WASHINGTON, D.C., Sep. 27 -- The International Finance Corporation (IFC) approved a record US$2.9 billion in financing for 213 projects in its fiscal year ended June 30, 1995. The results represent the fourth consecutive year of double-digit annual increases in the amount of financing approved by the private sector affiliate of the World Bank Group. According to IFC's annual report for fiscal 1995 (FY95), the Corporation also established a new benchmark in its resource mobilization activities: IFC's syndications with commercial banks reached a record total of US$2.6 billion, a 42 percent increase over FY 94. For every US$1 in financing approved by IFC for its own account in fiscal 1995, other investors and lenders will provide US$5.73. Reflecting the strong catalytic role played by the Corporation's own financing, the total cost of the projects approved in FY 95 came to US$19.5 billion. Net income, at US$188 million, was in line with historical levels. "The developing world's private sectors continue to show
tremendous strength and energy. This is what is driving IFC's strong expansion and continued innovation. 1995 was a banner year for the Corporation, especially because we were able to play such a strong catalytic role despite the disruptions caused by the Mexican peso crisis," said Mr. Jannik Lindbaek, IFC's Executive Vice President. IFC invested and provided technical assistance in more countries than ever before -- a record 67 developing countries during FY 95. The Corporation made its first investments in the Kyrgyz Republic, Latvia, Lithuania, South Africa and Uzbekistan, while Armenia, Georgia, Moldova, and Tajikistan became members of IFC during the year. The accompanying table provides a breakdown of IFC's approvals by sector and by region for the year.
New Initiatives
The report highlights a number of IFC initiatives undertaken to maximize the Corporation's development impact in its client countries: Financing Innovations -- IFC continued its pioneering role in creating new capital market products to raise financing for its clients in developing countries. During 1995, IFC signed its first syndication of a structured U.S. commercial paper facility, a US$150 million issue for a Thai finance company, Finance One. The facility will provide funds to Finance One for on-lending to medium-sized Thai companies. This commitment is part of a larger IFC effort to develop structured commercial paper programs that will enable companies in developing countries to gain access to the U.S. commercial paper market. In Mexico, IFC introduced a unique financing mechanism -- an asset-backed certificate -- to mobilize a new source of long-term investment capital for Apasco, S.A. de C.V., a cement producer. This instrument will help extend the maturity of the financing available to Mexican compa
nies and will enable U.S. institutional investors like insurance companies and pension funds to participate in IFC syndications. Four U.S. insurance companies purchased the certificates, a major vote of confidence in Mexico. IFC expects to use this instrument for other projects in the coming year. As part of its effort to mobilize investments from institutions that have not previously invested in the developing world, IFC securitized US$400 million of its own loans to privately owned companies in eleven emerging markets in Asia and Latin America. This represented the first issue of asset-backed securities by a multilateral institution and the first publicly offered asset-backed securities collateralized by loans to companies in emerging markets. The securities were placed privately with European institutional investors, including insurance companies, banks and pension funds. The securitization initiative will also enable IFC to invest more resources in developing countries by freeing up capital on its balance
sheet.
Infrastructure
More than 25 percent of the new projects approved during FY 95 were in the infrastructure sector, including projects in power, telecommunications, transport and water supply. Highlights included a US$5 million investment in Viet Nam's first private port - a project that will improve the distribution of goods, including agricultural inputs, and help stimulate growth in the Thi Vai River region. IFC invested in the first concession-based privatization in Uruguay, for the airport in Punta del Este, a major South American tourist resort. The project will bring a number of improvements, including an expansion of the main terminal, a new runway, and a new control tower, that will enhance safety as well as the airport's ability to accommodate growing tourist traffic.
Privatization
Through both new investments and its advisory activities, IFC continued to support the growing momentum toward privatization in its member countries. IFC expanded the successful privatization model for small shops and agricultural land that it developed in Russia to cities and rural areas throughout Ukraine and Belarus. Its investments in newly privatized enterprises included a leather tannery in Tanzania, a bank in Pakistan, and a telecommunications company in Latvia. To share the lessons of its extensive privatization experience, IFC released a study entitled Privatization: Principles and Practice, which highlights some keys to the successful design and implementation of privatization programs. Seventy IFC advisory assignments and 86 IFC post-privatization investments in 54 developing countries are examined in the study.
