IFC DONOR-SUPPORTED TECHNICAL ASSISTANCE PROGRAMS 2003 Report to the Donor Community © DiskArtTM 1988 © DiskArtTM 1988 © DiskArtTM 1988 © DiskArtTM 1988 This cover is the sixth in the series featuring flowers. We have used these images to symbolize our thanks to our development partners for their generous support. Previous years have featured cherry blossoms, dogwoods, tulips, edelweiss, and roses. This year's cover features the white lily. Copyright © 2003 INTERNATIONAL FINANCE CORPORATION 2121 Pennsylvania Avenue, NW Washington, DC 20433, USA www.ifc.org All rights reserved Manufactured in the United States of America Environmentally friendly printing on recycled paper using soy-based ink September 2003 The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Director, Trust Funds Department, IFC, at the address shown in the copy- right notice above. 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Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, USA Table of Contents 02 Message from IFC's Executive Vice President 04 Chapter 1: Leveraging Development Impact Opportunities through Technical Assistance 08 Donor Breakfast and Roundtable Meetings 10 Chapter 2: Technical Assistance and Advisory Services in the Regions 12 Sub-Saharan Africa 14 Asia & the Pacific 20 Europe & Central Asia 28 Latin America & the Caribbean 32 Middle East & North Africa 34 Global 38 Chapter 3: Donor-Funded Operations ­ Overview 39 Technical Assistance Trust Funds Program 44 SME Facilities 50 Private Enterprise Partnership 54 Foreign Investment Advisory Service 56 Social and Environmental Facilities 60 Capacity Building Facility 64 Annexes, Directory, and Glossary 66 Technical Assistance and Advisory Projects 86 IFC Donor-Supported Technical Assistance Programs: Purpose/Strategy 88 Cumulative Financial Support 90 Directory 92 Glossary Message from IFC's ExecutiveVice President I am very pleased to be able to present to you this comprehensive report on IFC's donor-supported technical assistance (TA) programs. As in previous years, support from you, our donor partners, was significant--you provided over $65 million in new commitments--and I would like to thank all of you for your continuing confidence in our approach to private sector development and poverty reduction. Our strategy remains strongly oriented toward frontier markets and frontier sectors. Now more than ever I am convinced that TA is absolutely critical in implementing this strategy.This conviction has grown from my visits to many of our client countries, from advice we have received from senior individuals with a lot of investment experience, and the success achieved by many of ourTA programs. In many countriesTA will be central to IFC's interventions; you will find evidence of this in the recent strategic initiative on Africa, where advisory services and capacity building activities are a large and integral part of the strategy. In the last year our TA programs have focused on the frontiers. Some of the numbers from our technical assistance activities will illus- trate this focus: · Over 90 percent of theTA assignments funded by theTechnicalAssistanceTrust Funds (TATF) program were in low- and lower-middle- income countries. REPORT from the IFC IFC regularly provides commercial financing globally and has extensive experience in evaluating and extending credit to financial institutions in emerging markets. The mission of IFC is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assis- tance and advice to governments and businesses. From its founding in 1956 through FY03, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY03 was $16.8 billion for its own account and $6.6 billion held for participants in loan syndications. 2 2 0 0 3 D O N O R R E P O RT · Over 50 percent were in high-risk countries. subsovereign tiers of governments.To be able to respond to the require- · Over 10 percent were in countries with a high incidence of poverty. ments of these entities, there is a need for the World Bank Group to become involved in stand-alone financing of their investment needs. OurTA delivery mechanisms are also comprehensive.Facilities (both In this context the World Bank Group created a new unit, the SME facilities and the Private Enterprise Partnership) now cover all Municipal Fund.With staff from both the Bank and IFC, its objective the developing regions with strong field-based networks, and our is to gain market knowledge in this sector by making a few investments HQ-based programs (such asTATF and the Social & Environmental in municipalities and entities controlled by municipalities, without Facilities) are able to provide complementary support.The critically sovereign guarantees.Armed with this knowledge and the experience important Financial Markets TA is now organized and managed gained through pilot transactions, the team will develop ideas for the with a central focus to enable maximum value. World Bank Group to respond to market needs.This will be done in close consultation with other multilaterals, bilaterals, donors, interna- IFC attacks poverty by supporting the private sector ­ which is a huge tional municipal/mayoral associations, private financial institutions, creator of jobs ­ and also uses our presence in the marketplace to rating agencies, and civil society to ascertain the specific needs of the leverage the opportunity to do more, and to persuade our partners sector. The Fund is currently processing its first investment, the to do more. Tlalnepantla MunicipalWater Conservation Project in Mexico. Peter Woicke The withdrawal of the foreign private sector from emerging markets IFC's perceived mandate and focus have become much broader than IFC ExecutiveVice President has increased the demand for our services. It has also meant that we the "transaction orientation" of the past.The use of TA at an earlier September 2003 have had to adapt our business and be more involved in earlier stages stage,with IFC in the role of project developer,is different from what of project development,making much more use of TA.To enable us we did even ten years ago.This is a challenge for IFC and its part- to do this more productively, over the last year we have undertaken ners. For us to do what is demanded of us where we have a compar- two important initiatives,with the objective of improving the organ- ative advantage,we will need a much more planned and stable source ization and delivery of these services. Firstly, we have "unbundled" of TA funding, not ad hoc pools of money. I foresee that more and our activities,recognizing those that are more closely linked with our more of what we will need to be doing in the pursuit of poverty traditional investment activities and those that are purely of an advi- reduction through the development of the private sector will require sory or capacity building nature.Secondly,we are working to measure the coordinated support of all our development partners, including the impact of advisory activity. This review is in progress,and we will the generous donors who have supported us through the years.We be reporting to our Board on a regular basis. have to be able to handle this in a streamlined and efficient manner, without creating administrative overheads for our partners, while We have also started developing different models of PPPs ­ Public simultaneously meeting mutual development objectives. We need Private Partnerships ­ and an investment in power in Tajikistan is a donors to "buy in" to our strategic development objectives and good example.It used donor funding for early stageTA,has commer- partner with us over the longer term. cial financing for the project itself,while using donor and IDA money to enable a lifeline tariff support mechanism for those who cannot IFC is committed to follow through on this role and seeks to work afford to purchase the power. in close collaboration with our donor partners in doing so. Our shareholders and our Board support these partnerships, as evidenced We are also focusing on another important area. The World Bank by the fact that in the budget for FY04, IFC has allocated $33.4 Group has been aware that in many of its client countries,much of the million from net income as our contribution toward technical assis- responsibility for providing infrastructure and other critical services in tance and advisory work, a vote of confidence to match that given our client countries has been transferred to municipalities and other to us by you, our donor partners. 2 0 0 3 D O N O R R E P O RT 3 1 Leveraging Development Impact Opportunities Through Technical Assistance These [donor] resources enable development activities which would not happen if just left to market players pursuing exclusive commercial returns T echnical assistance (TA) activities are a significant portion of IFC's activities, helping to enhance IFC's development impact. Many of these activities are central to building the private sector in developing countries, beyond what IFC can do through its commercially oriented investing. They are delivered through a variety of programs/mechanisms across the Corporation (see Chapter 3 and Annex ­ IFC Donor- Supported Technical Assistance Programs). Donors provided the majority of the funds needed, which are addition, SME development and sustainability continue to have a complemented by contributions from IFC's own budget resources high priority.IFC'sTA activities continue to support and enhance and staff time and, in some programs, by contributions from other the development impact of these priorities. World Bank Group sources.These resources enable development activities which would not happen if just left to market players A large part of TechnicalAssistanceTrust Funds (TATF) and Private pursuing exclusively commercial return,yet at the same time bene- Enterprise Partnership (the Partnership) projects are in financial fiting from the private sector discipline and orientation that IFC markets, reflecting the fact that about 40 percent of IFC's invest- brings to the table. ments in the last few years were in the financial sector. These TA projects include helping to create and to strengthen a range of finan- cial institutions in member countries ­ from first private commer- cial banks in transition countries to microfinance institutions ­ and Focus on Frontier developing domestic intermediaries as conduits for IFC financing, Markets Continues enabling more firms to access the kind of long-term funding essen- In its investment operations,IFC maintains a clear focus on coun- tial for capital investments.IFC has provided advice to policy-makers, tries where there is little or no foreign capital flow or areas and regulators, and institutions in many member countries on market sectors within a country where there is very limited capital avail- structure, institutional