WASHINGTON, D.C., Sept. 15 -- The International Finance Corporation (IFC) approved a record US$2.1 billion in financing for 185 private sector projects in 54 developing countries in its fiscal year ended June 30, 1993. According to IFC's annual report for fiscal 1993 (FY93), released today, this represents a 20 percent increase over the amount of financing approved in the previous fiscal year. IFC's growth in FY93 was led by a dramatic rise in IFC's financing approvals for infrastructure projects. IFC is the private sector arm of the World Bank Group and the largest multilateral source of financing for private sector projects in developing countries. "The strong growth of IFC's investments reflects the vigor of private enterprise in much of the developing world," said Sir William Ryrie, IFC's Executive Vice President. "The demand for IFC finance and services now considerably exceeds the Corporation's ability to supply, as more governments in emerging markets look to the private sector to drive economic growth
and adopt policies that allow market forces to work." Equity and quasi-equity investments, at US$519 million, represented 24 percent of the financing IFC approved. The total cost of the 185 projects approved in FY93 will be about US$17 billion. For every $1 that IFC invested for its own account, it will mobilize over $7 from other financial sources. IFC's loan syndications program -- its main form of direct mobilization -- had another record year, with US$1.8 billion in approvals. IFC's net income declined to US$142 million, from US$180 million in FY92. Lower short-term interest rates reduced the returns on the liquid asset portfolio to US$133 million from US$156 million in FY92. War and economic and political uncertainty in the former Yugoslavia and some countries in Africa, and a slower than anticipated rebound in Turkey's tourism industry, lowered the income from the loan portfolio to US$320 million, compared with US$343 million in FY92.
However, IFC's equity portfolio continued to perform strongly, generating gross income of US$155 million. Capital gains of US$117 million were realized from sales of mature investments, while dividends reached US$38 million. To fund its lending program, IFC raised US$1.3 billion through issues of bonds in the international capital markets, almost double the amount raised in 1992. Infrastructure During FY93 IFC intensified its focus on the infrastructure sector, supporting a worldwide trend to allow efficient, private sector firms to provide power generation, telecommunications, transportation, and environmental services. Throughout the developing world, the provision of infrastructure services is critical to economic and social progress. To meet this need, IFC increased its investment approvals for its own account in infrastructure projects to US$379 million, 65 percent more than in FY92 and about half the Corporation's total investment in this sector in the previous 36 years. Latin America secured more than
two-thirds of IFC's investment approvals for infrastructure projects in FY93 followed by Asia. IFC estimates that the demand for financing for private infrastructure projects in developing countries in the 1990s will be around US$150 billion annually. The mobilization of private savings for investment in infrastructure will be a critical factor over the next decade and will continue to be a priority for IFC. Most infrastructure projects involve high capital costs and long pay-backs, requiring long-term financing. For infrastructure projects with total estimated costs of US$3.6 billion, IFC approved syndicated loans of US$357 million in FY93. For every US$1 IFC approved for its own account it will mobilize US$9 from other investors. IFC also helped establish the Scudder Latin American Trust for Independent Power to provide equity capital for private sector power projects in Latin America. Former Soviet Union IFC approved its first investments in Russia in FY93, shortly after the country became a member in Apri
l 1993: two oil and gas projects and a credit line to the International Moscow Bank for on-lending to small and medium-sized private Russian businesses. IFC continued its technical assistance program in support of privatization in Russia, with funding support from the U.S. Agency for International Development and the U.K. Know-How Fund. The auctions of small enterprises launched by IFC in October 1992 in Nizhny Novgorod served as a model for the rest of Russia. IFC initiated similar programs in Belarus and Ukraine. It assisted in the auctions of large and medium-sized enterprises, and the privatization of the trucking industry in three regions in Russia.
