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IFC Operations & Strategy in Iraq
Ziad A. Badr
Iraq Country Manager
Feb 2, 2014
Agenda
• Introduction to IFC
• IFC Activities in Iraq
Investments
Advisory Services
• Overall IFC Strategic Priorities & Focus areas
• Challenges Facing International Investors in Iraq
2
3
Multilateral
Investment Guarantee Agency
1988
Provides political
risk insurance /
guarantees
against losses
from non-
commercial risks
to facilitate FDI in
developing
countries
International Development Association
1960
Provides
concessional
loans/guarantees
to governments of
the poorest
countries. Total
credits outstanding
in 2011 were c.
$125bn
International Bank for Reconstruction and Development
1945
Lends to
governments of
middle income
developing
countries. Total
loans outstanding in
2011 were c.
US$132bn
International
Centre for Settlement of Investment Disputes
1966
Settles
investment
disputes
between foreign
investors and
host countries
International Finance Corporation
1956
Provides loans,
equity, and Advisory
services to stimulate
private sector
investment in
developing
countries. Total
committed
investments in 2011
were c. US$31bn
The World Bank Group
IFC is a member of the World Bank Group responsible for promoting private sector development
in developing countries and frontier markets
• IFC is the only global multilateral institution focused exclusively on the
private sector — the global leader in private sector development finance
• Largest investor in emerging markets and developing countries
• Facilitate transfer of knowledge, expertise and introduce best industry
practice
• We invest, advise, mobilize capital, and manage assets — providing solutions
for an inclusive and sustainable world
• We create opportunity for people — improving lives in developing countries
Who We Are, What We Do
5
Owned by 181 countries
Highly decentralized with more than 100 offices worldwide in 86 countries
Dakar
Nairobi
Johannesburg
Cairo
IFC HQ
IFC Hub Offices
IFC Regional Operations Center
IFC Country Offices
World Bank Group Hub Office
Washington
Mexico City
Bogota
Buenos Aires
São Paulo
Santo Domingo
Moscow
Hong Kong
New Dehli
Almaty
Istanbul
Singapore
IFC’s Global Reach
IFC Offers Clients
A Unique Role • Emphasis on development impact World Bank affiliation
• Participates only in private sector ventures.
• Market discipline: has market pricing policies
• Long-term partnerships; countercyclical role
• Risk-taking and risk management. Shares same risks as other investors. Takes Equity
risk.
• Does not accept government guarantees.
• Is profit oriented but balanced with development impact
IFC presence reassures Foreign and local investors, and
Governments. It is a Catalyst for other investors and lenders
IFC’s Key Roles
Financier
World’s largest multilateral provider of financing for private enterprises
with over US$45 billion in outstanding investment commitments
Lender:
provides loans
Shareholder:
provides equity
Guarantor:
provides guarantees
Advisor
IFC also provides technical assistance and advisory services to governments and private sector businesses
in:
Access to
Finance
Investment
Climate
Sustainable
Business
PPP
& Infra advice Asset manager
through IFC Asset
Management
Company (AMC)
IFC Activities in Iraq
• First IFC mission after the end of the War in July
2003.
• Active involvement in 2003 and 2004, then slow
down due to security and other constraints.
• IFC representative stationed in Baghdad in Sept
2011.
IFC’s committed portfolio in Iraq currently stands at US$700 million in 6 companies/projects:
• 10% equity stake in Credit Bank of Iraq in partnership with National Bank of Kuwait
• US$29 million loan for the first 5-star Greenfield hotel in Erbil – Erbil Rotana Hotel.
• US$135 million loan to Gulftainer to support their investments in ports
• US$400 million IFC-led facility for Zain Iraq
• US$135 million loan to Lafarge for the Bazian and Karbala cement plants
• US$25 Million equity investment in Commercial Bank of Iraq (CBIQ)
Target investments in the range of US$ 800 m over the next 3 years
PROGRAM TO DATE
Building long term relationships in Iraq is key.
IFC Investments in Iraq
Centers around the following objectives:
• helping diversify the economy away from the oil sector
and the creation of jobs in its non-oil economy.
• Strengthening and building institutions.
• Developing a favorable business and regulatory
environment.
• Strengthening private sector led growth in non-oil
sectors.
IFC Can Play a key role in Iraq’s Development
Overall IFC Strategy Framework in Iraq
The Implementation of the strategy is guided by 4 key
principles:
• Identifying and supporting local investors who have the
potential to grow
• Support South-South investments (e.g., investors from
GCC, Lebanon, Jordan, and Turkey).
• Mobilization of additional funding from DFIs and other
financial institutions particularly in Infrastructure
development
• collaboration with the World Bank & other Donors
IFC Can Play a key role in Iraq’s Development
Implementation of the Strategy
Promoting sustainable and private sector led
infrastructure development
• Target investments in the range of US$ 800 million over
the next 3 years across various sectors.
• IFC focus will be to promote private investments in
Power, Gas, Agriculture, banking, and Transportation.
• Active PPP transaction Advisory can play a key role
Advisory Services would be supported by a $28 million
Multidonor Trust Fund
Overall IFC Strategy Framework, cont’d
STRATEGIC PILLARS
% of firms identifying constraint as "major" or "very severe"
Investment Strategy in Brief Challenges Facing Investors in Iraq
0 10 20 30 40 50 60 70 80
Telecommunications
Labor Regulations (Like Social Insurance)
Customs and Trade Regulations
Courts
Inadequately educated workforce
Water
Tax Administration
Regulatory Uncertainty
Business Licensing and Operating Permits
Transportation
Tax Rates
theft,disorder and crimes
Access to Land
Practices of competitors in the informal …
Access to Financing (Ex: Collateral)
Corruption
Political instability
Electricity
Leading Constraints to Firms Operating In Iraq
Source: World Bank, Enterprise Survey, 2011
Challenges Facing International Investors in Iraq
Increased government spending as % of GDP
Healthy economic performance, stable inflation
Rising FDI flows
Strong growth prospects driven by the need for greenfield
infrastructure and essential services
Government keen for private investment in infrastructure
Substantial upside potential provided proper risk management
Poor legal and regulatory framework
Lack of transparency
Unsophisticated and underdeveloped financial and labor market
infrastructure
Unreliable mechanism for dispute resolution and allegation of
corruption
Delays in granting project approvals and cumbersome bureaucracy
Challenges facing Iraq also represent opportunities
when rewards are viewed to be worthwhile & risks can be adequately managed
Appraisal – Presence of experienced local consultants on
the ground in Iraq provides comfort
Market Information – Ability to get sufficient and close
to accurate market and sector information
Security Cost and restrictions
Lack of knowledge in international practice from local
investors
•Concept notes & Feasibility studies
•Financial models
•Audited Account
•Credit Reporting
•Investors due diligence
Investment Strategy in Brief … Cont’d
Challenges Facing International Investors in Iraq
Challenges for Setting a National Investment Fund
• Experienced team
• Clear Strategy, sector focus, rate of return…
• Appraisal
Market Study
Feasibility studies
Financial model
• Investor Due diligence
Thank You!
IFC Web site: www.ifc.org