Chengdu, China, May 28, 2002--
World Bank Group President James D. Wolfensohn launched the China Project Development Facility (CPDF)—a new International Finance Corporation (IFC)-led multi-donor initiative—to support private sector development in China’s Sichuan province. IFC is the private sector lending arm of the World Bank Group.
As part of his current visit to China, Mr. Wolfensohn launched CPDF, which is managed by IFC and funded by IFC as well as the Governments of Australia, Switzerland, and the United Kingdom. Its key objective is to fight poverty by creating private sector jobs and strengthening local small businesses and support institutions. Mr. Wolfensohn held discussions with Chinese government officials and Chengdu-based SME (small and medium enterprise) owners representing key sectors, such as, light manufacturing, pharmaceuticals, and consulting services.
“Small and medium enterprises are an essential part of China’s domestic private sector and their development is a priority, both for the government’s economic reforms program and the World Bank Group,” Mr. Wolfensohn said. “CPDF has a comprehensive and integrated approach to some of China’s most important economic challenges, including, the lagging development in Western China, a relative lack of commercially-oriented financial institutions that lend to private companies, and a struggling SME sector.”
CPDF is planning several efforts to support SMEs in Sichuan Province where incomes lag behind those in the more prosperous coastal provinces. While they are crucial to the local economy, Sichuan’s SMEs are characterized by a high degree of informality, opaque financial reporting, inappropriate ownership and management structures, and weak corporate governance mechanisms. Such practices limit their ability to attract outside investments for further growth. They are further hampered by the frequent denial of credit by banks, the high costs of registration, enforcement of debt security, and interest rate controls.
CPDF is expected to focus on three broad areas
:
Access to Finance
: Technical assistance/capacity building for Sichuan banks; preparation of SME risk-sharing finance initiative; direct assistance to domestic SMEs to strengthen and restructure their operations; and providing access to new capital to better meet challenges and opportunities emerging from China’s WTO membership.
Capacity Building and Sustainable Development Initiatives:
Strengthening local consulting companies through innovative ‘franchising’ and technical support projects; designing and supporting management education and training initiatives; and corporate governance and environmental management programs.
Business Enabling Environment
: Collaborative program with the World Bank, UK Department for International Development, and government agencies; providing support to implement reforms in regulation, legislation, and other key policy areas; administrative cost surveys; and support for private sector business associations.
CPDF joins a family now totaling seven regional IFC-led SME support initiatives, which include the Africa Project Development Facility, the A African Management Services Co., the Mekong Project Development Facility, the South Asia Enterprise Development Facility, Southeast Europe Enterprise Development, and the South Pacific Project Facility. While these field-based vehicles do not provide investment capital, they fill a critical need through technical assistance and capacity building in the SME sector, a key source of job creation and sustainable economic growth in the developing world. Collectively, the seven IFC-managed facilities now have approximately 330 staff with a total annual budget of about $31 million.
Tthe feasibility study assessing the need for establishing CPDF was funded by the Dutch Government.
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 through the close of the last fiscal year on June 30, 2001, IFC 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.
To date, total IFC financing in China amounts to $1.2 billion, of which $127 million was spent on seven projects in Sichuan province.
