INTERNATIONAL FINANCE CORPORATIONANNUAL REPORT 1986

PI, Y-.,

22669

FILE COPY|

THIRTIETH ANNIVERSARY

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

This Annual Report commemorates the 30th anniversary of the International Finance Corporation. In order toillustrate the progress the Corporation has made over these past three decades, we have reproduced sections ofour first annual report against the appropriate pages of this report

INTERNATIONAL FINANCE CORPORATIONANNUAL REPORT 1986

IFC's Objectives

IFC is a multilateral development institution estab- IFC makes both equity investments and loans withoutlished in 1956 as an affiliate of the World Bank. IFC's government guarantees. This permits the Corporationpurpose is to promote the growth of productive pri- to provide financial assistance suited to the needs ofvate investment and to assist enterprises that will each project and to the ability of each firm to raisecontribute to the economic development of its devel- funds from other sources on reasonable terms.oping member countries.

In all of its activities, the Corporation works to raiseIFC's capital resources are provided by its 128 mem- investor confidence. In addition to providing financialber countries, 107 of which are developing, which and technical assistance, the Corporation may, as ancollectively determine its policies and activities. international institution, help facilitate the process by

which investors and governments can arrive at mu-The ultimate objective of the Corporation is to im- tually satisfactory agreements.prove the well-being of the people in its developingmember countries. Its principal tasks are to provide The Corporation seeks to encourage the flow of pri-and bring together financing, technical assistance and vate capital both domestically and internationally,management needed to develop productive invest- through the establishment or expansion of local capi-ment opportunities in its developing member coun- tal markets and financial institutions. It also offerstries. The Corporation seeks to invest in privately technical assistance to member governments in sup-owned enterprises but will participate in mixed enter- port of their efforts to create an investment environ-prises, with an element of government ownership, ment which will encourage productive and beneficialwhere there is no realistic local alternative. In such domestic and foreign investment.cases, IFC seeks to encourage movement towards full-er private ownership and control.

ii

1957

InternationalFinanceCorporation

FIRST ANNUAL REPORT1956 -1957

In,D.

Afy d M, QWZRDS7br),t15

Y'Co Y ou,~

ZntCLhn

InternationalI Finance

Corporation

APPENDIX A AlttST ANNUAL REPOT IXB054 1957

Balance Sheet Statement of lncome sad ExpeasesJuNE JO. I' 'l 7NE P04,00 JUt)' 2J. 54 -ro IUN I JU O'l

ASSETS

D. R- ....... . ... 4.. . . - -on...- s5nin r.e. en . .u $2,40,048UNIO SYl- Go 01.-0 Oe.otbl

t104,55, t- -01, .J 00 pJ 0._ IIdO ..u.. ..-) .S942N4",111 E-nomAcrued ___0_c OTh2P..996 92.".107 Adm.a.flow Elea:

A-mseO *0011 USOI C-OrP5 .DsO .Ps... ... ..... ,,1 -i- ...... S 424.965

Goos A40--' 16.73 Coetib4uo. to eff beosfil 38.294TOTrAL: A556rS ..ssom.... .P. -. t773,62L2tl F.d nd oompeouul2F .d 42,123

TOTAL ASSETS _____RV9e.nuro ... .. 133114

Tmrvd. . .... ... . . 6,395

LIABILITIES AND CAPITAL (u) SuppIe ....... . . .... 13,611

Ree-. .4d fcIlty xrvks .. 51,729AcONIOroSO P10N0w AosDAcoso PJJeeoue6 E,349 C-.1u Ioio o. 15,823C-erAL F-rnIture 8ed equpiplr- . 33,743

CVu4to Bookc E b d Ib3y .2 ...... ... 8 -834AJd lOlOd 10M80 . of S1,E40 3w Pnn6ng ... . 13,858

SWtcbed 91.,92.ueo, S9.1 92t0 3 lnosrnce... . 1,9.31

Nt 1oe ltther -eP.-s . . . .6. . SI3NFor IOt lEnOd p Jly 24. N 19S o1 ., .957 (SmApeendox) . S1,671.542 S 732,666IA -Dqu.ouuelooopeoue ruincued___

111t0JJtd 2. J1956 . 32,450 1.642932 931534,932

Th. Colpooeo hn In ... oSOo Nn OON1. .o. . . . . . 31,675,382S2 .661101 inuaoslo m Snree do BIke CD.ooOekos deEtectrdudt for e_aNNn od leufCoueekarE emantoltatgN w In 1001 001090t0 02f 0nO Sd13 1011000100e foldIl elacton nI stedutoso. TIe ine o berlOtllld 1056130010 Io4SINI l4untmIon" eOIo aelooNe.O.on beldeo.nI u end ofIFe rto o r. Ion .ddilmn.6,. Caepoleto a 00 l^e IS-,ar 089001 on sheOSSwel CoIBIWfl.

7t7TAL LJ.81L1T1E.U .430 CAPITAL . 89.66............ -. 5$6128t

oOoOoog,lhd.ouOOJf.eu v01 3.1 2Y9_ lolrOe 1101 nnl5.00,00 to*I 5

IS 15

Table of Contents

Page

ii IFC Objectives2 Letter to the Board of Governors4 The Year in Review8 Investment Climate

12 The Year's Operations19 The Year's Investments21 Africa24 Asia27 Europe and the Middle East29 Latin America and the Caribbean32 Capital Markets35 Other Operations42 Investment Table54 Personnel and Administration55 Financial Statements63 Appendices

1

International Finance Corporation 1818 H Street, N.W (202) 477-1234Washington, D.C 20433 Cable Address CORINTFINU.S.A

August 5, 1986

To the Board of Governors:

The Board of Directors is pleased to report that during Fiscal Year 1986, the Corporation significantlyexpanded its assistance to the private sectors of its developing member countries and introduced a number ofinitiatives that permit the Corporation to respond more effectively to the needs of its clients. The totalinvestments of $1,156.3 million, including $710.5 million for IFC's own account, which were approved by theBoard of Directors in 85 business ventures reflected the increasingly diversified nature of the Corporation'sactivities. At the Year's close, the Corporation's portfolio consisted of 378 investments in 72 countries, tworegions and one worldwide in scope.

The authorization of $650 million in new shares in the Corporation, approved by the Board of Governors onDecember 26, 1985, increased the authorized capital stock of the Corporation to $1.3 billion. This will enablethe timely implementation of the Corporation's current Five Year Program which has now completed itssecond year

As of the end of the Corporation's Fiscal Year, June 30, subscriptions totalling $350 million of the capitalincrease and payments of $60 million had been received It is anticipated that by September 1, 1986,subscriptions to 70 percent of the total and payments of 20 percent of this amount will have been received.Subscriptions to much of the remaining 30 percent are expected to be received early in Fiscal Year 1987.

The Corporation increased its market borrowing to $350 million in Fiscal Year 1986, taking advantage offavorable market rates to obtain funding for the Corporation's expanding activities. The timing of theseborrowings allowed the Corporation substantially to reduce lending rates to its client companies. In thecourse of the last 18 months, IFC has raised $500 million through ten bond issues in major financialmarkets.

Fiscal Year 1986 saw a number of innovative moves by the Corporation. IFC embarked on a new businessdevelopment and marketing program in industrialized countries to attract new investment partners. TheEmerging Markets Growth Fund was successfully launched with the participation of a number of institutionalinvestors to invest in publicly listed shares in certain developing countries. The Africa Project DevelopmentFacility to assist sub-Saharan African entrepreneurs was established in cooperation with the United NationsDevelopment Programme and the African Development Bank. And the Corporation set up a Foreign Invest-ment Advisory Service that will assist member governments to attract foreign investment.

The Board expresses its appreciation to the management and staff of the Corporation for their dedication andinnovative efforts during this critical year in the history of IFC. This thirtieth anniversary of the Corporationfinds the Corporation at a critical point in its history, and the Board is confident that the course now beingcharted by the management of the Corporation will make it an even more effective instrument for theevolution of the role of the private sector in the economic development of our member countries.

The Board also expresses its thanks to the Corporation's outgoing president, Mr. A. W Clausen, who stronglysupported the growth and development of IFC during his five years in office, and welcomes the new presidentof IFC and the World Bank, Mr Barber Conable. -

The Board of Directors has had this Annual Report prepared for the Fiscal Year ending June 30th, 1986, inaccordance with the By-Laws of the Corporation. Barber Conable, President of the Corporation and Chairmanof the Board of Directors, has submitted this Report, together with accompanying audited financial state-ments, to the Board of Governors.

2

The Board of Directors

Directors Altemates

Fawzi Hamad Al-Sultan Mohammad Al-ShawiMourad Benachenhou Salem Mohamed OmeishGerhard Boehmer Michael von Harpe

Hugh W FosterKenneth Coates Felix Alberto CamarasaRonald H. Dean You Kwang ParkJacques de Groote Oral AkmanMario Draghi Rodrigo M. GuimaraesAstere Girukwigomba Mitiku JembereLeonor Filardo de Gonzalez Maria Antonieta DominguezEdgar Gutierrez-Castro Patricio RubianesChristian Ulrik Haxthausen Per TaxellTimothy P. Lankester Richard ManningHelene Ploix Olivier DebainsFrank Potter Horace BarberC. R. Krishnaswamy Rao Sahib Gholam KibriaNicephore Soglo Andre MilongoFerdinand van Dam Riza SapunxhiuVibul Aunsnunta Sashi N. ShahXu Naijiong Yang GuanghuiKenji Yamaguchi Zenbei Mizoguchi

Senior Management

A.W. Clausen* PresidentSir William Ryrie Executive Vice PresidentFrancisco J. Alejo Vice President, Corporate Affairs

and DevelopmentJose E. Camacho Vice President and General CounselMakarand V. Dehejia Vice President, EngineeringJudhvir Parmar Vice President. Investment OperationsHilary P. Reddy Vice President, Portfolio and Financial Management

Banking Advisory Panel

IFC's Banking Advisory Panel meets regularly with the Corporation's management to discuss its activities and policies. TheCorporation wishes to express its appreciation for the valuable advice the panel members have given.

