Parliament likely to ratify European Investment Banking

Though the Opposition objects strongly

The European Investment Bank (EIB) framework agreement is likely to be ratified by parliament in the upcoming session which will begin from November 26  as the government has addressed some of the objections on EIB raised by the National Council (NC) which had rejected the framework agreement in 2015.

The previous government had signed the EIB in December 2014 and presented it to the National Assembly (NA) which then deferred the agreement.

However, the NC had rejected the framework agreement back then reasoning that it is not in accord with the country’s external commercial borrowing guidelines and that it could undermine Bhutan’s sovereignty.

Talking to Business Bhutan, Finance Minister Namgay Tshering said that the government is tabling the EIB framework agreement for ratification in the upcoming parliament session. “The ratification of the agreement would increase avenues of finance in the country.”

Lyonpo said other than from the two international banks in the country, World Bank and Asian Development Bank (ADB), the government is expecting to get borrowings at concessional interest rate.

“The government has addressed the objections and recommendations made by the parliament,” said Lyonpo, adding that this time he hopes that EIB framework agreement would be passed in the parliament.

Chairman of the economic and finance committee, Member of Parliament from Athang_Thedtsho, Kinley Wangchuk said the committee delivered their review reports to the parent organization to incorporate them.

He said that the Committee did not have many points as the NC and the Office of Attorney General have thoroughly looked into the details of the agreement.

“Personally, I feel, with impressive track records of collaboration in development with the European Union for many years, welcoming EIB is another milestone which will create a congenial platform for future investments,” said the MP.

The MP mentioned that the government as well as other eligible borrowers will have the opportunity to choose convenient external borrowing sources in addition to ADB and World Bank. “Having more players always come in the advantage of the clients in terms of interests rates and interest areas of investments and others.”

He said that the advantages and disadvantages of EIB can be best comprehended when the deliberation of EIB ratification unfolds in the upcoming session.

However, Opposition Leader (OL) Dorji Wangdi said they are still standing by the objections of the parliament based on which the EIB framework agreement was not ratified.

“There are general objections as well as specific objections. Unless these objections are not addressed we should still not ratify the agreement,” said the OL.

The parliament had made around 14 objections on the ratification of EIB framework agreement.

The objections are pertaining to security and sovereignty of the country, undermining of national legislation, undue immunity and privileges being proposed to the staff of the EIB, undermining the judiciary and it also circumvents external commercial borrowing regulations.

“It contradicts the Income Tax Act 2001, is contrary to the provisions of Bhutan Foreign Exchange Rules and Regulations and FDI Rules and regulations 2005 and external commercial borrowings guidelines,” said the OL.

The OL also said that finance ministry has already presented the EIB framework agreement to the economic and finance committee. “We had already three rounds of discussion on this. I am in the committee as well as I attended when they presented plenary of the NA MPs.”

The OL mentioned that if the government wants to re-submit the framework, they must address the objections to the satisfaction of the parliament.

He mentioned the World Bank and ADB are significantly different. “World Bank and ADB are not only sources of loans, they also provide huge amount of grants, whereas EIB provide only the loans. They are a purely commercial bank.”

“We cannot treat EIB like World Bank and ADB in terms of immunities and privileges,” OL said.

The OL said that this time the government has made some changes and had negotiated.

In the earlier EIB framework agreement, it was mentioned that EIB could lend to the private sector directly.

“This is where the issue of external commercial borrowing comes because we have regulation on external commercial borrowings. If any private individuals want to lend from outside it has to pass through the external commercial borrowing regulations in which government has to give sovereign guarantee.”

The OL said that if this is allowed to happen, it will have implications on the nation. “This will lead to widening of the gap between rich and poor, because rich people will have access to international finance.”

He said now they changed the provision whereby a private individual cannot borrow money from EIB and they should follow the regulations.

“If we join EIB we will have increased access to commercial finance but to join or not depends on how government has been able to favorably negotiate the terms and conditions,” said the OL.

Meanwhile, NC Deputy Chairperson Jigme Wangchuk said that for the upcoming session, there is no agenda on the EIB.

He mentioned that if the government has addressed the objections and recommendations on the agreement, the house might pass the agreement.

Dechen Dolker from Thimphu