Good Business: September-October 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., October 31, 2001—The
International Finance Corporation announces new investments in financial
services, an Internet services provider, hotels and tourism, a cement plant,
an infrastructure equipment services company, several banks which provide
credit lines to support small and medium enterprises (SMEs), a cable manufacturing
plant, an auto parts company, and an industrial estate—in sub-Saharan
Africa, south Asia, the Middle East, eastern Europe, and Latin America—to
support sustainable private sector enterprises in the developing world.
IFC also assisted the South African National Parks in successfully
designing, structuring, and implementing a commercialization program which
enables private sector operators to become involved in the commercial operations
of the parks and sustain the organization while it focuses on its core
function: biodiversity conservation. In addition, IFC provided financial
packages to support the restructuring of two textile companies in Pakistan
and established a trust fund with the state government of Bavaria in Germany
to provide technical assistance to businesses in developing countries.
IFC also released the latest edition of its annual publication, ”Trends
in Private Investment in Developing Countries” which includes statistics
and analyses on trends in private and public capital formation from 1970
to 1999 as well as a limited sample of 2000 estimated results. IFC
and the Commodity Futures Trading Commission recently cohosted the third
annual workshop on Creating Access to Derivative Products and
Markets, which looked at why, when, and how to build and access derivatives
markets to improve risk management. Key topics included what was
needed to build a local market, when to use over-the-counter versus exchange-traded
products, and why and when fixed-income derivatives are needed.
IFC’s mission is to promote sustainable private sector investment in developing
countries, helping 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. Since its founding
in 1956, IFC has committed more than $31 billion of its own funds and arranged
$20 billion in syndications for 2,636 companies in 140 developing countries.
IFC’s committed portfolio at the end of FY01 was $14.3 billion.
SOUTH AFRICA—FINANCIAL SERVICES
IFC is buying $800,000 worth of preference shares in South African company,
Fin-X (Comesa Financial Exchange Pty. Ltd.) to help finance the roll out
of the SWIFT bureau service in Africa, focusing initially on eastern and
southern Africa. The availability in Johannesburg (a key financial
hub) of a high-quality, reasonably priced encrypted messaging system is
encouraging the growth of data processing and custodial companies in South
Africa’s financial sector serving overseas financial markets.
Fin-X provides SWIFT services to small banks and financial services companies.
The company has signed up customers in South Africa and Kenya and
will continue to develop its network. The SWIFT bureau service enables
these companies to join the SWIFT encrypted funds transfer and messaging
system at a cost which is lower than full membership of the SWIFT network.
Larger banks prefer full SWIFT membership because of the economies of scale
they obtain from the high volume of transactions conducted over the SWIFT
network. For smaller institutions, however, joining the SWIFT bureau
run by Fin-X makes economic sense because the upfront hardware costs as
well as the ongoing maintenance costs are shared among members of the bureau.
The development impact comes from this lowering of costs for the
smaller financial institutions.
SOUTH AFRICA—COMMERCIALIZATION PROGRAM FOR NATIONAL PARKS
IFC recently assisted the South African National Parks (SANP) with the
successful financial closing of 10 concession contracts to operate commercial
facilities within the country’s national parks, thus bringing to a close
IFC’s mandate to design, structure, and implement a commercialization
program for the parks. By enabling private sector operators to become
involved in the commercial operations of the parks and sustain the organization
while it focuses on its core function—biodiversity conservation—the program
is expected to result in a significant improvement in SANP's finances.
The first phase of the commercialization program helped to close seven
concessions to construct and operate ecotourism lodges in Kruger and other
national parks. The second phase involved the outsourcing of restaurant
and retail facilities. Strict controls were placed on the branding,
design, and operations of commercial facilities while operators developed
new themes and designs without using existing commercial brands.