management, and corporate governance. ability.IFC also seeks to emphasize spill-over sectors that contribute relatively more to development,i.e.,where spillover effects in addi- Going forward, IFC will pursue partnerships with donors inter- tion to the economically productive use of capital are significant. ested in financial markets development under three global themes: These have included domestic financial markets, infrastructure, institution building for banks; diversification into nonbank finan- information and communications technology,and social sectors.In cial services; and increased financing for SMEs. 2 0 0 3 D O N O R R E P O RT 5 The SME Sector ­ a difficult development challenge - continues Sustainability has emerged in recent years as a new challenge for to be a high priority of many of IFC's member governments, and many businesses in developing countries.As public concerns grow a difficult development challenge. IFC finds that financing SMEs over a broad range of environmental,social and governance issues, through intermediaries provides notably better asset quality than companies in these countries face new demands from consumers, investing in SMEs directly.IFC's SME strategy therefore focuses on investors, trading partners, regulators, and policy-makers. Related (a) continued efforts to create specialized financial intermediaries opportunities also arise, and the emergence of sustainability as a or extend the services of existing domestic institutions to serve business issue has found IFC extremely well-positioned to add SMEs, and (b) significantly expanded non-investment support to value to its clients in reducing risks and finding opportunities to build and effectively utilize domestic capacity and improve the reduce costs and gain competitive advantage.By finding new ways investment climate for SMEs. to increase convergence between the private interests of firms and the public goods deriving from good environmental,social,gover- As a result there has been a major buildup in microlending and on nance practices, IFC is able to both help clients and improve the several high-profile demonstration linkage projects,some of which quality of growth in our member countries. have been supported by the Capacity Building Facility (CBF). The SME Facilities and PEP have significant field networks that enable the speedy delivery of TA,once programs are designed and International Banks Follow IFC Lead funded. They have each developed multiple partnerships with donors and executing agencies in the last two years.The networks are being tapped in efforts such as building supply and distribution In June 2003, ten leading banks from seven countries chains to link smaller companies to major investors and building adopted the Equator Principles, a set of guidelines which business support services and improving the regulatory environ- were developed and based on the policies and guidelines ment for SMEs. of the World Bank and IFC for managing social and envi- ronmental issues related to the financing of development Major challenges remain in terms of scaling up impact, upgrading projects. The banks received extensive advice and guid- assessment of results,finding effective business models for financing ance from IFC, including a screening process for projects small (as distinct from micro) enterprises, and rationalizing the that is based on IFC's environmental and social screening process. funding of these activities.A number of steps have been taken to make headway on these challenges, in particular the collaboration The IFC Web site established for the Equator Principles, with International Development Association (IDA) for initiatives equatorprinciples.ifc.org, receives on average about 80 to scale up its activities and impact. It is expected that a number visitors per day, for a total of 3,000-plus visitors of countries will take part in the $225 million pilot program over through July. the next three to four years,drawing funding from IDA credits,IFC and other commercial investors,and other sources.Comprehensive country-specific initiatives will focus on access to financial serv- ices, capacity building and business development services, and investment climate and enabling environment (see box, page 12). 6 2 0 0 3 D O N O R R E P O RT The three Social and Environmental Facilities established one year Improvement of Development ago are spearheading these efforts along with a Corporate-wide Effectiveness of Advisory emphasis on mainstreaming environment and social sustainability in IFC's operations. and Capacity-Building Activities Each of IFC's donor funded operations is tailored to differing IFC, in line with the World Bank's own strategic emphasis, is also yet complementary specific objectives (see Chapter 3 for details) focusing on strengthening the investment climates. Over the and includes self-assessment of development impact. These longer term, focusing on this area is expected to lead to stronger systems, with varying evaluation tools, are currently operating growth in private sector development.IFC supports governments' independently. efforts on privatization, on attracting foreign investment, and on improving the investment climate ­ especially for SMEs. Given the increasing importance of advisory and capacity-building activities,in FY03 IFC initiated an"unbundling"exercise to better recognize the resource implications and to enable a more informed discussion about the mix between these activities and those closely related to IFC's more traditional investment activities.This exer- cise also includes an effort to create more robust indicators of the development impact of theTA activities,both ex-ante and ex-post, to ensure that the resources are appropriately directed. Strengthened partnerships among donors,IFC,and local benefici- aries of TA are very important in order for the experience to be shared and the development impact of TA to be scaled up. IFC continues to hold discussions with the donors about their priori- ties in the regions and sectors of mutual interest so that the devel- opment objectives are achieved to the satisfaction of all the stakeholders. Donor Breakfast and Roundtable Meetings IFC ANNUAL DONOR BREAKFAST MEETING |Washington, D.C., September 28, 2002 IFC's Annual Donor Breakfast meeting, held in conjunction with IFC's ability to achieve its development mandate while conducting the World Bank/IMF Annual Meetings in Washington, D.C., was prudent and profitable business. This contributes to the recogni- chaired by Mr. PeterWoicke, ExecutiveVice President of IFC and tion of IFC as the leading financier for the private sector in Managing Director of theWorld Bank.The Donor Breakfast is the emerging markets. main forum for IFC to discuss its programs and activities with the donor representatives. It provides IFC and the donor community The breakfast meeting comprised two sessions.In the first session, with an opportunity to lay out the broad directions of their in his opening remarks, Mr. Woicke indicated that IFC would strategic priorities for the coming year and to review the perform- continue to pursue its strategy of emphasizing work on helping to ance of past or current initiatives. build robust and effective private financial markets,targeting infra- structure investments (including telecommunications,power,trans- At the meeting, the donors acknowledged the enhanced role that portation,and utilities),and support for the SME economic sector. IFC is playing,and has to continue playing,in the markets at a time At the same time, he said, IFC would continue to work with when private flows are being retrenched from emerging economies. donors, with other development entities, and with private groups IFC's support inArgentina (IFC is the only lender that has injected to find new tools to promote private sector development.This was new funds after the crisis) is well recognized by the financial followed by an active discussion on various issues, including a community. Past experiences of countercyclical investments (such possible mechanism for the provision of subsidies in infrastructure as in Korea during the Asian crisis) as well as IFC's approach projects, and the need for patient capital. to selectively assist sound clients in crisis countries illustrate In the second session, presentations were given by IFC staff managing substantial technical assistance programs.The presenta- tions and discussions covered the progress to date and planned future activities of these programs.The participants were generally positive toward discussing further cooperative arrangements with IFC on sustainability,providing innovative public-private financing for selected projects, and helping IFC to extend its expertise to more clients, sectors, and regions. 8 2 0 0 3 D O N O R R E P O RT IFC DONOR ROUNDTABLE MEETING |Paris, April 15-16, 2003 The theme for this year's IFC Donor Roundtable was: Beyond suggested that particular attention be paid to local implementa- Financing: Enhancing Private Sector Capacity Through tion capacity limitations in the client country, especially with Partnerships. A broad cross-section of donor representatives respect to SMEs. attended the Roundtable, as did a delegation of IFC staff, led by Mrs. Farida Khambata, Vice President Portfolio and Risk Donors saw an important role for IFC in the area of public-private Management, who chaired the Roundtable.Through a series of partnerships, but stressed the need for tailor-made approaches IFC presentations and open discussions the Roundtable demon- adapted to country circumstances:adequate attention must be paid strated what specific activities IFC and its partners have carried to regulatory framework and pricing policies; the public partner out together to develop the private sector and enhance private must be strengthened;a strong,independent regulatory mechanism sector capacity in emerging client countries. The Roundtable must be in place; and stakeholders must be actively involved and offered an opportunity for a constructive exchange of ideas on fully informed.They also called for IFC to play more of a role in strengthening partnerships.The Roundtable also showed how, by facilitating access to credit for municipalities.They welcomed IFC's strengthening and expanding partnerships,IFC and its donor part- work on environmental and social sustainability and cautioned ners can support new activities with a view to achieving their that corporate social responsibility should not be limited to larger, common poverty reduction objectives. The donors expressed export-oriented enterprises but should include smaller, domestic general satisfaction with the Roundtable and welcomed the market enterprises. continuation of an annual IFC Roundtable, to be held at the same time and location, possibly back-to-back with the