EFTA02540406.pdf

From: [email protected] Sent: Monday, June 13, 2011 6:25 AM To: [email protected] Subject: Re: The city has not issued bonds related to anything that touches the po=r. Ocean rights, fishing, roads, airport etc. I can ask our 4 reviewing teams to look again but from the list bill=gave us, we see nothing pro-poor. The big thing he wants is something around sanitation since it is ver= difficult to actualize otherwise since the beneficiaries largely can't=pay for it. In some cities I ma able to use returns from the carbon finance with=solid waste to cross-subsidize the sanitation costs but i don't really wa=t to start up carbon stuff in senegal. too hard. We have a team traveling with me and the mayor is really knowledgeabl= too. The city financial team knows their stuff. From: jeffrey epstein <[email protected]> To: [email protected] <[email protected]> Sent: Sun, Jun 12, 2011 10:43 pm Subject: Re: The country issued 500 million dollars bonds last year. You need to=review Sent from my iPad On Jun 13, 2011, at 1:19 AM, [email protected] <mailto:[email protected]> wrote: This is an email for you, please DO NOT FORWARD= Sorry about formatting, AOL not very good at it. The son of the pres has=a master's in "financial engineering" and would likely find this interestrng given that he could lead W Africa. Small dollars compared to the size=of the need, but certainly a step forward. Your friend does not like the=mayor of Dakar so this could be tough if we only limited it to Dakar. My=plan would be to see how ECOWAS tolerates this and then push deeper into=Senegal, maybe Mali. Pikine and Saint Louis are other Senegal cities that=might be do-able. And please don't make some rude comment about my skill=set. This is my job and I am doing my best. Ratio=ale for Investing in Municipal Finance In the developing world, most cities=finance major infrastructure investments in two principal ways. They rely=on transfers or on direct expenditures from central governments, or they=allocate resources incrementally from their own limited budgets. As devel=ping cities look anew at the plight of the urban poor, and as much needed=investments in overall slum improvements, housing, transportation, potabl= water provision, sanitation infrastructure, and urban food security l>=80. to name but a few of the topics of interest to the foundation and=to our partner cities — neither option holds much promise of maki=g a dent in long term urban poverty alleviation. Central governments, par=icularly in Sub-Saharan Africa, often pay only lip service to decentraliz=tion and de-concentration of EFTA_R1_01689257 EFTA02540406 services—or at the very least, these=processes have yet to mature into reliable, accountable mechanisms for eq=itable transfer of investment funds to local governments. Scarce financia= resources, political differences between national and local leaders, or=simply bureaucratic inefficiencies have been the chief culprits in explai=ing why promised devolved funds often fail to materialize at the local le=el. Left to their own devices, cities have few alternatives but to financ= infrastructure or long term capital investments through resources genera=ed from their annual budgets—or to postpone or, most likely, igno=e the much needed investments. Investments that directly benefit the=urban poor suffer disproportionately from this state of affairs. Whereas=governments may occasionally step in to fund major road or energy project= that can benefit the urban population at large, they rarely if ever focu= on initiatives that specifically target the poor or the informal settlem=nts where the poor usually reside. In select cases, the foundation has=an opportunity to use the lure of increased access to capital as an incen=ive for cities to re-direct their attention on poor urban families. Speci=ically, in cities with potential access to capital markets and where fisc=l conditions sound are in place, debt financing of long-term projects can=be a useful substitute for annual budget earmarks—as is the case=for most cities in the developed world. Cities working under this theme would recei=e support from the foundation to enable themselves to access the debt mar=et, in exchange for a guaranteed commitment that the majority of funds ra=sed through the first round of financing would be dedicated to addressing=issues of urban poverty — in some cases even targeted towards cro=s- subsidizing ongoing foundation projects (i.e., sanitation). Support wou=d fall into two broad categories. The first would be support to the city=to solidify finances, obtain a credit rating, and issue a bond on the com=ercial market(1). The second would be to support participatory exercises=with both city officials and organizations of the urban poor to plan the=use of the anticipated resources, and funding for small scale, jointly-im=lemented pilots to test and refine the models/concepts selected so that=when the financing comes through, they are ready for investment. While th=s theme involves significant external risks — including national-=evel regulatory approval, the evolution of global debt markets, etc. etc.