IFInet, Information About the International Financial Institutions

This report contains information on the various Arab and Islamic financial institutions, including development funds, located in the Gulf countries (Abu Dhabi, Kuwait and Saudi Arabia and Sudan). The OPEC Fund in Vienna is included because of the important contributions made by Arab oil-exporting countries and the Fund's participation in consultative meetings with other Arab and Islamic development funds. The report also includes some Gulf-based investment institutions that are major players in the financing of industrial and infrastructure projects in the region or abroad. In addition to information on the organizational structure of these institutions and their procurement rules and procedures, the report addresses the financing of infrastructure privatization projects. This report is not meant to be exhaustive and comprehensive; some institutions may not be mentioned or are located in other Arab countries. The report should be construed as a guide in identifying alternative financial sources. We hope it will contribute to the identification of direct business opportunities for Canadian enterprises.

With the growing importance of private sources of financing for projects, including privatization programs, in the region and in developing countries, Islamic banking and its creative approaches to new trends in global markets is being examined. Islamic banks are playing an increasing role as providers of capital in the economic development of the region and even in other countries with important Islamic populations. Understanding this role will be crucial for Canadian companies and financial institutions when the financial structuring of a transaction or project proves critical in clinching a deal.

Arab and Islamic Financial Institutions

The Gulf countries, notably the six member nations of the Gulf Cooperation Council (GCC) comprising Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the United Arab Emirates, which depend on their energy sector (oil) revenues for up to 40% of their GDP in some cases, have made considerable efforts to diversify their economies away from oil through the adoption of several measures to promote trade and investment in the region. Investments in the manufacturing sector grew substantially and it seems the region is gradually recovering from the aftershocks of the Gulf War. The 1990s have witnessed new developments and efforts towards regional economic integration in the Arab world and the GCC countries: GCC members decided to harmonize trade tariffs and to promote economic cooperation among member states; the Arab League called for the creation of a free trade zone by the year 2008 through the implementation of the inter-Arab trade agreement; the Arab Fund for Economic and Social Development (AFESD) undertook preparatory work for the creation of a financing entity for private sector projects (see report on AFESD); a Business Development Department at the Islamic Development Bank was established, and a rating agency in Bahrain was created by the Arab Monetary Fund to provide ratings for Arab financial institutions.

These initiatives were accompanied by reforms for developing Arab financial markets and linking them together, improving investment codes and incentives, diversifying revenue bases (Bahrain has become a major financial centre in the region, UAE and Oman are developing gradually their tourism sector), liberalizing interest and exchange rate policies, and adopting privatization programs. The GCC countries are encouraging a greater role for the private sector, even foreign, in the development of their economies. These developments illustrate a regional commitment to liberalizing inter-Arab trade, fostering growth and accelerating some degree of Pan-Arab economic integration. There is a growing awareness of the Arab regional group's financial clout, and its determination to use revenues as investments to develop their respective economies, and also its desire to look ahead to a future with a more solid and diversified investment base and source of income.

Interestingly, the majority of Arab and Islamic development funds and regional financial institutions are based in three Gulf countries: Saudi Arabia, Kuwait and the Arab Emirates, with the exception of the BADEA (Banque arabe pour le développement économique en Afrique) and AAAID (Arab Authority for Agricultural Investment and Development) based in Sudan and the OPEC Fund in Vienna. In fact, these three Gulf countries are usually the major shareholders of the institutions mentioned in this report. Several private and religious charitable organizations complete the vast amount of financial resources made available for development assistance or for Arab economic integration and development.

Implications for Canadian business

The collective developmental and financial activities of Arab financial institutions represent substantial sources of financing for projects worldwide. These in turn translate into major business opportunities for Canadian firms, suppliers and consultants, provided they have a thorough understanding of the mechanisms, structure, and procedures inherent to each institution. Furthermore, they must be made to realize the importance of networking, partnering, forming strategic alliances with local firms or individuals. Personal contact and long-term relationships are the key to developing a solid business base in the region. In most instances, the operation and mandates of these funds are not designed to exclude international involvement, and do not entail particular impediments to greater participation by Canadian firms. Counter to some beliefs, recipient country eligibility is not restricted to Arab or Islamic countries, with the exception of the Arab Fund for Economic and Social Development and the Islamic Development Bank to some degree.

Canadian business should also be aware of the ongoing, or at least frequent periodic consultative activities of these funds to aim for efficient use of Arab resources. Regular meetings are held among the development funds mentioned in this report, including the OPEC Fund, BADEA, and the Arab Monetary Fund. These meetings offer the opportunity to hold consultations on matters of common interest, to discuss co-financing strategies, to co-ordinate projects, to set-up joint missions, to follow-up on co-financed projects, to exchange information and views on various financial issues and even to compare lists of projects submitted by beneficiary countries to discuss which Fund is more suitable for a given type of project.

This consultative process is also reinforced by the co-financing requirements of each fund (most will finance only up to 50% of the cost of a project) to reduce exposure. The pivotal point of this consultative structure is the Coordination Secretariat of the Arab National and Regional Institutions Group housed in the Arab Fund for Economic and Social Development (AFESD). Consequently, where a large portion of the required project financing is to be secured, approaching several institutions is required. With a reasonable knowledge based on this report's description of each institution, a Canadian firm will be in a position to advise its client(s) on approaching the appropriate fund and also explore on behalf of its client the financing possibilities with the Coordination Secretariat.

Because procurement preferences are often given to recipient and donor nationals, consultants and contractors are advised to team up, as mentioned above, with local partners. Consultants should duly register with each institution but definitely not omit the AFESD because of the upcoming standardized registration system.

Manufacturers and suppliers should send brochures and references. Because of the lack of a diversified industrial base to protect in donor countries, the national preferential treatment should not constitute a concern for suppliers and manufacturers. Furthermore, designing Canadian specifications by consultants in tender documents has not met with any resistance from donors, and can be of great advantage to Canadian suppliers.

Generally, qualified in-house staff are spread thin and expertise is not readily available in every sector, which makes it difficult for institutions to adopt an ongoing hands-on approach to all projects, hence a substantial amount of work is off-loaded to the recipient countries and to consultants. Canadians would be at a great advantage in concentrating their efforts also on lobbying local executing agencies, particularly in Francophone Africa and the Caribbean where Canadian presence and expertise are well established and recognized. Surprisingly, many funds are in possession of lists of Canadian companies with whom they have worked with; Canadian capabilities are well accepted and generally all institutions indicated a willingness to do business with Canadians.

Arab development institutions are gradually moving to direct their attention to the promotion of the private sector as an important development engine, as witnessed by the recent creation of business development departments or funds. Still in their infancy stage, these programs are likely to evolve rapidly along the lines found in IFC projects and other privatization-type of projects. Canadian companies should take early advantage of this trend by creating and sponsoring their own projects in conjunction with private sector partners.

Islamic Banking and Finance

The growth in Islamic banking and finance initially coincided with the surplus revenues of oil-exporting Islamic countries. More recently, the globalization of the economy, the liberalization of capital movements and privatization have paved the way for the expansion of Islamic finance. The mushrooming capital requirements for infrastructure projects in the Middle East and Asia have increased the need for project sponsors to tap private sector funding. Islamic banks have welcomed project finance transactions as a religiously acceptable long-term investment alternative, although they still are in the process of coming to grips with its implications and various return on equity aspects. These banks are fairly liquid and usually enjoy a double-digit growth. With no shortage of capital, the Islamic banking sector is expected to continue its expansion at an annual growth rate of 15%.

There are an estimated 140 Islamic financial institutions with total assets of more than US$110 billion and capital of US$5 billion in more than 40 countries offering some form of Islamic finance. Many are located in Sudan, Pakistan and Indonesia but the largest in terms of assets are concentrated in Bahrain, Kuwait, Saudi Arabia and Iran. Abu Dhabi has just launched one such bank while Dubai has had a dynamic bank since 1975. Bahrain alone is the base for 11 Islamic financial institutions, including one set up by Citibank in 1996. A number of other Western financial institutions have followed suit by offering Islamic mutual funds and other investment products in an attempt to attract liquidity from this growing market. The growing sophistication of Islamic banks is leading an increasing number of Muslims to invest money in them.

The Islamic financial system is founded on the absolute prohibition of the payment or receipt of any predetermined, guaranteed rate of return. This closes the door to the concept of interest charges and precludes the use of debt-based instruments. The system encourages risk-sharing, promotes entrepreneurship, discourages speculative behaviour, and emphasizes the sanctity of contracts. Some banks that are not entirely " Islamic" do have an Islamic window to accommodate Muslim clients.

Islamic banks operate through Islamic financial instruments described below, being equity (same as conventional mutual funds), commodity and leasing. The future of Islamic finance seems bright, partly owing to the privatization trend under way in some Muslim countries such as Egypt, Jordan and Morocco, and in high-growth Islamic countries such as Malaysia and Indonesia, where the demand for Islamic financial products is growing rapidly.

While Islamic finance meshes well with project finance, observers don't expect projects costing more than $200 million to be financed by Islamic funds alone. Given the capital requirements of many deals, especially in the Middle East's oil and gas sectors, most will need to combine Islamic financial products with conventional financing. Islamic finance is relatively inexperienced when it comes to project finance and privatization financing which implies a long-term commitment not characteristic of Islamic banking. In terms of participating in project finance deals, perhaps the most perplexing challenge facing Islamic banks lies in the Islamic investors' preference for investing their money short-term, whereas BOT projects, for example, are for the long-term.

Despite the mounting competition in the market and the gradual number of ground-breaking deals, further development of Islamic finance depends on how successful the Islamic banks can develop their ability in finding solutions to their shortcomings. They still are faced with a slow pace of innovation, new instruments are needed, a uniform regulatory environment and legal framework have yet to be developed. The development of an interbank market is another challenge, and, finally, there is a lack of uniformity in the religious principles applied by different Shariah Boards. Nevertheless, Islamic banks are becoming resourceful. Some institutions have raised project-specific funds or special pools of funds which are deployed for project financing. Some are planning to set up unit trust or mutual fund types of investment vehicles aimed at longer-term investors.

International and regional institutions are cooperating with Islamic finance and are contemplating the introduction of various products and syndication to enhance project finance. The IFC has executed several transactions in the Middle East and other Muslim countries, that conform to Islamic principles. Ultimately, securitization might prove to be the most appropriate solution. Banks will be in a position to take a lease on a project and issue paper that will be priced. With the expansion of securitization, the customer base of Islamic financial systems will grow as institutional investors, with access to broader maturity structures, are attracted to the market.

