Good Business---July-August 2001
Ludi Joseph, (202) 473-7700, ljoseph@ifc.org
Africa, South Asia, East Asia & Pacific
Afshin Molavi, (202) 458-5674, amolavi@ifc.org
Middle East-North Africa, Southern Europe-Central Asia
Adriana Gomez, (202) 458-5204, agomez@ifc.org
Latin America-Caribbean, Central-Eastern Europe
Sujani Eli, (202) 458-0933, seli@ifc.org
General Press Information
Richard Romm, (202) 458-4698, rromm@ifc.org
General Press Information
Washington, D.C., August 14, 2001—The
International Finance Corporation announces new investments in software,
the financial sector, support for small and medium enterprises (SMEs),
mining, and agribusiness in Africa, Asia, eastern Europe, Latin America
and the Caribbean—to support sustainable private sector enterprises in
the developing world. In its efforts to be more responsive to client
needs, IFC established a swaps facility in India which enables it to provide
local currency finance products to Indian borrowers without foreign currency
risk. IFC also advised the government of Cameroon on the institutional
reform of the electricity sector and the privatization of the electricity
utility, SONEL; held its annual Participants Meeting in Washington, D.C.,
a gathering of banks and other financial institutions that participate
in IFC's B-loan program or lend in parallel with IFC; and released a new
discussion paper which concludes that SMEs are key to achieving economic
and social progress.
The mission of IFC, part of the World Bank Group, is to promote sustainable
private sector investment in developing countries as a way to reduce poverty
and improve people’s lives. IFC finances private sector investments
in the developing world, mobilizes capital in the international financial
markets, and provides technical assistance and advice to governments and
businesses.
CAMEROON—REFORM OF THE ELECTRICITY SECTOR AND PRIVATIZATION OF THE ELECTRICITY
UTILITY
In July 2001, IFC successfully concluded an advisory mandate with the government
of Cameroon on the institutional reform of the electricity sector and the
privatization of the electricity utility, SONEL. The winning bidder,
the U.S.-based company; AES Corporation paid $72 million to acquire 56
percent of SONEL through a combination of capital increase and secondary
share purchase, valuing the company at $213 million after capital increase.
As part of its mandate, IFC advised the government of Cameroon on creating
a new legal and regulatory framework, establishing a regulatory agency
and rural electrification agency, defining a privatization strategy, marketing
the transaction to investors, drafting concession agreements that set out
investors’ obligations for the next 20 years, assisting the government
in negotiations with investors, organizing the bidding process, and closing
the transaction. The mandate was completed in just under three years.
SONEL’s privatization concludes a wide-ranging reform program established
by the government in 1998 to promote private sector investment; improve
the quality of service; increase electrification in urban and rural areas;
boost efficiency in production, transmission, and distribution; and provide
electricity at competitive prices. As part of its contractual obligations
in taking over SONEL's new concessions, AES has committed to a four-fold
increase in the number of electric connections over the next two decades
and to substantially enhancing the quality of service.
SOUTH AFRICA—SOFTWARE COMPANY DEVELOPS SYSTEMS
FOR FINANCIAL INSTITUTIONS
IFC has invested $5 million in Rubico Holding SA (Pty) Ltd., a leading
South African software company that develops and implements software systems
for financial institutions. Rubico, which launched operations in
1997, develops flexible software components that are assembled into applications.
These components, built around business processes, allow implementation
speeds that are about ten times faster than traditional programming languages
and guarantee full integration with existing corporate systems.
IFC’s partners in the project are International Development Corporation
and Brait Capital Partners, both of South Africa; and Copia Capital of
the United Kingdom. Altogether they have raised a total of $9.75
million, including IFC’s financing. The project demonstrates that
South Africa can develop world-class technologies that are competitive
in the software market of the developed world. Financial institutions
are among the largest consumers of IT products and will continue this trend
in the foreseeable future.
The World Bank Group recently established a Global Information and Communication
Technologies Department (www.ifc.org/ict) to promote the transfer of information
technologies to the developing world. The department focuses on communications
networks and Internet infrastructure projects that are expected to have
a multiplier effect in expanding the use of the Internet in developing
countries.
