IFC is responding to the growth and opening of the Pakistani economy by increasing its own commitment to the country’s private sector. In fiscal year 2006, IFC nearly tripled its investment commitments in the country, reaching a total of $125 million. The year also saw a substantial increase in advisory services addressing the needs of Pakistani entrepreneurs and institutions.
To help manage the rapidly expanding portfolio, IFC has increased its presence in the country, adding several investment and project officers, with plans to add more staff. The $125 million committed in FY06 is expected to more than double to $300 million in FY07, with a focus on the financial, small and medium enterprise, and infrastructure sectors.
These developments build on a long-standing partnership. Since Pakistan joined IFC over 50 years ago, the Corporation has committed over $1.5 billion of its own funds and arranged over $556 million in syndications from participating banks to support projects in the country. IFC’s investment portfolio is spread across the financial, infrastructure, manufacturing, oil and gas, petrochemicals, and telecommunications sectors.
Infrastructure: A Key Priority
The head of IFC, Lars Thunell is visiting Pakistan this week. He plans to sign a $125 million financing to the Karachi Electricity Supply Corporation, supporting one of the country’s largest investments in infrastructure. KESC provides electricity to about 12-14 million people in Karachi, Pakistan’s industrial and commercial center. The company was privatized a year ago when the government sold most of its shares to a business consortium headed by the Al-Jomaih Group from Saudi Arabia.
Following privatization, it became clear that KESC’s facilities needed upgrading, and IFC’s loan will help the company increase its capacity and reliability. KESC will install two new generation plants, refurbish its existing assets to reduce technical and commercial losses, and use a combined cycle plant to reduce fuel costs through greater efficiency.
IFC also supports Pakistan’s infrastructure through advisory services. We recently completed an advisory mandate to help the Punjab government explore opportunities to increase the delivery of water for the Lahore Water and Sewerage Agency. IFC has also advised on the country’s gas sector and is encouraging its development. Our investments in a number of local companies are helping meet the country’s increasing domestic demand for energy.
An agreement between IFC and the government of Pakistan will lead to additional infrastructure projects. IFC will advise the Ministry of Finance’s Infrastructure Project Development Fund on establishing public-private partnerships, which bring in private funding to infrastructure projects, as well as a high level of expertise from the private sector.
The Financial Sector: Expanding Access
IFC is helping Pakistan’s financial sector expand its reach. One example is our support to Habib Bank Ltd., an institution the government privatized in 2004 that is now the country’s largest private sector bank. In 2006 IFC issued a $50 million Tier II-subordinated loan to the bank and made an equity investment of up to five percent of its capital. The financing is helping Habib Bank expand its already strong portfolio of corporate and small business loans. It will also help the bank diversify its funding sources, strengthen its capital adequacy, and expand its consumer lending.
IFC’s financial sector work focuses heavily on expanding access for Pakistan’s micro, small, and medium enterprises. IFC considers smaller businesses the backbone of any developing economy and sees microfinance loans as a particularly powerful tool in reducing poverty and unemployment. Hence IFC is helping develop Pakistan’s commercial microfinance institutions. For example, IFC bought a 10 percent stake in Tameer Microfinance Bank Ltd. and is providing it with advisory services.
Founded in 2005 by a group of experienced bankers, Tameer aims to serve more than 50 million Pakistanis not otherwise reached by the financial sector. Today, Tameer is not only a microfinance lending institution, but also a full service bank that provides a wide variety of services.
To help Tameer Bank build on its initial success, IFC recently signed an agreement to increase its advisory services. This second phase, which will be supported by IFC Advisory Services in the Middle East and North Africa — PEP-MENA — will enable Tameer to expand into rural areas from its largely urban base, including through banking via mobile phone.
Mediation for SMEs
IFC is also helping Pakistan’s smaller businesses resolve business disputes in more efficient ways. The country has more than a million backlogged cases, and litigation through the traditional court system could take up to 10 years and cost around 35 percent of a company’s assets.
- IFC PEP-MENA helped establish the Karachi Center for Dispute Resolution, which held its first commercial mediation sessions this year.
- IFC has been working with the mediation center to create a database of qualified mediators and to educate legal professionals and court systems about the value of mediation.
- The center received an ”Award for Excellence” from the United Kingdom’s Center for Effective Dispute Resolution.
- The center is enjoying a high rate of success—many cases are being resolved in a day.
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Encouraging Growth
A shortage of quality accommodation and office facilities in Islamabad is a challenge to the growing needs of business people visiting the city. IFC is partnering with the Aga Khan Fund for Economic Development and will contribute a $16 million equity investment toward construction of a new Serena brand hotel to encourage corporate and economic activity in Islamabad.
IFC is also strengthening its long-standing partnership with Packages Limited, Pakistan’s largest producer of paper and paperboard.
A $4 million loan and the conversion of an existing $25 million guarantee facility into a loan for IFC’s own account will help the company carry out an ambitious expansion program and triple production by 2008. Talks are also underway on a possible joint-venture project in Morocco.
For additional information contact:
Riham Mustafa
Communications Analyst
Cairo, Egypt
Tel: 20-2-461-9150
E-mail:
RMustafa@ifc.org
Published March 21, 2007