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2. BILATERAL ARAB DEVELOPMENT INSTITUTIONS

ABU DHABI FUND FOR DEVELOPMENT (ADFD)
P.O. Box 814, Abu Dhabi
United Arab Emirates (UAE)
Tel: (971)-2-644-1000 Fax: (971)-2-644-0800

Public Relations Manager
Mr. Abdullah Bokammas
Tel: 971-2-645-9670
Tel: 971-2-644-1000 Ext. 457 Fax: 971-2-644-0800
E-mail: opadfdmn@emirates.net.ae
Web Site: www.adfd.org.ae

The Abu Dhabi Fund for Development was established in 1971 as an autonomous national development institution of the Government of Abu Dhabi. Its objective is to assist LDCs in the development of their economies by extending project loans, guarantees, technical assistance grants and equity participation. The Fund is uniquely financed by the Emirate of Abu Dhabi, one of the seven emirates that constitute the United Arab Emirates. As such, it is a personal foreign policy arm of the State.

The Abu Dhabi Fund also administers other development assistance extended directly by the Government of Abu Dhabi.

The Fund is managed by a Board of Directors, an Executive Committee and a Director General, all of whom are government officials. H.H. Sheikh Khalifa Bin Zayed Al Nahyan, the Crown Prince, is Chairman of the Board, which provides broad policy guidance. The Executive Committee plays an active role in decisions on loan recipients.

Initially, the Fund's assistance was restricted to Arab countries. However, in 1974, coinciding with a substantial increase in resources, the mandate was enlarged to cover all developing countries. The activities now include 47 countries notably in Africa and Asia. Presently, 80.5% of total loan commitments are for Arab countries, with Asia and Africa receiving 9.5% and 7% respectively. The balance of the committed loans, i.e. 3%, has gone to countries such as Malta and Turkey.

Although the Fund has no particular sectoral preference, its activities have so far emphasized infrastructure, agriculture, and industry. About one third of total commitments support extractive and manufacturing industries. Energy and water supply account for 27%. Transport, communications, fisheries and rural development also benefit from the Fund's interventions.

As at the end of 1997, the Abu Dhabi Fund extended loans totaling approximately US$1.8 billion. As well, the volume of grants reached US$130 million at the end of 1997, and benefited 11 Arab and African countries. Equity participation amounted to US$121 million, while loans and grants administered on behalf of the Government totalled CAN$2.2 billion. In 1997 alone, the ADFD committed US$68 million and disbursed a total of US$74 million (mainly due to an increase in grants).

The Fund's loan maturities range from 10 to 25 years, depending on the recipient country and the type of project, and include a grace period of 3 to 10 years. The interest rates including a fee of 0.5% vary from 2 to 6%.

The terms and conditions of each lending operation are determined by the Board of Directors. More concessional terms are given for infrastructure and rural development projects; less concessional terms are for industrial and tourism projects. Loans are normally extended for major infrastructure projects while grants cover social projects. The Fund does not do program lending.

Loans are made to a government, to a company or to a public institution assisted by the guarantee of the Government. Procurement is subject to international bidding procedures.

The Fund entertains regular consultations with other sister Arab development institutions such as the Kuwait Fund for Development, the Saudi Fund for Development and the Arab Fund for Development. The Abu Dhabi Fund is also an active member of the Coordination Group of the Arab national and regional development institutions.

Prospective recipient countries need to forward their request for assistance directly to the Director General of the Abu Dhabi Fund. After assessing the economic and technical viability of a project, the Fund presents its recommendations to the Executive Committee for approval.

The Abu Dhabi Fund's paid in capital is approximately US$581 million (soon to be raised to US$1,089 million). The Fund has no annual lending program. By charter, the Fund may not contribute more than 10% of its capital to any one single project. In addition, the maximum contribution to any project is limited to 50% of its total cost.

The Abu Dhabi Fund has had forms of cooperation with CIDA in the past. The ADFD does co-financing with other Arab funds and IBRD.

Interest for Canadian firms:

Canadian companies and capabilities are well known to the Fund. While Asian and EU consultants and firms are aggressive, the Fund would like to see more Canadian firms approach it. They are keenly interested in keeping their consultant and supplier rosters up to date and would welcome any indication of interest on the part of Canadians. The Fund needs expertise from Francophone-speaking firms to work in Francophone West Africa. So far, the Fund uses the World Bank DACON registration system for its searches; obviously, firms who visit the Fund have the advantage of establishing a personal contact and relationship. Except for large projects where tenders apply, very often work on projects begins on short notice and firms who are known and registered have an edge. Firms should complete the forms of the " Fédération internationale des ingénieurs-conseils" and send information to:

The Director General
Operations & Loans Department
Abu Dhabi Fund for Development
P.O. Box 814
Abu Dhabi, United Arab Emirates
Tel: (971)-2 725800
Fax: (971)-2 728890

KUWAIT FUND FOR ARAB ECONOMIC DEVELOPMENT (KFAED)
Mr. Hisham Al-Woqayan
Deputy Director General
Operations & Disbursement
P.O. Box 2921, 13030 Safat
13030 Kuwait
Tel: (965) 246-8800/243-7711
Fax: ((965) 241-9060/241-9063/241-9090/241-7940
e-mail: info@kuwait-fund.org
Website: http://www.kuwait-fund.org

Kuwait Fund for Arab Economic Development (KFAED) was established in December 31, 1961. Its mandate is to assist Arab countries and, as of 1973, developing countries by providing loans and technical assistance grants required to facilitate the implementation of development plans.

The Fund is entrusted with the management of grants directly extended by the State of Kuwait and as such is an arm of the State's foreign policy, with the proviso that a project to be considered must be deemed viable. After the liberation of Kuwait in 1991, a major policy shift was introduced whereby the Fund was mandated to offer assistance to all developing countries that supported Kuwait military and/or politically during the crisis. This may open opportunities for Canadian companies in the Caribbean states, for example, as they do not have a long established history of receiving fund from KFAED.

The KFAED has accumulated extensive operational experience through joint operations with the World Bank and other international, regional and bilateral development aid institutions: AfDB, AsDB, KfW, CIDA, UN agencies, etc. The Fund continues to collaborate with national, regional and international development institutions. Co-financing is estimated at 47.6% of the total amount of the Fund's loans as of the end of last year.

Paid-up capital is over $8 billion, with loan commitments totalling more than $10 billion.

Due to its statutory limitations it will not participate in equity. Furthermore, the Fund avoids potentially sensitive projects in social areas, as well as projects without adequate cash flow. The lending conditions depend basically upon the nature of the project and the beneficiary country's overall economic situation.

The KFAED extends financing for over 437 projects in 80 countries. Most active Arab countries are: Egypt, Morocco, Syria and Lebanon.

The distribution of the total loans committed since the Fund commenced activities covers many sectors: transport and communications (32%); energy sector (23%); industrial sector (17%); agricultural sector (17%); water and sewerage sector (10%); and other sectors (1.8%). In recent years the water sector is given higher priority. The KFAED has also contributed US$25 million to the World Bank's Palestine Fund for projects in the social sector.

The maturity of the loans extended by the KFAED ranges from 22 to 30 years with a grace period from 2 to 10 years; interest rates (inclusive of 0.5% annual service charge) range between 1.5% and 4.0%. The terms of these loans reflect a grant element ranging from 16% to 85% of the value of loans. The Kuwait Fund does not finance local costs as a rule, and its share in the financing of a project must not exceed 50%. These limitations may be waived when necessary. It is not involved in assistance to the private sector for the moment, with the exception of situations where the country's institutions are involved in helping SMEs and micro-enterprises (micro-credit).

Recipients eligible for assistance from the Fund comprise a wide range of entities, namely:

central governments, local authorities, public utilities, and other public bodies;
development institutions, whether international, regional or national, and especially development finance organisations;
mixed enterprises and private corporations whose activities have a development impact and which are not exclusively geared to profit making. Such enterprises and corporations must be either under the control of a developing country or nationals of such a country or jointly owned by a number of developing countries.

In the case of a lending operation where the borrower is not itself the government of the country concerned, the Fund usually requests the conclusion of a guarantee agreement with such government in order to cover the borrower's obligations under the loan agreement.

The project cycle is short but similar to that of the World Bank. The ministry responsible for a particular sector in the applying country must contact the Fund to apply for a grant (in the case of feasibility study) or for a loan (for funding a project). It is the Fund's policy to convert a technical assistance loan into a project loan in the event of the project materialising, otherwise it is considered a non-repayable grant.

The project appraisal is done mostly by a resident specialist, with outside support where needed. When a study is financed by the Fund, a short list of ten consulting firms from a variety of countries must be submitted by the recipient executing agency and approved by the Fund. Preference is given to local and Kuwaiti firms, as well as Kuwaiti firms in joint-venture with foreign consultants, as it is a bilateral aid fund similar to CIDA. Canadian consultants new to this part of the world should seek alliances or partnering with Kuwaiti firms. In the selection of a consultant, 80% of the appraisal points are allocated to technical expertise (advantage to Canadians in high tech sectors), and 20% to the financial proposal, with an additional 7% on top if the consultant is a Kuwaiti national.

A roster of consultants (not suppliers), kept by the KFAED, can be referred to directly or may be used by the recipient country which normally has a say in the selection process. Registration is a must. Information and curriculum should be sent directly to the Fund. Copies of the registration forms are available either via the Department of Foreign Affairs and International Trade or at the Embassy in Kuwait. Information on pre-pipeline projects is also available. Canadian firms experienced in dealing with potential recipient countries, should encourage them to use the same approach with the KFAED as with other multilateral development institutions and have them apply for loans.

For projects, international firms are required to contact the responsible ministry in the foreign country to pre-qualify for projects there. Firms should approach the relevant government with a letter of intent to pre-qualify according to that government's pre-qualification procedures.

Foreign firms are also required to register with the Kuwait Fund as a prerequisite bidding for projects. The registration procedure is for the Kuwait Fund to approve international firms and to keep record should a foreign government request particular expertise from the Fund. Other than registration, international companies have no other formal relation with the Fund.

Once the project is approved the applicant government must put the project to public tender and registered international companies are called on to bid.

Twice a year, the Coordinating Group of the National and Regional Development Institutions meets. The Group comprises the Kuwait, Abu Dhabi, Saudi and Arab Funds (the latter being the Secretariat) as well as the OPEC Fund for International Development (based in Vienna) and the Islamic Development Bank. The KFAED being the longest established member (1961), and recognized as the best staffed, often takes a lead role. It would therefore be advantageous for Canadians seeking joint regional financing to attempt to interest the KFAED in seeking co-financing from its sister institutions.

The KFAED has a long term positive relationship with Canada. Canada's Executive Director at the African Development Bank also represents Kuwait.

THE SAUDI FUND FOR DEVELOPMENT (SFD)
P.O. Box 50483
Riyadh 11523
Kingdom of Saudi Arabia
Tel: (966-1) 464-0292
Fax: (966-1) 464-7450
Email: info@sfd.gov.sa
Website: www.sfd.gov.sa

H.E. Mohammed El Sugair (Deputy Chairman and Managing Director
Public Relations Manager:
Mr. Doweihi Abdulrahman Al Doweihi
Tel: (01) 464-0292 x 2353

PROFILE

The Saudi Fund for Development (SFD) was chartered by a Royal Decree on 14 Sha''ban 1394 AH corresponding to 1 September 1974. The Fund commenced operation with effect from 18 Safar 1395 AH (1 March 1975).