Democratization in Haiti
One of IFC's most important advisory projects was launched in Haiti, where IFC has been retained by the government to evaluate and help transfer to private ownership seven state-owned enterprises involved in major sectors of the Haitian economy, including power, telecommunications, and banking. The program is designed to encourage the members of formerly disadvantaged groups as well as foreign investors to participate in Haiti's efforts to rebuild and modernize its economy. South Africa -- IFC opened for business in South Africa this year and shortly thereafter made its first three investments there, consistent with its strategy of encouraging economic opportunity among formerly disadvantaged groups. The three financial sector projects included the creation of the world's first fund to invest exclusively in small and medium-sized franchise operations.
Stock Markets in Russia
In response to a request from the government, IFC helped devise the concept, structure and management arrangements for and invested in the Russia Registry Company, the country's first share registry joint-venture. The company will help remedy the difficulties encountered in recording the ownership rights of shareholders in Russia, at the same time helping to promote the development of local stock markets and strengthen shareholder rights.
Tapping Local Savings
The Mexican peso crisis underscored the importance of domestic savings as the key source for financing the investments necessary for sustainable economic growth. IFC continued to emphasize the development of local capital markets as a vital component of mobilizing domestic savings and channeling them into productive investments. IFC promoted the development of local capital markets in FY 95 through investments as well as extensive technical assistance to member countries. To build the financial infrastructure essential to effective capital markets, IFC approved loans and equity investments for commercial and investment banks, leasing companies, discount houses, insurance companies, venture capital funds, and risk rating agencies. IFC invested in P.T. Citimas Capital Indonesia, the country's first specialized securitization and credit enhancement institution. IFC's investment in the Inter-Arab Rating Company will help establish domestic credit rating agencies in the Middle East and North Africa. In Argentina,
IFC help establish the Tower Fund L.P., which will help finance expansion and modernization programs by medium-sized enterprises. Capital markets advisory activities included drafting securities markets laws and regulations (China, Viet Nam, Lithuania); shaping the regulatory environment for new types of financial institutions (Pakistan); establishing supervisory and enforcement entities and mechanisms for securities markets (Romania); and creating or developing stock exchanges (Venezuela, Malawi, Kazakhstan).
Regional Overview
In sub-Saharan Africa, IFC approved financing of US$318 million for 51 projects in 21 countries during FY 95. The number of projects approved continues to reflect IFC's commitment to the region: of the 213 projects approved worldwide in 1995, 24 percent are in sub-Saharan Africa. Sixty percent of IFC's projects in the region were financed through the Africa Enterprise Fund, reflecting the Corporation's priority on strengthening small and medium-sized enterprises in the region. In Asia, IFC approved financing of US$691 million for its own account and mobilized an additional US$752 million through its loan syndications program for 45 projects in ten countries. IFC focused on capital markets, infrastructure, and general manufacturing and adjusted its country and sector mix to address the needs of the region's most recently emerging economies. The Corporation's priorities in FY95 included acting as a catalyst to local and foreign resources, fostering international investments, and shifting its focus to support a
large number of small and medium-sized enterprises. IFC is also promoting intra-regional investments between more and less developed Asian countries, by facilitating access to capital and by providing expertise in assisting companies to understand the dynamics of new business environments. IFC approved 34 projects in nine countries in Central Asia, the Middle East and North Africa, for a total of US$387 million in financing for its own account. Reflecting its emphasis on mobilizing additional resources to private enterprises in the region, IFC approved US$227 million in loan syndications. IFC also worked to promote small businesses and the development of local capital markets, particularly through the creation of new financial instruments. In addition, IFC assisted in opening up infrastructure projects to private participation, as several countries in the region have adopted new incentive frameworks to encourage private investment in infrastructure.
In Europe, IFC approved financing of US$403 million for its own account for 26 projects in 10 countries, as well as 2 projects with a regional focus. IFC welcomed three new members from Europe during 1995 -- Armenia, Georgia and Moldova -- bringing to 20 the number of member countries eligible for IFC investments. IFC's broad strategy in Europe was to assist with the transition to successful market economies through a broad range of instruments. Because local entrepreneurs and enterprise managers often lack the capital and know-how needed in the post-reform marketplace, technical assistance and advisory services have become critical components of IFC's developmental contribution, particularly for countries in the early stages of transition.
Fallout from the Mexican peso crisis contributed to tightened access to international capital markets for firms in Latin America and the Caribbean. IFC responded by developing new instruments for international funds mobilization and working to promote domestic savings. IFC also supported medium-sized companies, which are generally unable to access the international capital markets, through direct investments and through capital markets activities like credit lines and venture capital funds. Overall, the Corporation approved investments in 53 projects in 17 countries in the region, for a total of more than US$1 billion in financing for its own account, in addition to more than US$1.2 billion in loan syndications.
