17.06.2009 | PR27/2009
PR27/2009 June 18, 2009 Vienna, Austria
The Ministerial Council of the OPEC Fund for International Development (OFID) held, June 16th, its 30th Annual Session at the institution’s headquarters in Vienna. The Council is OFID’s highest policy-making body. It re-elected as Chairman, H.E. Dr. Seyed Shamseddin Hosseini, Minister of Economic Affairs and Finance of the Islamic Republic of Iran, while H.E. Dr. Ali Rodríguez Araque, Minister of the Peoples Power for Economy and Finance, Venezuela, was elected Vice Chairman.
In attendance at the OFID Annual Ministerial Council session was H.E. Abdalla Salem El-Badri, Secretary General of the Organization of the Petroleum Exporting Countries (OPEC).
At the Opening Ceremony, OFID’s Annual Award for Development, 2009 was presented to the Confederación Nacional de Mujeres Campesinas Indígenas Originarias de Bolivia “Bartolina Sisa” (the National Confederation of Peasant Indigenous Native Women of Bolivia “Bartolina Sisa”). This is an organization which, over many years, has sought to address long-term concerns of critical importance to women in Bolivia, and has succeeded in drawing strategic response from the authorities. The OFID Annual Award honors individuals and groups that, in various ways, contribute to the progress and advancement of societies across the world.
Also at the Opening, the new President of IFAD, the International Fund for Agricultural Development, HE Dr. Kanayo F. Nwanze (Nigerian) was welcomed by the assembled ministers. Dr. Nwanze addressed the Council, calling for even closer cooperation between OFID and IFAD and reminding the Council that IFAD was, indeed, an institution “whose very existence owed much to the vision and leadership of OPEC countries.” The two institutions have worked together for some three decades to accomplish their common goal of enabling the poor throughout the world (and especially in rural areas) to secure a better life, Nwanze declared. With nearly US$420 million, Nwanze recalled, OFID is the second largest co-financier of IFAD-sponsored projects and programs in all developing regions of the world.
1. Opening the Session, the Council Chairman, Dr. Hosseini, described the day’s agenda as capturing the many existing and new challenges in the way of development co-operation. He chronicled the most salient trends and their impact on OFID’s efforts to fight poverty, hunger and other development constraints, particularly in the world’s poorest countries. He said the prospects for the global economy have hardly improved since 2008. World output is forecast to contract by 1.3% this year; down from a positive 3.4% in 2008, and to expand by only 1.9% in 2010. Output growth for the developing countries as a whole is projected to drop markedly to 1.6% in 2009, down from 6.3% in 2008, reflecting a sharp reversal of private capital inflows, worker remittances, as well as weaker demand and investment. All of these, he said, were compounded by consistently high food prices. And although food prices have fallen from their peaks of 2008, the food crisis per se has not abated. And contributing to the crisis has been the increased use of food crops to satisfy the needs of a rapidly growing bio-fuels industry.
This issue, the Chairman said, was adequately addressed by OFID at the March 2009 4th International OPEC Seminar when OFID presented the results of its study on Bio-fuels and Food Security. The study concluded that bio-fuel production contributed to higher food prices, increased food insecurity in the world’s poorest countries, and would not have meaningful benefits on climate change before 30 years. The Council Chairman declared that the global economic and food crises were rapidly reversing hard-won gains toward debt sustainability and the UN Millennium Development Goals (MDGs). Such gains, he said, had been made possible from external assistance extended by OFID and others.
2. In his own statement, HE Mr. Jamal Nasser Lootah, Chairman of the Governing Board of OFID, recalled that it had been a year since he last addressed the Council in Isfahan, IR. Iran, and that since then, the world has witnessed a swift unravelling of the global financial system, with the impact of the crisis dimming economic prospects for the rest of 2009, 2010 and some time to come. He said this new economic environment could influence OFID’s work patterns if it persisted. Nevertheless, and despite the difficulties, OFID concluded another eventful year since the last Ministerial Council meeting. OFID “has continued to implement the objectives of its mandate, addressing itself to the changing priorities of its beneficiary countries which are deemed essential for poverty eradication, sustainable development and the achievement of the MDGs.”
Mr. Lootah said despite the global economic downturn, “OFID has demonstrated its strength in critical times by making available an assortment of financial products for development purposes." Since lending operations began, and as of end March 2009, the Governing Board has approved a total of 1,223 public sector loans worth about US$8.1 billion. These loans were extended to 121 countries, including 20 under the Blend Facility and 25 under the Heavily Indebted Poor Countries Initiative. Over the past year, Mr. Lootah reported, the Governing Board approved 53 public sector loans in the amount of roughly US$616 million, out of which US$107 million were under “blend” terms.
Mr. Lootah also spoke about the Grants Program of OFID. He disclosed that total grant assistance in the amount of US$447 million has been approved. The sum included US$84 million destined for the First and Second Accounts of the Common Fund for Commodities. Since June 2008, the Board has approved a total of US$5.8 million to be used for technical assistance, research-related activities, as well as humanitarian relief and food aid following natural and other disasters. Additional amounts were approved and drawn from the Special Grant Accounts for Palestine and for HIV/AIDS. A request was before this Council Session for replenishment of both accounts.