The winning bidder for the Kruger Park restaurants, Nature's Group, is
an operator of several South African franchise chains and will develop
a new, parks-specific brand based on wildlife in the Kruger. Other
restaurant packages were won by smaller, local operators. On the
retail (shops) side, the two main packages were won by a consortium of
curio and supermarket retailers and empowerment partners based on their
superior financial offer to increase turnover and a comprehensive proposal
to create an environmentally appropriate theme.
ZAMBIA—INTERNET SERVICES PROVIDER
IFC will invest in Zambian Internet services provider, Qnet Communication
Systems Africa Limited (Qnet) to develop Zambia's telecommunications infrastructure
by providing Internet, e-mail, data management, and related services to
consumers.
The Zambia Communication Authority (ZCA) has issued an Internet service
provider license to Qnet to procure and install the required communications
equipment. Qnet will initially offer Internet and e-mail services
to consumers in and around Lusaka before extending services to the Copperbelt
and Southern Province. This will be done through 120 dial-in lines
catering to up to 10,000 subscribers in the Lusaka area and 16 lines for
each of the other major centers. Support services will include training,
installation, Internet connectivity, and Web development.
The Lusaka area accounts for 80 percent of Zambia’s Internet market and
is currently underserved because of the limited capacity of existing operators.
E-mail delivery delays of up to 24 hours are not unusual. Qnet will
install a service based on the most recent technology with significantly
larger capacity than currently available.
ZAMBIA—NEW HOTEL INVESTMENT FOLLOWS RESURGENCE IN MINING SECTOR
IFC will help develop Protea Hotel Chingola, the first international standard
business hotel in Chingola, a town in Zambia's Copperbelt. The $2.4 million
40-room hotel will offer five-star facilities for commercial and recreational
visitors to Chingola, which is undergoing a resurgence in the mining sector.
Hotel facilities will include conference and function rooms, a business
center, and shops.
This is the second Protea hotel owned and operated by Union Hotels Limited
of Lusaka, which is expanding the South African hotel brand into Zambia
and planning further hotels in other cities, including Lusaka. In
addition to the hotel facility itself, the town of Chingola will benefit
from a significant increase in employment as well as enjoy a higher profile
through its association with the regional Protea brand.
IFC is looking at a number of other projects in the Copperbelt area where
there are clear indications of renewed prosperity and good investment opportunities.
ZAMBIA—HOTEL ACCOMMODATION FOR BUSINESS VISITORS TO COPPERBELT
IFC will help develop Protea Hotel Chingola, the first international standard
business hotel in Chingola, a town in Zambia's Copperbelt. The $2.4 million
40-room hotel will offer five-star facilities for commercial and recreational
visitors to Chingola, which is undergoing a resurgence in the mining sector.
Hotel facilities will include conference and function rooms, a business
center, and shops.
This is the second Protea hotel owned and operated by Union Hotels Limited
of Lusaka, which is expanding the South African hotel brand into Zambia
and planning further hotels in other cities, including Lusaka. In
addition to the hotel facility itself, the town of Chingola will benefit
from a significant increase in employment as well as enjoy a higher profile
through its association with the regional Protea brand.
IFC is looking at a number of other projects in the Copperbelt area where
there are clear indications of renewed prosperity and good investment opportunities.
BANGLADESH—FIRST MODERN INTEGRATED CEMENT PLANT
IFC is investing in Bangladesh’s first modern integrated cement plant
located in the northern part of the country, Lafarge Surma Cement Limited,
which will procure its key raw material—cement-grade limestone—from a
company-owned quarry in the neighboring Indian state of Meghalaya and transport
it to Bangladesh by a 17 km-long overhead conveyor belt.
IFC is providing a financial package of $60 million which includes $10
million in equity, $35 million in loan financing for IFC’s own account,
and an additional syndicated loan of $15 million. The plant, which will
cost about $255 million to build, will have an annual capacity of 1.2 million
tonnes and will increase the supply of reasonably priced high-quality cement
in a market that has been unusually dependent on imports of bagged cement.
