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Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China

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Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China Empty Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China

Post by claud39 on Fri Dec 06, 2019 6:02 pm

Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China


05/12/2019





Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China Dr.-Mudher-new-image-2-1-e1561918112323


Within the framework of the Belt and Road Initiative launched by the People's Republic of China since 2013, Iraq entered for the first time with a series of memoranda of understanding and agreements signed by the Iraqi and Chinese governments in Beijing on September 23, 2019, representing a new economic stage in the reconstruction of Iraq's infrastructure within a program that can be called oil for reconstruction, As Iraq is one of the most important sources of supplying crude oil to the People's Republic of China, with an export between 750 thousand barrels to 1 million barrels per day, and the trade balance between the two countries is not less than 30 billion dollars annually thanks to the momentum of merchandise imports from China.
 
China’s desire to develop its economic relations with Iraq comes from the framework of its global program called the “Belt and Road Initiative” referred to above, which is inspired by the idea of ​​the ancient Silk Road, which paves the way for enhancing communication, investment, trade and capital flows between China, Asia, Africa and Europe. (The belt) consists of projects linking China to Europe via Asia and the Middle East by land, while the (road) refers to projects linking maritime routes linking China to Africa and the Middle East through Southeast Asia and South Asia and the countries that signed the initiative with all Beijing. Noting in this regard that the international community associated with the Belt and Road Initiative today constitutes about 66% of the world's population and nearly a third of the world's gross domestic product.
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Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China Empty Re: Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China

Post by claud39 on Fri Dec 06, 2019 6:15 pm

Policy papers on international cooperation


05/12/2019

Dr.. Mazhar Muhammad Salih *: The political economy of the cooperation framework agreement between Iraq and China Dr.-Mudher-new-image-2-1-e1561918112323




Q d. The appearance of Muhammad Salih *:
Tourist economy
Ni
Ne Iraq and th
Agreement Framework of Cooperation b
1 reboot
As part of the Belt and Road Initiative launched by the People's Republic of China a year ago
2013, entered Iraq for the first time in a series of memoranda of understanding and agreements signed by the two governments
, New economic representative in Iraq and China in Beijing on September 23, 2019 for the stage
Reconstruction of the infrastructure of Iraq within the program can be called oil for reconstruction, as it is prepared

Iraq is one of the most important sources of supplying crude oil to the People's Republic of China, with exports
One million barrels per day, and the trade balance between the two countries ranges between 750 thousand barrels to 1
$ 1 billion annually thanks to the momentum of merchandise imports from China. Less than 30 b
China's desire to develop its economic ties with Iraq comes from a framework
Its global program called the Initiative Road and Belt

Why do you want to reinforce the references that are inspired by the idea of ​​the ancient Silk Road that paves the way?

Communication, investment, trade and capital flows between China, Asia and Africa
And Europe. The (Belt) consists of projects linking China to Europe via Asia and the Middle East
While pointing
Overland (road) to maritime-related projects linking China to Africa
And the Middle East across Southeast Asia and South Asia and the countries that sign the initiative with
Beijing all. Noting in this regard, the international group associated with the Belt and Road Initiative
Today, about 66% of the world's population and nearly a third of global GDP.

2- The mathematical mechanism of the agreement, cooperation framework
The framework between Iraq and the Export and Credit Guarantee Corporation
Chinese Government Sinosure
There are four groups of accounts that the CBI will be responsible for managing
For the benefit of the Iraqi Ministry of Finance within the accounting agreement annexed to the framework agreement with
Mainly signed by China is called the Framework Cooperation Agreement
In Beijing on May 11, 2018 and it was approved by the accounting agreement in September 2019
As follows:

1- Account Settlements, which is the first account to be received
Net oil revenues that will be allocated to finance the construction projects that are being contracted
Under the framework cooperation agreement with the best Chinese companies in the field of infrastructure or
Others and decided by the Iraqi government and approved within the federal budget law.
In other words, this account includes a deposit of the net oil revenue) after deduction of compensation
The Kuwait War, which currently amounts to 5.1% of the value of each barrel exported to the agreement for the year
2019, or 3% of the value of each barrel of oil exported in the year 2020 and beyond (to be followed)
Deposit of 10% of our net monthly export earnings to China into this account,
It is the value allocated for implementing the agreement within the export mechanisms and for two Chinese government companies

They are known and have daily oil exports of about 100,000 barrels per day, and they are awarded equally.
Calculate the adjustments

Note, the settlement account will maintain a deposit balance of
$ 100 million is paid on annual interest, according to the global market rates
The mechanism of the agreement to be deposited in the second account.

