbean,
Africa/Europe through well-targeted investment forums.

Table 7 below summarizes the nature of the gaps identified in large industrial project financing
across SSA.

Table 7 Large Industrial Project Finance Gap Assessment in SSAʹ DEMAND/SUPPLY/GAP ANALYSIS

Quantitative Gap Assessment Qualitative Gap Assessment, Additional Demand, Innovation

Finance:
ƒ Equity finance
Demand: $ 81 billion ƒ Mezzanine finance
Supply: $ 14 billion ƒ Debt finance and co-financing
ƒ Credit risk guarantee

Financing Gap: ƒ Local currency financing

Financing gap over a 3-year period is: $ 81 billion
ʹ $ 14 billion = $ 67 billion for every 3-year
period (or on average 22 billion per year) over
the planning horizon of the ACP bank project of
10 years.
ƒ Political risk insurance(PRI) agencies
Advisory & Technical Assistance:
ƒ Knowledge resources sharing
ƒ Project planning & development support for complex projects
ƒ Technical resources mobilization from Asia/Pacific,
Americas/Caribbean, Africa/Europe in favor of ACP countries
ƒ Facilitation of investment through an ACP B2B

Caribbean: There exist large project financing gaps across the Caribbean, namely in sectors such as
tourism, logistics, infrastructure, agriculture, fishery, food processing, etc. Large project financing
requires not only funding access, but also affordable costs of funds, capital adequacy issues
and the ability to arrange and structure complex financial instruments. Local sources such as
indigenous financial institutions do not have the structure to compete with international
institutions that can process and approve financing at more competitive rates.

The structure of project financing requirements in the Caribbean is limited to:

ƒ Projects requiring less than US$300 million.

ƒ Non-investment grade project sponsors.
ƒ Payback period of less than 10 years.
ƒ Ability to sell the facilities to institutional investors.
ƒ Basic infrastructure financing (Toll Roads, Airports, Ports, etc.)
ƒ Greenfield projects.

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Pacific: There are two categories of large project investment/financing gaps across the Pacific
region:

1/. Unrealized potential in large industrial projects

The region has a number of existing and large projects which potential is not yet fully realized.
These can be classified in three main groups with different internal dynamics and patterns:

ƒ Mining and petroleum resource projects

ƒ Tourism
ƒ Others, including agriculture, fishing and food processing

Tourism is the largest and most pervasive industry across the whole region. For many countries with
few if any natural resources, it is their only significant industry and second only to remittances as a
source of foreign exchange. The larger tourism projects ʹ resorts and large hotels ʹ usually involve
foreign companies with their own sources of finance. At the next level down there is significant
local involvement with a strong demand for both funding and technical services. The base of this
pyramid is in the multitude of small tourism businesses, often family-owned and operated, that fall
into the SME category.

Fishing is a major economic activity across the Pacific, from long line tuna fishing to local reef fishing,
and including live coral exports to the USA and sea cucumbers to Asia. The top end of the industry
involves large enterprises investing in boats and processing facilities including canneries. These are
large projects that usually involve foreign companies with their own sources of finance. The Forum
Fisheries Agency in their questionnaire identified the funding needs of the smaller fishing
enterprises (SMEs) who find it difficult to borrow from conventional lenders because of their
perceived risk.

2/. Emerging New Industries

Under-sea resources of the region are increasingly attracting interest from international investors
and foreign countries such as China. Canadian miner Nautilus Minerals is negotiating to establish the
world's first deep sea gold and copper mine 1.5 kilometres under the Bismarck Sea, off Papua New
Guinea. Talks have also been held with Tonga and possibly other Pacific island countries. dŚŝƐ͞ŶĞǁ
ĨƌŽŶƚŝĞƌ͟ŽĨĨĞƌƐŐƌĞĂƚpotential for these countries along with potentially significant environmental,
economic and social risks. New industries like this offer opportunities for participation by an ACP
bank.