The Saudi Fund for Development (SFD) extends concessional loans for financing projects that contribute to the social and economic well-being of the beneficiary countries. Although all developing countries are included, assistance is concentrated primarily on the least developed countries (LDCs), particularly the low income countries (LICs) and most seriously affected.

SFD operates from a capital provided by the Government. The initial authorized capital was ten billion Saudi Riyals in 1394 AH (1974) which was raised to fifteen billion Saudi Riyals in 1400 AH (1980) and to twenty five billion Saudi Riyals in 1401 AH (1981), and the third raise to 31 billion Saudi Riyals in 1411/1412 AH (1991).

The Fund now contributes to the financing of 276 projects in 61 countries.

The terms of SFD financing depend on the type of project and the economy of the beneficiary country. SFD assistance is only in the form of soft loans with a 1to 2.5% average interest rate, with maturity at between 20-50 year and grace periods of 5 to 10 years, representing a de facto 60-70% grant element. The Saudi Fund's share in the financing of a project will not exceed 50% of its total cost, and overall financial assistance provided to any country must not exceed 10% of the SFD capital.

The Fund will give due consideration to the priorities of the recipient countries and only deals in sovereign loans. The Saudi Fund has a policy of participating in co-financing for most of its projects, usually with other Arab or Islamic bilateral or regional funds, but also with the World Bank, the African Development Bank and even CIDA. It will agree to finance a private sector project but only if the recipient country agrees; the loan agreement still have to be signed by the host country. The Saudi Fund privileges infrastructure projects essentially.

Geographical distribution of loans during 1997 indicates that Asia received the greater share with 56.8%, while 40.4% of SFD loans went to Africa and 2.8% to other regions, including Bosnia and Malta. The SFD recently indicated it will not favour involvement in the Americas and Caribbean. Arab countries are due to receive a larger share of its assistance in the future. Lebanon has received recently substantial loans; other Arab beneficiaries include the Maghreb countries, Yemen and Egypt. In Africa, assistance is mostly concentrated in West Africa and the Sahel; and in Asia, Nepal and Bangladesh. Countries with arrears in repayments will not receive further assistance.

Procurement is untied and International Competitive Bidding (ICB) procedures apply. There is no pipeline of projects as such as each project is dealt with on a case by case basis. The SFD does not release procurement information. The SFD appears to delegate to the recipient country most of the administration of the project, retaining only a macro, at arms-length role. This applies equally to the pre-qualification and short-listing of firms. For these reasons, approaching the SFD would not prove productive. It is preferable for Canadian companies to explore avenues with the recipient country. The latter only can present a request for funding.

Usually, an evaluation mission will assess the merits of a project. The process may take several months. Feasibility studies submitted in the request for co-financing saves much time. Those seeking to bid on SFD-funded projects must promote their qualifications and secure an invitation to bid from the executing agency of the recipient country. Information may however be obtained through the list published twice a year by the Coordination Secretariat for Arab & Regional Development Institutions following their consultative meetings, normally held in Kuwait at the Arab Fund for Economic & Social Development.

The Saudi Fund may in some cases propose to the recipient country a short list if the country requires one. The SFD keeps a list of registered companies, mostly consultants, valid for three years. Forms for registration with the Fund may be obtained by writing to the Technical Department. Registration is necessary for consultants; contractors need only to send brochures. The SFD has had good experience with Canadian companies so far.

THE ZAYED BIN SULTAN AL NAHAYAN CHARITABLE AND HUMANITARIAN FOUNDATION
P.O. Box 41355
Abu Dhabi, U.A.E.
Tel: (971-2) 6681-4700
Fax: (971-2) 681-6571

Contact
Mr. Salem Obaid Al Dhahri

The Foundation was established IN 1993 on a personal initiative by Emir Zayed, Head of State of the U.A.E., for charitable purposes. It finances small and medium-sized projects such as mosques, cultural centres, food aid, hospitals, medicines, equipment for the handicapped, etc. The Foundation cooperates with the Red Cross, NGOs, and the HCR in their humanitarian work.

The Zayed Foundation has a capital of $1 billion of which about a third is paid up.

There are normally no restrictions regarding the beneficiaries as long as the project serves a humanitarian purpose. NGOs or consultants working in a humanitarian field could suggest to a potential beneficiary country that it approach the Foundation. The same applies for suppliers. Examples of assistance provided are medicines to Iraq and Bosnia, tents for refugees, foodstuffs for Iranian refugees, etc. Projects are normally decided by the Emir.

The Foundation, in principle, can accept proposals by Canadian NGOs. At first glance, there are few direct business opportunities for Canadian firms but as the Foundation is relatively new, it might eventually adopt new assistance approaches where it may purchase medicines and foodstuffs itself and have them shipped directly to the beneficiaries. Project proposals should be directed to the Director General at the above-mentioned address.

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3. MULTILATERAL ARAB/ISLAMIC FINANCIAL INSTITUTIONS

3.1 MULTILATERAL DEVELOPMENT AID INSTITUTIONS

ARAB BANK FOR ECONOMIC DEVELOPMENT IN AFRICA (BADEA)
Abdel Rahman El-Mahdi Street
P.O. Box 2640, Khartoum, Sudan
Tel: (249-11) 770-498/773-709; Fax: (249-11) 770-600

Established by Arab oil-rich countries in the aftermath of the 1973-74 petroleum crisis, BADEA (Banque Arabe pour le développement économique en Afrique, as it is commonly known, or ABEDA in English) seeks to promote economic, financial and technical cooperation between African and Arab countries. Operations began in 1976. It is the first institution to institutionalise the interests of the sub-Saharan African countries and the development commitment of the Arab oil-exporting countries.

BADEA's major roles are:a) it is an instrument dispensing and coordinating Arab aid to non-Arab Africa; b) to encourage the participation of Arab and international capital in African development projects; c) is a forum for broad discussion of cooperation between African and Arab countries.

More specifically, BADEA has had a special interest in trilateral co-operation arrangements, the motivation being:

to mobilise additional funds for the development of sub-Saharan Africa and simultaneously benefit from the experience of co-financing institutions;
to rationalise the Arab-African co-operation and increase the pace and impact of operations;
to extend the scope of operations to as many recipient countries and sectors, and cover as many projects, as possible in Africa;
to reinforce the negotiating power of inexperienced LDCs.

BADEA finances economic development in African countries, stimulates the contribution of Arab capital to African development, and helps provide technical assistance. Forty-one member states of the Organization of African Unity that are not members of the League of Arab States are eligible for aid from BADEA. By the end 1997, 41 of them had benefited from BADEA's operations. At the end of 1997, the Bank had loans/projects totalling US$1.3 billion and technical assistance grants for US$41 million.

BADEA is funded by Arab governments. It provides both project loans on concessional terms and technical assistance, mainly for project feasibility studies.

Its lending terms vary according to the nature of the project and the economy of the recipient country. The weighted average of its loans to the end of 1997 indicates an interest rate of 3.0% and a maturity of 18 years including a 4.4 year grace period. This weighted average corresponds to a grant element of 44%.

BADEA's share in the financing of a project, like most Arab development institutions, must not exceed 50% of its total cost or a ceiling of US$15 million. In exceptional cases, however, BADEA's share can be raised to 80% on the condition that the total cost of the project does not exceed US$10 million.

During its Board meeting held in Marrakech March 10-12, 1996, the existence of an " Action Plan 1995-1999" for 40 non Arab African countries was unveiled. At its May 1997 annual meeting in Abu Dhabi, BADEA's Board of Governors approved the allocation of US$50 million to finance foreign trade between Arab and African countries. The funds are administered by the Islamic Development Bank on BADEA's behalf, in accordance with rules, regulations and procedures determined by the Board of Directors.

Special Arab Aid Fund for Africa (SAAFA)

SAAFA was established concurrently with BADEA in January 1974 by Arab oil-exporting countries as an emergency facility. Its administration was entrusted to the League of Arab States and its recipients exclude Arab countries in Africa.

The financial resources of SAAFA were incorporated into BADEA in 1977. SAAFA's emergency operations during 1974-77 comprised rapidly-disbursed aid for BOP support to 32 countries. In 1978, BADEA also extended emergency assistance through its special programs for the agricultural sector.

Sectoral distribution of BADEA project loans as of the end of 1997 (in percent)

Transportation & infrastructure: 50.0%
Energy: 8.0%
Agriculture: 31.0%
Industry: 3.0%
Technical assistance: 1.8%
Education and health: 1.3%
National development banks: 4.0%

Bank headquarters are in Khartoum, Sudan, which makes communications for experts and executives difficult. It, however has a liaison office in Cairo, Egypt, which can be reached via the Embassy. Consultants may proceed with registration through FIDIC forms.

Although BADEA has a yearly volume of commitments of US$100 million, it will remain a " gap feeder" , i.e., a co-financier complementing the structuring of a loan rather than a project leader, which normally supervises it until completion.

ARAB GULF PROGRAM FOR UNITED NATIONS DEVELOPMENT ORGANIZATIONS (AGFUND)
P.O.Box 18371
Riyadh 11415
Tel: (966-1) 441-6240
Fax: (966-1) 441-2963
Email: projects@agfund.org
Website: www.agfund.org

Public Relations Manager: Mr. Abdulatif Al Doweihi
Tel: (01) 441-6240 Ext. 232

AGFUND coordinates assistance offered by Arab Gulf member states to 17 UN agencies and ensures that certain humanitarian principles apply to the projects thus financed. Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates contribute to AGFUND which was established on the initiative of H.R.H Prince Talal bin Abdul Aziz Al-Saud of Saudi Arabia. In addition, AGFUND provides assistance to a number of Arab NGOs.

Since its creation in 1981, AGFUND has committed close to US$200 million in 125 countries, of which US$172 million have been disbursed. AGFUND also launches fund-raising campaigns for specific causes. The Fund spends between US$3 to 4 million annually among the 17 UN agencies. UNICEF has over 60 projects with AGFUND with a cumulative contribution of US$60 million since the beginning.

All the financial assistance provided by AGFUND is in the form of grants. Its financial contribution provides no more than 50% of the cost of a project.

AGFUND finances projects in education, health, nutrition, water and sanitation, disability and environment. The main group targeted by AGFUND are mothers and children.

AGFUND is also training personnel and teachers but will not get involved in countries where there are wars, civil strife or other disorders.

