JICA’s Private Sector Partnership Activities~ Business-based Pro-poor Approach on Water and Sanitation for
Better Sustainability ~
Date: March 14th, 2012
Time: 19:15-20:45
Venue: "Europa 3 (PEU3)"Room, "Palais de l'Europe "Hall, Parc Chanot Convention Centre, Marseille, France
Speaker: Mr. Osamu MURATA, Director General,
Office of Private Sector Partnership (OPSP), JICA
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Table of Contents (JICA Presentation)
I. JICA’s assistance in water sector ……………………………………………………
II. JICA’s assistance to water businesses through Private Sector Operations …
(1) Private Sector Investment Finance ………………………………………………
(2) PPP F/S Assistance ………………………………………………………………
(2) BOP F/S Assistance ………………………………………………………………
III. Case studies ………………………………………………………………………………
IV. Conclusion ………………………………………………………………………………
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I. JICA’s Assistance in water sector:
Japan is the largest donor agency supporting the developing countries in water sector, amounting 1,851 Million USD as of 2010.
Source: OECD/ DAC Statistics (2010)
Unit: Constant Prices（2009 USD Millions)
Aid to water and sanitation by donor, Commitments 2010
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I. JICA’s Assistance in water sector:
Japan has continuously been the largest donor agency in the water sector since 2005.JICA has committed 21.7 billion USD in ODA loans, 2.2 billion USD in grants, and 1.2 billion in technical assistance in the water sector for the past 10 years.
Source: OECD/ DAC Statistics (2010)
Unit: Constant Prices（2009 USD Millions)
Aid to water and sanitation by donor, Commitments 2005 -2010
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Table of Contents (JICA Presentation)
I. JICA’s assistance in water sector ……………………………………………………
II. JICA’s assistance to water businesses through Private Sector Operations …
(1) Private Sector Investment Finance ………………………………………………
(2) PPP F/S Assistance ………………………………………………………………
(2) BOP F/S Assistance ………………………………………………………………
III. Case studies ………………………………………………………………………………
IV. Conclusion ………………………………………………………………………………
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II. JICA’s Assistance to water businesses through Private Sector Operations :
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(1) Assistance tools JICA’s private sector operations include the following.
Preparatory surveys for PPP
infrastructure
Preparatory surveys for PPP
infrastructure
Private Sector Investment
Finance (PSIF)
Private Sector Investment
Finance (PSIF)
InvitationProgramsInvitationPrograms
Technical Assistance (Policy Advice/ Training)
Technical Assistance (Policy Advice/ Training)
Preparatory surveys for BOP
business
Preparatory surveys for BOP
business
Financial Support to private projects through concessional loans and equity investments, which will facilitate private finance into the field where otherwise will not be feasible with just the available private finance in the market.
Financial Support to private projects through concessional loans and equity investments, which will facilitate private finance into the field where otherwise will not be feasible with just the available private finance in the market.
Project Development Assistance to PPP infrastructure projects/ BOP businesses. JICA calls for proposals and private companies willsubmit their investment ideas (proposal-public offering system). JICA will then award some good proposals to be conducted under JICA’s budget. Proponents are required to propose JICA of their necessary assistance from JICA (including finance, grants, TA, and others).
Project Development Assistance to PPP infrastructure projects/ BOP businesses. JICA calls for proposals and private companies willsubmit their investment ideas (proposal-public offering system). JICA will then award some good proposals to be conducted under JICA’s budget. Proponents are required to propose JICA of their necessary assistance from JICA (including finance, grants, TA, and others).
JICA can facilitate private finance into developing countries through policy advise to the government and training to government or private companies.
JICA can facilitate private finance into developing countries through policy advise to the government and training to government or private companies.
JICA can support the private companies who intend to invest in developing countries by inviting the key person of the project to Japan and other countries to show the experience and know-how of the private companies or past ODA experience.