The Board Chairman pledged that, for the future, “OFID will continue to operate to benefit the world’s poor, the vulnerable and underserved population groups.” The focus will continue to be on retrieving the highest development returns from OFID’s resources and to integrate the various strands of development to achieve sustainability with a lasting impact. “We are doing this alone, as well as in cooperation with our partner institutions.”
3. In his address, Mr. Suleiman J. Al-Herbish, OFID Director-General, said the Ministerial Council was meeting today “in very troubled times, with the world economy experiencing its deepest downturn for 60 years.” According to projections by the International Monetary Fund, per capita GDP is expected to fall by 2.5 % this year, compared to an average drop of 0.4 % in the recession of 1975, 1982 and 1991. Against this background, the Director-General disclosed, “our work as a development finance institution has become more challenging than before, not least because of the impact of the global financial crisis on OFID investments.” Along with the rest of the financial community, OFID has not escaped the fallout from the crisis, which has wiped trillions of dollars off world stock markets, leaving no country untouched. Still, throughout 2008 and into 2009, OFID has rigorously maintained its aid volumes, often providing supplementary financing for projects that have encountered cost overruns as a direct result of spiralling prices.
The Director-General touched on other issues such as energy and bio-fuels; food security and the public information strategy of the institution. He also spoke about the OFID bio-fuels study conducted by the Vienna-based International Institute for Applied Systems Analysis (IIASA). The study had concluded that, if energy consumption targets - such as the one fixed by the EU of reaching a share of 10 percent of biofuels in transport fuels by 2020 - are maintained, millions of people will be put at risk of hunger, Mr. Al-Herbish said. This issue, the Director-General declared, raised the related difficulty of energy poverty. The Director-General referred to the Third OPEC Summit of November 2007 and its resultant Riyadh Declaration. He quoted Item 6, Chapter 2 of the Declaration in which OPEC Member Countries “resolved to continue to align the programs of our aid institutions, including those of the OPEC Fund for International Development, with the objective of achieving sustainable development and the eradication of energy poverty in the developing countries, and study ways and means of enhancing this endeavour, in association with the energy industry and other financial institutions.”
The Director-General went on to recall the Jeddah Energy Summit of 2008, at which the Custodian of the Two Holy Mosques announced an Energy for the Poor Initiative. The stated aim of the initiative is to help developing countries confront a lack of access to energy. For OFID, said Mr. Al-Herbish, the placement of energy poverty on the global agenda was a welcome rally-call. “As an institution, we have long recognized the importance of energy to the development process. We are keen to pursue this mandate and, in the past 12 months alone, have independently approved almost US$120 million in financing for projects whose primary aim is to improve the delivery of energy services to the poor.”
Mr. Al-Herbish told the Council that OFID continued to pursue its mandate to the best of its ability in 2008. In terms of core operations, and in the course of the year, OFID approved US$815 million in fresh financing for some 140 operations. From this amount, a total of US$527 million was given in public sector loans, including US$96 million from the Blend Facility, with the bulk going to low-income countries. Investments in the area of private sector financing amounted to US$216 million; an increase of two-thirds over 2007, while operations worth US$149 million were approved under the Trade Finance Facility. A further US$27 million was committed through the Grants window, the lion’s share going to support emergency operations in Gaza. Total disbursements for the year reached US$484 million.
On the public information strategy (PIN) of OFID, the Director-General said heightened visibility was the primary aim. He mentioned new developments in PIN, including a second scholarship scheme - the Careers Development Program (CDP); a Media Guest Program; and sponsorship of the high-profile Vienna City Marathon (VCM).
Yet another critical pillar of PIN is an OFID Chair in Sustainable Development, which would be a highly visible means of scaling-up OFID’s contributions to research in this relatively young field. An OFID Chair in academics could not be timelier, the Director-General said. With the global community facing its toughest challenges in decades, development thinking has reached a major watershed and is ripe for a new direction. Through the endowment of a professorial Chair in Sustainable Development, OFID would have the opportunity to be an architect of this undertaking.
Evaluating the benefits of PIN, Mr. Al-Herbish said it was always difficult to quantify the dividends from investment in communications activities. “What we can say with certainty is that OFID has risen from a position of limited visibility just five years ago to an institution with a respected public profile.”
- The Ministerial Council adopted OFID’s 2008 Annual Report and reaffirmed the support of Member Countries for the basic principles and objectives of OFID, reiterating their commitments thereto (See press release 28/2009).
- The Council mandated the Governing Board to further discuss issues relating to the negative impact of the current financial crisis on OFID’s resources as well as questions relating to Energy for the Poor.
- Furthermore, the Council approved the audited financial statements of OFID for its 32nd fiscal year (2008) and reappointed the current external auditors.
- Three new countries (the Democratic Republic of Congo; Senegal; and Mozambique) were added to the list of eligible countries to benefit from subscriptions (and obtain subscription payments) to the Common Fund for Commodities’ (CFC) First Account.
- The Council also approved a further replenishment of OFID’s Special Grant Account for HIV/AIDS Operations in the amount of US$15 million for an implementation period of two years (June 2009 - June 2011).
- The Special Grant Account for Palestine was replenished as well with a further US$20 million for an implementation period of two years (June 2009 - June 2011).
- The Council expressed its sincere gratitude to the Government and People of the Federal Republic of Austria (OFID’s host nation) for the hospitality extended toward facilitating the Council meeting.
- The 31st Annual Session of the Ministerial Council will be held June 17, 2010, in the Bolivarian Republic of Venezuela.