=— it also offers perhaps the greatest opportunity for leverage,=sustainability and replicability across developing world cities with a sm=ll investment on our part and the majority of the risk borne through capi=al markets. Illustrative Grant under Preparation: Munici=al Finance in Dakar The proposed intervention would help=Dakar become the first West=African city to tap into capital markets to finance long-term investments=benefitting the urban poor. The Dakar Municipal Finance Program=would be implemented over a period of five years. It would cost five mill=on US Dollars and unlock an expected $35 million by 2015. This would be=achieved by enabling Dakar to issue its first municipal bonds and raise=funds in city-backed debt financing, serving as a model for other West Af=ican cities. The condition for providing the support would be that a majo=ity of the proceeds generated from the first bond issue would be jointly=allocated with the poor to projects that benefit them directly. </=ONT> Dakar, with almost four million inhabitants=in its metropolitan area, is one of the largest and most economically vib=ant cities in Sub-Saharan African. As the capital of Senegal, one of the=most democratically stable and financially dynamic countries of the conti=ent and as the de-facto economic center of the French-speaking CFA econom=c zone(?) <http:/=mail.aol.com/33790-111/aol-1/en-us/suite.aspx#_ftn2> ,=the city has emerged as an ideal candidate for pioneering municipal acces= to capital finance in the West African region. Indeed, as a member of th= West African CFA community, Dakar's potentially trail-blazing ro=e in viable municipal financing offers the promise of full-scale replicat=on in a dozen cities across the region and beyond its frontier. The munic=pality has a track-record in pro-poor policy implementation (notably in=the areas of education and health(3)) as well as ambitious urban revival plans for=the city, which would benefit the poor, estimated to constitute 80% of Da=ar's population. The mayor has also devoted considerable efforts=to putting his financial house in order (with support from France) and to=good governance.[4] According to an AFD (=gence Francaise de Developpement) representative,[5] <http://mail.aol.com/33=90-111/aol- 1/en-us/suite.aspxtftn5> "the abi=ity of Dakar's mayor to restructure (the city) financially is spe=tacular." Furthermore, the city has demonstrated political commit=ent to the poor. For example, formal consultative processes[6]<=SUP> <http://mail.aol.com/33790-1=1/aol-1/en-us/suite.aspx#_ftn6> have been set=up and appear to be functioning, allowing stakeholders to voice their opi=ions. The project would build upon this pre-existing pro-poor orientation=by creating a requirement, a structure, and enhanced capacity for the urb=n poor to play and active role in the planning, implementation, and monit=ring of the investments funded by the bond. The program's principal munic=pal government partner would be the Municipality of Dakar, which is heade= by a pro-poor mayor who improved the financial position of the city. The=civil society partner will consist of a network of a 2 EFTA_R1_01689258 EFTA02540407 dozen neighborhood=and city level committees representing the urban poor. A Program Manageme=t Unit (PMU) would be set up within the Municipality to help guide key pr=gram activities and to ensure responsiveness and long- term viability. Oth=r partners, including the Institut Africain de Gestion Urbaine, wi=l provide additional support. A. Program Desc=iption, Objectives and Results The Dakar Urban Municipal Finance Pro=ram would be implemented over a period of five years and would be expecte= to cost approximately five million US Dollars. The Program would include=four main phases: • &nbs=; Involving the Poor in the Program.=/B> This phase of the program would ensure that the voice of the poor is=heard by the city from the day the program begins and beyond the life of=the program. It would also reduce the risk of municipal bonds proceeds go=ng to projects that are not relevant to the poor. Involving the poor in=the program could be done by: a) holding meetings with civil society at=the city hall, and in neighborhoods to announce and explain the program,=b) involving the poor in quarterly decisions on how expected resources wo=ld be used, c) creating a formal mechanism (for example through an SDI af=iliate), to enable the poor to monitor the use of funds and d) implementi=g small pro-poor pilot projects. • &nbs=; Helping Dakar Issue Municipal Bond=. This phase of the Program would focus on helping the Municipality=continue to get its "house in order" from a financial per=pective, and would result in the issuance of municipal bonds. Over a peri=d of up to two years, we would work with municipal authorities to ensure=that Dakar can fulfill all fiscal, financial and regulatory conditions re=uired to issue long-term debt in the ECOWAS region's capital mark=ts. This is notably expected to include: (a) helping the city clean up an= better document its tax base in order to maximize future fiscal revenues= (b) obtaining a favorable credit rating, by building on the city.