JICA can support the private companies who intend to invest in developing countries by inviting the key person of the project to Japan and other countries to show the experience and know-how of the private companies or past ODA experience.
JICA have many tools to support the water projects not limited to the traditional ODA but also private sector operations.
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II. JICA’s Assistance to water businesses through Private Sector Operations :(1) Assistance tools: in case of water projects
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JICA’s PSIF has been suspended for 10 years but has resumed in 2011.
JICA signed L/A on “Industrial Human Resources Development Project (Vietnam)” on Nov, 2011.
“First Microfinance Bank Pakistan (equity)” and “PPP Duong River Water Supply System Project (Vietnam)” is scheduled to conclude by the end of Mar, 2012.
JICA- PSIF provides loans and equity investments to private companies/ SPCs for the implementation of projects, which contributes to the economic development of the developing countries.
Enhanced financial access for the poor （microfinance and SME-finance）Assistance to businesses leading improvement of lives of the poor (BOP business)
(e.g. forestation, renewable energy, energy efficiency projects, etc)
Infrastructure for the poor (e.g. social infrastructure in education and health, rural electrification, water supply services, roads, etc)Projects for reducing poverty through growth （e.g. infrastructure in the sector of power, transportation, water and waste disposal, etc）
1. MDGs and Poverty Alleviation: Assistance to Projects for the Poor1. MDGs and Poverty Alleviation: Assistance to Projects for the Poor
3. Climate Change: To Prevent and Reduce Negative Impact to the Poor by Climate3. Climate Change: To Prevent and Reduce Negative Impact to the Poor by Climate
2. Infrastructure: To Accelerate growth through Infrastructure Development for Poverty Reduction2. Infrastructure: To Accelerate growth through Infrastructure Development for Poverty Reduction
PSIF
’s T
arge
t Sec
tors
I. JICA’s Private Sector Operations(1) Assistance tools: Private Sector Investment Finance
PSIF Loan PSIF Equity ODA Loan
Project Type Private Project Government Project
Financing Tool Loan Equity Investment Loan
Currency JPY denominated** Possibility of other currencies denominated loans is under discussion
Local Currency JPY denominated
Terms & Conditions- Interest Rate/
EIRR
- Repayment Period/ Exit Policy- Grace Period- Maximum Share
- Base rate: GOJ Bond + spread
- 20 years(25 in special case)
- 5years- 70% (80% in special case) of total project cost
- Higher than risk-free rate (rate of 10 – 15 year bond) of the country- Exit Policy will be pre-arranged- N/A - 25% of total equity share(cannot take majority stakes)
(in the case of Vietnam)- Normal ODA loan: 1.4%
Special Condition: 0.2%
- Normal ODA loan: 30 years
Special Condition: 40 years- 10 years- 85% of total project cost
Procedure Initiated by the private company’s request(Short and simple procedures)
Initiated by official request by government of recipient
countries
Security Package Sovereign guarantee is not required Sovereign guarantee or Government borrowing
Procurement Project company will select the contractor JICA’s procurement guidelines
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I. JICA’s Private Sector Operations(1) Assistance tools: Private Sector Investment Finance
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Background:
F/S is necessary for project implementation.
But, F/S cost is risk money for private companies. Conducting a F/S on challenging projects in developing countries are in most cases unable to conduct without public support.
JICA will call for ideas from the private companies, select some of the good ideas through a competitive process, and finance the cost of F/S.
JICA’s Support:
Max. JPY 150 mil. (aprx. USD 1.80mil.) to cover part of Feasibility Study cost.
Eligible projects:
PPP infrastructure projects in developing countries
Preparation for utilizing JICA ODA assistance or PSIF
Proponent should have an intention to invest in the project (not only construction)
Results:
4 batches in 2 years, 28 proposals awarded.