World Donors encouraged IFC to share itsTA experience with its part- Bank Donor Roundtable. ners in a spirit of greater complementarities with the regional banks. They commended IFC's efforts to implement a moni- In view of IFC's increasing use of TA in recent years, several toring and evaluation system that more clearly captures the donors felt there should be clear guidelines on IFC's priorities and impact of IFC's TA on poverty reduction. They also endorsed use of TA,and a more strategic and coordinated approach to IFC's proposals to streamline donor trust funds approval processes and donor fundraising efforts so as to avoid confusion and a percep- welcomed the trend in the direction of comprehensive frame- tion of competing programs. Donors also called for a more direct work agreements,given the largely positive experience of several link between IFC's TA and investment operations, and a clearer donors with them thus far. policy on the ratio of IFC grants to its investment operations.They cautioned that in providing subsidies to IFC's investments through donor-funded TA, IFC should be transparent in its selection of companies to receive these subsidies, to avoid giving an unfair advantage to certain companies. Many donors stressed the need for a clearer link between IFC's TA activities and poverty reduc- tion through the Country Assisted Strategy (CAS) / Poverty Reduction Strategy Papers (PRSP) process. In particular, they envisioned a closer link to the Millennium Development Goals and a more explicit incorporation of such issues as HIV/AIDS and gender into IFC's operations.They pointed out that most of the world's poor work in the informal and agriculture sectors and IFC should make more of an effort to reach them. Donors also 2 Technical Assistance and Advisory Services in the Regions Private sector-led development must play a bigger role in meeting the development challenge and poverty reduction 12 14 20 28 32 Sub-Saharan Asia & Europe & Latin America & Middle East & Africa the Pacific Central Asia the Caribbean North Africa Angola, Benin, Botswana, Burkina Faso, Bangladesh, Bhutan, Cambodia, China, Albania,Armenia,Azerbaijan, Belarus, Antigua & Barbuda,Argentina, Afghanistan,Algeria, Bahrain,Arab Burundi, Cameroon, CapeVerde, Fiji, India, Indonesia, Kiribati, Republic Bosnia and Herzegovina, Bulgaria, Bahamas, Barbados, Belize, Bolivia, Republic of Egypt, Islamic Republic Central African Republic, Chad, of Korea, Lao People's Democratic Croatia, Czech Republic, Estonia, Brazil, Chile, Colombia, Costa Rica, of Iran, Jordan, Kuwait, Lebanon, Libya, Comoros, Democratic Republic of Republic, Malaysia, Maldives, Marshall Georgia, Hungary, Kazakhstan, Dominica, Dominican Republic, Morocco, Oman, Pakistan, Saudi Congo, Republic of Congo, Côte Islands, Federated States of Micronesia, Kyrgyz Republic, Latvia, Lithuania, Ecuador, El Salvador, Grenada, Arabia, Syrian Arab Republic,Tunisia, d'Ivoire, Djibouti, Equatorial Guinea, Mongolia, Myanmar, Nepal, Palau, FYR Macedonia, Moldova, Poland, Guatemala, Guyana, Haiti, Honduras, United Arab Emirates,West Bank and Eritrea, Ethiopia, Gabon,The Gambia, Papua New Guinea, Philippines, Romania, Russian Federation, Serbia Jamaica, Mexico, Nicaragua, Panama, Gaza, Republic ofYemen Ghana, Guinea, Guinea-Bissau, Kenya, Samoa, Solomon Islands, Sri Lanka, and Montenegro, Slovak Republic, Paraguay, Peru, St. Kitts and Nevis, St. Lesotho, Liberia, Madagascar, Malawi, Thailand,Tonga,Vanuatu,Vietnam Slovenia,Tajikistan,Turkey, Lucia,Trinidad and Tobago, Uruguay, Mali, Mauritania, Mauritius, Turkmenistan, Ukraine, Uzbekistan República Bolivariana deVenezuela Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland,Tanzania,Togo, Uganda, Zambia, Zimbabwe 2 0 0 3 D O N O R R E P O RT 1 1 these challenges African governments have maintained prudent macroeconomic policies. The New Partnership for African Development,anAfrican initiative that promises to bring improved governance and economic development, progressed through the year and is expected to attract new investment in the region. Sub-Saharan Africa SMEs remained a key component of IFC'sAfrica strategy in FY03, and the World Bank Group's jointly managed SME Department continued to provide training,capacity building,management,and other services through the field-basedAfrica Project Development Promoting Sustainable Development Facility (APDF) and the African Management Services Company through the Private Sector (AMSCO). (See Chapter 3) Africa continues to be a key priority, and a unique challenge, for IFC and the international development community. Economic In the financial sector,TA initiatives focused on the development growth levels has modest,and in many countries in the region,glob- of financial markets and institutions, including training programs alization has not had the beneficial impact experienced in other for banks on project finance and SME lending. In developing developing countries.While the global economic slowdown has had countries all over the world,but especially inAfrica,many segments a less pronounced impact on Africa than on other regions, it has, of the population suffer because of a lack of access to credit. however,depressed commodity prices forAfrica's principal exports. Empirical research shows that credit bureaus are critical to the This has been compounded by a decline in the tourism industry in expansion of credit, since they increase the quality of credit deci- the wake of the September 11 attacks and the war in Iraq. Despite sions and mitigate risk by minimizing fraud. IFC is addressing the IFC and IDA: Collaborating for Small Business Seeking to leverage the private sector experience within IFC and the concessional funding of IDA, an effort has been launched to support sustainable development of smaller businesses in Sub-Saharan Africa. The initiative will, over a three- to four-year period, focus on providing access to capital, technical assistance, and capacity building, and improving the investment climate. The program's initial focus will be on Burkina Faso, Ghana, Mali, Mozambique, Nigeria, Rwanda, Tanzania, and Uganda, and will be implemented by the Africa Project Development Facility. In Mali, for example, the program will complement the government's comprehensive economic growth agenda. IDA and other donors have already provided debt relief in support of structural reforms, including the expansion of a private sector largely composed of smaller businesses. The initiative will also help create a commercial microfinance institution in Mali, support APDF's training of the local bankers' association, and run a mentorship program for firms that receive financing. APDF will also work with the West African Enterprise Network to improve the capacity of local business consultants, and IFC's Nigeria-based microenterprise capacity-building program will expand into Mali. These efforts in Mali will build on a strong base established in FY03 with donor support, including the basing of a full-time IFC coordinator for SMEs in Bamako. 1 2 2 0 0 3 D O N O R R E P O RT environment required for credit bureaus to flourish in a number ices, which will depend partly on how quickly tourism develop- of countries through the Global Credit Bureau Program. ment takes off in Mozambique. The TA is also helping Supported inAfrica by the NorwegianTrust Fund for Private Sector Mozambique design a new tourism policy and strategy. (see box) and Infrastructure,theTA will foster the development of private credit bureaus inAfrica.Separately,recognizing the need to The Foreign Advisory Service (FIAS) has continued its active strengthen the Kenyan insurance industry, IFC is helping Kenya program of assisting Sub-Saharan African governments' efforts to through TA to assess the viability and the development of Kenya's liberalize their investment regimes and improve their attractiveness insurance premium financing business (Ireland). for FDI. Many countries have made basic investment law reforms, and FIAS advice has moved toward the next generation of prod- Linkage programs are an example of IFC's work in the sustainability ucts,such as incentive structures,simplifying maze-like administra- area. With support from the Netherlands and Luxembourg, IFC is tive systems, and creating investment agencies that focus on helping to develop Community Development Plans (CDPs) for promotion rather than regulation. communities associated with gold mines in Ghana and Mali.These CDPs will establish a prototype model for sustainable social and FIAS conducted 12 advisory projects in Sub-SaharanAfrica during economic development for communities confronted with eventual the past fiscal year, in a range of product areas including adminis- mine closure and the loss of employment and infrastructure. trative barriers studies (Burkina Faso and Eritrea),administrative and Successful implementation of the CDPs can be replicated in other regulatory cost surveys (CapeVerde,Ghana,Guinea-Bissau,Senegal, IFC projects and will help develop best practice in the mining Uganda, and Zambia), reviews of investment-related laws (Sierra industry on sustainable community development and mine closure. Leone), and taxation and incentives policy and implementation (Guinea-Bissau, Sao Tome and Principe (not yet an IFC The East African textile industry would like to take advantage of Shareholder), Senegal, and the East Africa Community ­ Kenya, theAfrican Growth OpportunityAct,which provides access to the Tanzania, and Uganda). In addition, FIAS assisted Eritrea by US market. IFC is helping the governments and private sectors of conducting a survey of prospective international investors as inputs Kenya,Tanzania,and Uganda map out potential solutions to issues for investment promotion strategies. that their garment industries might face (Switzerland). This assign- ment will identify constraints,high potential investment areas,and The emerging consensus inAfrica and in development circles around foreign partners for local firms in the industry, and could help the world is that private sector-led development must play a bigger attract export-oriented investment into the East African region. role in meeting Africa's development challenge and reduce poverty Recognizing that agriculture products offer good business oppor- in the region. Improving the investment climate, upgrading infra- tunities, IFC is also helping Ghana to improve its capacity to structure, supporting SMEs, and developing domestic financial produce and process tropical fruits and vegetables to international systems must be given the highest priority for private sector-led quality standards, and thus develop a commercially sustainable development to succeed. African countries and their interna- value chain in Ghana (Netherlands). tional partners must step up to support the growth