The sponsor is Lafarge of France, one of the world’s largest cement manufacturing
companies. The project is expected to create direct employment for
about 400 people in Bangladesh and Meghalaya and indirect employment, throughout
the life of the plant, for over 1,000 people engaged in contract activities
such as maintenance, security, and cement transportation to market centers.
INDIA—FIRST NATIONWIDE INFRASTRUCTURE EQUIPMENT
SERVICES COMPANY
IFC has provided financing of up to $10 million to establish the first
nationwide infrastructure equipment services company in India, Indian Infrastructure
Equipment Limited (IIEL), with SREI International Finance Limited and the
Kanoria family. IIEL will provide infrastructure equipment to Indian
contractors on a usage basis, allowing contractors to focus on construction
and project management while obtaining access to infrastructure equipment
without investing capital.
The project will accelerate mechanization in the Indian infrastructure
construction sector by providing contractors with an alternative method
of accessing high-quality and expensive equipment. Increased mechanization
will also improve the quality of infrastructure construction, ensure better
maintenance, and reduce delays in project implementation.
IFC played a pivotal role in helping IIEL develop and structure a comprehensive
environmental management system which includes the establishment of an
environmental advisory board to ensure that equipment is not provided to
projects that do not meet minimum environmental criteria. The use
of the environmental management system is expected to encourage Indian
contractors and project promoters to focus on better environmental practices.
PAKISTAN—PRODUCER OF DENIM JEANS RESTRUCTURED
IFC is providing a financial package to restructure Crescent Greenwood
Limited (CGL) of Pakistan, one of the country’s largest producers
of denim jeans. The restructuring is important to Pakistan’s economy
because CGL—an export-oriented producer of denim garments—can contribute
significantly to the country’s foreign exchange earnings besides employing
about 2,400 persons.
The $30 million restructuring package will support CGL with new equity
and new working capital and restructure its existing debt obligations.
IFC is providing guarantees to two Pakistani banks, United Bank Limited
and ABN AMRO Bank, N.V of Karachi, to mobilize local currency loans that
will convert part of the company’s foreign currency obligations
into rupee loans and extend the maturities of debt obligations.
The guarantees are on IFC’s own behalf and on behalf of commercial bank
participants, making this the first time that IFC has provided a syndicated
guarantee facility. The participants of the facility are ABN AMRO
Bank N.V., Netherlands and Asian Finance & Investment Corporation Ltd.,
an affiliate of the Asian Development Bank. Colenders providing similar
facilities include Deutsche Investitions-und Entwicklungsgesellschaft mbH
(DEG) of Germany and Citibank, Bahrain.
PAKISTAN—RESTRUCTURING OF KNITWEAR GARMENTS’ PRODUCER
IFC is supporting the restructuring of Sarah Textiles Limited (Sarah) of
Pakistan with a financial package of $1.6 million. Sarah, one of
the largest knitwear exporters in Pakistan, can make an important contribution
to the country's export earnings.
IFC is providing guarantees to a local bank, United Bank Limited, to mobilize
local currency loans that will convert part of the foreign currency obligations
of the company into rupee loans and extend the maturities of its debt obligations.
The other lenders to the company include CDC Capital Partners of
U.K, Saudi Pak Agricultural and Investment Corporation Limited, Union Bank
Limited, and PICIC Commercial Bank.
Sarah, which currently has 1,200 employees, is a significant source of
direct and indirect employment. Its customers include major U.S.
outlets such as Levis, Target, Chaps, Tommy Hilfiger, and Vantage.
MOLDOVA—SMES SUPPORTED WITH TWO FINANCIAL SECTOR INVESTMENTS
IFC is supporting SMEs in Moldova with investments in two of the country’s
leading banks—a $1.5 million credit line to Moldindconbank SA and a $4
million credit line to Banca Comerciala Victoriabank SA (Victoriabank).
The banks will onlend the funds to Moldovan SMEs which presently
lack dependable sources of long-term financing. IFC’s investment
in Moldinconbank SA follows an earlier $1.5 million credit line, which
the bank successfully used to distribute loans to 15 SMEs in Moldova.
