IFC recent experience in FRY

Roberto Albisetti – Chief of Mission IFC Belgrade 4 February, 2003 – European Movement, Belgrade Economic Forum

International Finance Corporation

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

IFC: A Member of the World Bank Group

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

International Bank for Reconstruction and Development, 1945 International Finance Corporation, 1956 Multilateral Investment Guarantee Agency, 1988 International Development Association, 1960

World Bank Group Institutional Roles

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

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

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

• MIGA provides guarantees to foreign investors against noncommercial risk.

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Defining characteristics

• Participates only in private sector ventures • Shares same risks as other investors • Invests in equity • Has market pricing policies • Does not accept government guarantees • Is profit oriented 5

Capital Stock Held by our Shareholders

175 Member Countries

Five largest: 45.8% Other countries: 54.2% United States 24.1% Other countries 54.2% Japan 6.0% Germany 5.5% France 5.1%

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United Kingdom 5.1%

IFC’s Operating Income FY 1998–2002

U.S. $millions 380 400 300 249 212 200 241 100 0 FY98 FY99 FY00

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FY01 FY02 161

Financial strength

(As of June 30, 2002) Authorized capital

: $2.45 billion

Total capital

:

$6.3 billion

Capital strength

:

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

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Investments by Sector

FY02 Total Commitments: $3.61 billion Sector Commitment s $ millions Sector Commitments $ millions

Agriculture & Forestry 75 Financial 1,236 Pulp & Paper 73 Transportation & Warehousing 621 Health Care & Education 60 Information 310 Primary Metals 46 Construction & Real Estate Nonmetallic Mineral Product Manufacturing 289 227 Textiles, Apparel, & Leather 43 Food & Beverages 190 Accommodation & Tourism Services 39 Wholesale & Retail Trade Oil, Gas, Mining, & Chemicals 129 117 Professional, Scientific, & Technical Services 25 Industrial & Consumer Products 112 Plastics & Rubber

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

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IFC Financing

IFC Commitments FY02 Total: $3.61 billion 3 2 1 0 6 5 4 IFC loan participations & underwriting IFC loans and equity 1998 1999 2000 2001 2002 Includes loan guarantees and risk management products for FY99-02

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IFC in FRY

• • • • • • • FRY’s membership of WB and IFC in May 2001 IFC opened a field office in September 2001 IFC’s investment portfolio in former Yugoslavia was among the top country exposures One of the largest markets in Southern Europe Substantial interest from foreign strategic investors FRY is then a priority in IFC’s strategy to support private sector development IFC as an early investor aims at increasing confidence to attract foreign direct investments 11

• • • •

What IFC has achieved so far

MicroFinanceBank Yugoslavia, equity investment of US$ 1 million equal to 16.6% of share capital Raiffeisen Bank Yugoslavia, equity investment of Euro 1 million equal to 10% of share capital Fresh&Co (agribusiness) Loan of Euro 7.7 million, signed November 2001, disbursed Tigar Rubber Company (tires) Loan of Euro 16 million and equity investment of Euro 4 million (10% of share capital in new JV with Michelin) signed March 2002 12

• • • • •

IFC’s role in FRY

Invest in modernization: Serbia has largely under-utilized industrial infrastructure, mostly state or socially owned, some traditionally trade oriented Provide long term capital: during isolation companies have lost market share, are left cash starved, need investments but have no access to international financial markets Develop the local financial market: financial intermediation is still very low, interest rates are high Attract and provide confidence to foreign investors: in the early phase of transition, the privatization process is relatively slow and foreign investors are still prudent Provide technical assistance: skilled workforce is available, but modern managerial resources are limited 13

• • • • • • • •

IFC’s strategy in FRY

Help to fill some of the existing gaps by delivering results on the ground immediately, mobilizing significant resources Provide technical assistance to support capacity building (market focus, business plans, accounting discipline) Invest in commercially viable companies both private and partially private/to be privatized Support privatization and restructuring process Strong client focus, provide flexible solutions for modernization investments and working capital needs Provide comfort to foreign investors through a demonstration effect Focus on the financial sector (banks), develop other financial intermediaries (leasing, funds) Promote the growth of local entrepreneurship and SMEs 14

Actions being taken

• • • • • Focus technical assistance on critical segments of the real sector and financial sector, increased attention on infrastructure New project developments under way in garment-textiles, agribusiness, mechanical industry, pharmaceuticals, distribution, tourism, banking, insurance, leasing Build a broad pipeline of investment opportunities in order to diversify risks Intensify cooperation with the Privatization Agency to help increase results on the ground Mobilize financial resources to local intermediaries for on lending to SMEs 15

Project Cycle and Timing

As Seen by Client

Initial Discussions

Internal to IFC

Initial Review & Authorization to Appraise Mandate Letter Appraisal Financing Negotiations Info. Memo and Syndication Legal Documentation Disbursement Management Approval Board Approval

Supervision/Evaluation

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How to contact us

• Send us a brief outline of your project: description, sponsors, management, market and sales, industrial background, investment requirements, anticipated financial plan • IFC Belgrade Office, Kneginje Zorke 96 • Tel: (011) 3023760-1; fax: (011)3023733 • [email protected]

• www.ifc.org

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