China-ASEAN Fund on Investment Cooperation

Summary of Proposed Investment

This Summary of Proposed Investment 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. Board dates are estimates only.

Project number

28790

Company name

China-ASEAN Investment Cooperation Fund

Country

East Asia and Pacific Region

(IDA)

Sector

Private Equity/Venture Cap Fund - Regional

Environmental category

Department

Reg Ind, Financial Markets, ASIA

Status

Pending Disbursement

Date SPI disclosed	January 25, 2010
Projected board date	March 10, 2010
Previous Events	Signed: May 19, 2011 Approved: August 5, 2010

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

China-ASEAN Investment Cooperation Fund ("CAF" or "Fund") is an unlisted, closed end private equity fund with a target size of $1 billion. The Export-Import Bank of China (“The Exim Bank”) will be the anchor sponsor for CAF with a seed investment of $300 million.

The target geographies are the ASEAN countries with a mandate to support commercially viable infrastructure projects. The Fund will make investments in equity, equity-linked instruments in both minority and majority. The Fund will primarily focus on the infrastructure sector with investments in transportation facilities, public works, telecommunication network, energy, resources etc. The Fund will also target strategic opportunities based on market needs and work with the respective governments to secure concession for the larger deals. The initial investments will be in cash-flow viable projects/companies.
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Anticipated development impact of the project

Infrastructure investment is among the most important challenges facing the Asian economy, with overall growth, living standards, trade and commerce constrained by bottlenecks in the power, water, transport, sanitation and other related sectors. The public sector’s resources are not sufficient to meet all infrastructure investment requirements in the target countries. A key challenge facing developers of private or public-private partnership infrastructure projects has been the limited availability of equity capital. Given the large funding requirements as well as the longer gestation periods of such projects, long term equity, as opposed to the typical available equity with a short term investment horizon, has remained a scarce commodity for such projects. This project will thus address a key constraint to the increasing involvement of the private sector in the development of infrastructure projects thereby resulting in efficient and reliable provision of infrastructure services. It will also free up public sector capital to be invested in other priority sectors.

IFC's expected development contribution

IFC’s additionality will be in its ability to (i) play an important role as a cornerstone investor; (ii) help achieve its target Fund closing size, which is essential to mitigate concentration risk and to enable successful implementation of the Fund’s investment strategy; (iii) influence the investment mandate of the Fund to adopt a stronger development-focus and to implement Equator Principles and E&S standards; and (iv) participate in establishing market practice terms and governance structures.

Environmental and social issues - Category FI

This is a category FI project under IFC’s environmental and social review procedure. As a start up Fund, the appraisal will focus on: management team selection and experience (especially with large scale projects with complex E&S issues associated with them e.g. large scale resettlement); investment eligibility criteria and target sectors; approach to due diligence process, specifically on the identification, assessment and management of environmental and social risks to ensure compliance with applicable countries laws and regulations, IFC’s Exclusion List, and the Performance Standards and approaches to portfolio management in both majority and minority stakeholder positions.
A Social & Environmental Management System, appropriately scaled and resourced, will be required as a condition of IFC’s investment. This must include assignment of responsibilities and accountabilities for E&S issues, implementing procedures and processes, access to consultants and other technical expertise as needed, training, monitoring and review processes. Additionally, IFC will need to retain the right to (1) review the implementation and performance of the SEMS for the first few sub-projects, prior to the Fund’s investment decision, (2) for all Category A sub-projects, the Fund to provide IFC with prior notification at which point IFC can request further information OR (3) for all Category A sub-projects, IFC retain the right to review all such proposals. The approach to sub-project review (including notification and/or review turnaround times) will be determined during appraisal. The purpose of such notification and review is to ensure that sub-projects' compliance with the applicable requirements can be demonstrated.

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