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| This Summary of Project Information is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. |
Summary of Project Information (SPI) |
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| Project number | 11736 |
| Project name | Mekong Project Development Facility II |
| Country | Vietnam |
| Sector | Other Services (Including IT Enabled Services) |
| Department | Partnership & Advisory Serv. Operations |
| Company name | INTERNATIONAL FINANCE CORPORATION(IFC) |
| Environmental category | C |
| Date SPI disclosed | October 1, 2002 |
| Projected board date | October 31, 2002 |
| Status | Promotion |
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| Project sponsor and major shareholders of project company |
| The project sponsors are IFC and bilateral and multilateral donors. Current donors to MPDF include the Asian Development Bank (ADB), Australia, Canada, Finland, Japan, Norway, Sweden, Switzerland, the United Kingdom, and the IFC. Other potential new donors include Belgium, France and the Netherlands. |
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| Total project cost and proposed IFC investment |
Over a five-year period (2003-2007), the total funding requirements for the Mekong Project Development Facility - Phase II ( or MPDF II), , are estimated at $28.5 million. IFC would provide a total of $5.0 million, representing 17.5% of the total funding requirements. The IFC contribution is in addition to the $0.3 million IFC's share of the estimated $1.8 million excess funds in Phase 1 that are proposed to be rolled over to Phase II. The remaining financing will be sought from bilateral and multilateral donors. Should there be any shortfall, IFC contribution will not exceed the absolute amount of $5.3 million over the five-year period.
At the June 2002 Donors' Meeting in Hanoi, Vietnam, the findings of the independent evaluation of the MPDF and the proposed strategy for MPDF II was discussed. Donor representatives were very pleased with the findings of the evaluation and endorsed the proposed strategy for MPDF II . They also indicated strong commitments for funding support for MPDF II and are expected to seek approvals from their respective head offices/boards during the fourth quarter of 2002. |
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| Location of project and description of site |
| MPDF's head office is in Hanoi (Vietnam). The facility has offices in Ho Chi Minh City (Vietnam), Phnom Penh (Cambodia) and Vientiane (Lao PDR). The Hanoi office covers all MPDF activities in the north while the Ho Chi Minh office on the south of Vietnam. The Phnom Penh office covers all of Cambodia, and the Vientiane office for all of Lao PDR. |
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| Description of company and purpose of project |
MPDF II is a proposal for the extend for another 5 years the Mekong Project Development Facility (MPDF) which will end on December 31, 2002. Established in 1997 by the IFC, MPDF is a technical assistance project with financial support from various donors. Its mission is to support and accelerate the development of productive, domestically-owned, private sector small and medium-sized enterprises (SMEs) in the three countries of the Mekong region: Vietnam, Cambodia, and Lao PDR.
From its inception to June 30, 2002, MPDF has secured funding for 129 projects in three countries representing total investments of $109 million. MPDF helped raise over $60 million of these funds, as equity or long-term loans. These projects are estimated to have created some 17,000 jobs directly, and will generate about $132 million foreign exchange earnings per annum. MPDF also completed 23 technical assistance projects which facilitated private sector development through practical improvements of business operations, enhancing the regular financial assistance activities of the facility. In addition, during this period, MPDF trained over 3,700 SME managers and 2,700 bank officers, sold 43,000 flexible learning workbooks, published 13 private sector discussion papers, and helped establish 4 new institutions (the Bank Training Center, the Mekong Enterprise Fund, the Siem Reap Hotel and Guesthouse Association, and the Cambodia Rice Millers Association) that support the private sector in many ways. With the growing recognition of the role of the private sector in economic and social development in the Mekong region, the demand for MPDF services continues to be strong.
MPDF II is consistent with the World Bank Group (WBG) strategies in all three countries of the Mekong region, which emphasize private sector and SME development as key elements for sustainable growth and poverty reduction. It is also consistent with the new directions for Project Development Facilities (PDFs) defined by the WBG SME Department, such as increased outreach and sustainability through development of local institutions and markets, greater cost recovery, and stronger emphasis on improvement of the business environment. Many of the products and approaches developed by MPDF are also being leveraged and shared with other PDFs.
A recently concluded independent evaluation of MPDF found that MPDF had been successful in its first phase in providing needed services to the target firms, and has made an important contribution to private sector development in the region.