The institution is very lean with a staff of 25, including three officers, the rest being administrative and support staff. It does not manage projects. AGFUND thus needs to hire external resources to undertake evaluations of projects financed with UN agencies. Consultants with expertise and an academic background in the health and basic education sectors are regularly needed. Canadian consultants can register with AGFUND by writing directly to: Director of Programmes, P.O. Box 18731, Riyadh, fax: (966-1) 441-2963.

THE ISLAMIC DEVELOPMENT BANK (IsDB)
P.O. Box 5925,
Jeddah 21432,
Saudi Arabia
Tel: (966-2) 636-1400
Fax: (966-2) 636-6871
Email: idbarchivcs@isdb.org.sa
Website: www.isdb.org

H.E. Dr. Ahmed Mohamed Ali , Chairman
Mr. Uosmane Seck, Vice President, Operations
Public Relations Manager: Mr. Talaat Fakhri Zaree
Tel: (02) 636-1400 x 6516

The Islamic Development Bank was established in 1973. The Inaugural Meeting of the Board of Governors took place in Rajab 1395H, corresponding to July 1975, and the Bank was formally opened on 15 Shawwal 1395H corresponding to 20 October 1975.

The purpose of the Bank is to foster the economic development and social progress of member countries and Muslim communities individually in accordance with the principles of Shari'ah i.e., Islamic Law. The functions of the Bank are to participate in equity capital and grant loans for productive projects and financial assistance to member countries for economic and social development. The Bank is also required to establish and operate special funds for specific purposes including a fund for assistance to Muslim communities in non-member countries, and to setting up trust funds.

The Bank is authorized to accept deposits and to mobilize financial resources through Shari'ah compatible modes. It is also charged with the responsibility of: assisting in the promotion of foreign trade (especially in capital goods) among member countries; providing technical assistance to member countries; and, providing training facilities for personnel engaged in development activities in Muslim countries to conform to the Shari'ah.

The present membership of the Bank consists of 53 countries. Prospective member country should be a member of the Organization of the Islamic Conference, pay its contribution to the capital of the Bank and be willing to accept terms and conditions as may be decided upon by the IDB Board of Governors.

IsDB financing is denominated in Islamic Dinars (ID); one ID is roughly equivalent to one SDR of the IMF. Its authorized capital is US$8 billion of which US$ 3 billion is paid-in.

The Bank's principal office is in Jeddah in the Kingdom of Saudi Arabia. Two regional offices were opened in 1994: Rabat (Morocco) and Kuala Lumpur (Malaysia). In July 1996 a regional office was opened in Almaty, Kazakhstan, to serve as a link between IDB member countries and Center Asian Republics.

The Bank's financial year is the lunar Hijra Year.

Three divisions of the IsBD are headed by a vice-president: Finance, Operations, Administration. The secretariat, (includes information, policy and strategic planning) is headed by an Advisor to the bank. The first two are of interest to firms wishing to do business with the IsDB. The Trade Finance & Promotion and the Business Development departments of the Finance Division are important for exporters.

Project lending, of interest to prime contractors and consultants, is dealt with by the Operations division. It is divided in three units along member country language: Francophone (including Lusophone & Spanish), Anglophone and Arabic.

The IsDB has been implementing the " Strategic Agenda for the Medium-Term Priorities and Main Operational Aspects" , which attempts to emphasize intra-member country cooperation, enhancement of human resources, promotion of science and technology, reduction of poverty and preservation of the environment. The Agenda has placed special emphasis recently on the promotion of the private sector and SMEs. Like other IFIs, the IsDB is concerned with the performance of its operations and is seeking to improve and streamline management of the project cycle. All IsDB-financed projects evolve through the project cycle of identification, preparation, appraisal, implementation and post-evaluation. Bank financing is expected to gradually move from individual project to a country-specific approach in the near future. In recognition of the importance of the private sector in the development of member countries and as a part of the Bank's strategic agenda, it has recently launched a programme to support the private sector. During 1997, a full-fledged Department of Business Development was established specifically to anticipate the Bank's current and future programmes for assisting the private sector. There is also a special department for Business Development which comprises three sections: (1) Private Sector Development (it covers the National Development Financing Institutions (NDFI) and Islamic bank); (2) Marketing and Consultancy Services; and, (3) Equity Portfolio Management.

The IsDB and 44 Islamic banks have established close cooperation links which have brought about the creation of the following institutions: Islamic Banks' Portfolio (at the IsDB); Unit Investment Fund (at the IsDB); Islamic Trade Company (in Bahrain); Research Coordination of Islamic Banks (in Egypt); The International Islamic Lease Financing Company (in Kuwait).

IsDB support to the private sector is extended through investment in the equity of private companies and Islamic banks. To date, the IsDB has equity in 14 banks and in 78 companies.

The IsDB engages in three main activities: Project Financing; Trade Financing; and, Procurement and Registration.

Project Financing is provided in seven different ways:

Loans for socio-economic projects for infrastructure development (usually long-term implementation and revenue generating), for a maximum of US$10-12 million, are provided interest free and subject to a service charge ranging from 0.75% to 2.5% maximum per annum, to cover administrative expenses. They are repayable over a period of 15-25 years with a 3 to 7-year grace period for ordinary loans and 25-30 years, including a 10-year grace period, for least developed member country loans (LDMC).
Technical assistance is hired for feasibility studies, design and preparation of tender documents, supervision of projects. This is of interest to consultant firms. The IsDB also retains consultancy services to assist its own staff in the preparation and follow-up of projects. The selection of consultants is made through limited competition which can involve consultants from non-member countries; however, member countries receive preferential treatment. Canadian consultants seeking IsDB contracts should register with the IsDB, and should consider partnering, forming an alliance or a joint-venture with a local firm in the beneficiary member country to capitalize on the preferential treatment allocated to local consultants.
Equity participation in the capital of financially viable industrial and agro-industrial projects or through the national development financial institutions (NDFI). Equity participation is restricted to companies which do not carry interest-based finance on their books. The level of financing does not exceed one-third of the equity of the project.
Lines of equity/lines of leasing/ lines of instalments and combined lines: Close cooperation exists between IsDB and NDFIs to design these instruments/techniques to assist and strengthen SMEs through technical assistance aimed at institutional capacity building and accessible financing. The IsDB, therefore, is an interesting source of additional financing for Canadian firms negotiating with private sector interests in member countries.
Leasing of equipment which in practice comprises both the purchase and leasing to beneficiaries: During the leasing period, IsDB retains the ownership of the equipment. For the last few years, this type of financing has been the main source of medium-term funds provided by the Bank. At present, this financing is primarily utilized by higher income member countries. The repayment period is between 7 to 15 years, including a 2 to 4-year grace period. Repayments carry a mark-up from 6 to 8%. The normal ceiling is ID 20 million per project.
Instalment sale: A contract sale whereby the ownership of the asset is transferred immediately to the buyer while the purchase price is payable in instalments. Repayments are normally made over a period of six to ten years with a mark-up of 7 to 8 per cent.
Profit sharing (mudaraba): A mode of financing based on the placement of funds by two or more parties for financing specific projects/operations that generate a reasonable financial return, with each party sharing in the profit on a pro rata basis.

Trade Financing

The Import Trade Financing Facility (ITFO) is designed to finance member countries' import needs of a development nature. Financing is provided on a short-term basis varying between 9 and 24 months on relatively soft terms; it involves the supply of goods and their re-sale to recipient member countries, inclusive of a reasonable mark-up and with a deferred payment arrangement. Canadian firms can benefit from this facility. They may also suggest to their customers the availability of such IsDB concessional financing provided their country is a member of the IsDB.
The Long-term Trade Financing Scheme, which has been implemented through the creation of a special fund, aims at promoting trade among OIC member countries by financing exports of non-traditional commodities and capital goods for periods ranging between 6 and 60 months. The Scheme involves the purchase of a commodity from an exporter on a cash basis and the resale to an importer against a mark-up of between 5 and 6% on deferred payment terms.
The Scheme's financing is limited to exports of eligible commodities originating in the member countries. They are considered as originating in the member country if produced or manufactured from inputs of that country and/or of an OIC country with at least 40% of the FOB value of the finished product (export commodity). Financing can be provided up to 80% of the FOB value.
The Islamic Banks' Portfolio whose objective is to finance trade among member countries, undertakes leasing and participates in equity financing. It is designed to meet the needs of the private sector importers and exporters via the financing of capital as well as non-capital goods. The portfolio aims mainly at encouraging trading of principal certificates among participants and eventually issuing certificates tradeable in secondary markets. Modes of financing consist of a transaction involving a mark-up on the cost of the goods, or a purchase contract where the price is paid in advance with the goods delivered in the future, or leasing and instalment sale. Twenty Islamic banks participate in the Portfolio which has a paid-up capital of US$100 million.
The Unit Investment Fund is a trust fund pooling the savings of individual and institutional investors, and investing these savings in productive projects in member countries. So far it has raised capital amounting to US$325 million.
The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) provides export credit insurance to cover non-payment of export credit receivables resulting from commercial and non-commercial (country) risks. Currently, the ICIEC provides only export credit insurance. The investment insurance operations have started in 1998. (See separate report on ICIEC for details.)
The International Islamic Lease Financing Company (ILC) is a joint IsDB financing company with other Islamic banks for the establishment of a leasing company based in Kuwait. The ILC will create specialized leasing companies at the national level in different member countries.

Other financing and business development promotion initiatives

As part of its search for innovative modes of financing compatible with the Shariah, in 1966, the IsDB launched Istisna'a, a medium-term mode of financing for the promotion of trade in capital goods among member countries and the enhancement of production capacity. It is a contract for the manufacturing or construction whereby the seller agrees to provide the buyer with finished goods identified by description after they have been manufactured/constructed in conformity with that description within a certain time and for an agreed price. Financing will be extended to pre-shipment financing of goods, i.e., at the production stage. In addition, Istisna'a will give IsDB a mode of financing for infrastructure projects that cannot lend themselves easily to financing by way of leasing or instalment sale.

Procurement and Registration

The Board of the IsDB meets every seventh week to review and approve projects submitted by member countries. The list of approved projects is publicly released by the Bank and can be obtained through the Bank, the recipient country's executing agency, or our office in Jeddah.

Though beneficiary countries manage the bidding process, the IsDB retains a reviewing right to accept the recommendation. ICB rules are followed. Companies thus need to approach the executing agency once they are aware of projects in the early phases of the pipeline.

Concerning consultants, though preference is given to member countries, expertise does not appear to be sufficient in some fields. IsDB usually chooses from a roster of 3,700 consultants (of which only 600 are from member countries). Registration is essential and can be done by applying for the Bank's registration forms. A short list of six to ten consultants is then reviewed by two committees at both the IsDB and the country. Completed forms should be sent to the Head of the Marketing & Consultancy Services.

Partnering with a member country firm would be advantageous in some cases. It is recommended that Canadian firms explore such possibilities with the Technical Assistance Association of Islamic Consultants based in Cairo, and for enterprises, a similar association based in Rabat.