China has already shown interest in the resource and the tourism sectors, with investments already
in a nickel mine and a fish cannery in PNG and the tourism sector in Fiji amongst others.

3.3 Structuring 2)WKH´$&3%$1.µ

The structuring of the ACP Bank is based on: (i) the conclusions of the market study, (ii) the capital
ŵŽďŝůŝnjĂƚŝŽŶ ƉŽƚĞŶƚŝĂů ŽĨ ƚŚĞ ďĂŶŬ ƌĞǀĞĂůĞĚ ďLJ ƚŚĞ ŝŶǀĞƐƚŽƌƐ͛ ŵŝƐƐŝŽŶƐ ĂŶĚ ƉƌĞůŝŵŝŶĂƌLJ ĨŝŶĂŶĐŝĂů
commitment/support level secured from regional sponsors ƚŽ ƚŚĞ ƉƌŽũĞĐƚ͕ ĂŶĚ ;ŝŝŝͿ ƐƉŽŶƐŽƌƐ͛
objectives in terms of strategic positioning; operational effectiveness, outreach and meaningful
impact.

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Strategic Intent of the ACP Bank
ƒ Distinctive human resource competence: ACP Bank will endeavour to build/develop
distinctive capacity/expertise
ƒ Strategic and technical partnership::
ƒ Partnership with industry-specific technical expertise/knowledge
ƒ WĂƌƚŶĞƌƐŚŝƉǁŝƚŚ͞'ŽŽĚWƌĂĐƚŝĐĞ͟&ŝŶĂŶĐŝĂů/ŶƐƚŝƚƵƚŝŽŶƐ
ƒ Concrete technology transfers projects and transactions
ƒ Partnership with targeted sovereign funds, private equity funds, FDI investors and
portfolio investors
ƒ Investment grade credit rating

ACP Bank will adopt a regional approach in its business focus due to the fact that the infrastructural,
industrial and SMME development challenges of the ACP countries are quite similar from a regional
perspective. The Bank will therefore support projects of regional nature while strongly supporting
regional economic integration.

Mission Statement
WĂŶŬ͛ƐŵŝƐƐŝŽŶŝƐƚŽďĞƚŚĞleading international investment bank in ACP region to be defined by
the following:

ƒ Achieving international investment grade risk rating which would facilitate successful
fundraising for projects and operations
ƒ Delivering a track record of profitability and providing attractive returns to shareholders
ƒ Being recognized as the most innovative private sector development/financing vehicle for
infrastructure, complex/large industrial projects and SMME across the developing world.

Additionally and Value Addition of the ACP BANK

ACP Bank value addition will involve the following:

To Existing DFI: ACP Bank will offer a complementary focus to their own mandate, with ACP Bank
specialising on: (i) proactive Infrastructure project development with the aim of making the targeted
ƉƌŽũĞĐƚƐ͞ŝŶǀĞƐƚŵĞŶƚ-ƌĞĂĚLJ͕͟;ŝŝͿƉƌĞ-investment and project development support for complex/large
ŝŶĚƵƐƚƌŝĂů ƉƌŽũĞĐƚƐ ǁŝƚŚ ƚŚĞ ǀŝĞǁ ŽĨ ŵĂŬŝŶŐ ƚŚĞ ƚĂƌŐĞƚĞĚ ƉƌŽũĞĐƚƐ ͞ŝŶǀĞƐƚŵĞŶƚ-ready, (iii) equity
support to large infrastructure and industrial projects to enhance their creditworthiness/risk profile,
(iv) risk-sharing support to large infrastructure and industrial projects, (v) equity support to the SME
sector, (vi) value-adding technical assistance support to clusters of SMEs in targeted sectors to make
them investment-ready, export-ready or sub-contracting ready, hence, ready for financing; (a)
Leveraging financial resources and knowledge resources from Asia, North America, selected
emerging economies and the ACP states themselves and make them available to ACP financial and
private sector.