Under MPDF II, the facility will pursue a three-fold strategy:
(i) continue to provide direct advisory assistance to private enterprises, but with a view to developing the market for local providers of business development services (BDS) and gradually phasing out direct service delivery, except where clearly justified by “public good” or external benefits;
(ii) build on the key achievements in Phase I to further expand the capacity building of essential local support institutions, notably financial intermediaries, training and information providers, and business associations; and
(iii) continue and expand its work in the area of private sector research and business enabling environment (BEE), in particular to provide inputs and feedback from its enterprise-level experience into the policy discussions of the World Bank Group and donor community.
Compared with Phase I, there will be thus be a continued and significant shift away from direct service delivery to developing local business service providers as well as enhancing the policy environment.
IFC’s Role
IFC will continue to support projects that assist the country’s transition to a market economy, while helping to meet its need for export earnings, employment, and fiscal revenues. IFC will support the reform of SOEs and SOCBs, as well as other regulatory reforms. MPDF will support IFC’s policy and investment work, including potential investments in the financial, tourism and mining sectors.
MPDF II will expand regional linkages, by transferring and adapting the training and capacity building products developed in Vietnam to Cambodia and Lao PDR. This has already been successfully piloted with the bank training and management workbooks, and will be further expanded with the flexible learning program, business associations strengthening, and BDS development. It will also collaborate closely with ongoing and planned World Bank Group activities, such as the Rural Development Fund project in Vietnam and the development of private contractors and infrastructure providers. The new phase will also continue the emphasis on improved performance monitoring and impact measurement, building on the procedures established in Phase I.
IFC has developed considerable expertise in assisting the development of SMEs through the establishment of project development facilities (the PDFs). In addition to MPDF, IFC currently operates five PDFs: (i) the Africa Project Development Facility (APDF); (ii) the South Pacific Project Facility (SPPF); (iii) the Southeast Europe Enterprise Development (SEED); (iv) the China Project Development Facility (CPDF); and (v) the South Asia Enterprise Development Facility (SEDF). IFC is also a main shareholder of the African Management Services Company (AMSCO), and is the executing agency of AMSCO’s technical assistance and training program.
As with other PDFs, IFC has taken the lead in designing, funding and managing MPDF. IFC also provides general administrative and operational guidance (through the SME Department), technical and environmental inputs (through the Industry and Specialist Departments), resource management support (through the Human Resource Department) and back-office accounting support (through the IFC Controllers and World Bank Accounting Departments). In addition, the SME Department, based in Washington, provides the link between MPDF and IFC and coordinates MPDF’s operations with other similar development initiatives. This relationship gives MPDF access to IFC’s unique expertise in small business development and ensures cross-fertilization between the facilities. MPDF benefits in particular from access to international partners through the Pilots and Partnerships program of the SME Department, and from exchanges of information and experiences with other PDFs.
Development Impact
The rationale for the proposed extension of MPDF is that all the three countries of the Mekong Region (Vietnam, Cambodia and Lao PDR) are (i) low-income economies in transition from central planning to a market-oriented economy; (ii) have relatively weak and underdeveloped private sectors; and (iii) need rapid private sector and SME development to achieve sustainable growth and poverty reduction in the face of rapidly growing workforces and high unemployment. Sustainable private sector development in these three countries requires assistance at all levels, that of the individual enterprises, their supporting institutions, and the policy and regulatory environment.
With its good track record, comparative advantage in promoting private sector and SME development, through its multi-donor character, affiliation with the World Bank Group, and practical enterprise-level experience, MPDF can play/continue to play a very useful role in developing the private sector and SMEs in Vietnam, Cambodia and Lao PDR. It can play a particular useful role at the "meso" level, i.e., capacity building of key local institutions that have broad impact on private sector development, which includes financial intermediaries that finance private investment and trade, consulting firms and business associations that provide services to large numbers of SMEs, and larger private firms with linkages to small enterprises. Another key role for MPDF is to feed back information from its enterprise-level experience, and the understanding of local market conditions and constraints gained through its operations, into macro-level policy discussions and assistance programs of other donors and government agencies. |
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| Environmental and social issues - Category C |
This is a Category C project, according to IFC’s Procedure for Environmental and Social Review of Projects, because it is likely to have minimal or no adverse environmental impacts.
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| To contact the project company, please write to: |
Mario Fishel, General Manager, MPDF
E-mail: mfishel@ifc.org and/or
Todd Davenport, Manager
E-mail: tdavenport@ifc.org |
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