Direct Financing of State Owned Enterprise

The World Bank 2014-2016 supported objectives of Direct Financing of SOE Projects included SOE eligibility; loan preparation and processing, project/program execution and monitoring, government policy priorities and financial management, capacity building

Castlerock’s Task 1: Options on Institutional Mechanisms, and Procedures for Direct Financing incorporated:  

• Discussion with the RMD and with donors (WB, ADB, KFW, JICA, etc.) the proposed concept, and the expectations and procedures of GoI and of each donor related to the direct financing of infrastructure projects.

Castlerock’s Task 2: Building institutional capacity at PT SMI/PT IIF -provided support to both institutions to:

• define the institutional mechanism within each organization for project identification, due diligence, selection and recommendation to the Ministry of Finance;
• create the right organizational structure to undertake the financial advisory, project screening and due diligence functions; 
• prepare a detailed organization chart showing the functions, duties, and responsibilities of each unit within the two organizations for the project due diligence, prioritization, and selection process;
• prepare project eligibility criteria, by working closely with bilateral/multilateral lending agencies to define and ensure consistency with their project information, and appraisal requirements;
• assess the capacity of each organization to undertake project due diligence and selection, and recommend training programs to address gaps in their respective core competencies;
• create an interface on both the demand and supply sides of the project selection process including the preparation of an operations manual that details the processes, and provide standardized document templates to be used for receiving project documentation, and the documentation to be submitted for MOF’s consideration; and
• support the two entities in making presentations on the merits of proposed projects to MOF during the early phases of institutional buildup for direct lending.

Castlerock’s Task 3: Building institutional framework at MOF:

• Provided  the following support to Risk management Division (RMD):
• Identified gaps in the functions and capacity of MOF’s divisions that are to be in charge of the proposed  direct lending mechanism – and make recommendations for improvement.
• Proposed the institutional framework within MOF to prioritize projects for receiving sovereign guarantees.
• Defined the reporting lines and interface between BKF and DGDM in applying the headroom available to offer guarantees in the decision-making process for prioritizing and accepting projects that are slated for receiving sovereign guarantees.
• Coordinated closely with the legal team preparing the Presidential Regulation on direct lending to ensure consistency of the proposed institutional framework with the Regulation’s guidelines.

The work was closely coordinated with 2 other parallel initiatives for Contingent Liability Measurement and Management and Government regulation for direct financing