2- The account group called DSRA, which is the second account for hedging purposes and is allocated
For debt servicing, it is rather a hedge account that includes sums corresponding to future need
To pay the debt service when borrowing from Chinese banks that will guarantee it
(Sinosure) to secure financing for reconstruction projects implemented in Iraq
There is a need for actual additional financing (especially hedging against insufficient funding)
Net revenues from oil exports earmarked for the implementation of projects by companies
Chinese implemented or to be implemented under the agreement in Iraq. The mechanism requires
Reserve amounts in this account with a minimum of 150% or 5.1 times of
The value of servicing the debts resulting from the projects for the next 6 months and continuously in relation to the amounts

Which may be funded by loans from Chinese banks and with the guarantee of the Export Guarantee Corporation
Chinese (Signature). You receive reserves or hedge funds in your DSRA account
Annual interest according to the principles of the banking market. It will also receive the Central Bank of Iraq
A monthly report from the Signature Corporation explaining the credit standing of Iraq and the funds
To be paid or hedged within the next six months. If no payment is received
For the next six months, the CBI will transfer all DSRA account amounts
To a re-payment account or a third account, but $ 100 million remains on
DSRA account

3- As for the third account group, it is the Repayment account group
And the account also represents, as a percentage of the account amounts, the deposit of the contribution of the Iraqi side
The loans that Iraq will receive from the Chinese banks, under the guarantee of Sinosure Corporation, since
The sums to which Iraq will contribute will be deposited and registered in that account (re-payment account).
The amount of 15% of the value of each loan transferred from the third account or the second account DSRA
As Iraq will always receive credit equivalent to $ 8.1 billion within
The credit limit of $ 10 billion, in which Iraq contributes 15%, is deposited in
Account repayment to pay off interest and installments on debts
The remaining 85% represents the net credit or borrowing provided by
The Chinese side through loans provided by Chinese banks to the contracting companies
And within the credit limit and according to a competitive interest when borrowing or borrowing and according to

An offer or tender offered by the Ministry of Finance in the Chinese credit market, which is an offer or
The tender is identical to the competitive mechanisms that are dealt with with British banks or
Others within the Finance Export UK loan guarantee
Loan receivables

UKEF is currently on the capital market in London. Note


From Chinese banks it will be paid on maturity from the third account or account
Please return the payment. The third account handles wages, commission and other payments
Charged by the Sinocure Corporation. With the offer that the credit or borrowed money that
It will be managed by Signushor on the one hand and directed to finance the project
In a credit account called Account Syndicate Credit Export
Collective export credit.

4- As for the last account group, it is the investment account: it will be placed in this account, i.e.
Excess Iraqi funds that were not used in the third account at that time, and the funds are under
The Iraqi government is doing the same to finance projects (in Iraq) by companies
Chinese or international companies or for processing, according to the Federal Budget Law (either
It will be among the projects funded by the (Sinocure) guarantee, which is the guarantor or projects
Others outside the framework agreement with CineShorch). Account funds can be used
For purposes that serve the needs of the Iraqi government, as mentioned, and for whatever reason it was within implementation

General Budget Law, whether with Chinese companies or others. With the show that all
Iraqi accounts opened with Ltd International Bank SITIC China

You will be in dollars and all accounts will receive interest according to the average interest rates
Paid on dollar deposit accounts in international financial markets. Interest is also paid
(And according to the interest rates in the international financial market) on the loans obtained from
Chinese commercial banks when needed under tender bid to obtain

A competitive loan offered by the Ministry of Finance to the participating Chinese banks and the referral
At a Chinese bank or a group of Chinese banks syndicate with the lowest credit cost
Possible to fund projects in Iraq when necessary. Whereas when Sinushur takes over
Concluding the insurance coverage on the loan, a company will take over
External accounts for the Big Four account agreement above will be from a group
Firms Auditing supervises the movement of accounts, assesses the flow of funds, and supplies
Iraq with periodic supervisory and audit reports.

3- The Sovereign Diversification Fund justifies the cooperation framework with China
Funds Sinking Sovereigns are modern finance
A means by which organizations can put part of the money and collect it over time to extinguish

Its debt, i.e. money or money deposited used when needed to amortize a debt or it is money
Deposits shall be set aside to replace the cost of capital rates upon their extinction, including technical disappearance

Technological. Submerged funds also help business organizations to buy back their debt
Either at prevailing rates or at preferential prices. Or their bonds issued shall be calculated as part or part
The balance sheet of submersible funds on the understanding that the Sinking submersible fund
Fund equals assets and the corresponding bonds

Liabilities. As national infrastructure today represented net worth
Low growth (zero or negative), or what might be termed negative physical boundary storage
stock marginal is negative, sometimes, the flow of income, especially from oil revenues
Negative marginal storage is equivalent to the country's produced energy, and rebuilding marginal storage
Positive material requires high financial accumulations that exceed the country's current ability to save
Desired equivalent to the desired investment. Achieving desired savings is parallel

The necessary investment in physical infrastructure and various production capacities must be paid to
A soft borrowing mechanism that helps close the financing gap and strengthen the country's financial leverage
A meeting of two options that represent the difficult equation in the development of Iraq:
The first: accept offers from the enterprising foreign contracting sector that sticks to it
Assuming the risk of countries as a result of the secretions of the long wars that preceded on
Iraq, which makes the external contracting sector add a cost to its business
, Which is the fixed cost of imposing a cost called the cost of Iraq over the total cost
Sometimes 35-45% of the cost of executing a foreign contracting is one contract to reach between overstatement

In Iraq under the same normal conditions.