(2) PPP Infrastructure F/S Assistance: Overview of the SchemeI. JICA’s Private Sector Operations
# Country Major Proponents Project Title
1 Indonesia Toyota Tsusho, METAWATER Application of Waste water Reclaiming in Sothern Bali water supply system
2 Indonesia ORIX, Nihon Hels Industry Central Sewerage Treatment System in Jakarta
3 Indonesia Marubeni Corporation Umbulan Spring Water Distribution System Project in East Java
4 Philippines Marubeni Corporation Water Supply and Sewerage Development Project in the West Zone of Metro Manila
5 Malaysia
Sumitomo Corporation, Tokyo Suido Services, Tokyo Metropolitan Sewerage Service Corporation
Creation of the Best Optimized Water Infrastructure PPP in Major Urban Areas
6 Vietnam Kobelco Eco-Solutions Utility Management of Environment-Friendly Industrial Parks
7 Vietnam METAWATER, Tokyo Engineering, PPP Duong River Water Supply System Project
8 Vietnam ORIX, Nihon Hels Industry Yen Xa Wastewater Treatment Plant in Hanoi
9 Vietnam Kobelco Eco-Solutions Water Supply and Sewerage System Development in Phu Quoc , KienGian Province
10 Vietnam Swing CorporationMitsubishi Corporation Can Tho City Water Supply Improvement Project
11 Vietnam Sumitomo Corporation Wastewater Management and Solid Waste Management for Da Nang City
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(1) PPP Infrastructure F/S AssistanceII. JICA’s Assistance to water businesses through Private Sector Operations :
→ 11/ 28 assisting projects are water-related projects.
JICA is supporting the private sector in the following water projects.
MaintenaMaintenancence
OperationOperation
ConstrucConstructiontion
DesignDesign
PlanningPlanning
ServiceDistributionTreatmentTransmissionIntake
Subcontract
Subcontract
Traditional
Public sector provide full-service(partially subcontract with private sector)
SPC (water treatment)
Local Gov.(regulatory
agency)
Raw water provider
Banks,etc.Invest/loan
Concession
Raw Water
Scheme of water treatment business for private sector (example)
User
Could utilize traditional JICA ODA past assets to expand the private sector into developing countries
Possibility of utilizing traditional JICA ODA past resultsHuman resource development and capacity building (for regulatory agency / water business entity)Support the followings by TA / FS:
-Guideline development of operation and maintenance guideline for public water corporation
- Program for improving non-revenue water ratio- Program for improving tariff policy- Criteria for water quality test
=> Possibility of utilizing enhanced human resources, system, business infrastructure, and human network for PPP businessWater infrastructure
Water system arrangement by grand aid / yen loan=> Possibility of utilizing infrastructure assets formerly developed
Participation in infrastructure business
PPP-type
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
Public
ServiceDistributionTreatmentTransmissionIntake
MaintenaMaintenancence
OperationOperation
ConstrucConstructiontion
DesignDesign
PlanningPlanning Public
Public
Public
Private
Private
Public
Public
Public
Public
Public
Public
Public
Public
Private
Public
Public
Public
Public
Private
PublicPrivate
Public
Private
Private
Private
ServiceServiceDistributionDistributionTreatmentTreatmentTransmissionTransmissionIntakeIntake
Public Public
Private
Local Gov. (regulatory
agency)
Off take
JICA JICA
Water distributor Distribute
Japanese Localinvest
Yen loan
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(2) PPP Infrastructure F/S Assistance: case of water projectsII. JICA’s Assistance to water businesses through Private Sector Operations :
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Background:
F/S is necessary for project implementation.
But, F/S cost is risk money for private companies. Conducting a F/S on challenging projects in developing countries are in most cases unable to conduct without public support.
JICA will call for ideas from the private companies, select some of the good ideas through a competitive process, and finance the cost of F/S.
JICA’s Support:Max. JPY 50 mil. (aprx. USD 0.45 mil.) to cover Feasibility Study cost.
Eligible business type:
Businesses that involve BOP as consumers of a good or service which leas to developmental effect; or
Businesses that offers BOP the opportunity of participating in its economic activity as an entrepreneur or employee, which leads to developmental effect.
