Washington, D.C., June 29, 2001
—The International Finance Corporation announces eight new investments in textiles, tourism, information technology, leasing, and small and medium enterprises—in Sub-Saharan Africa, the Middle East, and Eastern Europe—to support sustainable private sector businesses in the developing world. IFC also provided a restructuring package to a cement company in Vietnam to help it recover from financial difficulties; organized a seminar in Hanoi, Vietnam, on the development of China's private sector, and a workshop in Beijing, China, on corporate governance in Chinese enterprise reform.
The mission of IFC, part of the World Bank Group, is to promote sustainable private sector investment in developing countries as a way 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.
MADAGASCAR—INVESTMENT IN GARMENTS
IFC will provide a loan of up to $2.75 million to Columbia Clothing Company, a newly established trouser manufacturing plant in Madagascar. The loan will enable Columbia Clothing Company to export over four million pairs of trousers and create over 2,000 jobs.
The project is a joint venture between members of the Ismail family, a prominent local business group with interests in manufacturing and agro-industry in Madagascar and Mauritius, and Phoenix Ventures Ltd, a Sri Lankan-based group involved in various manufacturing activities.
IFC’s participation will complete integration by the sponsors of textile operations in Madagascar and Mauritius and provide a “one-stop shop” for major international retailers.
IFC will provide a loan of up to $8.5 million equivalent to Cotona, a fully integrated textile operation in Madagascar and a leader in the region’s textile sector.
Over the past 50 years, the sponsors—Groupe Socota Industries—have built a solid industrial base in Madagascar and Mauritius and are among the largest employers in the region.
IFC’s investment will help Cotona achieve global competitiveness in the international textile market with the aim of developing the “made in Madagascar” label. Responding to demands from its international client base, the company will modernize and replace its obsolete equipment.
NIGERIA—HOTEL FOR BUSINESS TRAVELERS
IFC will provide a $2.5 million loan and quasi-equity investment of up to $1.5 million in the form of preferred shares to construct a new hotel in Port Harcourt, Rivers State, Nigeria. The new $13.1 million 124-room 4-star Novotel will provide reasonably priced hotel rooms for workers, investors, and other business travelers.
The new hotel will alleviate mid-week room shortages in a market where demand is expected to grow as new investments flow into the region. It will also diversify business tourism facilities, contribute to Port Harcourt’s emergence as a business center for the oil industry, and lead to more hotel investment as existing hotel accommodation improves to meet competition and generate demand for services and supplies. The hotel will create approximately 140 direct jobs.
The sponsor is JDI Investment Company Limited, a Nigerian company owned by Messrs. Koye Edu and Gbolahan Balogun through Moorhouse Properties Ltd. The hotel will be managed by the Accor Group, one of the largest hotel networks in the world, which operates approximately 3,200 hotels in over 140 countries under a variety of brand names, including Sofitel, Novotel, Ibis, Thalassa, Motel 6, etc.
RWANDA—INVESTMENT IN APARTMENT HOTEL
IFC will provide a loan of $800,000 to establish Dreamland Towers, a 34-unit apartment hotel in Kigali, Rwanda. The investment represents an important step in the reconstruction of Kigali following years of civil strife and will address the significant shortage of good quality hotel accommodation in Rwanda.
Dreamland Towers will cater to the growing regional and international business community in Rwanda and provide important conference facilities and business services.
The $3.2 million project will be cofinanced with a local development bank and is sponsored by Rwandan businessman Mr. Faustin Harelimana and his family.
SOUTH AFRICA–BRIDGING THE “DIGITAL DIVIDE”
IFC will invest $375,000 in South African company, Freecom (Pty) Ltd, to provide Information Technology (IT) solutions to buyers of personal computers (PCs). Freecom will make affordable IT accessible to lower-and middle-income consumers who make up a large part of the market but are currently excluded on the basis of price or difficulty of use or because their present PCs become rapidly outdated. As technology advances, this sector is a cause of global concern with the widening of the “digital divide,” the gap between technologically enabled countries and developing country “have nots.”
Freecom will provide PC solutions based on refurbished used computers, which are discarded by businesses because of incompatibility with the latest software. These refurbished PCs will be loaded with user-friendly “smart” software packages that require fewer resources—such as memory and processor speed—than the existing software on the PCs. The packages provide reasonably priced and practical solutions and will be backed by after-sales support and training, not normally available to buyers of used equipment. The target market includes schools, home users, and small businesses.
The project will help to reduce the “digital divide” by making suitable and affordable technology available to large parts of the population that presently lack access to PCs.
VIETNAM—RESTRUCTURING PACKAGE TO CEMENT COMPANY
IFC, Nissho Iwai Corporation, and the Export-Import Bank of Thailand will provide a restructuring package to Morning Star Cement Limited (MSC), Vietnam, to help the company better withstand financial difficulties and other problems in the cement industry. The ability to undertake the restructuring of such a major joint venture enterprise is a credit to the cooperation of the government of Vietnam and will have an important demonstration effect for other private sector projects, many of which have strong business prospects but are constrained by high leverage and liquidity problems.
The restructuring package involves a rescheduling of $142 million outstanding of the senior loans provided to the company to construct a cement project in 1995. This is Vietnam’s largest private sector restructuring and includes the conversion of $67 million of shareholder loans to equity, expansion of MSC’s cement capacity to 1.9 million tons per year, and improvements to its distribution system to make it more competitive.
