TRADE BANK OF IRAQ

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TRADE BANK OF IRAQ
Presentation to Baltimore Middle Business
Forum November 29 2004
Jo Morrison JPMorgan Chase Bank

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• Operational - November 2003. Created by CPA
  Order 20.
• Iraqs only creditworthy financial institution.
  Facilitates imports for the reconstruction of
  Iraq with funding from the Development Fund for
  Iraq (DFI).
• Owned by the Government of Iraq and supported by
  the JPMorgan Consortium. Separate capitalization
  of 100 million (5 million paid-in capital, 95
  million callable capital)
• Currently employs 60 experienced Iraqi bankers
  who work with Iraqi buyers to develop LCs that
  will meet contractual requirements

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Development Fund for Iraq

• Establishment sanctioned by UN Resolution 1483
• (21 May 2003)
• Held in the name of the Central Bank of Iraq at
  the Federal Reserve Bank of NY
• holds the proceeds of petroleum export sales from
  Iraq, remaining balances from the UN Oil-for-Food
  Program and other frozen Iraqi funds.
• Disbursements must be used for the benefit of the
  Iraqi people

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TBI Background

• Initial LCs issued for imports of medicines and
  medical equipment
• Now all Ministries that import use the Trade
  Bank
• Each Ministry has an operating budget agreed with
  the Ministry of Finance
• Ministries can enter into contracts and issue
  Letters of Credit through Trade Bank of Iraq
• Suppliers are assured they will be paid provided
  that they submit documents in accordance with the
  LC.

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TBI Available Trade Products

• Commercial Letters of credit
• Bid bonds
• Performance guarantees
• Payment guarantees
• Export Credit Agency support
• Payments mechanism planned

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Procedures For Using TBI

• Contract agreed with Iraqi importer
• Importer secures approval from Ministry of
  Finance
• Importer approaches TBI
• TBI collaborates with the applicant to develop,
  validate, and submit LC request to the
  Coordinator
• One of the Operating Consortium Bank issues LC
• Documents sent to Issuing Bank and funds paid to
  Exporter

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TBI LC issuance
Current volume of L/Cs issued
Distribution of L/Cs by region

• 700 letters of credit issued totaling
  approximately 2.5 billion
• 250 transactions in the pipeline worth 600
  million
• TBI letters of credit have financed imports from
  58 countries

Middle East/ Africa 28
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Export Credit Agency Support

• TBI has built partnerships with Export Credit
  Agencies (ECAs) across the globe
• US Export-Import Bank led the way
• 2.4 billion committed in December 2003
• All support lapsed at June 30, 2004
• Ex-Im has again led the way with renewal of a
  500 million facility to the Interim Iraqi
  government but only for 180 days

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Transition Post June 28th

• Need for a private sector led economy to develop.
• Financial Management Law outlines use of the
  Development Fund for Iraq
• Ministry of Finance has replaced the CPA in
  dealings with the Trade Bank and overseeing the
  Iraqi budget.
• Consortium Contract to provide support extended
  an additional year.
• LC issuance is subject to delays because of
  communications problems.

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Observations

• Economic activity and growth are taking place
  despite adverse conditions and uncertainties.
• Iraq is a Ready Market with significant pent-up
  demand.
• Huge demand for goods and services needed for
  infrastructure and repair of damage from the war.
  
• Knowledgeable of international practices but
  sheltered for a decade, so not always up to date
• Legacy of Oil for Food bad habits
• Desire to inspect before paying

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• Trade Bank of Iraq
• www.tbiraq.com
• Jo Morrison
• JPMorgan Chase Bank
• Trade Bank of Iraq Project
• E-mail jo.morrison_at_jpmorgan.com
• Tel [phone]