In addition to its investment, IFC also provided $747,000 through its donor-funded
technical assistance trust funds program to three Moldovan banks, including
Moldindconbank. The Netherlands Government provided donor support
to transform the banks into effective intermediaries to channel credit
to the SME sector.
IFC has played an active role in Moldova since the country became a member
in 1995. IFC has approved approximately $84 million in financing
for seven projects in a variety of sectors, including power, telecom, agribusiness,
and the financial sector, as well as technical assistance projects in banking,
tourism, wineries, food processing, and leather industries.
ROMANIA—CABLE MANUFACTURING PLANT MODERNIZED
IFC has invested Euro€15 million to refurbish and modernize a cable manufacturing
plant, ICME ECAB, in Bucharest, Romania, to produce a wide variety of cables,
conductors, and wires.
The investment in ICME—which will create new employment, both directly
with the company and indirectly through associated suppliers—is a model
case of regional investment expansion that could be critical in improving
stability in the region by strengthening cross- border cooperation. It
is expected to serve as an example for private sector development with
its successful application of modern management and marketing methods,
development of a key industry through strategic alliances, and promotion
of best practices in corporate governance.
Hellenic Cables, Greece’s leading cable manufacturer, will also invest
an amount exceeding Euro€15 million. Hellenic Cables is a part
of the Viohalco Group of Companies, the largest metals group in Greece,
employing more than 4,500 people.
RUSSIA—INVESTMENT IN REGIONAL BANK WILL HELP SMES
IFC has invested $2.5 million in NDB Bank, a regional bank in Nizhny Novgorod,
Russia’s third largest city and a leading center of economic reforms.
The project will support NDB’s efforts to expand its lending to
SMEs which are currently underserved by local financial institutions.
NDB is independent from the large financial industrial groups that dominate
the Russian economy. So far, independent regional banks have had
little access to commercial sources of long-term funding. IFC believes
that NDB will play an important role in the economic growth of Nizhny Novgorod.
The investment is part of IFC’s Russian Multi-Bank Credit Line project
aimed at providing long-term funding and technical assistance to a number
of regional banks in Russia.
NDB, which is among the largest banks in the region, was established
in 1992 and has a market share of about 20 percent of the local banking
business. Although NDB focuses on SMEs, its retail banking has increased,
and it now has the second-largest retail deposit base in the market. As
of June 31, 2001, total assets amounted to $31.7 million.
RUSSIA—BANKING SECTOR
IFC has invested $5 million in Probusinessbank, a Russian bank that focuses
on lending to SMEs. IFC’s investment, in the form of a subordinated
convertible loan, will strengthen the bank’s capital base and support
an expansion in corporate lending.
Probusinessbank was founded in 1993 as a full service commercial bank by
a group of Russians from some of Moscow’s top universities. The
initial capital for the bank came from companies in various sectors—chemicals,
construction, food production, and machinery industries. As of June
30, 2001, the bank had assets of approximately $167 million and equity
of $33 million equivalent.
In addition, IFC has put in place a $700,000 donor-funded program of technical
assistance to upgrade Probusinessbank's lending practices, systems, and
technologies. The technical assistance program is supported by the
U.K. Department for International Development.
EGYPT—INVESTMENT IN AUTO PARTS COMPANY
IFC has invested $3 million to help set up Alexandria Automotive Castings
Company (AAC), an Egyptian automotive parts exporter located in the Merghem-Amreya
Industrial Zone near Alexandria Port. IFC’s investment will support
a $14 million project to manufacture and export—to a leading German auto
brake systems manufacturer—18,000 tons per annum of automotive castings.
The project promotes a local enterprise and creates much-needed new jobs
in an industry in which Egypt has a comparative advantage due to its proximity
to Europe and relatively lower production costs. It will also contribute
to foreign currency earnings and help transfer the most advanced production
technology, know-how, and training to Egypt.