MSC’s two joint venture partners are Holcim Ltd (formerly Holderbank Financière Glaris Ltd) of Switzerland, one of the largest and most experienced cement manufacturers in the world; and Ha Tien I Cement Company, a wholly owned subsidiary of the Vietnam National Cement Corporation. MSC was the largest private sector project undertaken in Vietnam in 1995 involving limited-recourse financing and no government guarantees. Its successful restructuring in 2001 is evidence of the confidence that the lenders and joint venture partners have in its long-term viability.
ALBANIA—SUPPORT TO SMES
IFC will extend a partial guarantee facility to the American Bank of Albania (ABA) to expand its portfolio of small and medium enterprises (SMEs). This is the first financial product of its kind in Albania and will pave the way for other new and innovative financial interventions. The project supports the dynamic SME sector in a challenging environment and at a difficult moment in the region. It is in line with IFC’s strategy to strengthen the SME sector through strong financial intermediaries and will encourage further investment in both the country and the region as a whole.
Under the facility, IFC will guarantee 50 percent of each loan approved by ABA to finance eligible subprojects within IFC’s maximum aggregate exposure of up to $2.5 million. The subprojects will be identified by ABA in close collaboration with the Southeast Europe Enterprise Development Facility, a development facility established by the World Bank Group and international donors to operate in Albania, Bosnia and Herzegovina, FYR Macedonia, and Kosovo.
ABA was founded in 1998 by the Albanian-American Enterprise Fund, a non-profit organization that provides medium-term financing to Albanian legal entities. ABA introduced the first Internet banking service in Albania and has an agreement with Unioni Financiar Tirane (UFT), representative of Western Union, to distribute ABA's Certificate of Deposit through UFT’s branch network of 107 money transfer agencies in Albania and Kosovo.
FYR MACEDONIA—SUPPORT TO SMES
IFC will extend a Euro 5 million credit line to Komercijalna Banka A.D., one of the leading banks in FYR Macedonia, which will help finance its dynamic SME sector. The project will support the country’s efforts to promote a positive economic environment, attract more foreign investment, create employment, strengthen the private sector, and expand economic opportunities for SMEs.
Komercijalna Banka, one of FYR Macedonia's leading banks, was founded in 1955 as the first commercial bank in the country and has operated as a joint stock company since January 1990. The bank successfully provides commercial as well as retail banking services in Macedonia through its extensive branch network.
IFC has been playing an active role in FYR Macedonia since the country became a member in 1993 and has approved financing of approximately $65 million for nine projects with a total cost of $213 million.
IFC will lend $6 million to ORIX Leasing Egypt, SAE (OLE), a Cairo-based leasing company that specializes in providing medium-term finance to SMEs.
OLE will use IFC’s investment to expand its lending to SMEs, thereby supporting their growth and boosting job creation. The investment is in line with IFC's global strategy of strengthening domestic financial institutions and increasing the access to medium and long-term finance by local SMEs.
OLE is an unlisted joint stock company established in 1997 by the National Bank of Egypt, Commercial International Investment Company, ORIX Corporation-Japan, ORIX Leasing Pakistan, Ltd., and IFC.
JOINT WB/IFC WORKSHOP IN CHINA ON CORPORATE GOVERNANCE IN REFORM OF STATE-OWNED ENTERPRISES
The joint IFC─World Bank Department for East Asia and the Pacific organized a workshop in Beijing on corporate governance in Chinese enterprise reform. The workshop focused on a World Bank Group study on corporate governance issues in China, mainly in the context of ownership transformation of state-owned enterprises. The workshop is part of a broader WB/IFC initiative to provide technical assistance in the area of corporate governance including training for directors of independent companies.
The study is based on a survey of corporate governance practices in more than 250 Chinese companies listed on the Shanghai Stock Exchange as well as a smaller sample of nonlisted companies. Experience in China and elsewhere indicates that ownership transformation does not automatically translate into tangible efficiency gains unless a sound institutional framework and effective corporate governance are in place. For this reason, the Chinese leadership has identified corporate governance as a core issue in the current stage of economic reform.
The workshop was attended by representatives of the Chinese Securities and Regulatory Commission, Shanghai Stock Exchange, the State Council Office for Restructuring the Economic System, the State Economic and Trade Commission, the Chinese Center for Corporate Governance, the Development Research Center of the Chinese Government, the Australian Institute of Company Directors, private consulting firms and financial institutions, and Chinese experts on corporate governance.
IFC SEMINAR IN VIETNAM ON DEVELOPMENT OF
CHINA’S PRIVATE SECTOR
IFC and the Central Institute for Economic Management (CIEM) of the government of Vietnam held a seminar in Hanoi on the development of the private sector in China. The seminar was organized in response to strong Vietnamese interest in China’s experience with market-oriented reforms and presented the results of IFC’s recent study, China’s Emerging Private Enterprises.
The seminar was attended by representatives of the Central Economic Committee of Vietnam, the State Bank of Vietnam, the Vietnam Chamber of Commerce and Industry, CIEM, the Japanese government, the United Nations Industrial Development Organization, the Asian Development Bank, and several news agencies. Discussions centered on issues relating todevelopment of the private sector including investor confidence, judicial and legal systems, public perception of the private sector, and guarantee funds for small and medium enterprises.
The study China’s Emerging Private Enterprises (see
), which was supported by trust fund financing from the government of Australia, was recently translated into Vietnamese.