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IFC for 10% Increase in Financing in Developing Countries in FY-1999.

The International Finance Corporation increased investments by 10 per cent in the 1999-2000 fiscal year and shifted more financing to the world's most challenging markets, such as Sub-Saharan Africa where investments tripled in the past year, according to the IFC annual report released recently.

IFC, the private sector investment arm of the World Bank Group, focuses increasingly on investments that create a foundation for successful private enterprises. Recognizing the key importance of the financial sector and infrastructure to local entrepreneurs in developing countries, IFC placed almost 70 per cent of its new investments in those two areas.

"These are the Sectors where we can do most to build up business in the developing world. Our investments, as well as the signals that we send to the markets and other investors, can have a major impact", said IFC Executive Vice President Peter Woicke.

The IFC annual report for the fiscal year ending June 30, shows 259 new projects in 81 countries. Some 70 per cent of those projects are in the poorest or highest-risk frontier countries. Gross investments rose from $5.2 billion last year to $5.8 billion, a 10 per cent increase, in FY 2000. Total project costs supported by IFC amounted to over $21 billion. Forty-six per cent of the total dollar volume of approved projects was in the financial sector and another 23 per cent in infrastructure. Eighty projects were located in Africa, more than in any other region. Net income, at US$380 million, was the second highest ever.

Alongside its own loan and equity investments, IFC increased its syndicated loan approvals to $2.3 billion in 45 projects, up almost 30 per cent from last fiscal year. Signings of newly syndicated loans with commercial banks and other financial institutions reached an additional $1.5 billion, nearly twice the level registered the previous year. The resurgence indicates renewed interest by banks in lending to developing countries in an environment where access to long-term finance remains highly constrained. On the one hand, the results are evidence of a greater appetite for developing-country exposure. On the other, participant banks remain clearly more comfortable lending in the company of IFC or other multilateral Institutions.

Among the landmark deals that IFC signed last year was the Corporation's first foray into financing information technology. IFC and Softbank Corp., a Japan-based global Internet company, founded Softbank Emerging Markets to incubate and invest in Internet-related businesses in developing countries. That initiative will be followed by more investments in the information communications technology sector in the coming year as part of IFC's priority on investments aimed at bridging the digital divide. IFC agreed to finance $100 million, and syndicate another $300 million, for an oil pipeline in Chad and Cameroon in a World Bank Group project designed to support economic and social development in one of the poorest regions in the world, building in safeguards to protect the environment and local cultures, as well as a first of its kind revenue management plan. A different kind of infrastructure deal was brokered in a matter of days, when IFC provided an emergency loan of $30 million to Electricidad de Caracas to restore power to the poorest neighborhoods hit last December by torrential rains and mudslides in Venezuela.

Although the difficult economic situation in Pakistan constrained IFC's investment activities, IFC concentrated on helping its portfolio companies restructure their debt. IFC also sought to find new ways to help local companies regain access to international markets through the Pakistan Trade Encashment Facility with a project size of US$100 million. The project will provide a facility to guarantee documentary credits originated by selected commercial banks in Pakistan.

Overall, IFC invested most in terms of dollar volume in Latin America, with approvals valued at $2.7 billion, and most in terms of number of projects in Africa. IFC invested for the first time last year in Armenia, Chad, Samoa, Saudi Arabia, and Turkmenistan. IFC made its first investment in Syria, with an investment in Adritec, a company that makes water-efficient irrigation systems.

IFC took the unprecedented step last year of selling its database that tracked stock markets in emerging economies. The emerging Markets Data Base was sold to Standard and Poor's, a move prompted by clients' increasing demand for global benchmarks beyond what IFC could supply.

The mission of IFC is to promote private sector investment in developing countries, which will 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.
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Publication:Economic Review
Date:Oct 1, 2000
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