The second option: comes in order to avoid the restrictions of the first option, as it provides the foreign contracting sector

Offers to finance his contracting through the term of payment conditional or linked to the implementation of the contract

Through an integral link that represents the cost of non-concessional or near-concessional financing (that is, low
Interest (linked to the carrying out of the contracting contracting companies with the financing entity by physical execution operations

Transferred contract. The last model provides invisible savings or profits to the entities
The financier may be really less expensive and not (weak in its implemented guarantees or from the first option)

It is significant in its risks.) Therefore, when sufficient liquid guarantees are available, the second option
It would really be the least expensive option.


For the above, the correct way to develop and invest in national infrastructure requires
Skip the equation hard for the current stage still imposed by tails
Chapter 7 of the United Nations Charter on Iraq and the remnants of ISIS
(Previous) and its implications for the infrastructure of liberated cities, etc. So work requires:
Establish a fund sinking sovereign periodically that is fed
Annual allocations for infrastructure projects in the federal budgets and offsets
Sometimes a bridge bridge that when withdrawing from it and low its balance with bridge loans
Provided by international institutions such as the intergovernmental export guarantee institutions
CEA to support foreign recruiting companies, as this will fulfill the financing model
And executive) efficiency in the continuity of completion of contracting projects in Iraq.

Finally, the Dive Fund will continue to act as guarantor and financier of infrastructure projects.

Generates parallel financing in it
At the same time, the fund is an updated model

Governmental financial resources flowing into fund balances with bridge loan amounts
Submitted by the international parties and their withdrawals due for the implemented projects
And periodically. Thus, the financial flow from the government side will reduce the cost of borrowing
It converts it into a short term concessional loan when needed and is closer to the facilities
Secured by liquid countervailing flows provided by the plunge fund and from the oil revenue itself.

4- Conclusion

In order to improve the Iraqi infrastructure, it has set the ceiling for the agreement with the Sadat Guarantee Corporation

Chinese Sinosure is about $ 10 billion expandable, and the terms of the agreement are about $ 20
Years to the two Chinese companies for the purposes of implementing the agreement at a rate of 100 and crude oil is exported
a
Roll a barrel per day at world prices, then export earnings are deposited in dollars into an advance account
It is called an account settlement after the bank war compensation is downloaded to the bank
The Federal Reserve in New York then eventually transfers the net money to an account called
An investment account, in return for interest, for Iraq if deposits remain in
That account without withdrawal. Annual returns are estimated at approximately $ 2 billion
Current oil price rates. The Chinese companies are based on Iraq’s desire and budget

The annual federal general implementation of infrastructure or strategic projects chosen by Iraq
According to international competitive standards and prices and their implementation.
It is possible not to borrow from the Chinese banks with the guarantee of Sinosure if it is
Projects contracted with Chinese companies are covered with source oil money alone.

At that point, the projects will be executed with a regular contracting contract, ie, not an EPC contract
F + EPC as per the agreement mechanisms that the Chinese State Export Guarantee Corporation undertakes
Sinosure, by virtue of guaranteeing loans made to Iraq by Chinese financial institutions
In case of need for additional financing (i.e. under a loan agreement with the Ministry of Finance and with collateral)

Signature itself (and that each loan agreement is at a rate of no more than $ 8.1 billion
With a total ceiling of no more than $ 10 billion.

Iraq also participates with China when collecting loans, providing 15% financing
World Bank loans or others, and Iraq’s share is previously funded from the investment account and deposited
In another account within the four accounts it is called an account repayment in exchange for a loan
85% provided by Chinese banking institutions. The Iraqi side provides a cash guarantee
Payable in an account called account service debt whose amounts are equal to 150% of the value
The debt service serves the expected debt for the next six months. for example,

We assume that debt servicing in the next six months will be $ 10 million and should be
We withdraw from the investment account an amount of $ 15 million to be placed in the debt service account
To pay for Iraq to receive a waiting interest in return, too. And this is done with a view to hedging
Adjusting the debt service account monthly. The company will undertake auditing and global accounts. Finally
It's all of those

Monitoring the movement of payments and payments is appointed by the Central Bank of Iraq. Note
The four accounts are held by the Central Bank of Iraq and open with a Chinese bank
It is highly credit rated Bank Sitic

(*) Researcher and economic academic writer, former deputy governor of the Central Bank
Copyright © Iraqi Economist Network. Republishing is permitted provided that
Source. December 5, 2019
http://iraqieconomists.net/



http://iraqieconomists.net/ar/wp-content/uploads/sites/2/2019/12/%D9%85%D8%B8%D9%87%D8%B1-%D9%85%D8%AD%D9%85%D8%AF-%D8%B5%D8%A7%D9%84%D8%AD-%D8%A7%D8%AA%D9%81%D8%A7%D9%82%D9%8A%D8%A9-%D8%A7%D9%84%D8%AA%D8%B9%D8%A7%D9%88%D9%86-%D8%A8%D9%8A%D9%86-%D8%A7%D9%84%D8%B9%D8%B1%D8%A7%D9%82-%D9%88%D8%A7%D9%84%D8%B5%D9%8A%D9%86-%D9%85%D8%AD%D8%B1%D8%B1%D8%A9.pdf
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