Special Operation

Special operations consist of grants for training or research, for disaster relief, or for furthering Islamic causes.

THE ISLAMIC CORPORATION FOR THE INSURANCE OF INVESTMENT AND EXPORT CREDIT (ICIEC)
P.O.Box 5925
Jeddah 21423
Saudi Arabia
Tel: (966-2) 644-5666
Fax: (966-2) 637-9504
Email: iciec@isdb.org.sa
Website: www.iciec.org

Head of Admin. Affairs: Mr.Rahimi A. Rahimi
Tel: (02) 646-7555

Islamic Corporation for Insurance of Investments and Export Credits (ICIEC) is an Affiliate of the Islamic Development Bank (IDB). It was established on 1st August 1994, as an international Institution with full juridical personality offering Islamic compatible insurance for investments and export credit.

ICIEC commenced operations in July 1995 from its principal office in Jeddah, Saudi Arabia.

The authorized share capital of the Corporation is ID 100 million, made up of 100,000 shares of ID 1,000 each. IDB has subscribed to half of the authorized capital, while the other half was left for the subscription of the Member Countries of the Organization of the Islamic Conference (OIC). Each Member Country may subscribe to a minimum of 250 shares in the Corporation.

As of 30 Dhul Hijja 1421H(March 2001), IDB and twenty-nine member countries had subscribed to a total of 94,990 shares for a nominal value of ID 1,000 per share; equivalent of ID 94.99 million. The called-up installments amounted to ID 72.50 million, out of which ID 70.94 million has so far been paid-up. The balance of ID 1.56 million is receivable from the subscribing Member Countries.

There are 30 member countries: Algeria; Bangladesh; Chad; Egypt; Gambia; Indonesia; Iran; Jordan; Kuwait; Lebanon; Malaysia; Mali; Morocco; Pakistan; Saudi Arabia; Senegal; Sudan; Syria; Tunisia; Turkey; Yemen.

The objective of ICIEC (the Corporation) is to enlarge the scope of trade transactions and the flow of investments among Member States of the Organization of the Islamic Conference (OIC). In fulfilment of this objective, the Corporation provides: export credit insurance to cover the non-payment of export receivables resulting from commercial (buyer) or non-commercial (country) risks; and investment insurance against country risks, mainly the risks of exchange transfer restrictions, expropriation, war and civil disturbance and breach of contract by the host government.

The Corporation provides insurance facilities in accordance with the principles of Shariah. Thus, in carrying out its operations, the Corporation shall observe the following principles:

Endeavour to achieve mutual co-operation of policyholders through their collective sharing of losses which any one policyholder may suffer; distribute the surplus that may accrue from the insurance and any reinsurance operations to policyholders after meeting statutory reserve obligations;
Exclude cover of contracts for the sale of goods prohibited under Shariah, as well as Interest accruing from export credit or investment loans; and invest its own funds in accordance with Islamic principles.

ICIEC offers three insurance policies: Comprehensive Short Term Policy, Supplemental Medium Term Policy, and Bank Master Policy.

Comprehensive Short Term Policy (CSTP)

The CSTP is designed to cover shipments of raw materials, commodities and light manufactured goods under which credit extended to buyers does not exceed two years. The exporter is normally obliged to offer all his insurable export turnover but certain exclusions, with or without penalty, may be considered. CSTP covers commercial and non-commercial risks up to 90%.

Supplemental Medium Term Policy (SMTP)

The SMTP is suitable for exporters of consumer durables, capital goods or semi-capital goods where credit extended to buyers exceeds two years, up to a maximum of five years. As with the CSTP, the SMTP adopts the whole turnover concept whereby all insurable export contracts are covered under one policy. The SMTP is available for holders of the CSTP as a supplement, but could be also obtained separately.

The terms and conditions of cover, underwriting considerations and exporter's obligations under the SMTP are identical to those applicable to the CSTP. However, premiums are higher on account of the longer risk horizon.

Bank Master Policy (BMP)

The BMP is specially tailored to cover non-payment risks in connection with IDB's and other Islamic banks' financing operations. The BMP will cover the same risks as the two other policies, in addition to capital goods owned by the insured bank. The intended purpose of the BMP is to encourage the financing of trade and investment operations where difficulties in securing bank guarantees arise and where unacceptable commercial and country risks are perceived to exist.

THE ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES FUND FOR INTERNATIONAL DEVELOPMENT (OPEC FUND)
Parkring 8, Vienna A-1010, Austria
Tel: (43-1) 51564-0
Fax: (43-1) 513 92 38

The OPEC Fund is an intergovernmental development finance institution dedicated to promoting cooperation between OPEC countries and other developing countries, as an expression of South-South solidarity. It does this by, among other things, providing financial resources to assist those countries in realizing their economic and social development goals.

The Fund was established in 1976 by the member countries of OPEC (which include Arab oil exporting countries and Gabon, Nigeria, Venezuela, Indonesia, and Iran). The idea was to create a collective aid facility that would consolidate the assistance extended by member countries; its resources are in addition to those already made available by OPEC states via other bilateral and multilateral channels.

The Fund extends loans on concessionary terms of three types: for projects, for programs and for balance of payments (BOP) support. It also provides grants for technical assistance, food aid, research and other activities. Loans carry a 2% interest rate which could be lowered to 1% (one) in the near future; maturity is 17 years with a grace period of 5 years. While it does not normally engage in emergency relief work, the Fund occasionally contributes to international efforts to alleviate suffering in regions devastated by natural or man-made disasters such as droughts, floods, earthquakes, etc.

All non-OPEC developing countries are, in principle, eligible for Fund assistance, as are international institutions whose activities benefit developing countries, such as IFAD. The least developed countries and in general low-income countries are accorded priority. Close attention is paid to the priorities identified by the recipient countries. Over the years, Fund assistance has benefited 95 countries in Africa, Asia, Europe and the Caribbean, and loans have been extended to all major economic sectors. In 1997, the OPEC Fund added Kyrgystan and Tajikistan to its expanding portfolio.

Since its inception, the OPEC Fund has made available a cumulative total of US$5.033 billion in loans and grants to more than 1,000 projects. These include project and program loans as well as balance of payments (BOP) loans. In 1997, it approved 33 project loans valued at US$210.3 million (from US$146.2 million in 1996). Two further loans totaling US$24.7 million were approved to finance commodity imports program. In the area of grants, 31 grants worth US$5.4 million were extended, mostly to technical assistance schemes, funding research and backing humanitarian operations. As mentioned above, all sectors are represented in project loans approved in 1997, with transportation 24.3%, health 15.2%, education 19.6%, agriculture 22.8%, water supply & sewerage 4.8%, telecommunications 3.8%, national development banks (for micro-enterprises) 1.9% and other & energy 7.6%. The OPEC Fund has cofinanced 23 projects by extending loans totalling US$152 million in 1997, with other Arab OPEC-member agencies and by a number of other multilateral partners.

The Fund may undertake the technical, economic and financial appraisal of a project submitted to it, or entrust such an appraisal to an appropriate international development agency, or a qualified agency of an OPEC member country by other development institutions. Similarly, the administration of a large number of the Fund's project and program loans has been entrusted to development aid agencies.

With regard to procurement, the OPEC Fund follows the same ICB rules as the World Bank. It does not participate directly in the bidding process which is left to the recipient country. In the implementation stage, the executing agency supervises the project but is required to report periodically to the Fund.

Consultants are occasionally required to help in the preparation and evaluation of projects. Canadian consultants can register with the OPEC FUND by writing to the Director of Research and Information and request the Fund's forms.

Canadian companies are perceived with having an edge in the Caribbean and Francophone Africa.

Education is the sector where there is the most need for expertise. The Fund is lending to the private sector via the recipient country government. Its Board is currently considering lending directly to the private sector. Various formulas will be examined: equity, loans or both.

The Fund's Board meets four times a year in March, June, September and December. Following these meetings, proposed projects are approved (or rejected). Approved projects are announced by an official communiqué and the publication of a list of all the projects, which is still in the early stage and should allow firms sufficient preparation time to bid. Lists of approved projects may be obtained by writing directly to the Director of Information or the Export Financing Division of the Department of Foreign Affairs and International Trade.

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3.2 ARAB REGIONAL COOPERATION AND TRADE PROMOTION INSTITUTIONS

ARAB AUTHORITY FOR AGRICULTURAL INVESTMENT AND DEVELOPMENT (AAAID)
P.O. Box 2102 Khartoum, Sudan
Tel: (249-11) 773-752/3, 780-777
Fax: (249-11) 772-600

AAAID is an investment organization of 15 Arab countries aimed at improving food security in Arab countries and developing agricultural resources in member states. For many years, it concentrated its efforts on establishing agricultural projects in the Sudan through equity participation, in the hope of making Sudan a major food exporter to Arab countries.

In April 1984, it modified its emphasis by deciding to investigate the agricultural resources and the potential for agricultural development and related activities in other member states. Its mandate includes investing in all forms of agricultural production and related activities, particularly, land reclamation; plant, animal and fish production; pastures; forestry; the transport, storage, marketing, export and processing of agricultural produce; and all inputs necessary for agricultural production.

Authorized capital at the end of 1997 was US$492 million of which US$328 million is paid up. Cumulative commitments amounted to US$338.6 million at the end of 1997, and disbursements reached US$293.7 million.

AAAID has established several companies in the Sudan. Its participation in their capital amounted to $105 million at the end of 1997. These companies are the Arab Company for Agricultural Production and Processing Ltd. (ACAPP), the Arab Sudanese Vegetable Oil Co. (ASVOC), the Arab Sudanese Blue Nile Agricultural Co. Ltd. (ASBNAC), the Kenana Sugar Co., and the Pilot Farm for Production of Improved Seeds.

In 1985, the Board of shareholders adopted a resolution calling for the extension of AAAID's activities to other member states. AAAID is now involved in projects in Iraq, Kuwait, Qatar, Tunisia, Mauritania, Morocco, Saudi Arabia and the United Arab Emirates.

The unit of account of AAAID is the Kuwaiti dinar.

The potential contribution of industrialised countries such as Canada to this regional Arab project could concentrate on the following areas:

consulting groups for feasibility studies at the pre- investment stages;
detailed engineering studies, specification of equipment, etc., in the appraisal stage;
management contracts for specific types of projects to handle sophisticated technology in the implementation stage;
attraction of additional funds to accompany the transfer of technology, including the supply of machinery and training facilities.