of the private sector to help Africa move forward. IFC's Tourism is another area of importance for many African coun- TA activities in the region in FY03 have tries.IFC,with Dutch support,helped set up the South EastAfrican largely reflected these priorities,and are Tourism Investment Program to ensure that the activities of the firmly rooted in the Corporation's numerous bilateral donors and NGOs can be implemented,taking poverty reduction mission. into account the potential contribution of both the private sector and affected local communities.Through this TA, IFC will assess both the program's effectiveness and the likely demand for its serv- Our TA work also addressed a wide range of nonbank financial issues. In the area of asset management we are working to advise the China Securities Regulatory Commission on best practice in corporate governance for the securities and asset management industries (France).We are advising the Chinese National Council Asia & the Pacific for Social Security Funds on management of private retirement savings (Ireland and IFCTA Fund). Also in China,we are providing experts to help a leading securities firm introduce international best EAST ASIA AND PACIFIC practices in corporate governance,risk management,and manage- ment information systems in preparation for potential equity investors when legislation is passed that allows for foreign invest- Financial Sector Plays Key ment (Switzerland). In the Philippines, we are working with the Role in Job Creation Asian Development Bank to establish a Rural and Small Business In the East Asia and Pacific (EAP) Region the financial sector is Wholesale Facility that will invest in substantial minority stakes in the top priority, since there is a lack of institutional depth across local and regional rural banks (Netherlands). the region that is restricting the growth of the private sector. In addition, priority is given to improvements in the investment The SME facilities have been very active in the region. The climate, privatization of state-owned enterprises, general manu- Indonesian Enterprise Development Facility began operations facturing,and support to SMEs through the four project develop- during FY03 and has been working in various regions of Indonesia ment facilities: Mekong Private Sector Development Facility on local export and trade promotion in Denpasar by promoting (MPDF); South Pacific Project Facility (SPPF); China Project export of locally produced goods, on SME financing in Surabaya, Development Facility (CPDF), and the newly created Indonesia on SME oil/gas/mining linkages in Balikpapan by identifying the Enterprise Development Facility (IEDF). (See Chapter 3) procurement needs of selected extractive industry partners, on agribusiness linkages in Makassar, and nationally on the overall The bulk of the TA funded through the Technical Assistance Trust business enabling environment.The China Project Development Funds (TATF) program within the region in 2003 focused on the Facility has moved into its second year of operation and has devel- development of traditional banks as well as on nonbanking finan- oped good recognition with the local private sector services cial services such as pensions. In Vietnam, we helped Asia market, and there are now three main business lines: access to Commercial Bank (ACB) and SacomBank develop their consumer finance; capacity building; and business enabling environment. In and small business finance operations by improving their credit addition, with support through the TATF program, CPDF is underwriting processes and risk management systems undertaking a comprehensive effort to raise the awareness of local (Switzerland, Netherlands and IFC TA Fund). In SMEs on the value of good corporate governance (Canada and China we are working with City Commercial Italy). CPDF also received funding through the CBF for capacity Banks in both Nanjing and Chengdu building of local service providers and local managers. MPDF helping them transform themselves launched a second five-year phase with strong donor support and into modern commercial banks is focusing on extending its achievements of Phase 1 -- such as (Italy and Norway). bank training and management training and development of local business development services, in particular business consultants and business associations -- and on expanding its efforts in smaller VIETNAM: countries such as Cambodia and Lao PDR. SPPF continues to Private Sector Study assist SMEs in the Pacific Islands and is also conducting a survey of regional business development services (BDS) available to the private sector which is expected to lead to country-specific BDS The business climate is critical to the growth of the private development programs.(Australia and IFCTA Fund).SPPF has also sector in any country, and in order to understand the worked on a small equity facility pilot based in Samoa and with dynamics of private enterprises in Vietnam, the Mekong financial institutions throughout the region,including the Bank of Private Sector Development Facility and the World Bank's South Pacific in Papua New Guinea, to help them reach out into Private Sector Development Unit jointly produced a rural areas for micro and small enterprise lending. recently released study, "Informality and the Playing Field in Vietnam's Business Sector." The study explores the business environment in Vietnam from the perspective of Other notable TAs carried out in the region in support of IFC's supporting economic growth. It is based on findings from sustainability goals include a large TA designed to promote a survey of private and state-owned enterprises in 11 consensus building among stakeholders to promote the sustainable Vietnamese cities and provinces. The study reflects the development of Philippine mineral resources (Japan).In China we are views of Vietnamese entrepreneurs on the business envi- working in tandem with CPDF in Sichuan to develop the capacity ronment, and incorporates feedback from discussions with and skills of local consultants to undertake a social, environmental, policy-makers, financiers, and representatives of interna- health and safety review and mitigation work (Denmark). IFC also tional organizations. It provides evidence of the significant carried out project-specificTA in China,in preparation for a possible improvements that have taken place in the Vietnamese IFC investment where we are investigating the market for composted business environment and identifies areas where policy solid waste (Israel).The Sustainable Financial Markets Facility (SFMF) actions can help to create a more transparent, predictable legal regulatory framework and even the playing field for the private domestic-owned companies, the state-owned enterprises, and the foreign-invested companies. The study provides new insights into the status of the Vietnamese economy and new ideas for ways to support and participate in its future growth. © DiskArtTM 1988 2 0 0 3 D O N O R R E P O RT 1 5 sponsored theAssociation for Sustainable & Responsible Investment SOUTH ASIA inAsia (ASrIA) for its annual conference as well as prepared country profiles on sustainable and responsible investment for seven countries. Reaching Out to SMEs and Developing The Corporate Citizenship Facility (CCF) also provided funding to work with an IFC sponsor and other stakeholders to assess conser- Domestic Financial Intermediaries vation priorities and the impacts of limestone mining in Vietnam, Our technical assistance work in South Asia plays a critical role in which is threatening the habitat of the Sarus crane.In addition to the working toward the priority Millennium Development Goal of SME work done through the project development facilities (PDFs), poverty reduction.South Asia has a large number of SMEs that are we carried out a study on the privatization of state-owned enterprises the major source of employment and income for the poor.The in China to learn lessons from the transformation of their SMEs majority of ourTA work in South Asia is focused on SMEs either (Australia). We are also focusing on the development of linkages through direct support or indirectly through the development of between SMEs and larger firms,and in Indonesia we are investigating financial markets to improve their access to finance in order to opportunities in the mining sector (Ireland). reduce a major constraint to their growth. FIAS was very active in EAP and worked in:Timor Leste (not yet Bangladesh, northeast India, Nepal and Bhutan include a popula- an IFC Shareholder) to review its draft investment law;Indonesia to tion of over 200 million and make up one of the poorest regions advise on the establishment of an investment promotion agency; in the world.This area is home to about 200,000 registered private Malaysia to advise on linkages to maximize the positive impact of companies that often have poor growth prospects due to a weak foreign direct investment (FDI);Mongolia to assist the government business environment and services sector, as well as limited access with the staging of an Investors Forum, held as part of a "Year of to long-term financing.These factors keep most local SMEs from Investment." FIAS inputs included investor service training for the reaching their business potential and thus limit their ability to staff of FIFTA, the Mongolian national investment promotion create jobs and reduce poverty. The largest SMETA effort in fiscal agency, and assistance with the preparation of a new investment 2003 was the launch of the multidonor SouthAsia Enterprise policy statement.Training of Investment Promotion Agency (IPA) Development Facility (SEDF) in October 2002.SEDF is dedicated staff was also provided in the Pacific region, where FIAS, in associ- to reducing poverty through the growth of SMEs.The donors to ation with the Investors Forum Secretariat, ran a course on data SEDF (Canada,European Union,Norway,United Kingdom,and IFC) collection and management for staff from IPAs in the region. FIAS have committed approximately $33 million over five years to also conducted training courses and made presentations on investor support a program of activities that includes four strategic pillars: fraud and public private partnership. 