Members are:Jan Ekman, President, Dr. Conrad Oort, Member of

Svenska Handelsbanken Managing Board,Stockholm Algemene Bank Nederland

Dr. Wilfried Guth, Chairman of the AmsterdamSupervisory Board, Lord Roll of lpsden, Chairman,Deutsche Bank AG., Frankfurt S.G. Warburg and Co., Ltd.

Jean-Yves Haberer LondonPresident Directeur General, Robert V. Roosa, Partner,Banque PARIBAS Brown Brothers Harriman and Co.Paris New York

Yusuke Kashiwagi, Chairman, Anthony SolomonThe Bank of Tokyo, Ltd. Former Undersecretary for MonetaryTokyo Affairs of the United States Treasury

and President of the New YorkFederal Reserve BankNew York

IFC is proposing organizing a new Business Advisory Council consisting of prominent business executives from both developing andindustrialized countries. It will provide a forum where concerns and issues affecting the international business community can bediscussed in the light of IFC activities.

'Effective July 1, 1986, Barber B. Conable assumed the position of President of IFC.

~3

The Year in Review

his Report covers the Fiscal Year The $650 million capital increase approved by theIL . . .^: ... _.which ended on 30th June 1986, Board of Governors in December 1985 raised the totaland which was the second year in IFC's current Five authorized share capital of the Corporation to $1.3Year Program. This year, 1986, also marks the 30th billion. By June 30, 1986, 36 of IFC's 128 memberanniversary of the founding of the International Fi- countries had subscribed to their full allocations ofnance Corporation, and the Report summarizes the shares. By the same date, first payments of $60 mil-progress IFC has made in its 30 year history. lion had been received by IFC.

The expansion of the Corporation's activities, in line At the close of the Fiscal Year, 85 new investmentswith the Five Year Program, continued strongly dur- were approved by the Board of Directors, compared toing the Year. At the same time, the IFC developed a 75 in FY85, and $710 million of investments for IFC'snumber of new initiatives, complementing its tradi- own acccount approved by the Board was up 17 per-tional activities. These will enable the IFC to provide cent over the previous year. Total investments, includ-new financial services to its developing country mem- ing participations, were $1,156 million, compared tobers, while at the same time continuing the Corpora- $937 million in FY85. Net income for the year wastion's main role of assisting in the financing of private $25.4 million, compared to the $28.3 million reportedsector projects. The new activities include advisory last year.services and expanded technical assistance, the appli-cation of new financial services and instruments and At June 30, 1986, IFC held 378 investments in 72generally enabling developing countries to benefit countries, two regions and one worldwide, with a totalmore from innovation in financial markets. IFC thus value of $2,387 million. Although the economic out-becomes more like an investment bank with a devel- look for many developing countries improved in FY86,opment purpose. the current situation remained difficult and this was

reflected in the experience of a number of companiesPortfolio in which the Corporation has investments. In the Cor-US$ Mllions poration's portfolio, the level of non-accrual of in-

L Total terest income on loans and provisions for losses was3,500 |Held for somewhat higher in FY86 than originally expected,

Others reflecting this environment. Action intensified duringthe Year to deal with these problems. At the sametime, the trend towards stronger support for the pri-

3,000 r - ~ vate sector on the part of many developing countrygovernments continued.

2,500 Issues related to private sector involvement in theeconomic recovery of developing countries receivedconsiderable public and media attention during the

2,000 . , past year. In the initiative launched in Seoul in Octo-ber 1985, U.S. Treasury Secretary Baker called for in-creased lending by commercial banks in the devel-oped countries on the basis of sound economic pro-grams, including increased scope for private sector

1,ooo t C F , - growth. Many developing country governments con-tinued to follow policies designed to encourage the

t > t ~~~~~~~~~private sector and attract foreign investment. The pri-vatization of state-owned enterprises is a subject of

; t . l 0 growing interest. IFC is well placed to assist govern-soo p~~~ roiva itersetor and attac foeign invcedoasstmet Thvempr-ments in the process of privatization, with expert ad-

0 1 , W ffi L vice and assistance in restructuring of enterprises and1982 1983 1984 1985 1986 the sale of assets. In providing this service, it can act

4

FY86 was the second year in which IFC borrowed di-rectly on the markets to complement its borrowingsfrom the World Bank. The total amount borrowed dur-

International ing the Year was the equivalent of U.S.$350 millionCorporation compared with $130 million in FY85. These funds were

raised through seven borrowings, involving US dollars,Deutsche mark, Swiss francs and ECUs. Borrowings in

_*-- -- - -the latter part of the Year allowed the Corporation totake advantage of lower market interest rates in var-

1956.1957 ious currencies and, thus, to offer lower interest ratesto its clients. The Corporation was able in all its opera-tions to borrow at highly competitive rates. While IFCwill continue to rely on the World Bank as its majorsource of borrowed funds, the policy of borrowing a

TME 1--I-AeIONA FI-m-c Co-oeeroloaN established ondu 24, part of its requirements from the intemational capital19bS when 31 Srtri.nel, nith capital Sub-inpti- totRlahg $7800,00260 markets provides the Corporation with greater flexibili-had fufiiled the mcmb-rshop rlnpeuremento of the Articles of Agroomeneot ty in its activities.

Tho Inaugal Meting of the Board of Covernoro of tho Cotporation

hesld ir o ith the Atonul Meetng of tiu lte t-tnma To meet the particular needs of sub-Saharan Africa,Bank In Whmiogt.on D C., n Sept-embr 27, 196. A repott -o-ering ithe period fom July 24 to Sept-berhS 159 w9 oa suboitted to the IFC, in cooperation with the United Nations Develop-Bd of Goveors at that oetog ment Programme and the African Development Bank,

On Septenbrr 10, 1957, the Cotporation had 51 merner toun-tn, launched the Africa Project Development Facilityw-ose Sbhc-nptonS totaled $92 millon. an net forth im Appendin D MI (APDF) in May 1986. The APDF will help Africanthe apital doe hs bheen fully pnd with th -cepto of SS9fd000a which businessmen and companies to develop sound invest-hah bhee owed by Egypt ioc Augont 23, 1955 Addliorn a1 ppl-cItl om for

-oemobthip io the CorporAtion had been rece-v-d frm Afghnistao, ment projects and to find financing for these projects.Ch-oo Libha and folAy. The facility, which will be managed by IFC, will oper-

An receied, tbe cap-tal al- Ir-ern mcsted no Umotcd States Cl--- ate out of offices in Nairobi and Abidjan. Funding forwent obligatioos with maturittes up to five yearn. GCos ineome from thene the APDF has been provided by the United Nationsmvesme,to J.o 10, 19s57 -u2,409,0O6 an afr dtdn1eto of Development Programme, the African Developmentoper-tg enpenses of $733,000 net l,cowe for the year $1,675,1S0a

The balan-e rhet and the statement of Iocome and e-penses are attached Bank, IFC, and twelve donor countries.an Append-ee A and B

5 One of the highlights of FY86 was the launching ofthe Emerging Markets Growth Fund, another exampleof IFC's growing role in the promotion of portfolioinvestment in developing countries. The Fund willinvest in publicly listed shares in certain developingcountries. It was established with the participation of

in collaboration both with the World Bank and with a group of large institutional investors from the Unit-private institutions. IFC intends to expand its activi- ed States, Western Europe and Japan.ties in this field.

During the year IFC expanded its activities in theThe Corporation's new investments in FY86 covered a field of advice to member governments on foreignwide range of industries, including a continued ex- investment The Foreign Investment Advisory Servicepansion of investments in the food and agribusiness assists governments of developing countries in creat-sector, and new investments in a wide variety of in- ing the framework of policies and institutions neces-dustries including textiles, oil and gas exploration and sary to attract and regulate direct foreign investment.development, tourism, petrochemicals, pharmaceuti- The service the Corporation offers is based on manycals, and automotive industries, mining and financial years of practical experience of investing in develop-institutions. This year IFC approved its first invest- ing countries, often in collaboration with foreignments in Grenada, Mozambique and the Seychelles. investors. Activities in this area and others related to

r5

The Past Ten Years(US$ millions)

Fiscal Years 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

OPERATIONS

Approved Investmentsnumber of projects 34 41 48 55 56 65 58 62 75 85number of countries 21 31 33 30 34 31 36 37 38 39amount (gross $) 259 338 425 681 811 612 845 696 937 1,156total project costs 1,228 1,872 1,714 2,377 3,340 2,936 2,894 2,473 2,768 3,588

Cumulative Approvalsnumber of projects 388 429 477 532 588 653 711 773 848 933amount (gross $) 1,808 2,146 2,571 3,252 4,063 4,675 5,520 6,216 7,153 8,309total project costs 9,190 11,062 12,776 15,153 18,493 21,429 24,323 26,796 29,564 33,152syndications 548 688 890 1,157 1,559 1,747 2,166 2.471 3,125 3,571