ARAB FUND FOR ECONOMIC AND SOCIAL DEVELOPMENT (Arab Fund)
P.O. Box 21923
Safat 13080, Kuwait
Tel: (965) 484-4500
Fax: (965) 481-5750/60/70

The Arab Fund for Economic and Social Development is an Arab regional financial organization with an independent juridical status, established in 1968 but operational only since 1974. The Arab Fund finances projects through lending operations and technical assistance to contribute to the Arab countries' development programmes. The AFESD membership comprises all 22 members of the League of Arab States, and its beneficiaries have so far included all Arab countries with the exception of Kuwait, Saudi Arabia, Qatar and the United Arab Emirates (UAE), i.e., from wealthier to poorer states. Its mandate is limited to the financing of projects of Arab states only.

Its paid-up capital is almost US$3 billion, and total loan commitments are roughly US$10 billion. The largest shareholders are Saudi Arabia, Kuwait, and the UAE.

In 1993, Iraq, Sudan and Somalia were suspended. Palestine and Jordan are active members and are eligible for loans.

The Arab Fund extends project loans to governments and to public and private organizations and institutions on soft terms, giving preference to projects that are of vital importance to the Arab world and to joint projects involving Arab cooperation. It encourages the investment of public and private capital in a way designed to promote the development and growth of the Arab economy.

Loans: These are long term with a grace period calculated on implementation period usualy 4 to 7 years, an interest rate of 3% for the poorest countries up to a maximum of 4 1/2% for the others, with a maximum reimbursement period of between 22 to 30 years. Loans are mostly for infrastructure projects. The Fund's loan commitments for project financing during 1997 were about US$808 million. Seventeen Arab states benefitted from these loans which helped finance projects. Its activities during 1997 focused on sustained support for energy projects, which received 33% of total loans; this was followed by agriculture and agro-industry at 22.7%; transportation and telecommunications at 15.5%; water and sewerage at 10.8%, industry, 10.9%; and others, 7.1%. For the period of 1974-97, the Arab Fund's share of co-financing amounted to 31% of total loans committed to Arab, regional, and international institutions. Because of the weight of the electricity sector, Canadian technology and know-how are well known and favourably perceived. Hydro-Quebec International has been working for over ten years with the Arab Fund and is currently involved in studies for the Inter-Arab electrical inter-connexion grid. Hydro-Ontario has also worked for the Fund.

Grants: Mostly used for technical assistance programs such as feasibility studies, economic/social/cultural projects, institutional support and training programs, provision of computer programs, preservation of Arab heritage, and emergency relief; in 1997, technical assistance grants amounted to nearly US$16 million with the focus being on enhancing institutional support and training which received 42.3% of total grants.

The project cycle is similar to that of the World Bank: feasibility study, appraisal, detailed study, visit/finalize and initial agreement, final report, signing (usually in host country). It however is simpler and much quicker, usually taking an average six months. International Competitive Bidding (ICB) rules apply. The recipient country proposes and the Fund approves firms. If the project is complex, a pre-selection process is followed. The Fund, however, occasionally uses outside technical support, rarely takes up more than a minority position of the financing (maximum 40%) and depends on outside contracting for appraisals. Canadian firms should therefore, where appropriate, direct host countries to approach AFESD as an additional source of funding for well packaged projects. The Fund may also prove useful in its capacity as coordinator for other Arab funds in identifying co-financing sources.

Registration is recommended for consultants (and some suppliers) by writing directly to the Technical Department of the Fund. It is currently working on a standard registration system that should be agreed to and used by all Arab development funds. This will have the benefit of both a one-stop shopping for these funds as well as avoiding duplication and improving efficiency. Countries normally submit a short list which the Fund reviews and comments, seeking a balance of various nationals and subject to price. Information on projects in the pipeline may be obtained once the initial agreement between the Fund and the recipient country is signed. The Fund normally publishes an official communiqué, and the project is publicly announced in the beneficiary country. Usually, call for tenders have not been made, and it is not deemed too late for bidding at that point.

Interestingly, the Arab Fund will be launching in the near future a private sector window similar to the IFC, but which will remain within its current structure. The Board has approved the earmarking of US$500 million to start the activities of the new department which will be staffed with three directors. The Fund will hold equity in private sector projects, companies, encourage loan syndication and provide guarantees. This will de done directly with the private sector and will be on an non-objection basis by the host government which will not be required to give any form of approval nor guarantee. Though not yet operational, this financial vehicle would appear to hold interesting prospects for equity funding and Canadian companies involved in PPI (participation in privatization of infrastructure) in an Arab beneficiary country should explore avenues with their local partners.

Its structure has been streamlined and it no longer has the traditional country/desk division. Projects are reviewed by the Technical Department which oversees the various phases of a project. The Arab Fund is considered the Arab institution with the lowest overhead costs and as having an efficient coordination secretariat.

The Arab Fund in fact assists and houses the Coordination Group of Arab National and Regional Institutions which exchanges views and discusses policies and operations with the purpose of making Arab aid more effective. The Fund also enters into co-financing agreements with the World Bank and the African Development Bank. Interestingly, the Fund meets twice a year with the other Arab and Islamic Funds, including the OPEC Fund, to decide what projects to finance or to jointly finance, thus avoiding duplication and encouraging the rationalization of Arab resources. A compendium of all the projects approved by each Arab and Islamic bank is then published. This provides usual information on projects ready for ICB. It can be obtained through the embassy in Kuwait.

ARAB INVESTMENT COMPANY
P.O.Box 4009
Riyadh 11491
Tel: (966-1) 476-0601
Fax: (966-1) 476-0514
Email: taic@taic.com
Website: www.taic.com

Public Relations Manager:
Mr. Mohmed Abdulrahman AlHazeil
Tel: (01) 476-0601 Ext. 4306

The Arab Investment Company S.A.A. (TAIC) is a Pan-Arab joint stock company established in 1974 and owned by governments of 16 Arab states with a paid-up capital of US$400 million of which US$366 million is paid-up. The World Bank and the IFC have shares in TAIC. The company enjoys all guarantees and concessions provided by the national, Pan-Arab and foreign investment codes in the shareholder countries. In particular, its assets can be transferred but cannot be nationalized nor expropriated.

TAIC has regional offices in Tunisia, Egypt and Jordan. The member countries are: Saudi Arabia; Kuwait; Sudan; Egypt; Qatar; United Arab Emirates ; Bahrain; Syria; Iraq; Jordan; Tunisia; Morocco; Libya; Oman; Yemen; Lebanon.

Its prime objective is to invest in " Arab funds to develop Arab resources in different economic sectors, based on sound economic and commercial measures, in a manner that would support and develop the Arab economy." TAIC's two main line of activities are: project investment and banking services.

Project Investment

Project equity investment is TAIC's main function, and investment decisions are usually made on the basis of the sound economic and commercial viability of projects. Other criteria include the strategic importance of the project, its priority in the national development plan of the host country, its contribution to the integration of economic sectors, and the improved utilization of local resources. The main thrust is directed towards the private sector and commercially oriented enterprises. Loans are for specific projects and interest rates are determined for each one on a commercial basis.

The company acts as a catalyst and a promoter for investment by performing, inter alia, the following functions:

Identification of economically viable projects by conducting feasibility studies or evaluating such studies submitted by other parties;
Promotion of selected projects by subscribing in their capital and providing technical assistance during the initial stages to ensure timely and cost-effective implementation;
Participation in the management of on-going projects through representation on their boards of directors;
Follow-up of on-going projects in coordination with other parties to increase productive efficiency and competitiveness.

TAIC will support public and private Arab investment institutions to promote the development of a regional financial market in order to improve the general investment climate in the Arab region.

Banking Services

Banking services are provided by TAIC's branch in Bahrain which acts as an offshore banking unit (OBU) under licence and supervision of the Bahrain Monetary Agency. These services have been instrumental in enhancing project equity investments by generating additional income for reinvestment, in addition to mobilizing Arab surplus funds in support of Arab economies.

The OBU provides the following services:

Commercial banking services, including the provision of trade finance and other credit facilities to various entities. TAIC has also carried out trade financing activities with other banks including the Arab Trade Financing Program aimed at inter-Arab trade or between Arab countries and non-Arab trading partners.
Investment banking services, including project finance, portfolio management, investment in securities and various treasury operations such as accepting or placing deposits and trading in foreign exchange and money market instruments.
Islamic banking services provide Islamic modes of financing in accordance with Islamic Shariah laws.

OBU is authorized to deal with institutions outside the Arab world and has had relations with Canadian banks, notably for the syndication of loans.

TAIC prefers to deal with several partners in a project. However, companies involved in a project must be Arab, not foreign ones doing business in the Arab countries, unless an Arab company is involved in a joint-venture or has a substantial share in the foreign one.

TAIC has intensified contacts with regional investment promotion entities and actively follows the outcomes of privatization programs implemented by many Arab countries. Both the World Bank and the IFC have shares in TAIC. The company is divided into three departments: Agriculture, Services and Industry. At the end of 1997, TAIC's portfolio encompassed 34 projects consisting of 16 industrial, 5 agricultural and 13 service projects, with total equity participation amounting to US$212.8 million.

Feasibility studies are to be undertaken by promoters. TAIC sometimes hires independent consultants to review projects and proposals. Canadian consultants, therefore, should write to the Company and present their qualifications, references and past experience. For other financing considerations, TAIC may be of interest to promoters of an investment project that may involve loan syndication with various entities; it may become in the near future an interesting avenue for participation in privatization projects in infrastructure (PPI). Companies with a long-term approach and business plan should explore strategic alliances, joint-ventures or partnering avenues with Arab companies.

ARAB MONETARY FUND (AMF)
AMF Building
Corniche Road
P.O. Box 2818
Abu Dhabi, U.A.E.
Tel. (971-2) 621-5000
Fax: (971-2) 632-6454

The Arab Monetary Fund was set up in Abu Dhabi in 1977 following an agreement by the Council of Arab Economic Unity whose intent was to lay the monetary foundations of Arab economic integration, accelerate the progress of economic development in all Arab countries and promote trade among them. Similar to the IMF, the AMF started operations in February 1978 and is limited to its 21 regional member states. As a first step, the AMF is trying to prepare monetary measures conducive to regional integration, to promote trade within the Arab world and to provide technical advice and training in central banking techniques.

According to its Articles of Agreement, the Fund is mandated to:

correct disequilibria in the balance of payments (BOP) of member states through the extension of credit facilities (loans) in support of adjustment programs;
promote stability of exchange rates and the convertibility among Arab currencies, and strive to eliminate restrictions on current payments between members states;
promote such policies and modes of Arab monetary cooperation that will enhance the pace of Arab economic integration and the process of economic development in the member states;
assist member countries in their efforts to restructure their financial systems and public finance;
render advice on matters relating to financial resources of member states in foreign markets;
promote the development of Arab financial markets;
promote and develop inter-Arab trade through its specialized advisory services to the Arab Trade Financing Program (ATFP), an independent entity of the AMF; (* see section on ATFP)
study ways to promote the use of the Arab Accounting Dinar (AAD) as a unit of account and pave the way for the creation of a unified Arab currency;
provide training courses to enhance the technical and professional skills of junior and mid-level personnel of financial and monetary agencies of member countries; this activity is carried out by the Economic Policy Institute of the AMF.
coordinate the position of member states on international monetary and economic issues with the aim of realizing their common interests, and contribute to the solution of world monetary problems; and
settle current payments between member states in order to promote trade among them.