To the ACP Group of States and their Private Sector: (i) project development, co-investing, advisory
services for complex infrastructure projects and credit risk guarantee related to large infrastructure
projects; (ii) promotion of viable SMME finance systems through the promotion of viable
institutions, funding availability for credit, equity and risk sharing facilities, and
ƐŚĂƌŝŶŐͬĚŝƐƐĞŵŝŶĂƚŝŽŶ ŽĨ ͞ŐŽŽĚ ƉƌĂĐƚŝĐĞƐ͟ ŝŶ ^DD ĂĐĐĞƐƐ ƚŽ ĨŝŶĂŶĐĞ ŝŶƐƚŝƚƵƚŝŽŶĂů models,
strategies, programs and products; (iii) complex/large industrial project development support,
direct equity participation for large industrial projects, risk sharing support for large industrial
projects, and co-financing for large industrial projects; (iv) availability of competitive trade finance

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line of credit, structured commodity finance solutions; structured trade finance programs for large
firms as well as SMEs.

To Existing Private Financial Institutions: Refinancing / direct loan schemes for SMME finance;
partial risk sharing schemes, trade finance line of credit for SMEs, funding of private equity/venture
ĐĂƉŝƚĂů ĨƵŶĚƐ ĨŽƌ ^DƐ ŝŶ Ă ͞ĨƵŶĚ ŽĨ ĨƵŶĚƐ ͞ ĨŽƌŵĂƚ͕ ĂĚǀŝƐŽƌLJ ƐĞƌǀŝĐĞƐ ĂŶĚ ƚĞĐŚŶŝĐĂů ĂƐƐŝƐƚĂŶĐĞ ŽŶ
SME Banking and SME access to Finance strategies, programs and products.

The operating model of ACP Bank is diagrammatically depicted below:

Business & Operating Strategies

Corporate Governance

Organizational Structure

Front Office Back Office

Business Planning & Corporate
Investment Banking Strategy
Risk Management
Lending & Guarantee Operations Human Resources
Quality Management
Private Equity/Venture Capital Corporate Services
Performance Management
Treasury & Funding Legal & General Secretariat
Internal Audit

Target Market
Trade Finance
SMME Finance
Large Industrial Project Finance
Infrastructure Finance

Advisory Services & Technical Assistance

Start-up capital Mobilization and Investors͛ŝŶƚĞƌĞƐƚ: dŚĞ ŝŶǀĞƐƚŽƌƐ͛ ŵŝƐƐŝŽŶ ŚĂƐ ƌĞǀĞĂůĞĚ ƚŚĂƚ Ă
number of institutions (among the BRIC, GCC, OECD Member countries, African countries and DFI
Group) have expressed interest in partnering with the ACP Trade & Investment Bank subject to the
realization of certain preconditions such as a high-level and more structured contact with local
authorities, preparation of a comprehensive information memorandum, identification of the
founding members from the ACP Group of States and the proof/evidence of a fairly substantial
financial commitment in relation to the anticipated capital base from a core group of ACP countries :

Furthermore, the following preliminary list of potential technical partners in FDI Promotion, PPP in
Infrastructure & OGM Sector Optimization have also been identified:

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FDI Promotion Partners identified and met:

ƒ Corporate Council on Africa: leading FDI and Business promotion organization between
USA and Africa. Washington DC-based
ƒ Pacific Islands Trade & Invest: The region's lead export facilitation, investment and
tourism promotion agency. An arm of the Pacific Islands Forum Secretariat
ƒ Association of African Investment Promotion Agencies

Potential Technical Partners met:

ƒ Swiss-based Waste to Energy Company ʹ SATAREM

ƒ Brazil-based Infrastructure/Construction Company ʹ STADIA
ƒ Brazil-based Development Bank for PPP/Infrastructure project structuring ʹ BNDES
ƒ South Africa-based Boxcut Mining Deals Platform for OGM sector ʹ BOXCUT
ƒ London-based International Finance Faculty on PPP and Project Finance - IFF

Basic Financial Modeling Assumptions and Financial Projections: Based on the outreach and impact
ambitions of the project sponsors, a minimum start-up or paid-in capital of US $ 2 billion is required
to launch the proposed Financial Vehicles. Under very low interest rate environment, the project
displays solid profitability, liquidity position and financial structure with favorable scenario analysis.