1)Access to Finance;2) Business Development Services;3) Business 1 6 2 0 0 3 D O N O R R E P O RT Enabling Environment;and 4) Special Projects ­ such as developing SMEs. SEDF has also actively cooperated with financial interme- linkages between SMEs and large corporations. diaries and regulators on improving regulations in accounting practices, mortgaging pledged assets, implementing the use of SEDF has been working at the macro level and has shared IFC's movable assets as collateral,and conducting a comparative study on global experience on SMEs with the government of Bangladesh leasing conditions across their countries of operation.SEDF is also to help it incorporate SMEs into its three-year development plan; working to improve the regulatory framework in the agribusiness helped SMEs provide input into the formulation and implemen- sector and is collaborating with a wide range of business associa- tation of the March 2003 Poverty Reduction Strategy Paper; and tions and policy-makers to improve the business enabling envi- helped to focus the results of the World Bank and the SME ronment for SMEs. Department Investment Climate Survey on practical measures for Strengthening SME Lending Practices in Private Financial Institutions Under the umbrella of SouthAsia Enterprise Development Facility (SEDF), a newly launched and IFC-managed initiative, efforts are being targeted toward development of the small business sector. Increasing access to finance for small businesses is one of SEDF's major programs. In support of this program, TATF mobilized funding from Norway to assist private sector commer- cial banks in Bangladesh to strengthen their operations and increase their exposure to small and medium enterprises. The TA included small business finance diagnostics and skill gap analysis, and an international best practices banking symposium on small business lending. Norwegian consultants evaluated the macroeconomic environment for SME finance, including the following areas deemed to be in need of development: legal and regulatory framework, financial sector measures, interorganizational changes within the banks, and development of new financial products. Also with the support of the Norwegian TATF funding, SEDF then kicked off its operations with an international best practice SME lending conference, which brought to Dhaka small business finance experts and bank officers from highly successful small busi- ness lending institutions worldwide such as Business Partners of South Africa, Planters Bank of Philippines, and the National Development Bank of Sri Lanka. Following the seminar, a group of private, commercial financial institutions expressed a strong interest in participating in the initial diagnostic study, which evaluated and benchmarked institutions for their ability to downscale to small business lending, including internal operational systems from marketing and sales to underwriting, operations, and portfolio management. Since that time, local banks and leasing companies have responded positively to SEDF's Access to Finance program. Dhaka Bank Limited, Southeast Bank Limited, and Industrial Development Leasing Corporation have all signed a memorandum of understanding with SEDF to collaborate on technical and training assistance. The assistance comprises product development (building up factoring capacities); information technology (IT); marketing; human resource development; and credit management. 2 0 0 3 D O N O R R E P O RT 1 7 INDIA: "Mahindra Farms" Helping Indian Farmers Use Safer Chemicals Mahindra and Mahindra has a long relationship with the Indian farmer and has developed a model for commercially run farm service centers: one-stop shops for certified inputs. This model is being established on a franchise basis across India, with IFC as a 28 percent equity partner in the parent company, Mahindra Shubhlabh. The farm service centers will use the results of the TA to improve the health of farmers and to protect the environment from misuse of agricultural chemicals. This project and the work performed by the consultant have become a model for appraisal of IFC projects employing chemical pesticides for agricul- tural purposes. The consultant audited the company's agrochemical operations and prepared a policy and manual on pesticide management. The farm service centers are able to recommend high-quality and appropriate chemical materials for specific pests, handling requirements, and associated information. All of these activities help the farmer in a form of integrated crop management that effectively combines a number of inputs for meaningful production rather than relying upon the expedient of chemical destruction of ill-defined pest species. The significant, immediate development impact of the TA is that farmers are able to access meaningful tech- nical information, which can help them to increase their crop yields by as much as 40 percent. The rural-based farm service centers provide a number of high-quality farm inputs, including mechanical equipment rentals, seeds, fertilizers, and chemical pesticides. Chemical pesticides are accompanied by training and technical information in safe and effective use of the materials. Reducing the reliance upon chemical controls and maximizing more technical approaches to crop management reduce the cost of crop production, help to increase yields and reduce the farmers' reliance on expensive and potentially dangerous materials. The project is also helping to elim- inate reliance on WHO Class 1a (extremely hazardous) pesticides and utilize replacement chemicals that are equally effective and available at the same cost without the potentially harmful health and environmental consequences. 1 8 2 0 0 3 D O N O R R E P O RT The strengthening of domestic financial markets was the other Bangladesh. In Bhutan, FIAS undertook its fifth project in three major area ofTA effort in South Asia. In the Maldives, we assisted years, each of which has assisted the government with successive the Maldives Government in setting up viable and transparent steps in developing and implementing a foreign investment regime legislation for the development of the domestic insurance industry for the first time. In Bangladesh, rather than offer policy advice, (Ireland). In Bangladesh, we completed a project started in 2002 FIAS assisted the Board of Investment with the development of a that evaluated housing finance needs (Sweden and IFCTA Fund). strategic plan covering its promotion and policy advocacy activi- In India, we are building upon earlier TA work in the education ties. The short-term action plan included a restructuring of the sector by trying to identify the appropriate financial,legal,organi- Board,which is now underway.Another activity in South Asia was zational, and technical structure for a new financing mechanism a second High Level Roundtable on FDI, held this year in Male, that could make financing available to the SME Education Sector Maldives. FIAS also assisted the Maldives with a review of their (United Kingdom and IFC TA Fund).Also in India we carried out existing investment law and implementation guidelines and a detailed market assessment for mortgage guarantees,which in the provided comments on their current institutional arrangements for longer term will help in the development of the secondary mort- investment promotion. gage market (Canada). Other TAs supported IFC's environmental and social sustain- ability goals. In October 2002 a workshop on Environmental Management and Sustainable Tourism in the Maldives provided practical training in environmental impact assessment, hazardous operations risk management, and environmental management of tourism and trade operations in fragile marine environments (Japan). EOF supported an electric vehicle manufacturer in India ­ Mahindra Ecomobiles ­ which could provide important envi- ronmental benefits by reducing pollution.Also through the EOF we are helping a company that has developed a low-cost water filter with assistance in setting up manufacturing facilities and a sales distribution infrastructure. In addition FIAS, provided advice to a wide range of client countries: from some of the smallest and most remote, such as Maldives and Bhutan, to the more populous Europe & Ce markets and securitization systems and the need to harmonize with other countries in the region, and in particular Bulgaria. The CentralAsia Leasing Program,launched in the region in FY01 and currently implemented by IFC's Private Enterprise Partnership (the Partnership),produced exciting results in the Kyrgyz Republic Europe & Central Asia Tajikistan, and Uzbekistan. In June of 2002, the Kyrgyz govern- ment passed a law putting a clear set of leasing laws in place, and inAugust of that year,the Uzbek Parliament passed legislation that liberalized existing leasing laws and strengthened the Civil Code, SOUTHERN EUROPE AND CENTRAL ASIA customs tariffs,and the tax code in order to create a more inviting Providing New Businesses with Access to Capital and Creating New Business TAJIKISTAN: Opportunities through Privatization Farmers Ownership Model During FY03, IFC used TA programs to support the regional investment slate on two key fronts:by creating enabling regulatory IFC oversaw the success of the Farmers Ownership Model environments for private sector growth, and by developing and (FOM), a pilot initiative that helped some 365 struggling strengthening domestic financial markets to channel capital to cotton farmers in Tajikistan form a joint-stock company. growing businesses and private borrowers. Also crucial to creating The FOM program, managed by the Partnership, utilizes a a healthy business environment in postconflict regions still plagued private sector approach to help the farmers increase the by political instability is the privatization of state-owned enterprises money that they keep from the sale of their cotton. The Partnership advises the farm on company management and municipal conglomerates; this is why the region oversaw a and trains farmers in better cotton production practices robust program of prefeasibility work in support of privatizations and the growing and marketing of other crops. Within its in Albania, Bosnia, and Serbia, in particular. Project-specific work first year the farm reached profitability. The joint-stock to strengthen business operations and provide training in corpo- company now operates a profitable cotton collection and rate governance and industry standards continued across all sectors marketing business on behalf of the farmers, who are able in both regions. And new to the TA picture this year were two to make debt repayments with the profits and enjoy direct community development programs designed to help local popu- access to financial markets. The farm lent $76,000 to its lations adjust to adverse changes in their business environment. shareholder farmers to purchase inputs and machinery, and build irrigation systems. All of the loans are being paid The Secondary Market Legislative Project in Romania was designed back on time. With the help of the TA, the cotton farmers to carry out an assessment of the current legislative framework and are learning how to increase the productivity of their farms provide guidance on how to improve it in order to allow the appro- and play a greater role in their own livelihoods. If the pilot priate development of the mortgage