The unit of account of the AMF is the AAD; one AAD being equivalent to three SDRs (Special Drawing Rights of the IMF) or USD4. The Board of Governors may authorize an increase in capital and the AMF may borrow up to twice the amount of its capital and reserves. The AMF's total own resources at the end of 1997 amounted to AAD 622 million of which AAD 319 million were the Fund's loanable resources corresponding to the Fund's paid-up capital in convertible currencies.

The main activity of the AMF is the provision of loans in support of economic adjustment programs. During 1997, the Fund approved three loans totalling AAD 22.7 million. Agreements for loans amounting to close to USD 3 billion, had been signed with 12 member countries by the end of 1997.

The AMF extends four types of concessionary loans to its member states, which vary in terms of their maturity: the automatic loan has a maturity of three years, the ordinary loan (five years), the compensatory loan (three years) and the extended loan (up to seven years). The amounts, terms and maturities vary depending on the nature and scale of imbalances facing the borrowing country.

Member countries may draw unconditionally up to 75% of their paid-in capital convertible currencies to finance their BOP deficit (automatic loan). They may obtain loans in excess of this limit, subject to a financial adjustment or stabilization program (ordinary loan) or an extended loan for a recipient country facing a large and chronic deficit in its BOP attributable to a structural imbalance in its economy. This loan requires that the beneficiary country adopts a structural reform program of at least two years, agreed upon with the AMF. Another facility is the compensatory loan which may also be drawn to address a BOP deficit arising from unforeseeable factors (decline in receipts from exports or an increase in agricultural imports due to bad harvests).

To assist member countries to further their efforts to consolidate previous structural adjustment programs, the AMF has undertaken in 1997, to establish a New Lending Facility. This Facility will allow extending supplemental financial and technical assistance support, notably in the financial and banking sectors and government finance. It will be available to all member states with a strong track record of implementing macroeconomic stabilization policies.

In the context of these objectives, the AMF is providing financial and technical assistance to countries embarking on privatization programs, particularly Morocco, Algeria, Tunisia, Egypt and Yemen.

In the area of capital markets, to promote the development and linking of Arab capital markets, the AMF created in 1997, the Arab Capital Markets Database to disseminate information and market indices on a reliable and regular basis to increase awareness about these markets and opportunities for investment in them. This is in addition to the Inter Arab Rating Company (IARC) created in collaboration with the International Finance Corporation (IFC). The AMF also provides technical assistance to member countries to support their endeavour to create their domestic capital markets.

Besides its operational activities, the AMF is a forum for questions affecting Arab institutions. When the United States froze Iranian public assets, the Fund was outspoken in calling for an international agreement between the industrialised and Arab countries to ensure that Arab investments and deposits in the OECD region be guaranteed against sequestration and freezing.

Member states

Algeria
Bahrain
Djibouti
Egypt
Iraq
Jordan
Kuwait

Lebanon
Libya
Mauritania
Morocco
Oman
Palestine
Qatar

Saudi Arabia
Somalia
Sudan
Syria
United
Arab Emirates
Yemen

Occasionally, the AMF hires consultants to undertake independent studies notably economic and trade policy issues. Consultants may send their CV directly to the AMF.

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ARAB PETROLEUM INVESTMENTS CORPORATION (APICORP)
P.O.Box 1547
Al Khobar 31952
Tel: (966-3) 887-0555
Fax: (966-3) 887-0404/0505
Email: malmahdi@apicorp-arabia.com
Website: www.apicorp-arabia.com

Public Relations Manager:
Mr. Mahdi Al Mahdi
Tel: (03) 887-0555 x 203

The Arab Petroleum Investments Corporation (APICORP) is an Arab joint-stock company established in 1975 in accordance with an international agreement signed and ratified by the governments of ten member states of the Organization of Arab Petroleum Exporting Countries (OAPEC).

APICORP''s head office is in Dammam/Al-Khobar area, Kingdom of Saudi Arabia. Its issued share capital is US $ 460 Million owned by the following governments: United Arab Emirates 17% ; Bahrain 3% ; Algeria 5% ; Saudi Arabia 17% ; Syria 3% ; Iraq 10% ; Qatar 10% ; Kuwait 17% ; Libya 15% ; Egypt 3% .

The Corporation is independent, both in its management and in the performance of its activities. APICORP conducts its operations on a commercial and strictly business basis, aiming the maximization of profits.

The prime objective of APICORP is to participate in the equity, as well as the debt financing, of projects in the petroleum industry at large. These include all businesses which are based on the development, processing or transportation of the products of the oil and gas industry and its downstream derivatives. The corporation gives priority to joint Arab ventures which serve the regional Arab market.

The Corporation may undertake all operations required for the fulfillment of its objectives, in particular:

Initiate, study and promote petroleum, and petroleum related projects, and participate in their equity financing.
Extend or guarantee medium and long-term loans to finance projects in the petroleum industry.
Participate in the short-term financing of the international trade in Arab petroleum, gas and petrochemicals.
Underwrite, purchase and sell the shares (and equity capital) of companies in the petroleum industry; and Issue its own bonds and borrow from Arab and international financing markets.

APICORP has a strong capital base and enjoys a high degree of liquidity. The company offers a concentrated range of financial services to its clients specialising in the oil and gas industries in the Arab world. Clients include public, government sponsored institutions, and private sectors companies.

APICORP aggressively pursue the shareholders' objectives by developing hydrocarbon related projects throughout the region and connected areas.

Have a long-term commitment to the region and to the clients. APICORP emphasizes equity positions in newly formed and reorganised hydrocarbon related companies. This investment strategy enables the company to have a hands-on operating knowledge of world-class hydrocarbon.

THE ARAB TRADE FINANCING PROGRAM (ATFP)
Arab Monetary Fund Building, 7th floor, Corniche Road
P.O. Box 26799, Abu Dhabi, United Arab Emirates
Tel. (971-2 ) 316-999
Fax: (971-2) 316-793
E-mail:attp_fin@yahoo.com ou Finadmin@atfp.org.ae
Web site: www.atfp.org.ae

Mr. Aziz F. Jabara
Director, Development & Trade Promotion Department

Mr. Sherif Abdel Khalek
Director, Development & Trade Promotion Department

Mr. Hashim M. Abbas
Head, Trade Finance Operations Division

The Arab Trade Financing Program (ATFP), established in 1989 by the Arab Monetary Fund (AMF, the Arab IMF), is a specialized financial institution equivalent to the Canadian EDC. Operations, however, started only in 1992. Its objective is to develop and promote trade among Arab countries and enhance the competitive ability of Arab exporters. This is achieved by providing refinancing in the form of lines of credit, for export, import and re-export as well as buyer credits, through 85 national agencies appointed by monetary authorities in 18 Arab countries, and three foreign countries. The ATFP functions as an autonomous body, operating on a commercial basis.

ATFP provides re-financing for eligible goods in the form of lines of credit to member countries exporters and importers through the 85 designated national agencies for re-export, export and import, as well as buyer credits. Eligible goods are those with a value-added of at least 40 percent originating from primary sources and/or other domestic factors of production of an Arab country. Only inter-Arab trade transactions are eligible and not those from an Arab country to a non-Arab one. Goods like crude oil, used goods and re-exported goods are not eligible for re-financing. Financing is provided in US dollars for up to 85% of the value of the goods exported. National agencies play an important role in certifying the country's content (value-added).

ATFP assists Arab firms in their export activities by providing their buyers with internationally competitive financing packages. Drawings against lines of credit bear interest at an rate currently set at LIBOR plus a margin set at 1/8 % for 6 months and increasing to three years, (exceptionally 5 years for certain capital goods), with the term of the credit and the risk involved. Guarantee and insurance required vary with the risk involved, as ATFP may consider adequate. Somalia, Iraq, Sudan and Libya have been excluded from ATFP's financing. ATFP may also determine the level of guarantee and insurance required according to the risk involved. Three groups of institutions can participate in the ATFP: (i) the AMF; joint Arab finance institutions and government banking and finance institutions; (ii) private Arab financial and banking institutions; and (iii) joint Arab/foreign finance institutions and international finance and banking institutions.

The ATFP has a paid-up capital of about US$500 million of which 55% was contributed by the Arab Monetary Fund, 22% by the Arab Fund for Economic and Social Development, and the rest by 40 other shareholders representing the Arab Banking Corporation and Arab central and commercial banks. By 2002 the total amount of cumulated loans and grants that were approved by April 2002 was US$517.8 Million of wich US $506.7 was disbursed.

The AFTP has also undertaken the establishment of an Inter-Arab Trade Information Network (IATIN) with the United Nations Development Program (UNDP) and the International Trade Centre (ITC). ATFP has been mandated by the Arab League to implement and administer this Network on a regional basis. Canadian firms may consult this data base for the exploration of opportunities and partners on the internet web site: (www.atfp.com).

Other initiatives include the development of new financial instruments with the assistance of UNDP and the ITC, the development of human resources with UNCTAD and buyer-seller meetings at the ITC in Geneva for the promotion of Arab goods.

Canadian firms considering exporting goods to the region may structure deals by providing the remaining 60% of the value-added while possibly getting at least 85% financed by the AFTP. Some Canadian financial institutions have been reported to do business with the AFTP.

GULF COOPERATION COUNCIL (GCC)
P. O. Box 7153
Riyadh 11462
Saudi Arabia
Tel: (966-1) 482 7777
Fax: (966-1) 482 7716

The Cooperation Council for the Arab States of the Gulf - commonly known as the GCC - brings together Bahrain, Kuwait, Saudi Arabia, Oman, Qatar and the United Arab Emirates in a regional political and economic alliance. Founded in May 1981, with the signing of the Charter by the Heads of State in Abu Dhabi, the GCC formalized the close relationships between these countries with the creation of a permanent Council whose task is to foster common solutions and common opportunities.

The objectives of the Gulf Cooperation Council, as stated in the Charter, are to effect coordination, integration and interconnection between member states in all fields in order to achieve unity among them; to deepen and strengthen relations, links and scopes of cooperation prevailing among its peoples in various fields; to formulate similar regulations in various fields including, inter alia, economic and financial affairs, agriculture, industry, commerce, customs and communications, education, culture, health, social affairs, information, tourism, and legislative and administrative affairs; to stimulate scientific and technological progress in various fields, to establish scientific research centres and implement common projects, and to encourage cooperation with the private sector.