Summary of ACP Bank option together with two further options.

Option 1: Realizing the ACP Trade & Investment Bank

The implementation of the ACP Trade and Investment implies the realization of number of critical
preconditions:

Sufficient capital base: To be able to offer a fairly acceptable level of services in terms of scope,
outreach and impact, the ACP Bank should start operations with a minimum paid-in-capital level of
US$ 2 billion that compares favourably ŽŶůLJ ǁŝƚŚ ƚŚĞ ůĂƌŐĞƐƚ ͟ŶĂƚŝŽŶĂů͟ &/ ;ƐƵĐŚ ĂƐ ƚŚĞ EŝŐĞƌŝĂ-
based AFC and South Africa-ďĂƐĞĚ ^Ϳ͕ ĂďŽǀĞ ƚŚĞ ŽƵƚƌĞĂĐŚ ƉŽƚĞŶƚŝĂů ŽĨ ƚŚĞ ͟ƐŵĂůů LJĞƚ ƐƵď-
ƌĞŐŝŽŶĂů&/͟ƐƵĐŚĂƐ/͕ĂŶĚWdĂŶŬ͕ĂŶĚĨĂƌďĞůŽǁƚŚĞĂĐƚƵĂůůĞǀĞůŽĨŵƵůƚŝůĂƚĞƌĂů&/Ɛ
such as the AfDB, the IADB and the ADB as illustrated in the below table.

^ŚĂƌĞŚŽůĚĞƌƐ͛ ĨƵŶĚ ŵŽďŝůŝnjĂƚŝŽŶ: Potential shareholders to the ACP Bank include: ACP countries,
ACP financial institutions, BRIC sovereign funds and DFIs, GCC sovereign funds and DFIs, G8
countries and DFIs, EC Development Funds to name the most prominent ones.

However, the unlocking of this level of funding requires a high-level of diplomatic, lobbying and
roadshow activities with the backing and active/personal involvement of key Heads of State of the
ACP space.

Highly qualified personnel: The recuitment of highly qualified personnel and the adoption of the
highest level of professional standard in the management of the ACP Bank is the second most
important requirement for a successful operation and management of the institution. Hence,
recruiting the management of the ACP Bank through international/competitive recruitment and
attractive salary and benefits package will be key in ensuring such a result.

Rating of the ACP Bank: Ultimately, the credibility of the ACP Bank, hence, its ability to raise the
needed funds from the international financial market at favorable terms for on-lending and
investment in favor of the ACP private sector is dependent on its ability to secure a solid credit
rating, namely, an investment grade rating. In turn, this will be possible only if the bank is able to
attract highly qualified personnel capable of implementing the relevant management and operating

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standards; and ultimately, capable of achieving the operational performance expected from highly-
rated DFIs.

KƉƚŝŽŶϮ͗ůƚĞƌŶĂƚŝǀĞ&ŝŶĂŶĐŝŶŐsĞŚŝĐůĞ͗dŚĞ͟W/ŶǀĞƐƚŵĞŶƚŽŵƉĂŶLJ͟

As an alternative to setting-up a fully-fledged DFI, the ACP Group of countries could consider setting-
ƵƉ͞/ŶǀĞƐƚŵĞŶƚ&ƵŶĚƐ͟ĂƌŽƵŶĚ the following structures:

ACP Infrastructure Facility: The infrastructure facility will be a facility that includes debt and equity
components and provides short- to medium-term financing for infrastructure projects. It will also
include advisory services to help governments design public-private-partnership projects.