bonds and mortgage-backed is successful, the program will be replicated throughout securities markets (Canada).The"Securitization and Mortgage Bond Central Asia. Regulatory Package" will be submitted to Parliament in January of 2004.TA advisors will also design an appropriate legal structure for mortgage bonds and securitization under the current Romanian legal system that covers the various European mortgage bond 2 0 2 0 0 3 D O N O R R E P O RT state-owned oil and gas utilities conglomerate, in preparation for possible privatization (Italy).The program will assess the need for reorganization,rationalization,and modernization of the oil and gas industry as well as strengthen the reform agenda of the Serbian government in the energy sector. In Albania, the government has engaged the IFC Private Sector Advisory Services as Lead Transaction Advisor for the restructuring and eventual privatiza- tion of the state-ownedAlbanian Power Corporation;the program will help create new and independent companies in the genera- tion,distribution,transmission,and dispatch of electricity (Greece). Also in Serbia, project-specific work on a smaller scale continued environment for small businesses. In April 2003, the President of in a variety of sectors. FY03 saw the first projects in the health Tajikistan signed the Law on Leasing to promote the development sector,with the market and viability study of a proposed polyclinic of this financing mechanism traditionally more accessible to small serving metropolitan Belgrade (Sweden), and in the hotel sector, businesses than bank loans, Building on the success of the Central with the market study and modernization strategy for the Hotel Asia program, the Partnership launched a similar initiative in Metropol (United Kingdom and IFC TA Fund). Work in the IT Azerbaijan that includes intensive education and training compo- sector began with a study to identify business and investment nents for private companies, government agencies, and financial opportunities attractive to both IFC and strategic foreign investors institutions (Switzerland). (Italy).The project is also directed toward improving the possibil- ities for communication between the industrial and the business Because a stable banking system is a key element of the growth sector and creating new job opportunities.The results of the study strategy in postconflict regions, IFC oversaw several programs to will be presented to the government and relevant institutions and upgrade the operations of state-owned banks in preparation for could be useful in supporting the process of private sector­led possible sale to private investors. Consistent with its strategy of economic reform in Serbia.In FYR Macedonia,IFC implemented strengthening formerly state-owned banks so that they can provide a training program for local agribusiness consultants, providing needed capital to new businesses and individual borrowers, IFC them with expertise in the installation and operation of the food implemented an advisory program to upgrade and eventually priva- safety procedure known as HAACP (Hazard Analysis Critical tize Vojvodjanksa Banka, a critical member of the state banking Control Point).The proposed training would enable these consult- system in Serbia (Sweden and IFC TA Fund). The program will ants to assist SMEs in the food processing sector to implement support the bank's expansion and modernization, with a focus on HACCP (Greece). the strengthening of credit operations, the upgrading of manage- ment information systems, and establishment of state of the art portfolio management. While privatizations in the banking sector provide capital to a developing private sector, privatizations in the real sector create new business opportunities and jobs. In Serbia, IFC detailed a privatization expert to the national Privatization Agency to help assess the portfolio of companies held by the agency's State Share Fund and to help prepare them for privatization.At the state level, IFC implemented a TA program for Nafta Industrija Serbije, the ROMANIA: Health Care Public-Private Partnership Advisory IFC's objective is to use public-private partnerships (PPP) to expand the availability and quality of care for the public, especially the poor. IFC's approach includes: (i) ensuring that the provider complies with international standards of care and service provision through contractual and regulatory safeguards; (ii) transferring demand and capital risk to the private sector, thereby reducing or eliminating the need for government guarantees or funding; (iii) facilitating employee support and a smooth transition; and (iv) ensuring that PPPs support broader sector reform. For the past two years, IFC has advised Romania's Ministry of Health on PPPs in public hospitals, with the objective of improving the care for public patients and reducing the government's financial burden. The IFC team is supported by specialized health consultants (Advimed). IFC's advisory assignment covers three phases: a national PPP strategy (completed and publicly announced); development of a PPP Plan for Bucharest hospi- tals to identify potential transactions with the greatest public benefits (completed and publicly announced); and implementation of pilot PPP transactions for possible later national replication. IFC has completed two pilots and prepared tender documents for three additional pilots, which are expected to be completed shortly. The initial transactions focused on modernizing the radiology and laboratory services in a major public hospital, which had been experiencing chronic equipment shortages, with nega- tive impact on patient care. Under the new contracts, private providers retained existing staff and upgraded equipment, and supplied services to the hospital under well-defined perform- ance standards. Since contract award, the providers are furnishing quality service at a lower cost than before; in radiology, for example, costs are 35 percent lower. IFC has prepared model tender documents so that hospitals throughout Romania can implement similar PPP transactions. IFC is now preparing pilot tenders for other hospital and outpatient services. Other transactions completed to international clinical standards and norms include: (1) concession of a private wing in Bucharest's main maternity hospital; (2) outpatient dial- ysis services in two pilot locations; and (3) ancillary services for three adjacent hospitals. Future transactions will cover day surgery, home health care, and other outpatient services. A broader 10-point hospital reform program suggested by IFC has been largely imple- mented. It includes reforms in the legal/regulatory framework, provider payment arrange- ments, hospital management, and provider regulation and accreditation. 2 2 2 0 0 3 D O N O R R E P O RT In Serbia, IFC, though the Southeast Europe Enterprise Development (SEED), also launched a TA program for Tigar, a rubber tire, footwear, and consumer goods producer in which IFC has a substantial investment (Greece). The program will restructure the rubber footwear and consumer goods production unit into a standalone business. The process is expected to result in employee layoffs, so IFC and SEED are exploring a dairy development initiative to absorb displaced workers in the Pirot region of Serbia.A similar program is underway inTeteks,FYR Macedonia,where textile manufacturer Teteks A.D. will have to reduce its workforce in an effort to modernize and compete in the international market. The Teteks Corporate Citizenship Initiative will provide funding and training for displaced workers to start and operate small businesses (Norway). BOSNIA: IFC's SEED office in the Balkans and the CCF are working PBS Banks together to better understand issues relating to sustainable harvesting of herbal products and social equity in supply chains,the aim being to support the emergence of markets that reward socially and envi- In Bosnia, IFC developed a vehicle to purchase and reha- ronmentally sustainable practices (through price premium goods). bilitate the debt-burdened Privredna Banka Sarajevo and its associated banks (the PBS banks). The PBS banks In Azerbaijan, the small businesses that supply the busy oil and gas were not able to attract foreign investors because of unre- sector play a vital role in the local economy. But in order to grow, solved prewar guarantees. Because their liquidation they need access to capital and financial services not currently would have dealt a serious blow to the fragile economy provided by commercial banks, which often lack experience in of Bosnia and Herzegovina (the banks accounted for up making loans to SMEs.To help address this need, IFC stepped in to 30 percent of total assets and capital in the prewar with credit lines to two banks,Azerigazbank and Rabitabank, that banking system), IFC created the Sarajevo Privatization will enable them to increase their lending activity to the SME Venture (SPV), a financing vehicle to prevent this and to help pave the way toward successful privatization. The sector.At the same time, aTA capacity building program will help SPV settled the liabilities of the banks and at the same the banks minimize risks associated with lending to smaller busi- time acquired the state shares in three of them, effec- nesses by:1) implementing credit review systems so that loan appli- tively privatizing them. With a TA grant from Sweden cations can be properly assessed; 2) creating small business International Development Agency (Sida), IFC and the development centers to ensure the ongoing generation of new SPV implemented technical assistance inputs necessary lending opportunities; 3) implementing portfolio management to rehabilitate the banks and prepare them for sale. In and compliance tracking functions to monitor and control port- September of 2002, two were successfully merged and folio risk; and 4) launching a training program for branch were sold in the spring of 2003. managers, loan officers, and credit analysts. 