Market Focus of the Month – The Multilateral Development Banks
China: Anhui Environmental |
What are the MDBs?
Multilateral Development Banks (MDBs) are international organizations that provide billions of dollars in financing and technical assistance to governments in developing countries all around the world. Many companies are familiar with some of these organizations, such as the World Bank, and how they help many developing countries, but may not realize that MDB projects also provide opportunities for U.S. companies to grow or establish a new business presence in those markets.
MDB funds create tremendous business opportunities for U.S. consultants and manufacturers in projects across a wide spectrum of industries, from renewable energy and energy efficiency to infrastructure, health care, and education. The opportunities range from simple equipment purchases to large contracts for complex consulting engagements and infrastructure projects.
Borrowing governments must follow MDB procurement guidelines to purchase goods and services with funds provided by the banks. In addition to making the projects transparent and predictable, those procurement guidelines encourage competition. As a result, spending under MDB-funded projects is usually broken up into a large number of smaller purchases rather than a few large contracts. This generates many opportunities that small and medium-sized companies can pursue successfully. Some recent contract awards include:
- $145,888 contract to supply insulin in Kazakhstan
- $1,627,856 consulting engagement for a water supply and sanitation project in Vietnam
- $462,000 consulting engagement for road construction supervision in Ethiopia
Indonesia: Tree Crop Small holder
Sector Project (Photo credit: ADB)
The U.S. Commercial Service maintains liaison offices at the five largest MDBs (World Bank, Asian Development Bank, Inter-American Development Bank, European Bank for Reconstruction and Development and African Development Bank) to assist U.S. companies identify, pursue, and capture contract opportunities arising from MDB activities. We’ll work with you to determine quickly if the MDBs represent a potential new customer segment for your company, and then will teach you how to find and pursue those business opportunities.
When the global economy slowed down, the MDBs increased their lending and investments in the developing world. This represents greater assistance to the developing world, and greater opportunities for U.S. firms.
- The World Bank alone has committed $58.8 billion in fiscal year 2009 to help developing countries struggling amid the global economic crisis, a 54 percent increase over the previous fiscal year and a record high for that global development institution.
- The Asian Development Bank (ADB) committed an additional $10 billion in lending for 2009-2010 and a $3 billion "Countercyclical Facility" that will provide cheaper and faster loans to middle-income borrowers and will include project investments, quick-disbursing policy-based loans, guarantees, and new initiatives designed to address crisis-specific needs.
- The Inter-American Development Bank (IDB) declared at its 50th Anniversary meeting that it would double the amount of capital it has to lend to the region, which would translate to over $15 billion a year to Latin America.
- The European Bank for Reconstruction and Development (EBRD) has committed an increase in planned investment from €6 billion to €7 billion, a record for any single year since the Bank was founded in 1991. This is an increase of close to €2 billion and 33 percent above the 2008 investment levels. The EBRD is also doubling its support for trade to maintain cross-border commercial flows and avoid protectionism, and has expanded its EBRD Trade Facilitation Program to a maximum of € 1.5 billion. These funds will flow through the project pipelines for the next several years, producing numerous business opportunities and presenting a good opportunity for new companies to become suppliers for MDB-funded projects.
Fiji Islands: Road Upgrading
Project (Photo credit: ADB)
U.S. exporters have a strong track record in winning MDB-funded contracts. At the World Bank for example, companies from the U.S. won more consulting contracts in 2007 and 2008 than firms from any other country. At the ADB, U.S. firms won $378 million in procurement contracts in 2008 and on a cumulative basis have won $6.4 billion worth of contracts. The U.S. has consistently outperformed other large donors at the ADB in procurement awards.