AAC is owned by El Mansour and El Maghraby Investment Development Company,
Mansour Automotive Company, Commercial International Investment Company,
Olympic Group Financial Investment Company, the Sid Ahmed family, and Mr.
Said Ahmed Mohsen.
JORDAN—INDUSTRIAL ESTATE INVESTMENT COULD HAVE FAR-REACHING DEVELOPMENT
IMPACT
IFC has invested $8 million in Specialized Investment Company Plc., which
owns and operates Al-Tajamouat Industrial City (ATIC), an industrial estate
in Amman, Jordan. The investment will support an important sector
of Jordan’s economy, increase the country’s export competitiveness, generate
foreign currency earnings, introduce new technologies and training to the
workforce in the estate, and help create up to 10,000 new jobs.
The $18.5 million expansion project will add 60,255 square meters of industrial
space to the existing fully occupied 88,500 square meters. ATIC,
established in 1996 and located 20 km. from Amman, was granted the status
of a Qualifying Industrial Zone in October 1999, providing tenant companies
with duty- and quota-free access to the U.S. market. Given its proximity
to Amman, ATIC will help boost the local economy through increased demand
for goods and services that supply the manufacturing companies located
in the industrial estate.
Specialized Investment Compounds Company Plc. is listed on the Amman Stock
Exchange and is 32 percent owned by the Salfiti Group. ATIC hosts
more than 40 local SMEs involved in light engineering, plastic goods production,
beverages, furniture, fixtures, and distribution activities, as well as
13 large garment manufacturing companies from Pakistan, Jordan, Hong Kong,
Philippines, the United States, Korea, and the United Arab Emirates. ATIC
currently employs 5,000 people.
NICARAGUA—SUPPORT TO SMES
IFC is supporting SMEs in Nicaragua with a $5 million credit line to Banco
de la Exportación (Banexpo), one of the country’s leading financial institutions.
Private sector companies in Nicaragua—especially SMEs—have found
it difficult to obtain cost-effective long-term financing, especially at
a time when the country is going through a difficult economic period brought
on by a decline in coffee prices and a drought in northern Nicaragua.
The investment will support the efforts of local entrepreneurs to strengthen
their businesses and create jobs. The project will also help transfer
international best practices, particularly in environmental risk management,
to the Nicaraguan market.
Banexpo is Nicaragua’s fourth-largest private commercial bank with assets
of $223 million, deposits of $184 million, and equity of $16 million as
of June 30, 2001.
TRUST FUND ESTABLISHED WITH STATE GOVERNMENT OF
BAVARIA, GERMANY
IFC has signed an agreement with the state government of Bavaria, Germany,
to establish a EURO 2.5 million trust fund to help finance private sector
growth in developing countries. The agreement marks the first time
IFC has established a trust fund with a state government authority rather
than a national government or agency. The trust fund will enable
businesses in the German state of Bavaria to work closely with IFC in private
sector development in emerging markets and developing countries.
The trust fund, which primarily focuses on technical assistance, will finance
several key aspects of private sector development, such as prebusiness
feasibility studies, the establishment of pilot projects, technology transfer,
technical assistance in the rehabilitation of projects that experience
difficulties, and technical advisory services in privatization and capital
markets development.
IFC initiated the Technical Assistance Trust Funds Program in 1988 to identify
and support viable business projects in developing countries. The
program has supported up to a thousand technical assistance projects in
a broad range of sectors and also supports some privatization advisory
services and financial market activities that strengthen private sector
institutions.
NEW IFC PUBLICATION—"TRENDS IN PRIVATE INVESTMENT IN DEVELOPING COUNTRIES"
IFC has released the latest edition of its annual publication, Trends in
Private Investment in Developing Countries –Discussion Paper No. 44 by
Stephen Everhart and Mariusz Sumlinski—which includes statistics and analyses
on trends in private and public capital formation from 1970 to 1999 as
well as a limited sample of 2000 estimated results. The study continues
the investigation of the relationship between public and private investment
initiated last year and looks at the quality of public investment, its
interaction with corruption, and the resulting impact on private investment.