ACP Financial Institution Capitalization (Equity) Fund: to help strengthen systemically important
banks and Financial institutions across the ACP market, namely those serving the SMME market.

ACP Capitalization and Growth Fund: to capitalize systematically and support the growth of
emerging large industrial firms and high-growth SME and technology-based SMEs of the ACP region.

dŚĞƐĞĨƵŶĚƐĐŽƵůĚďĞĐƌĞĂƚĞĚƵŶĚĞƌĂŶƵŵďƌĞůůĂ͞W/ŶǀĞƐƚŵĞŶƚŽŵƉĂŶLJ͟Žƌ͞W/ŶǀĞƐƚ͟ǁŚŝĐŚ
mandate will be to mobilize and manage third-ƉĂƌƚLJ ĨƵŶĚƐ ĨŽƌ ŝŶǀĞƐƚŵĞŶƚ ŝŶ W ĐŽƵŶƚƌŝĞƐ͘ ͞W
/ŶǀĞƐƚ͟ǁŝůůƐĞƌǀĞĂƐƚŚĞĨƵŶĚŵĂŶĂŐĞƌŽĨƉƌŝǀĂƚĞĨƵŶĚƐƚĂƌŐĞƚĞĚĂƚůĂƌŐĞŝŶƐƚŝƚƵƚŝŽŶĂůŝŶǀĞƐƚŽƌƐ͘͞W
/ŶǀĞƐƚ͟ ǁŝůů ŚĞůƉ W ĐŽƵŶƚries mobilize additional capital resources for investment in productive
private enterprise.

͞W/ŶǀĞƐƚŵĞŶƚŽŵƉĂŶLJ͟ĐŽƵůĚďĞƚŚĞƐƚĂƌƚŝŶŐƉŽŝŶƚĨŽƌĂŶĞǀŽůƵƚŝŽŶƚŽǁĂƌĚƐĂĨƵůů-fledged ACP
Trade & Investment Bank.

Option 3: Capacitating Existing Regional DFIs

As a third option, the ACP group of States could consider developing the capacity (i.e. capital
increase and technical expertise) of the main sub-regional DFIs operating across the six geographical
regions of the ACP space: West Africa (EIDB/BIDC and/or WADB/BOAD), Central Africa
(DBCAS/BDEAC), East Africa (EADB), Southern Africa (PTA Bank), Caribbean (CDB), Pacific (To be
determined).

This has been a suggestion advanced by some stakeholders during the field missions, as it will save
the project sponsors the painstaking process of setting-up a new multilateral DFI.

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 3.4 Conclusion and Implementation Framework

Financing Vehicles Options for the ACP Group of States

ACP Trade & Investment Bank ACP Investment Company Capacity Building of Existing Sub-regional DFI
Key advantages Ability to launch a new innovative DFI with specialist knowledge Requires the mobilization of a more manageable Less difficult to implement
Ability to address and focus on critical needs (PPP infrastructure, level of funding Consolidation and pooling of resources
SMME Finance, Trade Finance) and critical sectors with greater Still focus on critical needs (PPP infrastructures, Solve the problem of having one institutions
outreach and impact potential equity & growth capital gaps for SME and large covering close to 80 countries in three different
firms, and weak capital base of financial continents.
institutions)
Key challenges Very high level political support from key Heads of State and High level political support from key Heads of State Introducing a new culture of efficiency and high-level
Governments of ACP countries required. Ratification by largest and Governments of ACP countries required. of expertise/professionalism into already established
possible number of member states needed. Will require a focus on a narrower range of culture
Initial capital mobilization can be challenging if political support and services and sectors. In particular, trade finance
leadership is not enough. and OGM finance services will be dropped
Management challenges across 80 countries & 3 continents
Some resistance from existing DFIs on the ground
Critical success Very high level of political commitment needed Ability to mobilize the needed capital Ability to mobilize the needed capital
factors Ability to mobilize the needed capital Highly professional and skilled fund managers Commitment of the present board members of the
Highly professional and skilled personnel required DFIs targeted
ACP bank must be rated the next 5 to 7 years
Financial US $ 2 billion to start US $ 500 million to 1 billion US $ 1 billion (capital increase + technical ass.)
requirements
Implementation Fairly long (2 years horizon minimum) Fair (18 month horizon minimum) Fair (18 month horizon minimum)
schedule
Technical Very high High but manageable Low and manageable
expertise needs
Funds raising High and manageable only with strong political support High but manageable Fair as beneficiary institutions/risks are known
difficulties