Best prospects for U.S. firms in the next two years include the following sectors:
- Consulting Services
- Renewable Energy
- Clean Energy
- Energy Efficiency
- Electrical Transmission Equipment
- Health and Medical
- Transportation
- Information Technology
- Education
- Tourism
MDB-funded business opportunities are found in three general areas:
- Direct contracting with the MDB itself (called corporate procurement);
- Contracts with the foreign governments that borrow from the MDBs (called operational procurement); and
- Contracts with private businesses that have received loans or equity investments from an MDB or an MDB-funded financial intermediary.
Operational procurement is by far the largest source of contract opportunities and is a special focus on the U.S. Commercial Service liaison offices at the MDBs. (The EBRD is an exception here, since it specializes in debt and equity for the private sector and does not lend to foreign governments.)
The U.S. Commercial Service liaison offices have noticed some common characteristics among companies that do well in MDB-funded contracts, and have developed tips for firms that are new to the MDB market segment:
- Learn how the MDB project pipeline operates so you won’t be surprised when bidding opportunities appear.
- Target MDB projects that will eventually produce contracts you can fulfill, e.g. if your firm provides medical supplies, look for healthcare projects in the early stage pipeline.
- Target countries where you have a representative or teaming partner and make advance preparations to bid on MDB-funded opportunities in those markets.
- Work with the U.S. Commercial Service in the target market to find a local representative, market your company, and provide advocacy support.
- Make sure that your bid adheres precisely to the tender documents; if you are not sure about a particular point, check with the contracting office for clarification before submitting a bid.
In January 2009, Maunsell AECOM, a wholly-owned subsidiary of AECOM Technology of Los Angeles, CA won a $17 million contract to design and manage the Padma Multi-Purpose Bridge in Bangladesh, funded by an ADB loan.
The Commercial Service liaison office at the ADB had been instrumental in the success. Throughout the year-long bidding and award period, the CS provided Maunsell concrete business counseling and project updates. And when negotiations reached a critical point and stalled, the CS engaged the commercial diplomacy of U.S. Embassy in Dhaka on behalf of Maunsell to signify that the U.S. government was interested in the continuation of negotiations with Bangladeshi authorities. The negotiations resumed shortly thereafter and Maunsell went on to win the award.
The U.S. Commercial Service liaison offices produce market research reports and project alerts to help U.S. companies to identify MDB projects that will produce business opportunities for them. Our MDB market research is available in the Market Research Library on www.export.gov, and the latest reports include:
These market research reports are a starting point for learning about the MDB project pipelines and provide a good general introduction to MDB-funded projects. Most companies find it helpful to review some of these projects and then contact the U.S. Commercial Service liaison offices for detailed counseling on the entire MDB procurement process and to identify specific contract opportunities.
The U.S. Commercial Service offers several options to learn about upcoming procurements and how to do business with the multilateral development banks. For example:
- CS World Bank provides detailed procurement training for trade associations or individual companies through a rolling series of webinars designed to fit your schedule.
- CS IDB is working with local partners to offer a seminar series on “Doing Business with the IDB” in Chicago, Miami, Northern Virginia, Houston and Los Angeles in Fall/Winter 2009.
- CS ADB will offer a series of Business Opportunity Seminars in three to four US cities in March 2010.
Check the CS MDB websites listed below to learn more about these and other events.
Our U.S. Commercial Service liaison offices at the MDBs will help you determine if there are appropriate MDB contracts in the pipeline and work with your company to pursue them.
- U.S. Commercial Service Liaison Office to the World Bank
Key Contact: David Fulton, Senior Commercial Officer - U.S. Commercial Service Liaison Office to the Asian Development Bank
Key Contact: Kenneth Reidbord, Senior Commercial Officer - U.S. Commercial Service Liaison Office to the Inter-American Development Bank
Key Contact: Americo "Mack" Tadeu, Senior Commercial Officer - U.S. Commercial Service Liaison Office to the European Bank for Reconstruction and Development
Key Contact: Sanford Owens, Senior Commercial Officer - U.S. Commercial Service Liaison Office to the African Development Bank
Key Contact: Christel Fredrikson, Commercial Officer