Investment Heldnumber of firms 200 225 253 288 314 333 341 349 366 377loans 704 799 889 1,159 1,374 1,551 1,588 1,644 1,748 2,001equity 160 184 223 245 273 284 294 346 368 386total 864 983 1,112 1,404 1,647 1,835 1,882 1,990 2,116 2,387

RESOURCES AND INCOME

Capitalizationborrowings 445 462 455 438 509 531 536 582 825 1,223paid-in capital 108 144 229 307 392 497 544 544 546 602accumulated earnings 87 100 119 140 159 181 204 230 258 284

Earningsnet income 8.9 12.5 19.2 20.7 19.5 21.6 23.0 26.3 28.3 25.4

foreign investment promotion will be coordinated niques. An example is the initiative known as thewith the Multilateral Investment Guarantee Agency Guaranteed Recovery of Investment Principal, or(MIGA), once this new World Bank agency becomes GRIP. This concept offers investors guaranteed protec-operational. tion of principal in equity investments made through

IFC after an agreed period, plus participation in divi-During the Year the Corporation embarked on a pro- dend income and capital gains.motional program to increase awareness of investmentopportunities in developing countries among corpora- Corporate restructuring assistance to existing privatetions and financial institutions in the industrialized sector enterprises was a feature of the Five Year Pro-countries. The aim of this program is to identify new gram and is well under way. In FY86, 15 restructuringpotential investment partners and to broaden under- investments were approved, compared with four instanding of IFC's services and facilities. The program FY85. Six of the current projects are with privateincludes the use of advertising and a selective pro- companies with which IFC had not previously invest-gram of contacts with corporations. IFC is also seek- ed, compared with one in FY85.ing closer cooperation with banks and other financialinstitutions, finding opportunities for investments and During FY86, IFC continued to give priority to itsarranging financing through syndications and other program in Africa. Apart from the APDF initiative, 24techniques. investments were approved during the Year with IFC

investment estimated at $117 million. This representsThe Corporation aims to promote investment in devel- a 33 percent increase in number and a 9 percentoping countries by introducing new financial tech- increase in volume compared with FY85. Five of these

6

projects were in the financial markets sector. longer term price outlook within the industry hasnaturally affected IFC activities in this field. However,

Another special emphasis in the Five Year Program is this mission is still relevant, although care is neededthe development of financial markets. The one note- to ensure that new investments must naturally beworthy activity in this field during FY86 was the es- based on realistic expectations about oil prices.tablishment of several equity lines and credit lines Energy-related projects for a total value of $193 mil-with banks and venture capital companies designed to lion were approved by the Board of Directors duringprovide help to small and medium-sized businesses in FY86.Kenya, Pakistan, Cote d'lvoire and Argentina, and thelaunching of the Emerging Markets Growth Fund dis- In FY87, the Corporation expects to continue to ex-cussed earlier. pand its investment activity in spite of persisting eco-

nomic difficulties in many member countries. ThisIFC continues to believe that it should aim to sustain continued expansion reflects the aims of the Five Yearenergy resources in developing countries and provide Program. The Corporation will also continue develop-the impetus for oil industry activity in these coun- ing new initiatives that will help IFC meet the chang-tries, partly by financing exploration. The sharp de- ing needs of its member countries.cline in energy prices and uncertainty about the

7

Investment Climate

he international economic situa- of the dollar itself, about 20 percent in real terms overtion has changed dramatically in the last year.

the last twelve months. Some of the most importantchanges have been so recent that their effects on Except for coffee, most commodity prices fell, and soeconomic growth, and on the climate for private in- even the non-fuel-exporting developing countries ex-vestment in developing countries, have not yet been perienced declining terms of trade in 1985-althoughfully felt. It is clear, however, that the major changes this movement has reversed and the IMF projects ahave been good for many-but by no means all- 3.6 percent increase for 1986. The developing coun-developing countries: tries as a group ran a somewhat larger current ac-

- As oil prices fell, the terms of trade of most non- count deficit in 1985, but this was financed not byfuel-exporting developing countries improved, increased capital inflows (which actually declined),some dramatically; for fuel exporters, of course, but rather by a reduction in reserves and in capitalthe fall in oil prices has been damaging. flight. Industrial country economic growth slowed

- Declining interest rates have eased everyone's significantly-from 4.7 percent in 1984 to 2.8 percentdebt service burden. in 1985-although again, the effects of the drop in oil

- The fall in the value of the dollar has also re- prices and in interest rates in 1986 should produce anduced the real burden of the foreign debt of upturn soon. Growth in the developing countries fellmost developing countries. from 4.1 percent in 1984 to 3.2 percent in 1985, with

the fuel-exporters' gross domestic product fallingThere has also been an important step forward in slightly (-0.1 percent) and the non-fuel exportersthinking-expressed in the Baker proposals and else- growing at a relatively healthy 4.8 percent.where-from short-term emphasis on crisis manage-ment of the international debt problem to a longer- The most hopeful events on the international finan-term focus on adjustment and growth. However, de- cial scene were:spite this welcome change, neither commercial bank - Steps taken by the industrialized nations to im-lending, nor foreign private investment, nor total net prove the coordination of their economic poli-capital flows to developing countries have yet risen cies, and to redress imbalances in their ex-from their low levels of the last few years. change rates.

- The recognition, as expressed in the Baker ini-Thus, the outlook has improved for many developing tiative and elsewhere, that when heavily-indebt-countries and become dramatically worse for some. ed countries adopt sound policies for efficiencyBut the current situation is that the severe financial and growth, arrangements should be made toconstraints on most developing nations have not yet provide them with sufficient resources to permitabated. These constraints have induced policy shifts, them to achieve reasonable levels of growthmany of great importance, in most of the countries. along with the servicing of their debts.Not least among these shifts are policies meant to - The "Structural Adjustment Facility" scheme toplace increased reliance on the private sector. The lend IMF Trust Fund reflows to needy low-in-final section of this chapter reviews these policies and come countries on concessional terms.their prospects, and discusses what is needed to makethem work. The Developing Economies

The changes just described are of course affectingIFC's developing member countries in different ways.

For the developing nations, the big news items in The sharpest and most obvious effect is the deterior-international markets during the last year have been ation in the circumstances of the middle-income fueldrops-the drop in crude oil prices from around exporters-including the Congo, Ecuador, Egypt, In-$28/barrel in mid-85 to a range around $15 in mid- donesia, Mexico, Nigeria, Syria, Trinidad and Tobago,86; the continued drop in nominal interest rates, from Tunisia and Venezuela. Many of these countries wereover 10 percent at the end of 1984 to about 8 percent already in financial difficulties following the cessationin mid-85 and further to about 7 percent in mid-86 of new lending by commercial banks in 1982. As of a(6-month US dollar LIBOR); and the drop in the value year ago, however, things were looking up for many of

8

them. Now the recent fall in oil prices has compound- governments wanted to take action to promote devel-ed their problems. The pressures of continued struc- opment. Many of these governments saw weak ortural adjustments and containment of domestic de- barely existing private sectors, at least in what wasmand will probably depress the business climate in seen as the "modern" areas of manufacturing, trademost of these countries for the next year or two. and services. They formed publicly owned entities for

these activities, to do what they feared the privateFor most of the other developing countries, the out- sector would not do. Other governments, committedlook for private sector growth is better now than it to socialist organization or otherwise concerned towas one year ago-although of course there are a few avoid concentrations of wealth and power in privateexceptions. For example, several countries that had hands, also formed parastatal companies, and enactedlarge exports of goods and services to the oil export- laws and regulations to inhibit what they feareders are now experiencing drastic declines in such would be abuses of unfettered private development.flows. The middle-income fuel-importing countries arenow benefiting considerably from the drop in oil Now, after several decades of experience with a varietyprices and the drop in interest rates-although in- of state interventions and regulations, many govern-terest rates are still high in real terms. Most of these ments have begun to look to the private sector tocountries suffered to some extent during 1985 from play a more prominent role in their countries' devel-the weakness in industrialized countries' demand for opment. This shift in emphasis does not imply anymanufactured exports, and from the slight fall in the change in the governments' committments to theprices of most standardized commodities. However, goals of development. It is, rather, a question of usingmany of these countries have also improved their eco- a better-balanced set of instruments to achieve thosenomic policies; in particular, additional attention has goals; of having public and private sector activitiesbeen paid to reducing inflation in some of them, in- complement each other more effectively by each con-cluding drastic reforms in Argentina, Bolivia and Bra- centrating on what it can do best. The causes of thiszil. In the low-income countries, the declines both in shift include the recognition of the above-averageoil prices and in interest rates are less important, but growth rates that have been achieved by those devel-still welcome events. Against the continued weakness oping countries that did encourage the private sector.in prices for most of their exports, hope is to be found They include severe financial constraints resultingin the end of the drought in much of sub-Saharan from reduced inflows of capital from abroad, and in-Africa, improvements in policies in many countries, and creasing government budgetary problems, that makethe new concessionary funds to be made available by it impossible to support the losses of inefficient para-the IMF Structural Adjustment Facility. statals. The shift reflects an increasing concern for

efficiency in a period of heightened scarcity of re-On balance, economic conditions for private business- sources.es in most of the non-fuel-exporters are still dominat-ed by depressed export revenues, scarce credit and A remarkable aspect of the increased reliance on pri-weak demand. In the heavily-indebted members of vate sector modes of organization is its occurrence inthis group, the burden of servicing the debt aggra- the most disparate places. It is taking place in allvates these problems. But these conditions can be regions of the world, in countries at all levels of in-expected to improve as the impact of the recent favor- come and of different political complexion.able events just mentioned begins to be felt, and asmany developing countries give increased scope to Among the more attention-catching of the developing

their~ ~ ~ ~ ~ ~ ~ ~~~~~mn priat sectors.-ctcl fth dvlomtheir private sectors. countries' efforts to increase their reliance on theprivate sector have been programs to move parastatals

Emphasis on Private Sector Development to private ownership and/or to private operationAfter the Second World War ended, the conscious ob- ("privatization") and efforts to increase foreign privatejective of economic development took hold, for the investment. Not always so remarked upon, but evenfirst time, throughout the world. In the poorer coun- more important, has been the adoption of more ge-tries that already were independent, and in the new neral measures to lay the groundwork and providecountries that gained their independence, virtually all support for steady and efficient growth of the private

9

sector. In some cases, these initiatives have so far technological skills are often scarce. Political difficul-been only partial, and sometimes have been intro- ties and vested interests sometimes impede the reformduced in an ad hoc manner without taking into ac- of pricing policies, overstaffing, subsidies and othercount the relevant overall macroeconomic and policy forms of protection that have caused or supported thelinkages. Results in these cases have often fallen weaknesses that privatization is supposed to address.short of expectations. Even where policy changes But the potential economic gains that can follow fromhave been coherent and well coordinated, the neces- addressing these problems successfully are substan-sary adjustments have been difficult and the benefits tial.take more time to appear.

