IFC recent experience in FRY

Roberto Albisetti – Chief of MissionIFC Belgrade

4 February, 2003 – European Movement, Belgrade

Economic Forum

  

 

InternationInternational Finance al Finance CorporationCorporation

InternationInternational Finance al Finance CorporationCorporationWe promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives.

International Bank for Reconstruction and Development, 1945

International Finance Corporation, 1956

International Development Association, 1960

Multilateral Investment Guarantee Agency, 1988

IFC: A Member of theWorld Bank Group

 

IFC: A Member of theWorld Bank Group

 IFC is owned by its 175 member countries, which collectively determine policies.

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World Bank Group Institutional RolesWorld Bank Group Institutional Roles

• IBRD lends to governments of middle-income developing countries.

• IFC finances a wide range of private sector sustainable projects in developing countries.

• IDA provides concessional loans to governments of the poorest developing countries.

• MIGA provides guarantees to foreign investors against noncommercial risk.

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Defining characteristics Defining characteristics

• Participates only in private sector ventures

• Shares same risks as other investors• Invests in equity• Has market pricing policies• Does not accept government

guarantees• Is profit oriented

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Capital Stock Held by our Shareholders175 Member Countries

Capital Stock Held by our Shareholders175 Member Countries

Five largest: Five largest: 45.8%45.8%Other countries: Other countries: 54.2%54.2%

United States24.1%

Japan 6.0%

Germany 5.5%

France 5.1%

United Kingdom 5.1%

Other countries 54.2%

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IFC’s Operating IncomeFY 1998–2002IFC’s Operating IncomeFY 1998–2002

0

100

200

300

400

FY98 FY99 FY00 FY01 FY02

161

249

380

212241

U.S. $millions

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Authorized capitalAuthorized capital:: $2.45 billion $2.45 billion

Total capitalTotal capital:: $6.3 billion $6.3 billion

Capital strengthCapital strength:: IFC’s capital IFC’s capital resources currently stand at 49 resources currently stand at 49 percent of risk-weighted assets, well percent of risk-weighted assets, well above the 30 percent minimum for above the 30 percent minimum for this ratio required by the capital this ratio required by the capital adequacy policy.adequacy policy.

(As of June 30, 2002)

Financial strength

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Investments by SectorInvestments by SectorFY02 Total Commitments: $3.61 billion

Gross investments, including loan syndications and financing for IFC’s own account. Also includes guarantees and risk management products, which are off-

balance-sheet.

Sector Commitments$ millions

Financial 1,236

Transportation & Warehousing 621

Information 310

Construction & Real Estate 289

Nonmetallic Mineral Product Manufacturing

227

Food & Beverages 190

Wholesale & Retail Trade 129

Oil, Gas, Mining, & Chemicals 117

Industrial & Consumer Products 112

Sector Commitments$ millions

Agriculture & Forestry 75

Pulp & Paper 73

Health Care & Education 60

Primary Metals 46

Textiles, Apparel, & Leather

43

Accommodation & Tourism Services

39

Professional, Scientific, & Technical Services

25

Plastics & Rubber 18

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IFC CommitmentsFY02 Total: $3.61 billion

0

1

2

3

4

5

6

1998 1999 2000 2001 2002

U.S

.$ m

illi

ons IFC loan

participations &underwriting

IFC loans andequity

Includes loan guarantees and risk management products for FY99-02

IFC Financing

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IFC in FRY

• FRY’s membership of WB and IFC in May 2001 • IFC opened a field office in September 2001• IFC’s investment portfolio in former Yugoslavia was

among the top country exposures • One of the largest markets in Southern Europe • Substantial interest from foreign strategic investors• FRY is then a priority in IFC’s strategy to support

private sector development• IFC as an early investor aims at increasing

confidence to attract foreign direct investments

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What IFC has achieved so far

• MicroFinanceBank Yugoslavia, equity investment of US$ 1 million equal to 16.6% of share capital

• Raiffeisen Bank Yugoslavia, equity investment of Euro 1 million equal to 10% of share capital

• Fresh&Co (agribusiness) Loan of Euro 7.7 million, signed November 2001, disbursed

• Tigar Rubber Company (tires) Loan of Euro 16 million and equity investment of Euro 4 million (10% of share capital in new JV with Michelin) signed March 2002

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IFC’s role in FRY• Invest in modernization: Serbia has largely under-

utilized industrial infrastructure, mostly state or socially owned, some traditionally trade oriented

• Provide long term capital: during isolation companies have lost market share, are left cash starved, need investments but have no access to international financial markets

• Develop the local financial market: financial intermediation is still very low, interest rates are high

• Attract and provide confidence to foreign investors: in the early phase of transition, the privatization process is relatively slow and foreign investors are still prudent

• Provide technical assistance: skilled workforce is available, but modern managerial resources are limited

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IFC’s strategy in FRY• Help to fill some of the existing gaps by delivering results

on the ground immediately, mobilizing significant resources

• Provide technical assistance to support capacity building (market focus, business plans, accounting discipline)

• Invest in commercially viable companies both private and partially private/to be privatized

• Support privatization and restructuring process• Strong client focus, provide flexible solutions for

modernization investments and working capital needs• Provide comfort to foreign investors through a

demonstration effect• Focus on the financial sector (banks), develop other

financial intermediaries (leasing, funds)• Promote the growth of local entrepreneurship and SMEs

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Actions being taken

• Focus technical assistance on critical segments of the real sector and financial sector, increased attention on infrastructure

• New project developments under way in garment-textiles, agribusiness, mechanical industry, pharmaceuticals, distribution, tourism, banking, insurance, leasing

• Build a broad pipeline of investment opportunities in order to diversify risks

• Intensify cooperation with the Privatization Agency to help increase results on the ground

• Mobilize financial resources to local intermediaries for on-lending to SMEs

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Internal to IFC

Supervision/Evaluation

As Seen by Client

Management Approval

Board Approval

Initial Discussions

Mandate LetterAppraisal

Financing Negotiations

Info. Memo and SyndicationLegal Documentation

Disbursement

Initial Review & Authorization

to Appraise

Project Cycle and Timing

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How to contact us

• Send us a brief outline of your project: description, sponsors, management, market and sales, industrial background, investment requirements, anticipated financial plan

• IFC Belgrade Office, Kneginje Zorke 96 • Tel: (011) 3023760-1; fax:

(011)3023733• Ralbisetti@ifc.org• www.ifc.org