The focus is on whether public investment crowds in or crowds out
private investment, the impact of corruption on this relationship, and
the long-term implications for growth and sustainable development. It
provides statistics and reporting trends in private and public fixed investment
in 60 developing countries. Coverage was expanded this year by adding
countries from Eastern Europe, Central Asia, and Latin America.
According to the paper, on average, the ratio of private investment to
GDP declined in 1999 compared to 1998 from 15 percent of GDP in 1998 to
14.1 percent, while public investment increased slightly from 7.3 percent
of GDP in 1998 to 7.5 percent. Despite the 1999 decline, which brings
investment ratios back to their 1995 level, preliminary and incomplete
estimates for the year 2000 suggest that private investment may have increased
last year.
The publication is available on IFC’s website at: http://www.ifc.org/economics/pubs/discuss.htm.
To obtain a hard copy, please send an e-mail request to emackenzie@ifc.org.
IFC HOSTS THIRD ANNUAL DERIVATIVES WORKSHOP WITH COMMODITY FUTURES TRADING
COMMISSION
IFC and the Commodity Futures Trading Commission (CFTC) cohosted the third
annual workshop on Creating Access to Derivative Products and Markets,
on October 23, 2001 in Washington, D.C. The workshop looked at why,
when, and how to build and access derivatives markets to improve risk management.
Key topics included what was needed to build a local market, when
to use over-the-counter (OTC) versus exchange-traded products, and why
and when fixed-income derivatives are needed.
Twenty-six people attended from 15 countries including officials from the
International Monetary Fund, Inter-American Development Bank, and several
U.S. government agencies and trade associations. Panelists included
Randy Gilmore, former chairman, Hong Kong Futures Exchange, and executive
director, Securities Futures Commission of Hong Kong; Larry Anderson, EVP
and head of marketing at Carr Futures; Terry Martell, former Comex chief
economist; and Paul Salzman, general counsel, Bond Market Association.
IFC’s Alison Harwood moderated the sessions
The meeting focused on several key messages: underlying liquid cash markets
are the most important component for developing exchange-traded markets;
the markets need speculators or there will be no one to sell a hedge and
limited liquidity; the impetus for developing derivative products and markets
has to come from users as regulators cannot make a market happen; price
volatility is an important catalyst for introducing and using derivative
products; interest rate derivatives are needed for fixed-income markets,
especially for dealers as a place to hedge and adjust portfolios; and OTC
and exchange-traded products are complements, not substitutes—OTC is preferable
when underlying cash markets are illiquid and to support customized needs,
and exchange-traded products are standardized, more flexible, and anonymous.
A Web site is being set up with presentations from the workshop.
PROFITING FROM SMALL BUSINESS LENDING: CONFERENCE PROCEEDINGS
Conference proceedings for the IFC-World Bank sponsored Global Conference
on Profiting from Small Business Lending: the Role of Credit Information
and Credit Scoring (April 2-3 2001, Washington D.C.)—reported in the April
edition of Good Business—is now available on the conference website: http://www.worldbank.org/wbi/banking/creditscoring
The key focus of the conference was on credit information and credit scoring—a
financial technology that rationalizes credit decisions and credit management—to
make small business lending profitable in emerging markets and transition
countries. More than 250 participants attended from 55 countries,
representing about 60 banks, 30 leading microfinance institutions, more
than 10 credit bureaus, several regulators, and 20 leading technology providers.
The conference was cosponsored by Coface, one of the largest international
credit risk insurers; CRIF, a leading credit bureau and credit scoring
developer; DBS/Temenos, a major technology provider to the banking and
microfinance industry; Trans Union Advantage, an alliance of two leading
international credit bureaus; and Visa International, the world’s largest
payment network. The conference was also supported by funds from
the Swedish government.
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