Results:2 batches in 1.5 years, 32 proposals awarded. 3rd batch award will be announced shortly.
(2) BOP Business F/S Assistance:: Overview of the SchemeII. JICA’s Assistance to water businesses through Private Sector Operations :
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(2) BOP Business F/S Assistance
# Country Proponents Project Title
1 Indonesia Toray Industries, Kitakyushu City
Portable water supply with solar power system and small water desalination units
2 India Shikoku Kasei Safe water supply and establishment of its supply chain for poverty reduction
3 Bangladesh Institute for Skywater Harvesting Rainwater tanks with microcredit system
4 Bangladesh Yachiyo Engineering Development of the water project with a water purification system loaded on a bicycle
5 Bangladesh Iwasaki Electric Safe water supply in Bangladesh
6 Sri Lanka Toyota Tsusho Corporation Water supply in non-supply areas
7 Senegal Yamaha Village water supply with clean water system in West Africa
I. JICA’s Private Sector Operations
※ We will announce the Third Batch awarded Projects (app. 10 -20) by the end of March.
→ 7/32 Projects selected is water-related.
JICA is supporting the private sector in the following water projects.
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Table of Contents (JICA Presentation)
I. JICA’s assistance in water sector ……………………………………………………
II. JICA’s assistance to water businesses through Private Sector Operations …
(1) Private Sector Investment Finance ………………………………………………
(2) PPP F/S Assistance ………………………………………………………………
(2) BOP F/S Assistance ………………………………………………………………
III. Case studies ………………………………………………………………………………
IV. Conclusion ………………………………………………………………………………
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# Project title Country Objective
1 Water supply in non-supply areas
Sri Lanka Water Supply project in rural area of Sri Lanka. The business will establish the small-scale supply system at the community level.
2 Project for water purification for poverty reduction in India
India Production and Distribution of water purification chemicals in rural areas of Madhya Pradesh, India. The business will incorporate rural women as vendors and aims to create jobs and improve theirsocial economic status.
3 Rainwater tanks with microcredit system
Bangladesh Production and distribution of rainwater tanks in rural Bangladesh to help overcome the problem of arsenic contamination. It will promote the introduction by using microfinance as a means of financial support to BOP.
4 Social Business Fund Bangladesh Formulation of a fund which provides finance (loan/ equity…etc.) as well as advisory service to social business enterprises in Bangladesh.
5 Africa Water Fund Africa A regional fund targeting PPP water projects in African countries. JICA is under discussions with USAID on the possibility of collaboration.
6 Philippines Water Revolving Fund
Philippines A revolving fund for water supply and sanitation projects that leverages ODA and public funds with commercial bank loans. It provides a facility to entice PFIs to enter the water sector by reducing credit risk. (USAID and JICA collaborative effort)
7 Vietnam Infrastructure Fund
Vietnam To leverage domestic and international capital markets to attract private investment, as well as private management and technical expertise to assist in building, operating and managing of the development of Infrastructure in Vietnam. 15
III. Case studies and analysis
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III. Case studies and analysis Case 1: Water supply in non-supply areas
Abstract: Water Supply project of rural area in Sri Lanka. The business will establish the small-scale supply system at the community level.
Progress: Conducting BOP F/S (- 2012.06)
Scheme: Image
Chubu SPCNationalWater Supply& Drainage
Board
Payment for
Construction Cost
Ownership transfer after completion of facilities
(Guarantee of Sri Lanka Government)
EPC Contractor
Intake weir, Intake, Raw water
Transmission, Treatment Plant,
Transmission main, Storage tanks
Construction
Debt ProvidersEquity Investors
Equity
Loan
Customers
Payment
Dividend
Payment for
O&M CostOperation &
Maintenance
Water Facilities
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III. Case studies and analysis Case 2: Project for water purification for poverty reduction in India
Abstract: Production and Distribution of water purification chemicals in rural areas of Madhya Pradesh, India. The business will incorporate rural women as vendors and aims to create jobs and improve their social economic status.