2 0 0 3 D O N O R R E P O RT 2 3 CENTRAL AND EASTERN EUROPE IFC's Private Enterprise Partnership (the Partnership) was active in increasing linkages between large companies and SMEs.In Magadan in eastern Russia the Partnership worked with the Bema Gold Deepening Financial Markets and Corporation to create a network of local suppliers of goods and Extending Linkages to SMEs services to the mining sector (Canada).In the automotive sector (see In line with corporate strategy,TA and advisory services in Central box) it is working with Russian automotive component manufac- and Eastern Europe focused on complementing IFC investment turers to help them improve quality and management standards to activities.The region includes countries that belong to two very qualify as suppliers to Ford's assembly plant outside of St.Petersburg distinct groups: (i) Russia and Eastern Europe's frontier countries (USTDA). In the forestry sector it is helping to introduce sustain- (Armenia,Belarus,Georgia,Ukraine),where IFC's strategy is to play able forestry management practices, improve harvesting and trans- a significant role; and (ii) the maturing transition countries of porting capabilities,and facilitate business partnerships (Finland).In Central Europe,where IFC has planned a more limited but contin- the information, communication and technology sector it is uing role in furthering the move toward EU accession. fostering the development of the software export sector in Russia and link Russian andWestern companies (Finland). In Eastern Europe, IFC's efforts continued to center on Russia, which is one of the few countries to have shown relatively stable In Ukraine, which shows strong business potential but is not as growth and an improving business climate.About half of the TA stable,IFC used its long-standing and extensive technical assistance projects or advisory services implemented in the country are in the programs to continue laying the groundwork for future investment financial sector,where the main emphasis is on deepening finan- by IFC and others. An example of this work is an SME survey to cial markets to increase the availability of basic services ­ encour- identify barriers and obstacles to SME development, analyze the aging the growth of domestic banks which offer basic lending and competitiveness of selected industries, and develop recommenda- savings products,legislation covering security,etc.­ and preparing tions for the government (Norway and IFC TA Fund).The results the ground for introducing more complex instruments, such as were useful in influencing the government's policies on SMEs,and securitization at a later stage.An illustration of this approach was a the Partnership has extended the survey to Uzbekistan and project to help set up and advise a working group of senior public Tajikistan (Switzerland) and Georgia (Canada). Another example is and private sector officials in Russia to identify and address obsta- research conducted on a law on mortgage securities that could cles to securitization transactions in the country, and advise rele- provide the framework for the development of the mortgage and vant government entities on making the legal, regulatory, and capital markets in the country (United Kingdom and IFCTA Fund). policy changes necessary for securitization to grow and develop in Russia (United Kingdom and IFCTA Fund). 2 4 2 0 0 3 D O N O R R E P O RT LATVIA: Inspectorate Reform THE PROBLEM: In 1998, a FIAS Report on Administrative Barriers to Investment iden- tified significant systemic problems with the 22 different inspectorates in Latvia. The entire inspections system was a major factor inhibiting the development of a welcoming business environment in Latvia. The report identified a series of problems, including: · Harassment of businesses in order to solicit bribes. · Absence of transparent appeals mechanisms. · Lack of coordination among the inspectorates in arranging site visits. · Lack of requirements for written documentation. Documentation was not always given to the inspectee after an inspection (and virtually never when no violations were found). · Lack of publicly available information on the mandate of the inspectorates and the rights and obligations of the inspectors and their targets. THE SOLUTION: The following solutions were recommended by FIAS and adopted by the government: · The Latvian government committed to an Action Plan to Improve the Business Environment and to prepare legislation regulating the activity of the inspectorates. · The Action Plan acknowledged that improving the inspectorates required a multifac- eted approach, including legislative change, training in procedures and client orienta- tion, pilot projects, and wider cooperation. COOPERATION: An Inspectorate Coordination Council was established to maintain a link among the inspectorates to review implementation and discuss the pilot project results. The Council was an important mechanism for helping the inspectorates to take ownership of the reform process. Collaboration also extended to the financing of the reforms, which involved the World Bank Group, the European Commission Phare Program in Latvia, the School of Public Administration, and the government budget. IMPACT: Feedback mechanisms helped assess the impact of the reform on businesses and the business environment over the long term; a FIAS follow-up busi- ness survey reported in 2002 that government inspections were cited by only 16 percent of firms, and only as a "moderate" obstacle. The Inspectorate Reform Program was an important contributing factor to Latvia's becoming an EU accession candidate, and the EU cited the removal of administrative barriers in Latvia as an example of "Candidate Country-BEST"1 that should be emulated by other EU accession countries. European Commission 2001: Candidate Country ­ Business Environment SimplificationTask Force. 1 2 0 0 3 D O N O R R E P O RT 2 5 In Ukraine, the Partnership works with farmers to find new markets by increasing access to market information and linking RUSSIA: them to processors, wholesalers, and supermarket chains. The The Ford Focus: Made in Russia Partnership also advises farmers on marketing strategies to increase profits at the farm level and gain stronger market positions (Canada and Sweden). In July 2002, Ford opened a new plant in Vsevolozhsk, near St. Peterburg, where it produces the popular Ford In Russia and Ukraine,IFC (through the Partnership) is promoting Focus for the Russian market. Although these cars are improved corporate governance by working with local companies, assembled in Russia, there are actually very few compo- big and small,on international standards and advising governments nents that are made locally ­ the majority are produced or on legislation (Canada, Netherlands, and Switzerland). partly assembled in other parts of Europe. Ford's strategy is to increase the content of locally manu- Armenia, Belarus, and Georgia continued to be challenging. In factured parts to 50 percent in the next five years. Armenia, earlier TA work on legislation led IFC to invest in the However, with Soviet-era production practices, outdated country's first private leasing company. In FY03, FIAS provided a equipment, and a lack of awareness of quality issues, review of the existing and proposed investment law, based on best Russian automotive component suppliers are poorly posi- practices and advice it had provided earlier.In Belarus,which is still tioned to take advantage of this new business opportunity. hostile to private business,IFC attempted to strengthen the capacity of local business associations by providing advice and consultation This is where IFC's Private Enterprise Partnership hopes to to their member businesses and improving their advocacy skills to make a difference. With funding from the United States promote reform of national policies and legislation affecting SME Trade and Development Agency (USTDA) and IFC TA development (Sweden). In Georgia, where the business environ- Fund, IFC launched the Automotive Supplier Development ment was poor and exacerbated by domestic and regional political Project in August 2002. instability,the Partnership started providing corporate governance expertise and training to leasing companies (Canada). A pilot, the project is providing technical assistance to several Russian automotive component firms, all of which In Central Europe, IFC's strategy is to have a solid though are working to qualify as suppliers to Ford's Vsevolozhsk selective role, focusing on areas underserved by private investors factory. In addition to teaching international quality stan- and in which its involvement can have a strong development dards based on ISO-9000, the IFC team is training impact and facilitate the process of accession to the Russian companies in new techniques to improve quality European Union. such as lean manufacturing, quick die change, and giving employees the power to identify and solve production and quality problems. An innovative and high-impact project funded last year by several Client governments that are engaged in administrative and regu- donors (Spain, Finland, and USTDA) in the Baltics and Central latory reform can now compare their progress over time and Europe was theTA component of an IFC initiative in energy effi- between countries using standard surveys of the business commu- ciency financing, the Commercializing Energy Efficiency nity.The surveys cover the costs and time requirements that busi- Finance (CEEF) project. The initiative seeks to reduce the nesses experience during standard investment procedures as well financing barriers for energy efficiency investments by building as the costs and time spent on such matters as company registra- the lending and marketing capacity of selected commercial finan- tion, business licensing, access to land, construction permits, tax cial institutions and supporting energy services companies to payment, customs procedures, product certification, and various identify, structure, and implement a pipeline of transactions that government inspections. FIAS continues to work closely with can utilize IFC financing. client governments to develop a constructive dialogue between the government and investors, prioritizing the reform agenda; to IFC continued to play its catalytic role for reforms in EU acces- develop workable reform strategies;to assess the impact of reforms sion countries. FIAS was particularly involved in Latvia last year, on the business environment; to determine which reforms are with three advisory projects.The impact of one of its earlier initia- working well and which are not;and to make the necessary adjust- tives in the accession reform process in Latvia was significant and ments to ensure that each country's overall reform program is commended by the European Commission (see box). having the desired effect both on investment levels and on posi- tive FDI spillover benefits throughout the economy. FIAS continues to be very active in Europe and Central Asia, carrying out reviews of investment legislation,investment incen- tives, and removal of administrative barriers to investment. FIAS has been particularly active in Southeastern Europe, Russia, the Baltics, and the Caucasus region. Having carried out 14 studies of administrative barriers to investment in Europe and Central Asia, FIAS has prepared self-assessment tools for monitoring and evaluating the resulting reforms, as well as setting up the initial stages of new administrative barriers studies.These self- assessment tools were piloted in Bosnia, Croatia, Latvia, FYR Macedonia, and Romania. FIAS also hosted a seminar on the removal of administrative barriers to investment in Sarajevo in February at which our Southeast European clients were able to share their experiences. 