Objective: To stimulate and facilitate expanded investment in vitally needed infrastructure, such as roads, water, electricity, through accelerating economic development, thereby generating more and better jobs and opportunities.

Commitment: A meeting will be held to take stock of the preparations to date for launching Global Development Bonds, and to welcome interest and involvement from those who wish to join this effort in some way. In the interests of reducing poverty in developing countries, we hope to continue building recent advances in private sector financing techniques (including securitization and collateralized debt obligations) that have had notable success in global markets and can now be adapted for developing countries.

Background: Among the many obstacles that developing countries need to overcome in their fight against poverty are huge deficits in basic infrastructure. Good investment projects that would help correct these deficits are going unfunded currently, while global markets are awash with capital looking for favorable returns. Better investment vehicles for attracting capital to such projects (Global Development Bonds, for example) are now feasible, due partly to recent overall progress in developing countries’ policies and partly to new techniques for managing the risks involved. If these new vehicles are to catch on without a lengthy delay that would be harmful for developing countries, concerted action is needed to launch several examples so that investors can see for themselves and then enable this market to take off on its own.

Some local entrepreneurs in India see an opportunity to improve a water supply system that would help farmers and urban water users. Other groups elsewhere – in, say, over 20 countries – see similar possibilities in roads, electricity, housing, etc. These projects would previously not have been able to get funding because their local banks would not have had enough capital or would not have been willing to take on the risks involved. But now, a global financial institution, based on Wall Street, is willing and able to provide most of the funding required to the local institutions, which are then able, in turn, to lend to the project sponsors. The global institution is able to do this because it has raised funds, on global markets, uniquely for this purpose, by issuing a specially defined kind of bonds (called Global Development Bonds). These bonds are partially guaranteed by entities (e.g., OPIC and/or others) that investors–and the ratings agencies they look to–trust. This backstopping, together with other features such as diversification across countries, reduces the risks, and thus makes Global Development Bonds more attractive than ordinary placements would be.

Partnership Opportunity: We are seeking a wide range of partnerships to produce an effective systemic solution that brings together institutional issuers and investors, local financial institutions, and a range of other partner organizations.

Update:
December 2005:
The two key elements of the plan that were addressed including the continued development of the GDB concept and implementation approach and a simultaneous outreach and consultation effort with potential GDB issuers, buyers, and other stakeholders and potential partners. The next steps moving forward include: developing the alternative models with potential issuers; communicating the GDB concept to prospective bond buyers, and developing term sheets. On the policy side, the team is continuing to develop the policy and legal framework in consultation with OPIC, the Export-Import Bank, Treasury, OMB, and other US government agencies. The goal remains to implement a prototype deal in late 2006.