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The International Finance Corporation.

INTRODUCTION

The International Finance Corporation (IFC), a Member of the World Bank Group, helps to foster economic development by promoting and financing private sector enterprises in its member countries IFC is owned by 170 countries, including Pakistan, and these shareholders collectively determine the Corporation's policies and activities. IFC fulfills its role through three main types of activity:

* financing private sector projects in developing countries.

* helping companies in the developing world mobilize financing in international capital markets, and

* providing advice and technical assistance to businesses and governments.

IFC in Pakistan

IFC's program in Pakistan expanded rapidly over the last four years as the private sector responded to economic liberalization and favourable Government policies. IFC's investment in 1996 consisted of 15 projects for a total of US$404 million covering the financial sector, high value added manufacturing, infrastructure and education.
Fiscal Year No. of Companies IFC Financing Project Cost

1993 8 130 441
1994 15 300 844
1995 22 352 1,112
1996 15 404 1,399


Financial Sector

In line with IFC's strategy to assist the development and transformation of Pakistan's financial sector, IFC directed nearly 40 per cent of its investment approvals in 1996 to capital markets helping to establish several financial institutions that were the first of their kind in the country. To support small and medium-sized enterprises, US$43 million in credit lines with new hedging operations was provided to investment banks in 1996. IFC also provided a major impetus to the development of the Corporate bond market by encouraging the removal of regulatory obstacles and helping establish Pakistan's first rating agency.

Infrastructure

In infrastructure, IFC working in close collaboration with the IBRD was able to mobilize funds and assist in attracting private investment. Currency power shortages are a serious constraint to economic growth in Pakistan with the cost to the economy estimated at about 2% of GDP. In order to overcome these constraints IFC and IBRD have jointly focused on the following three segments:

(i) generation;

(ii) transmission; and

(iii) distribution.

Generation: IFC so far has invested US$397 million in 5 private sector power projects (1,469 MW). The first four private power projects to achieve financial closure were IFC sponsored projects. More important, IFC's projects were used as model for other power projects in the country. IFC and IBRD helped Government to develop and implement a policy framework for attracting private investment.

IFC and IBRD coordinated closely in financing the Uch Power project, in which IFC provided debt financing of US$131 million both syndicated and from its own account and the IBRD provided a partial risk guarantee of a parallel commercial loan tranche.

Transmission: IFC and IBRD are helping GOP increase the capacity of Pakistan's trunk lines through private sector participation.

Distribution: IFC is assisting in the privatisation and restructuring of the Faisalabad Area Electricity Board, which provides electricity to 1.2 million customers. This would be the first public sector electricity distribution company to be privatised in this part of the World.

Manufacturing

IFC made several investments in high value added manufacturing to promote the diversification of Pakistan's industrial base and expand its export potential. IFC has played a major role in attracting foreign companies as equity partners in joint ventures in Pakistan and ensuring that the partners provide technical know-how, international market access and management to the joint ventures. These joint ventures result in significant technology transfer and have strong beneficial linkages to the rest of the economy.

Textiles: The focus is on the areas where liberalization is attracting private sector interest or where the economy's competitive advantage is firmly established. In textiles, higher value added products, such as top quality finished fabrics and garments with a strong export market are IFC's primary target.

Construction Materials Cement: Until recently, the cement industry was in the public sector. Acute shortages of cement developed, hindering infrastructural activities and economic development. To encourage private sector participation in the cement [TABULAR DATA OMITTED] sector, IFC invested US$197.18 million in 3 cement projects in northern Pakistan. An important feature of these IFC cement projects is their strong emphasis on environmental protection.

Education

With a population of 130 million and a literacy rate of only 35%, human resource development is an absolute necessity for the economic growth of Pakistan. IFC provided financing of US$10.0 million to the Beaconhouse School System - IFC's first major education project worldwide. The project involves construction of 14 schools throughout the country, enrolling an additional 16,000 students and providing an impetus to the education sector in Pakistan.

Environment

IFC is committed to environmental protection worldwide. All IFC investments in Pakistan strictly follow World Bank Group environmental guidelines. IFC's sponsored projects in Pakistan are pioneers in installing treatment facilities before all emissions and effluent discharge.
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Copyright 1996 Gale, Cengage Learning. All rights reserved.

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Publication:Economic Review
Date:Sep 1, 1996
Words:795
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