Foreign Private Investment: In the last few yearsIFC is in an excellent position to assist member coun- there has been a renewed interest in foreign privatetries that wish to promote the development of pri- investment, in countries as different as China, Ghana,vate sector activities in ways that will be efficient and Korea, Mexico, Turkey and the Andean Pact nations.contribute to their countries' development. It stands This interest has extended both to direct investment,ready to assist in privatization, in attracting foreign where the foreign investor obtains a significantprivate investment, and, most important, in helping to amount of control of the company, and to portfoliodesign policies, to strengthen institutions and to pro- investment where the investor's share in the enter-vide finance that will support the development of the prise is minimal and gives him no control.indigenous private sector, throughout all branches ofthe economy. These are developments that take time, The amount of foreign private investment in develop-that will require patience and perseverence by all con- ing countries (almost all of it direct rather than port-cerned. It would be unfortunate if these efforts were folio) accounted for about one-fourth of all capitalto be abandoned because poorly designed programs flows to the developing countries in the 1960s andor overly optimistic expectations led to unsatisfactory early 1970s, before commercial bank lending grew toresults. such high levels. From 1967 through 1982 it grew in

real terms at an annual rate of over 5 percent, peak-Privatization: During the past several years, countries ing at almost $15 billion in 1981. Since 1983 it hasas diverse as Chile, Guinea, Malaysia and Turkey have stagnated at around $10 billion per year. But themoved to privatize significant segments of their pub- contribution of foreign private investment goes be-lic enterprises. The goals and modalities of privatiza- yond just the money involved. It has furnished techni-tion differ, but the basic objective is to make public cal and managerial know-how, and recently has comesector enterprises more efficient-by exposing them to facilitate manufactured exports, as trans-nationalto market discipline, by rationalizing the multiple and corporations locate different production facilities in aconflicting objectives that prevent some of them from variety of countries throughout the world.doing a good job on any objectives, and by providingthem with the management and the outside support- Most foreign private investment has been concentrat-ing institutions that they require to function. Privati- ed in certain countries and in certain sectors, and willzation can be implemented in a variety of ways, in- probably continue to be so. During the 1970s onlycluding sale to another company, sale of stock to eight countries were the recipients of almost the en-many investors on the open market, transformation of tire amount that went to all the developing countries.the parastatal into a joint venture through sale of However, the smaller absolute amounts that went toonly part of the ownership, sale of assets, lease of some of the smaller countries have also made signifi-assets, or management contract. The most appropriate cant contributions there. Foreign private investmentform will vary from country to country and from com- aimed at domestic markets tends to go into largepany to company. countries and into process industries such as cement,

metals or chemicals; high-tech industries such asIn the majority of cases, privatization is a difficult transport equipment; or brand-name consumer non-undertaking. Insufficient domestic savings and poorly durables such as pharmaceuticals. Foreign private in-developed capital markets in many countries make it vestment aimed at export markets either follows na-difficult to finance the transactions. Managerial and tural resources, or tends to go into countries, and

10

industries such as electronics and clothing, where has to be the local entrepreneur and businessman. Itlow-cost, efficient labor provides an important cost takes not only the right environment, but also timeadvantage. for these actors to develop. It took time in the indus-

trialized countries, it is taking time in the "newly-Foreign private investment, like any private invest- industrializing countries" that are at the top of thement, requires complementary infrastructure and hu- income-level ladder among IFC's developing memberman capital. These must be financed by resources countries, and it will take more time in the low in-additional to the foreign private investment itself. come countries. A healthy, prosperous and modernMoreover, foreign private investment tends to respond private sector cannot be created in a single year. Itto increases in demand or other opportunities; there- requires laws and regulations to lead it in the properfore it is more likely to follow a renewal of prosperity directions, but also freedom from over-regulation andin the developing countries, rather than to lead it. unnecessary constraints. It takes government support,

but not excessive coddling. It takes stable rules of theFor all these reasons, foreign private investment can- game. Economically, it takes sound fiscal and mone-not be expected to make up for most of the decline in tary policies, reasonable exchange rates, well-function-other capital flows to the developing countries. Nor ing financial institutions, decent physical infrastruc-will it substitute for inadequate levels of domestic ture, education and training, and reasonable labor pol-saving. It has many things to contribute, including icies. No rhetoric, marketing programs or special in-capital as such, but the other sources of finance, as centives can make up for the absence of these condi-well as a basically stable and prosperous environment, tions. Businessmen and governments must work to-are necessary complements to it. gether in designing these policies and institutions,

and must be prepared to continue to work on themThe Overall Environment: The essential element, the and support them for as long as they wish develop-sine qua non of successful private sector development, ment to proceed.

1:1

The Year's Operations

k nvestment Approvals: During the Cumulative IFC InvestmentsL ~~~~ Fiscal Year, the Board of Directors Approvals

approved 85 investments in 39 developing countries US$MIlionsand one worldwide in scope. Of this, it is expected 9.000that $710 million will be invested for IFC's own ac-count and $446 million will be syndicated, or sold, to 00other investors.

Of the total, $1,070 million was for loans and $86 7.000million for equity investments. Of the equity, $4 mil-lion was approved foir the exercise of rights issues by 6,000Afirms in which IFC already has equity investments. Ofthe loans, 13, totalling $139 million, involved corpor -5000ate restructuring.

The Corporation estimates that the total capital costs 40of approved projects it will help to finance will bemore than $3,588 million. This means that for every 3 000dollar invested by IFC for its own account, others willinvest more than four dollars. 2.000

Loans were made at market rates with the typical US 1.000dollar fixed rate loan priced at 10.375 percent atyear's end for an average life of seven to eight yearswith a grace period of four years. Maturities of IFC's 1982 1983 1984 1985 1986loans are set to conform with the nature and needs ofeach project and this year they ranged between 7years to 12 years. Supplementing its loans, equity and equity-like instru-

Over 26 percent of the loans approved by the Board ments, the Corporation also provided clients with awere priced at variable rates, with 43 percent of US broad range of other financial services. During thisdollar denominated loans being so priced. The agreed Year, they included underwritings, guarantees, standbyrates ranged from 1.90 to 2.32 basis points over six- arrangements and swaps.month LIBOR or its equivalent, in addition to appro- Non-financial services have always been a significantpriate levels of front-end and commitment fees. activity for IFC and it is estimated that up to one-

T C ro n u ti at third of IFC's total staff effort is expended in techni-the elcrportion o ntinued its porrowe loly deofmingd ical assistance to clients through its project invest-the election of its borrowers, loans denominated incurrencies other than US dollars. While the majority ment work. This is in addition to the usual analyticalof loans were still in US dollars, the growth in the use and technical work needed by commercial lenders andof other currencies continued. For loans approved this investors to reach an investment decision. IFC hasFiscal Year the currency mix was (in millions of US generally provided this level of extra services todollar equivalents): clients free of charge, while similar services are a

source of substantial income for other international71 - r - lending institutions. To come more in line with mar-

, >- > - -.i,ket practice, during FY86 IFC sought opportunities to[ rS-,-, , *- -~ , part of IFC project financing services. Special service

fees generated about $3.9 million in income for IFC inFY86.

12

InternationalFinanceCorporation

All these etors roake it difficult to he sptcific negueding the nsmberFIRST ANNUAL REPORT OPER TIONS of applications for investent rerived by the Carponiti-o. Hwever, asIS-1957 a Iough approxnmatin, there are now before the Corporation between

25 and 30 proposato which appear to he wtthn the scope of its perationsINQUIrIES AND PROOSALS and which offer rsonable prospects of being snitable for isrestuest.