A vast array of organizations and institutions - hospitals, universities, government ministries, financial agencies - have been created. The GCC underlying approach aims at ensuring that the experience acquired by one state is shared by others facing similar conditions. The region's common cultural, historic and religious background, in addition to shared economic and geopolitical interests, contribute to facilitating some degree of integration. This can be evidenced by the free movement of citizens, jobs and capital between the six countries. GCC citizens and businesses are benefitting from increased integration of the legal systems, and may acquire properties in other GCC countries, which is normally not granted to foreigners outside the GCC.

Structure of the organization

The Supreme Council is the Gulf Cooperation's Council highest authority and is formed by the six heads of states with the presidency rotating each year on the basis of the alphabetical names of the member states. The Supreme Council lays down policy guidelines and approves the basis for relations with other states and international institutions such as the United Nations and the Arab League. It reviews reports and recommendations made by subsidiary bodies, appoints the Secretary General, approves the budget of the Secretariat-General, and approves the rules and procedure of the Commission for the Settlement of Disputes and nominates its members. Resolutions are passed on the basis of unanimity for substantive matters and majority for procedural matters. The Supreme Council meets annually, and in extraordinary session if requested by any member and seconded by another member.

The Commission for the Settlement of Disputes is formed separately for every case, based on the nature of the dispute. The Commission submits its recommendations to the Supreme Council for consideration.

The Ministerial Council is composed of Foreign Ministers or such other ministers as member states may delegate. Its Chairman is rotated every year, with the state hosting the summit assuming the chairmanship for the year. The Ministerial Council proposes policies and prepares recommendations, studies, and projects aimed at developing cooperation between member states and endeavours to encourage, develop and coordinate activities existing between member states in all sectors. Resolutions are passed on the basis of unanimity for important matters and majority for procedural matters. The Ministerial Council meets every three months, and in Extraordinary session at the same conditions for the Supreme Council.

The Secretariat-General is headed by the Secretary-General, who is appointed by the Supreme Council for a three-year term, renewable once. The Secretary-General nominates the Assistant Secretaries-General, who are then appointed by the Ministerial Council to renewable three-year terms. The Secretariat-General is composed of the Office of the Secretary-General, Directorates of Political Affairs, Economic Affairs, Military Affairs, Environmental and Human Resources, Legal Affairs, Financial and Administrative Affairs, and an Information Centre.

The GCC has a small 350 member staff and a $US30 million budget. Working towards achieving common positions and to encouraging more uniform regulations among its members, the GCC functions and achievements cover every major field represented by the above-mentioned directorates. In commerce, the GCC has favoured the proper conditions for regional investments and business location decisions. It also seeks to stimulate progress in agriculture and industry and encourages cooperation and joint-ventures in the private sector. The GCC maintains a permanent mission to the European Union (EU) and holds regular trade cooperation meetings with the EU and Japan among others, where prospective regional infrastructure and industrial projects are discussed. The GCC is gradually emerging as a serious regional trading bloc. The Unified Economic Agreement reinforces its commitment to free and open economies. Labour, capital and goods may move freely, and customs tariffs have been abolished on products manufactured in the GCC. The agreement also addresses the coordination of development plans and a common policy in matters pertaining to the oil industry.

More specifically, the GCC created the following tools to move towards its integration objectives;

The Unified Economic Agreement mentioned previously, was signed in 1981 and ratified in 1982. It aims include free trade among member states in agriculture, animal, industrial, and natural resource products of national origin. These products have been exempted customs duties and other charges. The Agreement also aims at implementing a common external tariff and trade policy. A GCC economic citizenship has been created, with the freedom to reside, own property, and work in any member state and transfer capital between them. Work continues on concluding a Customs Union.

The Gulf Investment Corporation, with an authorized capital of $US2.2 billion is the financial arm of the GCC, and was created in 1983 to consolidate economic activities among member countries in agriculture, commerce, industry and general investment. The Corporation can finance joint development productive projects submitted by the private sector. (cf. section on the Gulf Investment Corporation).

The Gulf Standards Organization was created in November 1982, when the Saudi Arabian Standards and Measures Organization was transformed into a regional body serving all member states. It has since approved over 1,000 GCC standards.

The Patent Office of the GCC was established in 1982 to implement the patent regulations in the six countries and to authenticate and publish data relating to inventions.

The GCC Commercial Arbitration Centre was created in 1991 to settle trade disputes, including between member states,or their citizens, and foreigners.

Joint Agricultural Policy calls for integration in this sector among the six countries, based on the optimum use of water resources and aiming at self-sufficiency for the region. Programs have been set up for coordinating local agricultural plans, for surveying, utilizing and conserving natural resources, and for research and technological development.

Linking infrastructure: programs have included projects for a regional electricity interconnection grid, integrated road networks and coordinated civil aviation plans. Further projects being considered include gas pipelines, desalination plants and aluminium smelters. The Gulf Organization for Industrial Consulting, based in Doha, Qatar is responsible for reviewing project proposals and feasibility studies and as such is a good source of information for projects that are at the early stage in the pipeline.

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THE GULF INVESTMENT CORPORATION
P.O. Box 3402, Safat, 1305, Kuwait
Tel: (965) 243 1911 Fax: (965)243-4289
Web site: www.gulfinvestmentcorp.com

The Gulf Investment Corporation (GIC), based in Kuwait City, acts as the Gulf Cooperation Council's (GCC) financial arm. Established in 1983, its objective is to support economic growth, regional cooperation and the development of private enterprise. The GIC will invest in productive revenue-generating projects, usually large multimillion dollar power or petrochemicals though it can consider smaller ones if warranted. With an authorized capital of US$2.2 billion, of which US$ 540 million is paid up, it is one of the largest well capitalised institution in the region. It has over $US12 billion in assets, and equity positions in a range of businesses including food processing, textiles, medical services, petrochemicals, aluminium production, electronics and power generation. It achieved a record operating profit of US$ 177 million in 1997, an increase of 28% over 1996.

The GIC's financial services include securities underwriting and the distribution of Gulf and international issues. It advises governments and institutions on project evaluation and finance, mergers and acquisitions, restructuring and risk management. In 1991, GIC acquired the Gulf International Bank (GIB)in Bahrain, which provides general banking services, wholesale loans and trade and project finance. In the latter, GIB has maintained a solid reputation for its capacity to structure the financing of complex projects and to lead loan syndication. It is involved in every major project in the Gulf region and collaborates with other sister institutions.

The GIC Group is composed of three main units: an investment-banking business deals with new issues, merchant banking, advisory services and corporate finance. The global-markets unit is responsible for treasury and foreign exchange operations, futures and options, and asset management. Commercial banking handles lending, trade and project finance.

As part of its efforts to assist the development of efficient private enterprises, and their increased role in the economy, the GIC provides advisory services to GCC governments pursuing privatisation programs and policies. It will also assist them in attracting foreign capital to partially finance their infrastructure development programs, with the participation of its banking subsidiary, Gulf International Bank (GIB).

Canadian companies wishing to pursue business opportunities with the GIC may also complete their search for information by contacting another GCC-related organization:

Secretary General
Gulf Organization for Industrial Consulting (GOIC)
P.O. Box 5114
Doha, QATAR
Tel: (00974) 858-888 Fax: (00974) 831 465

GOIC is a useful source of information on GCC projects in the pipeline, still under review or in the feasibility study phase. It provides advice and assessments in the early stages of a project.

THE INTER-ARAB INVESTMENT GUARANTEE CORPORATION (IAIGC)
P.O. Box 23568 Safat, 13096 Kuwait
Tel: (965) 4844500
Fax: (965) 4815741 or 42
Web site: www.iaigc.org

The Inter-Arab Investment Guarantee Corporation is a regional organization similar to the World Bank's MIGA, comprising all Arab states. It was established in 1974 and its headquarters is located in Kuwait. Paid-up capital is over US$80 million. It was felt that one of the bottlenecks in the flow of private capital between rich and poor Arab countries was the lack of insurance coverage against non-commercial risks. The purpose of the scheme was to create a joint arrangement in which Arab countries, both capital-exporting and capital-importing nations could participate on an equal basis. IAIGC seeks to promote Arab investments in Arab countries, thus fostering Arab economic development and integration.

IAIGC provides essentially export credit guarantees against both political and commercial risks, investment guarantees (political risk only), and insurance coverage for Arab investments as well as for inter-Arab trade transactions. It also undertakes investment/project promotion activities among Arab countries.

The guarantee operations offer coverage for three-types of non-commercial risks:

political risks such as nationalisation, confiscation or " creeping" expropriation;
non-transferability of principal and dividends;
losses due to military operations, war, or civil strife.

The most important sectors covered by the IAIGC are real estate, agro-industries, transportation, mining and some light industries. The Corporation has worked at promoting trade between member states, provided that this involves goods produced, processed or manufactured in one of the member countries. It complements the activities of the Arab Trade Financing Program (ATFP) which provides export financing.

To be eligible, investors must be a national of an Arab member country, or a firm substantially owned by Arab nationals and whose office is located in one of the member countries. Coverage is not provided in the investor's country and only new projects exceeding three years are considered. Eligibility criteria include very extensive interpretation of the investment types: projects may be public, mixed, or private in ownership, provided the investments in the two first cases operate on a commercial basis.

IAIGC has extended its coverage to joint Arab-foreign banks and financial institutions provided their capital is at least 50% Arab, to encourage these organizations to direct part of their investments to Arab countries. Services of the Corporation include coverage for privatization projects, BOT, and BOO.

Direct and portfolio investments are eligible for insurance. Furthermore, loans for terms exceeding three years as well as export credit for shorter periods are eligible. The sole condition for obtaining coverage is the approval by the host government for both the investment and the insurance for the project. Priority is accorded to investments:

promoting Arab economic integration and co-operation such as joint ventures;
building up productive capacities in the host country;
feasible only via the guarantee coverage of the IAIGC, i.e. for which the insurance is an essential factor.

Claims are settled to the extent that the Corporation will pay out 85 per cent of the insured value. It will then represent the claimant and initiate action to recover the 15 per cent from the country through arbitration or international law procedures. The final 15 per cent, if obtained, will be paid to the investor, less expenses incurred.

Another activity of the IAIGC is project promotion for member countries, essentially on cost basis. The identified investment opportunities are brought to the attention of finance institutions. The Corporation itself will not invest in the identified projects. Other ancillary tasks assigned to the IAIGC include the evaluation climate in member countries and the promotion of the movement of investment capital towards member countries.

Annual volume of transactions ranges between US$100 and US$150 million.

Canadian firms contemplating selling equipment to a customer seeking to invest in a plant or project in a third

ARAB AND ISLAMIC DEVELOPMENT FUNDS AND FINANCIAL INSTITUTIONS A GUIDE FOR CANADIAN BUSINESS

TABLE OF CONTENTS

ARAB AND ISLAMIC DEVELOPMENT FUNDS AND FINANCIAL INSTITUTIONS
A GUIDE FOR CANADIAN BUSINESS