Progress: Conducting BOP F/S (- 2013.06). Pilot Business to be tested 2012.05 to 2013.01.
Scheme: Image
Local Organization(NGO etc.)• TOT center• Community access support
ODA donor(JICA etc.)
Treated Water(PET bottle etc.)
Product in bulkPackage materials
SHIKOKUCHEMICALS
End Custom
er (The poor without access to safe w
ater)
Product in bulkPackage materials
• Product design• Manufacturing• Marketing strategy• Marketing support
Training
Sachet type
Request for customizationLocal knowledge
Hygiene knowledge, product performance(through TV-CMs, radio programs, etc.）
MicrofinanceVocational training Community development etc.
Hygiene/health educationWater for Education etc.
Hygiene knowledgeUsage information
School/Hospital
Water Supplier
Sachet type
BOP1000～2000
Subjects for local training include; hygiene/health knowledge, product usage information, marketing skills, water quality analysis, repackaging, etc.
The product and treated water will be sold, not given for free (hospital/school as exceptions).
At any delivery point of products and services throughout the entire supply chain, customers’ needs and problems will be collected and reported back to SHIKOKU.
Development Assistance
Product
Product DistributionMarketing & Technical SupportInformation Flow
Treated Water(PET bottle etc.)
Sales agent Distributor
• Acquisition of authorization
• Supply chain management
• Promotion• Wholesale• Marketing
supportTraining of trainersStrategic Advice
Micro EntrepreneurWomen’s SHG
• Repacking• Water Treatment• face-to-face selling
Training of trainersStrategic advice
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III. Case studies and analysis Case 3: Rainwater tanks with microcredit system
Abstract: Production and distribution of rainwater tanks in rural Bangladesh to help overcome the problem of arsenic contamination. It will promote the introduction by using microfinance as a means of financial support to BOP.
Progress: Conducting BOP F/S. Pilot Business to be tested May to Oct, 2012.
Scheme: ImageJICAJICA
Middle Class/BOP PopulationMiddle Class/
BOP Population
Microfinance InstitutionsMicrofinance Institutions
RichPopulation
RichPopulation
Institute of SkyWater HarvestingInstitute of Sky
Water HarvestingNGOPR
Bangladesh
-Production of Sky Water Tank-Distribution of the product
- Development of low-cost Sky Water Tank- Produce and distribute the product
Sky Water Company
Service fee payment
NGO / Social Business Lab (SBL)-Educate people about social business-Connect social businesses to the company-Consulting Service to sub projects
NGO JICA Strategic Investor A
Strategic Investor B
Strategic Investor C
Project Development Account (US$2M) Investment Account (US$40M)
[Service Team]-Legal, Financial and Technical Experts-Administration
Social Business (Sub Projects)-Sector: Water, Nutrition, Microfinance, Renewable Energy -Investment from the company: US$ 1 M (average) x 40
Investment (Equity, Loan, etc.)
Social Business Fund Ltd (the Company)
Technical Assistance
Project Selection Committee
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III. Case studies and analysis Case 4: Social Business Fund Company Project
Abstract: Formulation of a fund which provides finance (loan/ equity…etc.) as well as advisory service to social business enterprises in Bangladesh.
Progress: Under discussions with local partners
Scheme: Image
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III. Case studies and analysis Case 5: African Water Fund
Abstract: A regional fund targeting PPP water projects in African countries
Progress: JICA is under discussions with USAID on the possibility of collaboration. USAID agreed to consider the possibility of applying private financing to Kenyan Water Company, while JICA will conduct a detailed study on the feasibility of the Fund.