The hargest nomber of there proposals -on-esno projects located in WotinThe Corporation baa received a large number and variety of ioquinrs AOmecsO; n somewhat smialln noshet in foo projeoI min and the Middlesod proposals with reference to possible investmcents in many of Its rc- East with relatively few in other aras The proposals iclude peajects forher countnes. As s ,inrtisble with a new type of inteational foancial plp, paper and forest prodlocts. testiles agricrt..al, indrotil andorganiation, many inqoisri hare bero basvd on a ousouderstandiog of co-striction machin-rr engieering. hc-riab, fond processig; cementits purose, which is to use Its foods for incestment in privat enterpies. mining; d prnitngand not to filance trasactions srh as esport credits, i.tallment sales The prolerts now omder consideration re m vrios stages of studyship mortgages, d the lihk. relating to the character, abihty and ep-ienre of the sponao, prossions

Other inqies involvig commerial or agricoltoul prjt b for oag , utlet p-opeti. engineering and other trh 1 flea-

been declined in siew of the Corporaton's policy to rofine its artirties otues. pwpoed 6fnan.ing, and prmpects of peofitable operations. It is.in the earlier years, to the field of indostrial enterpse, which includ of nonire, necessary also to tuke ito account the general nituan in the

pwdceising of agrirlthical producti and mining, country in whch the ivestment is to be leated, together with the awsIn uddition to the proposals which were outside the scope ot the adrgltoiwnhmudapyt h rpnl

Corporations actities, numbers nf others were vagoe ideas rather than and rguht- whic -ud apply to the popsal.

speific proposals, and had to be declined until they co.ld be pot intomore tangible form. Where apprprnate the Coporation has sooght tomake suggestmns no hew this aight be com pli shed INVESTOMEtNTS

The Corporation has as had co-rrspondence sod ducsn.on. with alarge numbe f industrial firs, financia g p d nd vidI regard- As of Septesber 10, 195E the Corporatio id entrd into font commit-og the Corpoations polices and pio May of there ar large meas totang the eqo-uIlnt i f $,Si20,000 as follows: $2 million icest-

Enropeon and United States companies with long eapeience in the ment in Stemes do Brail Comrpanhia de Eetirddude is Bran.il; theforeign fieldd, s wel as a wide variety of smallee concrns. somr of which eqaNvalent of J600.000 in Eagean-s y Prodictos Industuales S.A., inare considen.g foreign operations for the first time. Mexico; $2.2 million in Empresa M.,er. de Mantos BInoos l.A., i Chile;

There hba aso been wide-spread inrest, and a norher of specific and the eqoivalent of 5520.000 in Brstol de Wxico, S.A., i ineicoprposals, oiginating frme the ktr indostrally developed countries, i Siieiio do Brtril Com-phin di Eh,'trviiadd, in Bi-oilwhich the Corporation espee to onrentrate its investments.

A nomber of mvestment psoponnk which ut first appeored p-onosi-g On Jne 20, 1957 the Corporation rearhed an agreement, sbject to coi-showed, aftt investgution. wakessoes f ca-notpsmahig thew pleion of the necessary legal fooaities, for a $2 million investment ininsuitable for IFC financing. On the other hand, several proposals or Siemens do B-il Companhia do Electecidde. Sifemens do BHmil is

which considerable work w-u dono were potponed or withdr-wn by the owned by Semens of Germany, the rgest manofartonog eterpise insponsors for vaeiooi reasons Some decided to do the entne finan-ig that cutrsy.themoives; some seesired financhng fem other soorces A few habr heen The Corporation smvestmert, together with the eqoivalent of $S5withdrawn becaiseof inability to agree so financial tems. million being invested bY Siermes of Ceany, will be med to epand

C 7

Syndications: The Corporation continued to seek out Financial Resultscommercial banks and other financial institutions tojoin in loan syndications and parallel financing. ThisYear, some $446 million in loans by IFC were syndi- Net Incomecated with such institutions.

Net income amounted to $25.4 million, compared tothe $28.3 million reported in Fiscal Year 1985. All of

Disbursements the net income was added to accumulated earnings.During the Year, an equivalent of $324.8 million wasdisbursed against committed loans and equity invest- Income and Expensesments. Of this, $292.5 million was for loans and $32.3 The Year's operating income of $210.4 million wasmillion for equity. In addition, $140.4 million was $37 million higher than the previous year's.disbursed for participants in financings which theCorporation manages. In addition to the increase in operating income from

normal operations, IFC enjoyed a significant increaseTotal disbursements of $465.2 million were $114.8 in income from deposits and securities. This was duemillion larger than the previous year. Sales from the to profitable investment of the proceeds of its borrow-portfolio and repayments to IFC and participants dur- ings from private capital markets. The short-term in-ing the Year amounted to $365.3 million so that net vestments of IFC's funds were managed by the Worlddisbursements totaled $99.9 million. Bank.

13

Consistent with its policy of revolving its equity port- Net Incomefolio, i.e., selling its stock in mature companies so as US$ Millionsto free up resources to invest in new ventures, IFC 30sold 12 equity investments made at a cost of $33.8million, realizing a capital gain of $13.6 million.

25

20.*,*- , ;;0s- -.-2 -I ', t

* -,=-; ..-X 5.LF .

, ' ., 7-,. ;z~' - ' u :.' L ' . 715

Operating expenses rose $39.9 million over the pre-vious year to $184.0 million. About $20.2 million of 5the increase was due to higher financial charges onborrowings which this Year amounted to $83.7 mil-lion. 0 ' L L L

1982 1983 1984 1985 1986

Reflecting in part the Corporation's increased busi-ness activities, administrative expenses increased by$8.7 million over the previous year to $60.2 million.

Approved by Business Sector: Fiscal 1986

NUMBER OF INVESTMENTS AMOUNT OF INVESTMENT

Fertilizers Cnemicalsand Petrochemicals 5%

Cement and Steei 8%30% Fertijizers,

Energy and Minerals 8% - Chemicalsand Petrochemicals

Wood Pulp and Paper 9%0/

5% Cement and SteeTourism and Services 13%

19% Energy andMinerals

Agribusiness 15%

7% Wood Pulp andPaper

Capital Markets/ ' 0 9% Tourism andFinancal Services 17% Services

6% Agribusiness

i-8% Capital Markets,f ~~ - >, Financial Services

Other Manufacturing 25% F S16% OtherManufacturing

14

However, out of every dollar of operating income, ad- Of the seven FY86 borrowings from the internationalministrative expenses accounted for 28.6 cents. capital markets, three were denominated in US dol-

lars, placed in off-shore markets; two were denominat-Charges against operating income for reserves against ed in Deutsche mark and placed in the Germanlosses increased. This Year, about $39 million was add- domestic market; and one each was placed in two newed to the reserve against losses as compared to $29.4 markets for IFC: European Currency Units (ECU) is-million the previous year. sued and sold in France, Belgium and Luxembourg;

and Swiss francs issued in Switzerland. The Corpora-tion was assisted in these borrowings by leading fi-nancial institutions that were well established in

Financial Resources those markets. IFC swapped its ECU issue and one ofits fixed rate US dollar issues into floating rate USdollar funds, on a LIBOR basis, at very advantageous

Borrowings costs.

While it continues to rely on the World Bank as aprincipal source of borrowed funds, the Corporationborrowed $350 million from the international capital Underwriters of IFC Market Borrowingsmarkets, meeting a portion of its needs, by raising Lead Managersfunds through seven private placements. This was Bayerische Vereinsbank, Aktiengesellschaftpossible because of sharp interest rate declines. partic-

' ~~IBJ International Limitedularly during the second half of the Fiscal Year. and Deutsche Bank, Aktiengesellschaftthe favorable reception and pricing accorded to IFC's Credit Commercial de Franceborrowing transactions. Deutsche Bank Capital Markets Limited

Yamaichi International (Europe) LimitedPaymentZs: Credit Suisse

Fiscal Year 1986CrdtSis

Co-ManagersCommerzbankBank Leu Ltd.

9% Repayments Banque Bruxelles Lambert S.A.I

The Corporation borrowed from the market whenever Receipts.it could do so at costs comparable to or lower than Fiscal Year 1986those of obtaining the same currencies from theWorld Bank. The market borrowings enabled the Cor-poration to reduce its cost of funds and lending ratessignificantly. Thus, IFC's fixed lending rate in US dol-lars was lowered by 300 basis points during FY86.The lending rates in other currencies, such as theDeutsche mark and Swiss franc, were also significant- 27% Repaymentsly reduced. and Sales

During the Year, the Corporation also borrowed $150million in various currencies from the World Bank.Repayments during the Year amounted to $49.1 mil-lion and drawings on World Bank loans totaled $94.4million. Total outstanding borrowings from all sources 46% Borrowingsincreased from $1,300 million at the end of FY85 to$1,918.1 million.

Capital and Accumulated EarningsThe board of Directors' resolution to increase the capi-tal stock of the Corporation to $1.3 billion, with the 27% Income fromauthorization of $650 million in new shares, was ap- Loans/Equityproved by the Board of Governors on December 26,1985 Subscriptions to the additional shares and pay-ment~ of one-fifth of the total ($130 million) are to bereceived by the Corporation by September 1, 1986. Asof the end of the Fiscal Year (June 30, 1986), subscrip-tions totalling $350 million of the capital increase andpayments of $60 million had been received. It is antici-pated that by September 1, 1986, subscriptions toabout 70 percent ($450 million) of the total and pay- determine whether any shifts in direction or emphasisments of roughly one-fifth of this amount ($115 mil- may be warranted by recent or foreseeable changes inlion) will have been received. Subscriptions to much of the international economic environment and thethe remaining 30 percent of the capital increase are needs of the private sector in IFC's member countries.being delayed by legislative and budgetary circum-stances in a few IFC member countries and it is expect- The entire $25.4 million of net income was added toed that most of this amount will be received early in accumulated earnings, bringing the total up to $283.8FY87. The remaining payment periods for the capital million. With paid-in capital of $601.8 million, theincrease run to February 1, 1987-1990. Corporation's net worth equaled $885.6 million, up

from $804.2 million at the end of the previous FiscalThe capital increase will provide IFC with the founda- Year.tion for implementation of the second Five Year Pro-gram, which began in FY85. This program includes 7percent per annum real growth in operations and netinvestment over the five year period, FY85-89, with Portfoliospecial emphasis on sub-Saharan Africa, financial mar-kets and institutions, corporate restructuring andenergy exploration. During FY87 the Five Year Pro- Status: At the end of the Fiscal Year, IFC's portfoliogram will be reviewed with the Board of Directors to contained loans and equity investments in 377 com-

16

panies located in 72 developing countries and two $271 million. This net increment reflects an increaseregions, and one investment worldwide in scope. The of $252.8 million for loans and $18.2 million for equi-total value of the portfolio was (in millions of US ty for IFC's account. There was also a reduction in thedollars): portfolio managed for participants of $147.8 million.