INDIA—SWAPS FACILITY WILL EXTEND LOCAL CURRENCY FINANCING
IFC has established a swaps facility with the State Bank of India to enter
into currency swaps enabling IFC to be more responsive to the needs of
its clients and strengthen its ability to extend credit in rupees. The
facility, IFC’s first in India, will enable the Corporation to provide
local currency finance products to Indian borrowers without foreign currency
risk.
With annual business volume of about $400 million, India has emerged as
the largest recipient of IFC financing in financial year 2001. IFC’s
initiative in local currency financing, which this facility will support,
is expected to sustain further growth in the size and diversity of its
business in India.
The facility is expected to be particularly useful in IFC’s efforts to
extend local currency financing for the infrastructure sector as well as
for the general manufacturing sector. This offering will complement
IFC’s other rupee financing products, which include partial guarantees
and structured finance products.
INDONESIA—MINING SERVICES PROJECT WILL ENCOURAGE
GROWTH IN MINING SECTOR
IFC will invest $5 million in Dianlia, a medium-sized locally owned mining
services company in Jakarta, Indonesia. IFC’s investment will help
the company’s expansion program, which aims to double existing capacity.
Dianlia’s growth will provide employment to more than 250 Indonesian
workers and will benefit the local economy.
With current uncertainties in Indonesia, many mining companies are looking
to outsource to local contractors as a risk-sharing mechanism. In
addition, long-term financing is generally not available for local SMEs.
IFC’s investment will not only encourage growth in the mining sector—a
critically important sector in the country—but also provide a platform
to catalyze environmental and social best practices in SMEs.
The sponsor is PT Pandu Alam Persada, a local private holding company based
in Jakarta. The company is headed by Mr. Benny Subianto, a well-respected
Indonesian businessman.
BULGARIA—MODERNIZATION OF COPPER PROCESSING FACILITY
IFC will invest $11.5 million to refurbish and modernize Bulgaria’s Sofia
Med copper processing facility and establish a modern, cost-efficient plant
producing a wide variety of high- quality copper and copper alloy products.
The project will create significant new employment during a high
unemployment period in Bulgaria.
The copper plant, which was earlier owned by Bulgarian company KOCM (Non-Ferrous
Metal Works), had been idle for about a year before it was acquired by
Sofia Med in December 1999. The project sponsor, Halcor, Greece,
will inject the necessary capital to restart and modernize production,
improve production methods, and meet the stringent environmental and social
standards of the World Bank Group. Halcor is a major Greek manufacturer
of copper and brass drawn and rolled products. It is part of the
Viohalco Group of Companies, the leading metal producer in Greece. The
National Bank of Greece is investing alongside Halcor and IFC.
By creating strategic alliances with first-class industry sponsors, promoting
best practices in corporate governance, and applying modern management
methods, the project will serve as a model for further private sector development
in Bulgaria. To date, IFC has approved $173 million in investments
in 15 projects in Bulgaria costing over $900 million.
RUSSIA—INVESTMENT WILL FACILITATE TECHNOLOGY TRANSFER AND PROMOTE SME
DEVELOPMENT
IFC will lend $27 million for the $50 million expansion of brewing company,
Bravo International, in St. Petersburg, Russia which will help the local
economy by creating new jobs, promoting the development of small enterprises,
and increasing tax revenues. In addition to IFC’s loans, Russian
and European banks will also provide financing. The project will
facilitate the transfer of efficient technologies and business management
techniques relating to marketing and quality control, research and development,
and transport and distribution systems. Expansion of distribution
systems will involve increased participation of small private entrepreneurs.
The company will develop a training program for its employees on
environmental, health, and safety matters.
The project will also support a responsible social drinking policy to help
educate consumers and facilitate the government’s efforts to reduce alcohol
abuse. According to recent estimates, the Russian beer market continues
to grow as consumers switch from both hard liquor and lower-end beer to
premium Russian beer.
MEXICO—TOMATO GREENHOUSE WILL HAVE SIGNIFICANT DEVELOPMENT IMPACT IN POOR
RURAL REGION
IFC will lend up to $7 million to Greenmanor S.A. de C.V., a small Mexican
agribusiness company, to set up a high-tech, state-of-the-art, 20-hectare
hydroponic tomato greenhouse on a new site at San Luis de la Paz in Guanajuato
State, Mexico.