Scheme Image:
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III. Case studies and analysis Case 6: Philippine Water Revolving Fund
Abstract: A revolving fund for water supply and sanitation projects that leverages ODA and public funds with commercial bank loans. It provides a facility to entice PFIs to enter the water sector by reducing credit risk. (USAID and JICA collaborative effort)
Progress: 16 projects achieved financial closure involving private bank financing, 10 of which were funded 90-100% by PFIs. The 16 projects have a total loan value of US$94million, of which US$57 million came from PFI funds. These projects serves 1.8 million people.14 of the PFI projects were able to secure credit risk guarantee from LGU Guarantee Corporation, co-guaranteed by USAID‟s Development Credit Authority (DCA). 2 were closed without guarantees, and 1 PFI agreed to extend its loan tenor from 10 to 15 years.
Image:
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Purpose The two agencies will officially cooperate to support the development of PPP in infrastructure, that will assist Vietnam in maintaining strong economic growth.
Background Increasing infrastructure development needs require mobilizing private sector financing to supplement the public financing from the government budget.
USAID’s Role
USAID plays a leading role in assisting in PPP policy and systemdevelopment , through the provision of technical assistance to MPI’s TF. USAID proposes to use its DCA credit guarantee mechanism to support debt financing originated by the Fund.
JICA’s Role JICA is leading the effort in planning and establishing a PPP Infrastructure Finance Fund (IFF) that will be capitalized by public and private sector funds. The structure will offer other private sector investors the opportunity to participate in the Fund.
Background: JICA OPSP and USAID/ Vietnam Mission has signed a MOI regarding Vietnam Infrastructure Fund on September 7th, 2010.
III. Case studies and analysis Case 7: Vietnam Infrastructure Fund
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Infrastructure Projects applied by Ministries/ Local Governments of Vietnam
PDF（Project Development Facility）
BankablePPP Infrastructure Projects
VGF（Viability Gap Funding）
IFF（InfrastructureFinance Fund）
Partially BankablePPP Infrastructure Projects
Local Market Global Market
（F/S and Project Development Study）
Awarding Subsidy to partially finance the projects
Private Finance
Private Finance
Finance
Projects Projects
Equity, Loan, Guarantee
Other donors, IFI・DFI … etc.
Finance
Background: JICA and USAID intends to support the IIF, instead of PDF of VGF to fill the finance gap for the development of the Infrastructure Projects in Vietnam
III. Case studies and analysis Case 7: Vietnam Infrastructure Fund
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Project Scheme Image:
III. Case studies and analysis Case 7: Vietnam Infrastructure Fund
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Table of Contents (JICA Presentation)
I. JICA’s assistance in water sector ……………………………………………………
II. JICA’s assistance to water businesses through Private Sector Operations …
(1) Private Sector Investment Finance ………………………………………………
(2) PPP F/S Assistance ………………………………………………………………
(2) BOP F/S Assistance ………………………………………………………………
III. Case studies ………………………………………………………………………………
IV. Conclusion ………………………………………………………………………………
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III. Conclusion:
BOP Water PPP Water
Size Small Big
Location Rural Urban
Affordability to pay low high
Authority community government
Private Finance Availability
lower higher
Generally, BOP water businesses are far difficult than other water businesses such as PPP water businesses due to the below characteristics, and private finance is very limited. Therefore, donors and DFIs should support the mobilization of private finance into this field.
Through the BOP F/S, JICA is now assisting private companies who intend to enter this field. If it is proved that the projects are commercially viable through the BOP F/S, JICA will consider to support these projects through PSIF loans and equity investments as well as traditional ODA tools (such as ODA loans, technical assistance, and grants).
JICA welcomes various collaborations with donors, DFIs, NGOs and other private companies to facilitate these challenges by the private companies.
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Japan International Cooperation Agency (JICA)Office for Private Sector Partnership (OPSP)
TEL: +81-3-5226-6960
E-mail: [email protected]
URL: http://www.jica.go.jp/english/index.html
Inquiries
We appreciate your patience in hearing our presentation, and we look forward to hearing from you.
For Inquiries, please contact us at the below contact details.
Thank you.