[ ' ar - ~;* * ~: ; ^ . g. ''.................. .,-:'CeLoan repayments amounted to $174.3 million and-' ' i .,'$172.4 million of investments was sold. While adding

,. . " '-',-''i40 new companies to the portfolio during the Year, in29 cases loans were repaid, equities sold or invest-

L . = ments written off.The Corporation mobilizes funds from commercialbanks and other financial institutions through loan Arrears and Write-Offs: The Corporation has paid par-participations and administers such loans on behalf of ticularly close attention to the performance of itsthe participants. During the year, the Corporation portfolio. The incidence of write-offs and arrearagescalled and disbursed $140.4 million of participants' on repayments of principal and charges increased dur-funds ing the period. After write-offs, interest payments ov-

erdue more than 60 days were 4.7 percent of totalNew commitments for the Year totalled $681.2 mil- disbursed loans at the end of the Fiscal Year, the samelion. After taking account of repayments, cancellations as in the previous year. 27.2 percent of the companiesand write-offs, the net increase in the portfolio was in IFC's portfolio were in arrears. This reflects mainly

the cumulative effect of companies with long-termarrears remaining in the portfolio while the Corpora-tion provides technical assistance to help them re-solve unusual difficulties. In most cases the difficul-

Portfolio ties with the portfolio could be traced to the generalNumber of Ventures by Sector adverse economic conditions which have prevailed

22.3% Other over the past several years.Manufactu ring

IFC supervises the portfolio continuously. All compan-ies in which IFC invests are required to submit quart.erly financial statements to the Corporation. Almost

S 19.6% Capital Markets/ one quarter of the Corporation's administrative ex-Development Finance penses goes to portfolio supervision. This includes

providing work-out assistance to companies facing un-usual difficulties as well as the efforts of a special

_ _ 11 7% Cement andunit established within the Corporation to resolve* - 11.7% Cement and particularly difficult jeopardy cases. The CorporationSteel

has further strengthened the mechanisms for moni-toring the portfolio.

14.6% Food andAgribusiness Losses written off by the Corporation since its found-

ing in 1956 on investments held for its own accounthave amounted to $51.9 million against disburse-

10.3% Tourism and Services ments over the same period of $2,993.8 million. Loan9.5% Fertilizer, Chemicals and losses were 1.1 percent of its disbursed loans and

Petrochemicals equity losses 5.4 percent of its disbursed equity. Dur-4.8% Lumber, Pulp ing the Year, 12 write-offs against the reserve for loss-

and Paper es amounted to $18.1 million. Adequate reserves had7.2% Energy and already been set aside for such eventualities.

MineralsAs ol June 30, 1986

17

Reserve Against Losses: The Corporation follows a Year, the reserve was 10.0 percent of the total dis-conservative policy of building an adequate reserve bursed portfolio as against 10.0 percent the previousagainst losses by charging income with a provision for Year.losses following an extensive semi-annual review ofthe portfolio. Reflecting mainly the difficult business Sales from the Portfolio: During the Year, $33.8 mil-climate in many developing countries, $39 million was lion of equity was sold from the portfolio. On theseadded to the reserve compared with $29.4 million sales, the Corporation realized a gain of $13.6 million.added during the previous year.

Consistent with IFC's policy to encourage and broad-Total reserve after write-offs stood at $177.7 million at en local ownership in the private sector, most of theYear-end against loans and equity commitments out- portfolio sales were undertaken in the countriesstanding of $1,768 million. Thus, by the end of the where IFC investments were located.

18

The Year's Investments

egional Distribution: The 85 proj- Regional Distribution of IFC Investments:ects approved by the Board of Di- Fiscal 1986

rectors during the Year were located in 39 countries, NUMBER OF PROJECTSplus one that was global in scope. The previous year, 33% Latin America,75 investments were made in ventures in 38 countries Caribbeanand in one region.

In FY86, IFC approved investments for the first time 4- 29% Africain three countries-Grenada, Mozambique and the ..- ASeychelles. The Corporation also approved invest- ',ments in two other countries where it had not made Krinvestments during the prior three years. Of the totalapproved investments of $1,156 million, 33, with a F 26% Asiatotal value of $295 million, were located in countrieswith a per capita annual income of less than $800. 1 uThese investments accounted for 39 percent of the 12% Europeainvestments that IFC approved this Year and 26 per-cent of the amount approved. AMOUNT OF INVESTMENT

32% Latin Amernca"Regionally, investments were distributed as follows: 32 Lt Ca mbbean

-| .,'_ 10% AfricaDollar ,

Volume Number of(US$ millions) Projects .

Africa $117.1 24 AAsia $478.1 22 - 42% AsiaLatin America and the -Caribbean $366.5 28

Middle East/Europe $185.9 10 16% Europe/Worldwide $ 8.7 1 Middle East

The continued diversification of investment activity is Investments in food and agribusiness, which has beenin part due to IFC's more intensive promotional ef- an important sector for IFC investments, amounted toforts in both the developed and developing worlds. In $64.7 million for 14 ventures. This compares with lastthe latter, project promotion has been concentrated Fiscal Year's 13 food and agribusiness investmentson some of the smaller and poorer member countries. amounting to $59.3 million.About 16 percent of IFC's administrative expenseswere dedicated to promotional efforts last Fiscal Year. Capital markets projects also accounted for a signifi-

cant part of IFC's activities-12 investments totallingSectoral Distribution: The Corporation continued to $85 million. These encompassed a variety of opera-seek out and invest in a wide variety of business and tions including, for the first time, a mutual fund tofinancial institutions. This is particularly important invest in shares and other securities of companies in abecause, in all ventures, the Corporation tries to res- number of developing countries. Previously, IFC hadpond to the specific needs of, and circumstances pre- assisted a mutual fund investing in enterprises in justvailing in, each of its member countries. one country.

19

Sources of Financing and Ownership: It is estimatedFiscal 1986 that 44 percent of the total project financing came

from sources within the developing countries wherethe projects are located. Most of the foreign fundswere in the form of suppliers' credits or funding frominternational sources. Of the estimated $640.3 millionprovided by foreign commercial banks, over 70 per-

26% Minority shareholders only cent was raised through the syndication of IFC loans.It is estimated that some 71 companies from industri-al countries participated in one form or another inbusiness ventures that were supported by IFC this

14% Majority foreign owned Year. In 35 cases, foreign companies from 17 industrialcountries were equity investors.

9% Majority locally owned (pubIlc)Approximately $254.7 million of IFC investments wastaken up by government related financial institutionsof industrial countries which specialize in providingassistance to private enterprises in developing coun-tries. These included the German Company for Eco-

51% Majority local y owned nomic Co-operation (Development Company) (DEG)(prvate) in eight projects, the Commonwealth Development

Corporation of the United Kingdom and the EuropeanInvestment Bank in four projects each, the OverseasPrivate Investment Corporation in three projects,Caisse Centrale and the Netherlands Finance Com-pany for Developing Countries in two project each,and the Australian Guarantee Corporation, OverseasEconomic Cooperation Fund of Japan, the Export-Import Bank of the United States, the Industrial Fundfor Developing Countries of Denmark, and Swedfund

The range of sectors represented by IFC's investments in one project each.in Fiscal Year 1986 reflect the increasing diversity ofthe projects being undertaken by the Corporation. Of the investments approved by the Board of Direc-They included: tors, 37 were in wholly privately owned enterprises

and 48 were in mixed private/governmententerprises.

aluminum sulphate mining and refiningbananas motorcyclescement oil explorationcoal poultryfiberglass pulp and paperfinancial institutions resorts and hotelsfruit processing shrimp farminghealth care steel for constructionhydrogen peroxide synthetic rubberlogging and sawmills textilesmeat packing tomato paste

20

Africa

Board Approvals:

During FY86, the Board of Directors approved loans their incomes by supplying them with day-old chicks.and equity investments totalling $117 million for 24African business ventures. Of the total financing ap- Light industries, in particular textiles, represented an-proved, $107 million was for loans and $10 million for other main trend of IFC's investments in Africa thisequity. $5 million of the loans was syndicated to other Year. The African textile industry is in need of majorfinancial institutions. modernization programs to allow it to remain compe-

titive with imports and to develop its export potential.At the end of the Fiscal Year, the Corporation held In Tunisia, for example, IFC invested $8.2 million to$480 million in 103 ventures in 29 African countries assist in the modernization and privatization of SITEXincluding one regional project: about $421 million in (Societe Industrielle des Textiles, SA.). SITEX is theloans and $59 million in equity. This compares with largest integrated textile mill in Tunisia.IFC investments in 98 ventures with $348 million inloans and $69 million in equity at the end of the prior Also within the textile sector, IFC provided a loan ofFiscal Year. As in last year's Annual Report, the Cor- $11.14 million to Nigerian Textile Mills Ltd. to helpporation's investments in Egypt were included in the modernize its facilities. This investment also marked aEurope and Middle East Region. The focus of IFC re-activization of IFC's operations in Nigeria afteractivity during FY86 in Africa has continued to be some years. It reflected IFC's resolve to assist theagro-industrial projects, light industries-in particular development of companies with established records oftextiles-and natural resources. performance and reasonable prospects in the period

of lower growth and difficult economic adjustmentsOf this Year's approved investments, 17 percent were which the country is likely to face in the short toin the agro-industry sector, which reflects the contin- medium term.uing effort by most countries in Africa to reduce theirdependence on imported foodstuffs. Three of this Natural resources continued to constitute an impor-Year's agribusiness projects merit particular reference: tant part of IFC investments in Africa this Fiscal YearIFC made its first investment in Mozambique, where with the development of five projects in the loggingthe Government has begun to open its economy to and mining sectors in four countries.the private sector. This was a loan of $2.5 million toLOMACO, an agricultural project which will privatize In Liberia, for example, IFC assisted in the rehabilita-and rehabilitate several farms previously owned and tion and expansion of the Liberian Timber and Ply-operated by Government. The project will produce wood Corporation in connection with the company'scitrus and cotton for export, as well as food crops for return to private operation. IFC made an $8.5 millionthe domestic market. loan to this $25.9 million project.

The second agribusiness project of interest was in the An important characteristic of IFC investments in Afri-Cameroon: SILAC, a company which will use imported ca this Year has been the privatization and rehabilita-milk powder to produce sterilized milk yogurt and ice tion of previously government-owned ventures. Of thecream. This project provides a good example of IFC's 24 investments approved this year, two involved suchefforts to promote business ventures with African en- efforts. In Swaziland, for instance, IFC joined with thetrepreneurs. It will involve a substantial participation Government, other multi-national and bilateral finan-by Cameroonian shareholders. cial institutions to take over the assets of a Govern-

ment-owned development finance company which wasIn Zimbabwe IFC has approved financing for the mod- defunct. A new company is being formed in which theernization and expansion of another agribusiness en- Govenment will have a minority of the share capital.terprise. It is investing $5.3 million in a program to IFC will provide a total of $3 million for the projectnearly double production of Crest Breeders Interna-tional Pvt. Ltd., the country's largest poultry raising Investment Overviewoperation. This project will have important economic The economic situation in most of sub-Saharan Africabenefits both in expanding foreign exchange earnings has remained difficult While many countries in easternand in assisting small poultry growers to increase and southern Africa emerged from one of the worst

21

IFC FY86 Investment in Africa

IFC ProjectCompany Country Type of Business Investment Costs

(US$ millions)

Cotonniere Industrielle du Cameroun Cameroon Textiles 2.85 6.80Societe Industrielle Laitiere du Cameroun Cameroon Foods and agribusiness 2.45 9.60Congolaise des Bois lmpregnes Congo Pulp, paper and timber 1.83 5.50Congolaise Industrielle des Bois Congo Pulp, paper and timber .86 2.10Etablissements R. Gonfreville, SA C6te d'lvoire Textiles 7.99 21.30Liberian Timber and Plywood Operation Company Liberia Pulp, paper and timber 8.50 25.90Socota Textile Mills Limited Mauritius Textiles 6.00 22.10Societe Metallurgique d'Imiter Morocco Energy and mining 4.59 33.90Companhia Agro-Industrial Lonrho-Mocambique

Limitada Mozambique Food and agribusiness 2.50 15.50Nigeria Engineering Works Ltd. Nigeria Manufacturing 9.10 20.00Nigeria Textile Mills Limited Nigeria Textiles 11.14 25.00Societe de Teinture, Blanchiment, Apprets

et d'lmpressions Africaines Senegal Textiles 2.57 7.40Ailee Development Corporation Limited Seychelles Tourism and services 9.45 40.80The Royal Swaziland Sugar Corporation Limited Swaziland Food and agribusiness 2.09 3.40Swaziland Investment and Development Company

Limited Swaziland Development financing 3.00 31.00ADWYA SA Tunisia Pharmaceuticals 2.32 9.90Societe Industrielle des Textiles Tunisia Textiles 8.20 20.20Crest Breeders International Pvt. Ltd. Zimbabwe Food and agribusiness 5.34 12.30Hunyani Paper & Packaging Limited Zimbabwe Pulp, paper and timber 15.67 28.80

Sub-total 106.41 341.50Africa capital markets investments (see page 32) 10.71 48.00

TOTAL 117.12 389.50

famines caused by the prolonged drought, these gains they can function profitably. In the interim, the econo-were partly offset in some countries by both internal mies face slower growth and constraints on investment.and external constraints. Although the process of ad- Thus, while uncertainties continue, the stage is per-justment of Government's policies with regard to price haps being set for more promising medium and long-control and rates of exchange has begun in several term growth.countries, distortions continue in many others and hin-der the prospects for sustained growth. Several African countries are increasingly looking to

the private sector as the main driving force for sus-

The foreign exchange and balance of payment prob- tained economic growth. However, the structure of ad-lems have continued to be severe. In some cases, these ministrative regulations, policies which have the effectdifficulties were accentuated by lower prices for com- of protecting inefficient public sector enterprises andmodities on the international markets. While several price controls which have been in place for many years,sub-Saharan countries have begun the process of eco- are still major problems in a number of countries. Innomic adjustment, there is still a long way to go and these cases, it will take some time to establish a posi-the situation in the intervening period will remain dif- tive business climate in which the private sector hasficult. Economic adjustment programs will have to be real confidence to undertake genuine new investments.applied consistently over a relatively long period if theyare to reduce the inflationary pressures, bring the ex- Regional Initiativeschange rates to more realistic levels and provide rela- In the context of its technical assistance activities. IFCtively efficient enterprises an environment in which is developing a regional program to help member

22

countries in Africa to increase the inflow of productive region in receiving such policy advice assistance. Aforeign direct investment. This regional program, number of countries have expressed interest in IFCwhich is part of a more general effort described in the assistance, and IFC has begun to define the terms ofsection on Other Operations, will help member govem- reference for an advisory project in Ghana.ments to review and adjust policies, regulations andinvestment promotion strategies that affect foreign di- Other initiatives taken by IFC in FY86 include therect investment. Financial support for the preparation launching of the African Project Development Facility,of the regional program is being provided by UNDP a program to help sub-Saharan African entrepreneurs,and IFC. During FY86, efforts were directed mainly at described in detail in the section on Other Operationsidentifying the interest of member countries in the of this Report.

2:3

Asia

Board Approvals:

During Fiscal Year 1986, the Board of Directors ap- project is to be located in an International Develop-proved loans and equity investments totalling $478 ment Association funded tourism development areamillion for 22 Asian business ventures. Of the financ- on Indonesia's island of Bali.ing approved, $443 million was for loans and $35million for equity. $319 million of the loans were Also in the East Asia Region, IFC's first investment insyndicated to other financial institutions. a private hospital is being made in Thailand. It will

provide much-needed hospital facilities in the Bang-At the end of the Fiscal Year, the Corporation held kok area, help develop quality health services and$508 million in 95 ventures in 13 Asian countries enable the Government to apply scarce medical re-including one regional project: about $412 million in sources to rural areas.loans and $96 million in equity. This compares withIFC investments in 95 ventures with $336 million in A new trans-Pacific optic fiber cable linking the Phil-loans and $96 million in equity at the end of the prior ippines with North America will be financed with theFiscal Year. help of a $30 million IFC loan. The cable replaces a

soon-to-be retired analog cable and will increase theFourteen of this Year's investments were to establish efficiency and capacity of electronic traffic to andnew companies or were made in companies never be- from the Philippines.fore having received IFC assistance.

Three investments in agribusiness projects, all rela-How the Corporation's private sector efforts can bene- tively small in size, are expected to have substantialfit from the infrastructure work of the World Bank impact:Group was illustrated in FY86 by a project in IFC's - Fiji's wood products will be upgraded in a proj-East Asia Region where an IFC assisted resort hotel ect increasing the value of its forest resources

IFC FY86 Investment in Asia

IFC ProjectCompany Country Type of Business Investment Costs

(US$ millions)

Bata Shoe Company (Bangladesh) Limited Bangladesh Shoe manufacturing 0.25 2.60Fiji Forest Industries Fiji Wood processing 3.98 13.30Escorts Limited India Automotive 8.04 48.30Gujarat Fusion Glass Limited India Plate glass 9.36 40.10Hero Honda Motors Limited India Automotive 7.10 21.90Nagarjuna Signode Limited India Steel 0.33 3.30The Great Eastern Shipping Company Limited India Shipping 10.00 45.30The Tata Iron and Steel Company Limited India Steel 11.37 79.90Wimco Limited India Agribusiness 4.70 16.10P.T. Bali Holiday Village Indonesia Tourism 9.84 28.10Korea Zinc Company, Ltd. Korea Zinc/lead 6.00 100.40Fecto Cement Limited Pakistan Cement 7.24 87.50BPI Agricultural Development Bank Philippines Agricultural financing 1.00 3.70Philippines Cocoa Estates Corporation Philippines Agribusiness 4.60 18.70Philippine Long Distance Telephone Company Philippines Telecommunications 30.00 120.00Pure Foods Corporation Philippines Shrimp farming 1.43 4.70Naco Tomato Paste Thailand Agribusiness 4.88 7.40National Fertilizer Corporation Limited Thailand Fertilizer 323.03 481.90Phya Thai II Hospital Thailand Hospital 4.94 20.10

Sub-total 448.09 1,143.30Asia capital markets investments (see page 32) 29.99 117.70

TOTAL 478.08 1,261.00

24

and expanding exports; Foreign investment interest in China remained strong- a shrimp farming and processing enterprise- despite the Government's more cautious approach due

stemming from a recent IFC study on develop- to the temporary decline in the country's foreign ex-ing exports through the Philippine aquaculture change reserves. Following the first IFC joint venturesector-is expected to generate significant for- in China announced last year, discussions are proceed-eign exchange earnings and encourage similar ing on various other projects in cooperation with for-enterprises in the area; and eign investors.