=99s recent work with international partners and financers (notably the Fr=nch Agency for International Development or Agence Francaise de Developpement); (c) working with=the city and its national government counterparts to ensure that the gove=nment will have what it needs to provide its non-objection at the require= time; and (d) preparing all appropriate documentation necessary to go to=market, including an explanation of program objectives, repayment cash fl=ws, and guarantee or credit enhancement mechanisms. • &nbs=; Help Obtain Investments for Future=Financing. This phase=of the program consists in raising long- term financing for pro-poor inves=ments (sanitation, etc.) that cannot be financed through the Municipality=E2,40s recurrent budget. Through this grant, we expect the city to rai=e approximately $35 million by 2015 in city-backed debt financing. The ty=es of programs that could be piloted in the first few years of the projec= to prepare them for greater levels of financing when the bond is success=ully issued include (1) upgrading of the DKL neighborhood(7J <http://mail.aol.com/33=90-111/aol-lien-usisuite.aspx#_ftn7> (including=investments in water and sanitation infrastructure); (2) improving food=security in Dakar and Pikine, by scaling up urban agriculture initiatives=and capitalizing a municipal fund in support of urban micro-gardens; (3)=investing in revamping outdated city-wide solid waste in Grand Yoff and=Parcelles Assainies (primary collection) management infrastructure; and=(4) other capital investments in informal or poor neighborhoods (such as=street paving or potable water provision) that would increase access to=basic services and help create jobs. &n=sp; • &nbs=; Scale up Investments Once Financin= Obtained. This phase=would begin only after financing has been obtained, in the third or fourt= year. Our partners would now ensure that municipal investments are pro-p=or and aligned with stated objectives. B. Monitoring=and Evaluation (M&E) Indicators The basic indicators that project par=ners would track, with guidance from DIG, could include some of the follo=ing: = Diagnosti= of city's debt capacity concluded; • &nbs=; Amount=of financing raised through municipal bonds on capital markets or private=debt placement; • &nbs=; Increase=in revenues for the urban poor; • &nbs=; Number=of people with improved neighborhoods; &nbs=; Increase=in number of poor urban families with access to water; &nbs=; Increase=in number of poor urban families with access to sanitation services; • = Increase=in number of streets serviced (primary waste collection);</=iv> 3 EFTA_R1_01689259 EFTA02540408  C. Risks/Potent=al Challenges The risks and potential challenges DI= envisions are mostly political and inherent to any municipal work. The=Mayor of Dakar's term expires in three years. He and the presiden= are from different political parties, which can be a source of tension.=How capital markets in the region would react to an innovative municipal=bond issuance is unknown. =evertheless, based on our initial assessment in Dakar (March 2011), these=risks are low, can be managed and are out-weighed by enormous potential=benefits for the city's poor population. D. Opportunitie= for Scale and Replication The opportunities for scale and repli=ation are compelling. Dakar's example would have an important tra=l- blazing effect at a national level (for cities like Saint Louis for exa=ple), at a regional level (for other ECOWAS countries sharing the stock=market) and even at a Sub-Saharan level. (1)<=SPAN> (2)<=SPAN> <http://mail.a=Lcom/33790-111/aol-1/en-us/suite.aspxtftnref2> Senegal is one of nine countries sh=ring the Franc CFA currency and a joint stock market. [3]<=SPAN> <http://mail.ao=.com/33790-111/aol-1/en-us/suite.aspx#_ftnref3> Pro-poor programs include the Q=804,Allez a l'Ecole" program, which provides milk=for children two days a week to reduce hunger and improve performance, an= funds vaccinations and dental exams (in partnership with Colgate Palmoli=e). Out of Dakar's 159 schools, 89 are undergoing renovations. </=ONT> (4]<=SPAN> <http://mail.ao=.com/33790-111/aol-1/en-us/suite.aspx#_ftnref4> Dakar is one of the cities that sig=ed the "Charte de Bonne=Gouvernance". (5)<=SPAN> <http://mail.ao=.com/33790-111/aol-1/en-us/suite.aspx#finref5> Quote from Mathieu Vasseur, French=Agency for International Development (AFD). Meeting with DIG team, March=2011, Dakar. (6)<=SPAN> <http://mail.ao=.com/33790-111/aol-1/en-us/suite.aspx#_ftnref6> These mechanisms include a consulta=ion committee and neighborhood level committees (called the Conseil Consultatif, the Comite Consultatif and the Conseil des Quartiers.) (7)<=SPAN> <http://mail.a=l.com/33790-111/aol-1/en-us/suite.aspxtftnref7> This 10-15 year project is an urban=renewal of Dakar to transform the city into a hub for the private sector.=lt focuses on the Grand Yoff area, which has high levels of poverty. 4 EFTA_R1_01689260 EFTA02540409