ADB SIGNS TRADE-FINANCING AGREEMENT WITH FIVE PAK BANKS
June 1 - 7, 2009
The Asian Development Bank (ADB) has signed trade-financing agreement with five Pakistani banks to improve export, import activities and to help restore the health of the South Asian economy.
The ADB has signed trade finance agreements with Allied Bank, Bank AL Habib, Habib Bank, Meezan Bank, and National Bank.
The agreement is a part of the ADB's Trade Finance Facilitation Program (TFFP) which was increased in late March to US$ 1 billion from the previous US$ 150 million. Since many trade transactions can be rolled over at least once per year and since risk-sharing draws in private sector resources, the expanded program is expected to create around US$ 15 billion in trade financing until the end of 2013.
Trade finance around the world has dried up as banks seek to bolster their own capital ratios and accordingly have shied away from lending to even the better international and domestic borrowers, the ADB said.
According to Director General, Private Sector Operations Department ADB, Philip Erquiaga, it is essential that lenders like ADB work to support Pakistani businesses at this particularly challenging time for global economy.
Rune Stroem, Country Director of ADB's Pakistan Resident Mission said that unlike other trade financing arrangements, the TFFP can provide support to both private sector firms and state-owned enterprises.
Furthermore, the Asian Development Bank has approved $ 5.3 billion for 60 on-going development projects for Pakistan as of July 2008, which included a financing of $ 2.166 billion for energy projects.
Sources in the ADB told PAGE that ADB provided $1.8 billion in 2007, $ 1.2 billion in 2008 and $ 1.5 billion for 2009 to Pakistan, and stands as the largest development partner of this country. These projects were in key infrastructure sectors including energy, transportation, water resources and reforms.
According to them, ADB was also the largest development partner across the power supply chain. The ongoing loans included $ 510 million for renewable energy, $ 800 million for power transmission, $ 810 million for power distribution enhancement. Similarly, ADB will provide $350 million for sustainable energy efficiency, $800 million for power transmission enhancement and $500 million for energy infrastructure under its future loan programme. The ongoing technical assistance programme included gas sector restructuring, establishment of central power purchase agency, renewable energy policy formulation and capacity building, power distribution enhancement and energy efficiency.
It may be mentioned that ADB has recently concluded technical assistance programme for the development of Thar Coal Fields and provision of technical support to office of energy advisor to Prime Minister. Future technical assistance programme included NEPRA Institutional capacity building and energy infrastructure.
In addition, ADB is also investing in private sector energy projects including Fauji Kabirwala, Dharki Power, New Bong Hydro, Rajdhani, Winpower and LNG projects.
The World Bank has also approved US$ 25 million IDA credit for Pakistan to help the country improve its trade and transport logistics.
The Second Trade and Transport Facilitation Project will provide technical advisory services to help implement the National Trade Corridor Improvement Program (NTCIP) that is a comprehensive government programme designed to significantly cut the cost and time of exporting and importing goods.
It may be mentioned that the NTCIP encompasses services, infrastructure, reforms and investments in highways, trucking, ports and maritime transport, air transport, railways and trade facilitation.
World Bank Country Director for Pakistan Yusupha Crookes said that over the past decade, the government of Pakistan has done much to improve trade procedures and logistics services.
"Further improvements will help boost, trade, strengthen economic growth and ultimately reduce poverty", he added. Strong implementation of the NTCIP is vital to bring the quality of transport services to international standards adding that this project will provide an important analytical foundation necessary to execute the reform agenda and investments for this programme, he said.
He said Pakistan recognizes that transport and trade logistics efficiencies are necessary for economic growth and this was emphasized in the Government's Poverty Reduction Strategy for 2009-2011 which identifies removal of infrastructure bottlenecks as one of the key pillars of the strategy.
The objective is to make road transport services faster and more reliable to allow export companies to meet short deadlines by international buyers; to help railways regain their competitiveness against road transport in order to satisfy potential demand for freight transport; to reduce port costs compared to other ports in the region; to facilitate customs procedures; and to make air transport capable of responding to the growth demand resulting from a growth economy.
He said that the project builds on the results achieved by the World Bank's first Trade and Transport Facilitation Project, which closed in 2006, and will extend efforts to streamline and integrate trade data exchange and strengthen cooperation between public and private sectors at regional, national and local level.
It will also assist Pakistan in the World Trade Organization negotiations on trade facilitation.
Jean-Noel Guillossou, World Bank senior Transport Economist and project co-team leader said that at the world level, as an integrated and well coordinated programme, NTCIP can be considered a best practice example of a corridor programme.
The NTC serves domestic needs and links Pakistan's main industrial centers and neighboring countries with international markets through the ports of Pakistan.