Belarus, Kyrgyzstan and Lithuania also joined IFC in FY93. Estonia joined in the beginning of FY94. Capital Markets Investments and Innovations Activities aimed at developing capital markets continued to be a priority for IFC. A record level of financing for capital markets activities, US$385 million for 57 projects, was approved in FY93, including the extension of credit lines to financial intermediaries for on-lending to small and medium-sized businesses, the creation or expansion of financial institutions and the underwriting of corporate security issues. IFC also created new investment funds -- the Africa Fund and the Emerging Markets Gold Fund, an equity fund investing in gold mining companies in developing countries. Expanding on its successful Emerging Markets Data Base, which measures the performance of 650 stocks in 20 developing stock markets, the Corporation launched the IFC Investable Indexes. This innovative product takes into account the extent to which national laws, regulations, or company sta
tutes prohibit or limit foreign ownership. The Indexes provide global investors with a definitive benchmark of stock performance in 18 emerging markets, and are a logical progression of IFC's efforts to encourage foreign portfolio investment in emerging markets. Risk management services offered by IFC during the year helped to provide private companies in developing countries with the tools to manage the financial risks associated with movements in exchange rates, interest rates, and commodity prices. Because private sector companies in developing countries often lack direct access to markets for risk-management products, IFC has been working over the past four years to bridge this gap. In FY93, IFC approved eight projects incorporating risk-management techniques for companies in Asia, Europe, and Latin America, enabling client companies to hedge financial risks of up to US$539 million in liabilities. Advisory Services Demand for IFC's advisory services continued to expand in FY93, particularly in connection
with privatization and corporate restructuring. IFC signed 50 new advisory mandates, 15 of which related to privatization. These mandates were in all regions where IFC operates, although concentrated in Europe and Latin America. In addition, IFC approved financing totaling US$144 million for seven projects involving privatization.
Environmental Activities During FY93, IFC initiated a program to improve the environmental performance of the projects it invests in, strengthening the Corporation's internal environmental review procedure. The improved procedure will ensure greater transparency on environmental issues and increases the level of public consultation and participation in IFC projects. IFC's promotion of investment in the environmental goods and services sector also expanded significantly in FY93. Regional Overview In Sub-Saharan Africa, where the investment climate remains difficult, IFC approved financing of US$193 million for 45 projects, including investments through the Africa Enterprise Fund in small and medium-sized enterprises. The Corporation continued to give priority to small and medium-sized companies and to capital market development. It also helped launch two investment funds, the Mauritius Fund and the Africa Fund, which will invest exclusively in African companies. Financing of US$521 million was approved for 39
projects in nine countries in Asia, where economic growth is outpacing the rest of the world. A resident mission was opened in Beijing and a large number of prospective investments and activities are being considered including support for joint ventures between foreign investors and Chinese entrepreneurs and efforts to help Chinese enterprises broaden their ownership. IFC approved US$35.7 million in financing for two cement companies and US$7.5 million in equity financing for a commercial bank in China. IFC provided the Government of Viet Nam with technical assistance in laying the groundwork for the launch of leasing companies. In the Philippines, IFC approved US$148 million for two power projects. The largest number of investment projects were approved in India, in a variety of sectors including textiles, manufacturing, oil and leasing. In Central Asia, the Middle East and North Africa, IFC approved financing of US$270 million for 28 projects in seven countries. While the newly independent Central Asian Rep
ublics are experiencing a difficult transition, strong economic growth was recorded in a number of Middle Eastern and North African countries. For an Egyptian bank, IFC approved one of its largest equity investments in a financial institutionóUS$16.5 million. In Pakistan IFC approved financing of US$38.9 million for a cement company, including a syndicated loan of US$10 million. In Lebanon it approved a US$45 million syndicated credit line to five commercial banks. IFC provided Kyrgyzstan with technical assistance on the development of capital markets.
In Europe, including the European countries of the former Soviet Union, IFC has worked to accelerate the transition to market economies. IFC approved US$419 million in financing for 20 projects in four countries óa 66 percent increase over FY92. IFC opened a resident mission in Moscow, and a representative office in Frankfurt, which will strengthen ties with German companies interested in investing in Central and Eastern Europe. One of IFC's largest investments to date in the region (a US$371 million loan, of which US$247 million will be syndicated) went to a motor vehicle plant in the Czech Republic. IFC helped establish the New Europe East Investment Fund and the Private Equity FundóEurope. In Latin America and the Caribbean, where the overall investment climate continued to improve, IFC approved financing of US$710 million for 52 projects in 16 countries. Resident missions were opened in Buenos Aires and Mexico City. IFC continues to give priority to helping Latin American companies to gain access to the i
nternational capital markets by underwriting issues of securities and organizing syndications. A total of US$630 million in loan syndications and underwriting was approved. IFC approved financing for infrastructure of US$271 million in the region -- four telecommunications projects, five power projects, two railroads, and a port facility.
