WB PPT Template (MS Office 2007)

Project Financing to Meet Iraq’s Needs
Ravi Suri
MD & Regional Head - Project & Export Finance
Middle East, South Asia, Africa and Europe
27-28 January 2014
Table of Contents
Standard Chartered Bank and Iraq
Opportunities Galore – Can they be project financed?
Iraq Project Finance Roadmap
Standard Chartered Bank at a Glance
Track Record of Award Winning Solutions
Recently opened a branch in Baghdad
Standard Chartered Office
Bank in Hong Kong
Cash Management House in Asia
Investment Bank in Africa and Middle East
Project Finance House Africa and Middle
Investment Bank in Africa
Investment Bank in the Middle East
Bank in Hong Kong
Project Finance House Africa and Middle
“150 years of emerging market experience and focus on Asia, the Middle East and Africa has helped
develop a well-established presence in most of the world’s fastest growing economies“
“Leveraging cross-border opportunities and its global brand helps to make Standard Chartered stand out
among its regional competitors”
 Best Renminbi Trade Settlement Bank
 Best Structured Trade Finance Bank
 Best Working Capital and Trade Finance Bank
Islamic Project Finance House
Transaction Bank
Structured Trade Finance Bank
Treasury and Cash Management Bank
 Best Foreign Investment Bank in Pakistan
 Best Foreign Commercial Bank in India
 Best Foreign Commercial Bank in Bangladesh
Standard Chartered’s key
regions of focus
“Nobody knows how to do business in Asia better than Standard Chartered”
 Best Bank for Liquidity Management in Asia,
Africa and Middle East
 Best Emerging Market Bank in Asia
 Best Foreign Exchange Bank in Asia
 Best Investment Bank in Singapore and UAE
Bank in Asia
Bank in Africa
Bank in India
Investment Bank in UAE
 Best Global Bank in Emerging Markets
 Best Emerging Market Bank in Africa
 Best Foreign Exchange Provider
in Asia Pacific, Africa and Southeast Asia
 Best Emerging Market Banks in Asia
Bests Asian Currency Bond House
Best Leverage Finance House
Best Project Finance Advisory House
Best M&A House in India
Best Debt House in China, Pakistan and
Iraq – Immense Financing Needs
Opportunities galore but can they be project financed?
Legal Framework is Evolving
 A solid legal framework with enforceable
What does the National Investment Law Do?
contracts is essential to any financing
 Post Saddam, efforts have been made to
amend/repeal Saddam related laws and to
make Iraq an investment friendly state
National Investment
October of 2006
 However, National Investment Law does
not cover the Oil & Gas sector
 Encourages both local and foreign private investors to invest in
Iraq and protects investors' property rights
 Exempts approved investment projects from certain taxes and
fees for at least 10 years.
 Allows investors to repatriate investments and profits from
 Allows investors to rent or lease land for the period of a project,
in some cases for up to 50years
 Allows investors to insure projects with any national or foreign
insurance company.
 Permits investors to open accounts in Iraqi or foreign currency
or both at Iraqi banks or at banks outside Iraq.
 Ensures the right to employ foreign workers when needed.
 Allows non-Iraqi workers to transfer salaries outside Iraq.
 Guarantees that the government will not nationalize or
confiscate investments.
Security and Enforceability
 Iraqi Law: Iraqi corporate and commercial law is governed wholly by statute (the Civil Code) and interest on
debt is allowed subject to restrictions on usury.
 Mortgages: Lenders can take a legal mortgage over real property but the process of perfection is protracted and
 Share Pledges: Enforcement of a share pledge requires approvals from various Iraqi Ministries, particularly from
the Ministry of Interior which must approve any foreign shareholder in an Iraqi company
 Assignment of Contracts: Assignment of the relevant Concession to lenders will require consent from the
Ministry of Oil and the relevant regional oil company
 Governing Law: Contracts entered into by the government entities with third parties are subject to Iraqi laws. In
theory, other Contracts could be governed by any other choice of law.
 Sovereign Immunity: Waiver of sovereign immunity is not expressly prohibited under Iraqi law
 Enforcement of Foreign Court Judgments: Iraq is not a party to the Hague Convention on Recognition of
Foreign Judgments, and a judgment can be enforced in Iraq only if bilateral arrangements exist
 Enforcement of Foreign Arbitral Awards: Iraq is a signatory to 1983 Riyadh Convention but not to the 1958
New York Convention (the main treaty that ensures enforcement of foreign awards)
Other Considerations
 Regulation of Capital Outflows: The existing regulation issued by the Central Bank of Iraq regulates significant
capital outflows which could theoretically impact repayments due to a finance party. In practise, these are seldom
 Withholding Tax: A 15% withholding tax is applicable to interest payments made by an Iraqi borrower to a foreign
 Bankruptcy / Liquidation : Any creditor with undisputed commercial debt of more than Iraqi Dinar 500,000, which
has not been paid for more than 30 days, may present a petition for bankruptcy or liquidation against the debtor
 Environmental Regulations: relatively new in Iraq and details on compliance procedures are being developed.
International financial institutions will follow more stringent Equator Principles
These need to be addressed to encourage international financings
Working with an Evolving Legal Framework
Without formal
legislation backing up
contracts, various
mitigating measures
can be undertaken for
the benefit of all
• Support from relevant ministries / council of ministers
• Guarantee from the Ministry of Finance in respect of the payment
obligations under relevant concessions
In addition to
ministerial support,
political risk could be
passed on to a third
• Multilaterals like MIGA
• ECAs on the back of Government-to-Government relations
• ECAs looking at Iraq but waiting to agree framework with government
• ECAs willing to consider moving but on a selective basis
• Also too many deals hitting some ECAs - “wheat from the chaff”
Other Options
• Some developments with significant government involvement have been
financed on a medium term basis with TBI issuing payment guarantees
on the back of which international banks have issued LCs to the
• Some Turkish lenders are getting comfortable lending in parts of Iraq
So how would things
evolve if the basic
framework was
Iraq Project Financing Roadmap
Debt Liquidity
Largely ECA / Multilaterals
backed financing with some
clean risk by international
International banks take
more clean risk but still
require some ECA cover
Increasing local bank
International banks finance
without cover
Local banks bring significant
Some projects done on pure
local bank basis
Initially financed primarily by
local banks
Followed by international
Some local banks –
currency, competency and
ALM issues
Largely ECA / Multilaterals
backed financing
JVs between significant government entities and
international sponsors with project financing
Export oriented projects
Iraqi private sector projects
Domestic and export
oriented projects
Large Governmentowned sponsors
Domestic and export
oriented projects
Time / Better Regulatory Framework / Enhanced political certainty / Track record
Devoid of clean risk appetite, ECA/MFIs will provide the initial lead
Thank You