Overview:

 

The Coalition Provisional Authority (CPA) has created the Trade Bank of Iraq (Trade Bank or TBI).  Currently, Iraq’s financial institutions do not possess the experience, expertise or creditworthiness to support trade finance. The mission of the Trade Bank is to facilitate and support the reconstruction of Iraq through trade finance activities related to exports from and imports to Iraq.

 

In addition to providing a trade finance capability in Iraq on an expedited basis, the overarching goal of establishing a Trade Bank is to create a financial institution that will benefit the Iraqi people and drive the country’s economic growth long after the Coalition Provisional Authority (CPA) has departed.  It is important to note that the Trade Bank’s role in Iraq is expected to evolve over time.  The CPA expects Iraq’s private sector banks to supply the country’s basic trade finance needs as soon as practical, as is common in other countries, while the role of the TBI evolves in new directions.

 

The Trade Bank is an independent public entity with separate capitalization consisting of $5 million of Paid-in-Capital and $95 million of Callable Capital.  Import transactions supported by the Trade Bank will initially consist of equipment and commodities to fulfill the needs of the CPA and the interim Iraqi ministries for the reconstruction of Iraq.  These imports will be funded through the Development Fund for Iraq (DFI).  Under United Nations Security Council Resolution (UNSCR) 1483, ninety-five percent of the proceeds of all Iraqi export sales of petroleum, petroleum products, and natural gas are required to be deposited into the DFI account, which is maintained at the US Federal Reserve Bank of New York.  The DFI account is controlled by the CPA Administrator, and DFI funds are to be used in a transparent manner for the benefit of the Iraqi people. 

 

In order to become operational as quickly as possible, the CPA intends to procure the services of an international commercial bank or consortium of banks (the Operating Consortium or OC) to provide Letter of Credit (L/C) processing expertise in conformity with UCP 500 and, as appropriate, in conformance with the Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentation (eUCP), version 1.0.  Quickly establishing SWIFT access, initially through the OC banks, but working toward direct Trade Bank connection will be a priority.  The OC will both issue L/Cs on behalf of the Trade Bank and confirm L/Cs issued by the Trade Bank.  The Trade Bank will also be able to advise oil export L/Cs.  In addition, the Operating Consortium will be assigned the task of training Iraqi personnel to operate the Trade Bank independently after a period of L/C and trade finance training.  The Operating Consortium selected will represent a variety of geographic regions and diverse markets to provide the broadest access to imports from various countries.

 

The Iraqi budget currently estimates petroleum exports in the range of $14 to $17 billion over the next 12 months.  Initially, import financing is forecast in the range of $100 million monthly, but this total is estimated to increase to a monthly average of $500 million within a year. 

 

The OC will be the primary private institution providing foreign trade finance services to the CPA and the Trade Bank.  In addition, a portion of Iraqi oil sales evidenced by purchaser L/Cs will be channeled through the TBI, and the OC may perform collecting bank services to assist the Trade Bank, or the CPA, in advance of the commencement of operations of the TBI. 

 

The international commercial bank or bank consortium, chosen by the CPA under the recommendation of a Selection Committee established for this purpose, will be invited to negotiate an Agency Processing Agreement (the Processing Agreement or APA) to provide the services outlined below and described in more detail in the attached Statement of Work (See Tab A.).  The contract between the CPA and the Operating Consortium will be for an initial term of twelve (12) months.  The CPA will have a unilateral option to extend the APA for up to twenty four (24) months should conditions dictate continuation of the Processing Agreement. 

 

This Request for Proposal (RFP) has been drafted in order to provide a consistent framework for the submission of proposals by leading financial institutions to serve as the Operating Consortium for the Trade Bank of Iraq.  The CPA encourages firms to form alliances or consortia with other financial institutions, especially with those located in the Middle East.  If a group of financial institutions bid on the above contract as a consortium, the function and responsibility of each member firm should be described in detail in any submission pursuant to this RFP.

  

The OC will perform the following basic functions of the Trade Bank pursuant to the Processing Agreement:

 

·        The OC will provide trained personnel to draft and execute letters of credit on behalf of the Trade Bank and ensure that all necessary documentation is assembled for the trade finance transactions supported.  These letters of credit will be in conformity with UCP 500 and eUCP. 

 

·        The OC will provide all necessary information technology hardware, systems software, and communications equipment necessary for Trade Bank operations.  This will include required equipment and personnel to access the SWIFT system once the necessary communications infrastructure is in place.  Pending the Trade Bank’s ability to obtain its own SWIFT capabilities, the OC will use its own connections to SWIFT on behalf of the Trade Bank.

 

·        The OC will issue letters of credit either under its own name on behalf of the TBI or confirming letters of credit under the name of the TBI to pay for/finance Iraqi imports.

 

·        The OC will advise (and if mandated, will provide confirmation of) export letters of credit issued by foreign buyers of Iraqi petroleum and natural gas products to facilitate the export transactions.

 

·        The OC will train the Trade Bank staff to perform the same functions performed by the OC so that the TBI will be able to fully function as an international trade finance institution on its own, once the OC has completed its contract.  The goal is to create an Iraqi trade finance institution, and on the job training by the OC will facilitate this goal.

 

A more comprehensive Statement of Work is attached as Tab A.