Private sector excluded from borrowing

MB Subba

The government has tabled the European Investment Bank (EIB) framework agreement for ratification for the second time.

Introducing the agreement in Parliament on November 27, Finance Minister Namgay Tshering said that the country needed to take the opportunity of availing loans from EIB before it graduated from the Least Developed Countries (LDC) group.

The framework agreement was rejected by the second National Council (NC) in 2015 on the grounds that it was not in consonance with the country’s external commercial borrowing guidelines and that it could undermine Bhutan’s standing as a sovereign country.

The finance minister said that the NC’s concerns were communicated to the EIB and that the bank had reviewed them positively.

The government and EIB recently signed the agreement with changes. One of the changes incorporated in the framework agreement, he said, was that only the government would be able to borrow from EIB under the framework agreement.

He said that the initial agreement made borrowings to all in general. The agreement was first signed by the People’s Democratic Party government in 2014.

The finance minister said that among the EIB’s priority areas were climate change and private sector development and that they jelled well with the country’s policies. “I’m hoping that the members would support the agreement,” he said.

Opposition Leader Dorji Wangdi said that the initial agreement was rejected based on 13 objections, including national security and contradiction with national laws. He said that those concerns should be addressed.

Some of the sections of the agreement are expected to remain contentious.

As per the immunities and privileges given to EIB under the agreement, the assets of the EIB shall be exempt from search and all forms of expropriation. It also states that EIB shall be exempt from a levy or distraint prior to the award of a final, unappealable judgment against EIB, rendered by a court of competent jurisdiction.

In case of a dispute between the EIB and the government, the agreement states that the arbitration proceedings shall take place in the Hague international court in the Netherlands.

Recently, the 13-member economic and finance committee of NA reviewed the agreement on the request of the government which will review the committee’s comments. Ratification of the agreement will involve establishment of an EIB office in Bhutan.

The country has two international banks, Asian Development Bank and the World Bank today. The EIB is a publicly owned international financial institution whose shareholders are the EU member states.