- A tomato paste venture in Thailand will improvetomato yields, increase farmers' incomes in an In the Philippines, there appears to be a resurgenceunderdeveloped region and diversify crops away in investor confidence following the installation offrom tobacco. the new Government.

In IFC's South Asia Region, IFC made its first invest- The sharp decline in oil prices has meant that oil-ment in the shipping sector in India with $10 mil- exporting countries, such as Malaysia and Indonesia,lion in equity and a convertible loan that will help have had to make significant adjustments in publicstrengthen a promising shipping company's capital expenditures while encouraging the private sector tostructure. The Corporation invested $9.4 million in take on more of the responsibility for economicIndia's first high quality sheet glass plant-a project growth.where IFC was instrumental in negotiating technol-ogy transfer arrangements. In another venture, IFC The private sector in Thailand is also being encour-provided $11 million to further improve the efficien- aged to play a larger role in selected, previously pub-cy of India's only private sector integrated steel lic sector activities. Moreover, export-oriented enter-plant. prises are being encouraged, as are large-scale proj-

ects that can utilize the country's natural gas re-IFC made its first investment in the Indian agribusi- sources. The economy, despite unfavorable terms ofness sector with a $4.7 million loan for a fruit juice trade, has registered moderate growth.processing project that has significant export poten-tial. Two other investments will support the indigeni-zation of motorcycle production. A $7.1 million loanwill help finance the production of motorcycle en- IFC's Regional Initiativesgines, while an $8 million loan to another companywill assist the introduction of new motorcycle models. During the past Year, IFC initiated a new program of

The Corporation also provided $7 million to support a policy advice in the Asian Region. The regional pro-cement project in Pakistan and made a loan to help gram, which is part of a general effort described incement projet intPakist an maade. a the section on Foreign Investment Advisory Service, is

designed to help member countries review and adjust

Investment Overview their policies and institutions dealing with foreigndirect investment. The intent is to assist members

Conditions generally continued to favor private invest- develop an environment that is conducive to foreignment in South Asia in FY86, especially in India where direct investment.the private sector has responded enthusiastically tolower taxes, simplified investment approval proce- During the past Year, a number of countries in thedures and other policies increasing the scope for in- region have expressed their interest in the new pro-vestment. gram, and discussions have been initiated with several

countries to define programs of assistance for FY87.Recent elections in Pakistan and initial Government In addition, the work was carried out to prepare asteps to implement a deregulation policy are laying seminar in FY87 for Chinese officials designed to re-the groundwork for increased private investment view a number of important policy issues in light ofthere. Bangladesh and Sri Lanka moved to privatize a IFC experience and the experience of major hostnumber of public firms. countries.

25

The regional program is being supported financially smaller, emerging business groups. The Corporationby the UNDP, IFC, bilateral donors and the client also emphasized mobilizing foreign exchange financ-countries. ing for larger-scale projects and assisting in project

arrangements.In the Philippines, IFC is continuing technical assis-tance to help rehabilitate sound enterprises that have In Pakistan, IFC continued its interest in the oil andencountered difficulties because of economic disrup- gas sectors-both exploration and field develop-tions over the past few years. ment-and in assisting the Government's public sec-

tor disinvestment program. It also developed a novelIn Korea, IFC has begur exploring possible assistance means to finance small-scale ancillary manufacturersto Korean companies in rested in potential joint ven- in the engineering sector.tures in other developing countries. IFC will also fo-cus on the needs of smaller companies in developing In Bangladesh, IFC supports the Government's effortsfinancial instruments to strengthen their financial to develop domestic raw materials, principally naturalstructures. In Thailand, IPC's focus will continue to gas, and projects in areas such as the transportationbe on natural resource based projects and on agribusi- and distribution of liquified petroleum gas, fertilizer,ness ventures. petrochemicals and cement. This includes actively

promoting promising projects through investor identi-The increased IFC investment in South Asia was heav- fication, project negotiations and feasibility studies. Inily influenced by greater activity in India where the Nepal, IFC sees investment opportunities principallyCorporation is particularly interested in projects in- in the mining sector and in rehabilitation of tea es-volving technological innovation or technology trans- tates and, in Sri Lanka, it has been asked to assist infer-whether sponsored by larger, established firms or the privatization of the telecommunications sector.

26

Europe and the Middle East

Board Approvals:

During FY86, the Board of Directors approved loans The four projects financed in Turkey are also focusingand equity investments totalling $186 million for 10 on generating foreign exchange. IFC helped financebusiness ventures in the Region. Of the total financ- two hotel complexes on the Mediterranean coast toing approved, $165 million was for loans and $21 cater mainly to the German tourist market and othermillion for equity. $33 million of the loans were syn- foreign visitors. A $15.5 million fiberglass expansiondicated to other financial institutions. project of Cam Elyaf to boost production capacity will

enable the company to substantially increase its ex-At the end of the Fiscal Year, the Corporation held ports to Western European countries. Cam Elyaf is the$559 million in 63 ventures in 11 countries in the sole producer of fiberglass materials in the country,Region: about $505 million in loans and $54 million including reinforced plastics, and a subsidiary of Tur-in equity. This compares with IFC investments in 58 kiye Sise ve Cam Fabrikalari A.S., the largest glassventures with $375 million in loans and $54 million manufacturing group and the fourth largest exporterin equity at the end of the prior Fiscal Year. in the country. IFC also helped finance the moderni-

zation of Guney Sanayi, one of Turkey's oldest andNine of this Year's approved investments were to es- largest textile concerns which earns substantial for-tablish new companies or were made in companies eign exchange by exporting largely to the Middle Eastnever before having received IFC assistance. and neighboring countries. IFC's assistance helped

the company to remain competitive.During the Year, most projects undertaken focused ondeveloping foreign exchange earning potential. Promi- Investment Overviewnent among these were two projects in the energysector. In North Yemen, significant oil discoveries Several host countries in the Region have pursued anwere made and IFC helped finance an early oil pro- open door policy and have actively sought the partici-duction and refining operation based on these pation of foreign investors. In the two projects ap-discoveries. proved by IFC this year in Egypt, foreign investors

played a major role with the participation of DenisonSimilarly in Egypt, IFC and a consortium of banks are Mines Ltd. of Canada in the Meleiha Oil project andproviding a $79 million package to help develop the Boliden Kemi Aktiebolag of Sweden in the Aluminiumnewest and most promising areas of low cost oil pro- Sulphate Company project. Similarly, German inves-duction, located in the Western desert. IFC was in- tors and management companies are participating instrumental in arranging the financial package for the the hotel/resorts which IFC is helping to finance inventure. Turkey. In Yugoslavia, the two major projects financed

IFC FY86 Investment in Europe and the Middle East

IFC ProjectCompany Country Type of Business Investment Costs

(US$ millions)

Aluminium Sulphate Company of Egypt Egypt Energy and mining 7.47 16.50Meleiha Oil Development Project Egypt Energy and mining 79.50 180.00Cam Elyaf Sanayii AS. Turkey Manufacturing 8.23 15.50Eska Turizm ve Ticaret AS. Turkey Tourism and services 2.18 9.90Guney Sanayi Ve Ticaret Islemeleri AS. Turkey Textiles 15.50 31.80Silkar Turizm Yatirim Ve Isletmeri A.S. Turkey Tourism and services 5.69 24.50Marib Agriculture Company Yemen Foods and agribusiness 2.86 12.30Yemen Refinery and Marketing Company Yemen Energy and mining 9.00 50.30Tovama Avtomobilov in Motorjev Yugoslavia Automotive/vehicles 22.97 90.10Tovarna Glinice in Aluminija Boris Kidric Yugoslavia Manufacturing 32.38 115.90

TOTAL 185.78* 546.80*

*Excludes $110,000 investment in $2.8 million lYukish enterprise, not counted as a project.

27

during the Year had significant European involve- contribution to the availability of fresh fruit to Ye-ment. In the TAM truck project, Klockner Humboldt meni households.Deutz is the joint venture partner and in the modern-ization project of Tovarna Glinice in Aluminija Boris IFC's Regional InitiativesKidric, Pechiney of France has a major technical assis-tance role. During the year IFC opened a Regional Office in Is-

tanbul to help establish and strengthen the Corpora-Yugoslavia, Turkey and Hungary in particular are be- tion's relationship with the Turkish business and fi-coming more aggressive in seeking to attract foreign nancial communities and broaden contacts with theinvestors and IFC will concentrate its efforts in ass:st- Government in order to identify and help develop newing both domestic and foreign investors to strengthen private sector business opportunities. The Office willjoint venture relationships in all three countries. also help both foreign and domestic investors who

could benefit from IFC's financial assistance and otherAgriculture rela