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Next Steps: The next steps in implementing the Financial Vehicle Option adopted within a 24-30
month timeframe will involve the following:

ƒ Setting-ƵƉŽĨĂ͞dĞĐŚŶŝĐĂůŽŵŵŝƚƚĞĞĨŽƌƚŚĞ/ŵƉůĞŵĞŶƚĂƚŝŽŶŽĨƚŚĞWƌŽũĞĐƚ͟
ƒ Proposing a draft Convention creating the Agency
ƒ ACP ŽƵŶĐŝůŽĨDŝŶŝƐƚĞƌƐ͛ĂƉƉƌŽǀĂůŽĨƚŚĞƉƌŽũĞĐƚ
ƒ WƵƚŚŽƌŝƚLJŽĨ,ĞĂĚƐŽĨ^ƚĂƚĞĂŶĚ'ŽǀĞƌŶŵĞŶƚ͛ƐƌĂƚŝĨŝĐĂƚŝŽŶŽĨƚŚĞƉƌŽũĞĐƚƐ
ƒ Structuring and formalizing the Partnership Agreement with key technical partners.
ƒ ƌĂĨƚŝŶŐƚŚĞ͞,ĞĂĚƋƵĂƌƚĞƌƐŐƌĞĞŵĞŶƚƐ͟ĚŽĐƵŵĞŶƚ͖ and deciding on the location of the
WĂŶŬ͕W/ŶǀĞƐƚŵĞŶƚŽƌƉŽƌĂƚŝŽŶŽƌWĂƉĂĐŝƚLJWƌŽŐƌĂŵŵĞ͛ƐŚĞĂĚƋƵĂƌƚĞƌƐďĂƐĞĚ
on the agreed-upon criteria of location premium, competitiveness and incentives.
ƒ ^ĞĐƵƌŝŶŐ W ŵĞŵďĞƌ ĐŽƵŶƚƌŝĞƐ͛ ĐŽŶƚƌŝďƵƚŝŽŶƐ ƚŽ ƚŚĞ ĐĂƉital of the proposed Financial
vehicle
ƒ WƌĞƉĂƌŝŶŐ Ă ĐŽŵƉƌĞŚĞŶƐŝǀĞ /ŶǀĞƐƚŵĞŶƚ DĞŵŽƌĂŶĚƵŵ ĂŶĚ ƌĞůĂƚĞĚ ƐŚĂƌĞŚŽůĚĞƌƐ͛
agreement
ƒ Undertaking Road Shows towards identified potential investors to secure equity
investment into the ACP Investment Bank and/or the ACP Investment Corporation.
ƒ Secure/build office premises based on the collected Office Location Premium
ƒ Form the Board of Directors
ƒ Recruit competitively and internationally the CEO if the ACP Investment Bank or ACP
Investment Corporation option is adopted.
ƒ Recruit competitively the Managing Directors (or Partners for the Investment Corporation)
, the Audit and Risk Management Officer, and the Finance and Administration Officer if
the ACP Investment Bank or ACP Investment Corporation option is adopted.
ƒ Start the operations of the ACP Investment Bank or ACP Investment Corporation
gradually .

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