Announcement of The World Bank's Pre-Export Guarantee Facility (PGF) in Moldova on March 9, 1995

World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 95/60ECA Contact: Jan Pakulski Tel: (202) 473-1797 MOLDOVA: PRE-EXPORT GUARANTEE FACILITY (PGF) The following is information on a project approved by the World Bank's Board. DATE: March 9, 1995 WORLD BANK GROUP SUPPORT: World Bank: $30 million standby loan, repayable in one installment ten years after effectiveness at the Bank's standard variable interest rate. The standard commitment fee will be charged. In addition, a 25 basis points fee will be charged for any outstanding GAU guarantees backstopped by the facility. EXECUTING AGENCY: Guarantee Administration Unit (GAU) PROJECT DESCRIPTION: This standby loan facility is designed to attract foreign private finance for pre-export transactions which will allow the market to select the most viable activities and bear the full commercial risk of each transaction. The Guarantee Administration Unit (CAU), an independent entity established by the government, wvill sell guarantees against government performance and political force majeure risks, back-stopped by the World Bank standby loan facility. These guarantees will be sold on a first come, first served basis to foreign input suppliers, trading companies, or financial institutions that finance the provision of inputs to local Moldovan enterprises. Through a foreign agent bank to be hired by the GAU, this facility would backstop the government's claims payment obligations on up to $30 million of GAU guarantees outstanding at any given time. A typical pre-export transaction eligible for support under the PGF would have the following characteristics: (a) Basic Structure: a foreign (i) trading company, (ii) input supply company, or (iii) commercial bank would provide financing for working capital inputs required for the production of exports by a local enterprise; (b) Eligible Local Enterprises: all corporatized enterprises would be eligible, provided that the foreign financier of the transaction would be prepared to bear the performance risk of doing business with that enterprise; (c) Tenor: to (i) match the production cycle and (ii) would range from short to medium term (with a maximum of three years) and (d) Marketing Arrangements: Although many input suppliers and trading companies would attempt to market the output outside the FSU, some input suppliers and trading companies expressed interest in marketing the output in FSU Republics. Thus, in addition to financing the provision of much needed working capital, these input suppliers would also help Moldovan enterprises restore traditional trading relationships that were ruptured by the break-up of the FSU. Archives/Records Center, H 81-001 ( 1)