By creating direct employment for 240 local people, including about eight
technical and managerial positions, the project will have a significant
impact on the living standards of the local community. It will also promote
efficient tomato production and establish a socially responsible agro-industrial
enterprise supporting sustainable development in a poor rural area of Mexico.
The project sponsors are Nicolaas Poot, a Dutch entrepreneur with substantial
experience in greenhouse tomato cultivation in Holland, and the United
States, and Pablo Ramosquirarte, a Mexican businessman experienced in vegetable
trade with the United States.
IFC SUPPORTS PROJECT FINANCE IN THE CARIBBEAN
IFC will support project finance in the Caribbean region with a $20 million
credit line recently signed with Royal Merchant Bank and Finance Company
Limited (RMB), a major subsidiary of the RBTT Financial Group, headquartered
in Trinidad and Tobago.
RBTT is the region’s leading banking and financial services group. RBTT’s
network of subsidiaries and affiliates across the Caribbean will enable
IFC to provide long-term funding to support projects in countries that
have small markets and limited access to international finance. The
project will also facilitate the expansion and transfer of international
best practice in risk management, including environmental management, to
businesses in the region. Through its relationship with a strong
local partner like RMB, IFC can be more active in supporting growth and
development in the Caribbean, particularly in non-traditional sectors such
as education and health care.
IFC’s—ANNUAL PARTICIPANTS MEETING, WASHINGTON, D.C.;
—A LEADING FORUM FOR PROJECT FINANCIERS
IFC recently organized its ninth Annual Participants Meeting in Washington,
D.C. The meeting was a gathering of banks and other financial institutions
that participate in IFC’s B-loan program or lend in parallel with IFC.
About 250 international bankers and financiers from commercial banks,
institutional investors, and development agencies attended—demonstrating
the continued keen interest in IFC’s B-loan program. This event
has become one of the leading annual forums for banks involved in emerging
markets project finance. European institutions as well as U.S. and
Asian banks—which comprise the bulk of participants—met at a time when
the lending environment in markets such as Turkey and Argentina pose many
challenges to project financiers.
Some of the leading speakers at this year’s meeting were Tom Friedman,
foreign affairs columnist of the New York Times and author of The
Lexus and the Olive Tree; Miguel Kaguel, president, Banco Hipotecario
and former minister of finance, Argentina; and Horst Köhler, managing director,
International Monetary Fund. Panel discussions included the new Basle
Accord; the Argentine crisis; IFC’s multifaceted role in restructurings;
issues such as sustainability and corporate governance; investing in power,
telecommunications, environmental projects, and education; and a showcase
of upcoming syndications.
IFC’s syndicated loan (or B-loan) program is a significant source of funding
and is IFC’s principal direct means of mobilizing third-party funds. Through
this program, IFC has secured financing for many borrowers who would not
otherwise have had access to long-term project funds on reasonable terms
from the international financial markets.
IFC DISCUSSION PAPER NOTES THAT SMALL ENTERPRISES ARE KEY TO ECONOMIC AND
SOCIAL PROGRESS
IFC has released a new discussion paper titled Firm Size and the Business
Environment: Worldwide Survey Results (No. 43), which concludes
that the creation and development of small enterprises is key to achieving
economic and social progress. The paper is written by Beatrice Weder
and Mirjam Schiffer, consultants in IFC’s Economics Department.
The vast majority of firms start from very small beginnings. Drawing
on a World Bank survey of 10,000 firms in 80 countries, the Discussion
Paper reflects entrepreneurs’ views of business environments. The
study analyzes the quality of interactions between firms of various sizes
and governments on a world-wide scale. It focuses particularly on
SMEs and on the institutional obstacles they face. The authors find
that smaller firms are facing steeper obstacles than are larger ones. In
particular, small firms suffer more than do large ones from taxes and tax
regulations, difficulties in obtaining financing, and from inflation. For
the first time, information has been published about specific obstacles
faced by small firms in each of 80 advanced industrial, developing, and
transition countries. Governments and aid agencies can use these
data in order to help small firms and thus level the playing field.
Reporters who would like to receive a hard copy of the paper should contact
Sujani Eli at telephone (202) 458-0933 or e-mail seli@ifc.org.
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