2 0 0 3 D O N O R R E P O RT 2 7 Latin America & the Caribbean Helping Governments to Generate Business Growth and MEXICO: Initiate Structural Reforms Municipal Infrastructure ­ A First for IFC In FY03 theTA portfolio for the LatinAmerica and the Caribbean (LAC) region complemented the overall investment strategy, with In Mexico, a TA assignment supported an infrastructure projects divided evenly between the financial markets and general project, which became IFC's first project involving into manufacturing sectors.The global, in particular the US, economic the municipal finance market. downturn led to growth in the export and tourism sectors, and microfinance. Coupled with international political or economic In Mexico City, groundwater resources are limited and issues,and the region's vulnerability to the retreat of private capital, overexploited, and the lack of a modern wastewater the region experienced a challenging year. Many of the TA treatment facility has created polluted and unhealthy projects launched during FY03, most notably the new SME drainage canals above ground. The municipality of Development Facility,were designed to spur job creation and instill Tlalnepantla de Baz needed to construct a new water public confidence in local business environments. treatment and recycling plant. The wastewater treatment plant, the first in Mexico's most industrialized munici- On the regional level,IFC began to prepare local businesses to use pality, will treat a combination of industrial wastewater the funding made available through the facility this year. Financial and domestic sewage, recycling it for industry use and service providers were trained through workshops customized for freeing up the potable water they use now. The plant is the hotel and tourism sector using the SME "toolkit" approach a critical component of a sustainable water management plan for the region. (Canada and IFC TA Fund).The workshops covered critical areas such as business planning, operational management, accounting, A TA assignment (IFC TA Fund) helped create a program marketing and sales, and capital location and procurement. Local to strengthen the capacity of the municipality in the stages financial institutions, chambers of commerce, consulting firms, of plant design and project implementation.This will and other organizations were recruited to help maintain an active enable the municipality to undertake further projects on long-term presence in each country and to provide ongoing serv- its own. IFC has partnered with a local bank to support the ices to local SMEs. municipality's bond issue. 2 8 2 0 0 3 D O N O R R E P O RT While SME training at the regional level complemented the launch Funding Long-Term SME Growth: of the new facility, work in the financial markets sector addressed the needs of small businesses on a project level. In Colombia, New $30 Million Regional Business microentrepreneurs rely on the informal microfinance services of Development Facility the Mario Santo Domingo Foundation.IFC completed a study and business plan to commercialize these services into a viable lending An exciting TA development occurred in the final days of facility (Canada). FY03 with the initiation of a dedicated SME facility funded by IFC and other donors ($30 million over five In Nicaragua,Canada and IFCTA Fund financed an in-depth study years), to cover Bolivia, Honduras, Nicaragua, and Peru. of the current housing finance system.The government and IFC These countries share common characteristics that are need a long-term plan to help with the development of the resi- conducive to a vital SME sector: relatively stable macro- dential housing finance market in order to make housing more economic environments, many informal microenterprises affordable to middle and lower income buyers. IFC will use the and a few large enterprises but almost no medium-size study to create a long-term business strategy for the sector that will sector, and governments that are committed to reforms include suggestions to liberalize regulations and possibly to create necessary to spur SME growth. In those countries micro a secondary mortgage finance institution. and small businesses that wish to grow face obstacles: burdensome registration procedures, changing regulations In Bolivia,Colombia,and Mexico growing evidence indicates that and policies, an inefficient legal system, limited access to during economic downturns, there is a drop in private and public capital from commercial banks, and barriers to the inter- university enrollment. To correct this trend, and to learn more national market. about how to develop successful student financing programs, IFC commissioned four case studies of student financing institutions in To help break down these obstacles, the facility will focus those three countries (Switzerland). on linking small-scale producers to both domestic and export markets. Core activities will include: promoting the development of industry clusters; building capacity for Because administrative obstacles to business development local SMEs to enable them to sell goods and services to continue to pose a serious challenge in LAC, FIAS oversaw six larger enterprises ­ ideally using linkages with IFC invest- projects in the region that focused on the business environment ment projects; training bankers in order to familiarize them and administrative barriers, including a strategy for promoting with lending best practices in the micro and SME sectors; FDI in Peru,and a program to help the government of Suriname introducing credit scoring methodologies to lower the (not yet an IFC Shareholder) refine its FDI strategy,create an transaction costs of loaning to untested businesses; investment promotion agency, and draft new laws providing financial services to micro and small businesses regulating foreign investment. through technology (e.g., use of smart cards and teller machines in rural areas with local dialects); providing busi- ness financing from nontraditional sources such as NGOs, microfinance institutions and equity funds; and providing alternate solutions to high collateral requirements such as guarantee funds and credit registries. ECUADOR: Labor Practices in the Banana Industry IFC's Corporate Citizenship Facility is working with our long-standing client, Favorita, and other major producers and buyers, to improve labor practices in their supply chains so that they can meet international buyer and consumer expectations. This work will ensure that thousands of rural poor can continue to sell produce in international markets. Because investors and consumers are concerned about social and environmental conditions on the farms that supply Ecuador's Favorita Fruit Company, IFC created a TA program to train its suppliers in environmental and labor issues. While Favorita has attained Rainforest Alliance accreditation and its facilities are certified to international environmental standards, many of the small farms from which it obtains its bananas are unable to afford the training to achieve these standards. CCF will provide courses in labor and environmental issues at no cost to nearly 400 of Favorita's suppliers in four geographical regions throughout Ecuador. The project has the potential to affect practices on over 18,000 hectares of plantations and to improve labor conditions for thousands of workers in the field, helping to ensure that the banana industry in Ecuador is both socially and commercially sustainable and that it remains a viable player in the global marketplace. 3 0 2 0 0 3 D O N O R R E P O RT In the real sector, IFC continued to make progress in linkage- BRAZIL: related manufacturing projects. In Colombia, IFC worked Privatization of COELCE (Ceará power with Bavaria, the fourth largest beverage company in Latin America,to train its small and micro distributors in operations and utility), and the Establishment of a basic financial and accounting skills (IFCTA Fund). State Multisector Regulatory Agency (ARCE) ­ a Status Report In Ecuador, IFC helped Reybanpac, an established producer of bananas that is diversifying into milk production and other dairy enterprises,by offering advice on new product development, marketing, and distribution (Denmark). In 1997, the government of the state of Ceará in Brazil requested IFC's assistance in privatizing the Ceará state electric distribution utility (COELCE) and establishing a state In Honduras, the flower/ornamental plants sector has been iden- multisector regulatory agency for a number of infrastructure tified as a potentially key driver in Honduras' development. To sectors (ARCE). This assistance was to support the Ceará help the government tap its potential, IFC created a program to government, reform of the state infrastructure sector and to upgrade management/technical/marketing skills,match local and attract private sector investment for its modernization. international companies, support the preparation of business strategies and investment plans,and help create new business asso- ciations (Netherlands). The assistance was successful. A concession was awarded to a consortium of investors led by ENDESA, a Spanish Continuing the theme of environmental sustainability in LAC,the power concern, and legislation creating ARCE was approved by Ceará's Legislative Assembly in December 1997. Social and Environmental Facilities oversaw five technical assis- tance programs in FY03.When companies in the general manu- facturing sector wanted more information on sustainability ARCE has been fully operational and staffed since 1998. practices and how to implement them, the Corporate Citizen ARCE is highly regarded as having a catalytic effect on the Facility (CCF) organized a regional workshop for those compa- development of Ceará's private infrastructure by helping nies that included information sharing and longer-term part- mobilize $880 million in private investments for the nering with clients that have already adopted these practices in purchase of COELCE during the period immediately following their daily operations.When conch producers in the Caribbean the Asian financial crisis of 1998, when foreign direct invest- wanted to expand production and capture greater market share, ment flows to emerging markets collapsed. Later, COELCE, under strict monitoring of ARCE, was forced to invest heavily the Environmental Opportunities Facility (EOF) sponsored a in order to satisfy the service and quality targets imposed by regional initiative to train them in sustainable resource use while the concession. COELCE invested about $120 million in expanding sales and upgrading distribution channels. some years, a spectacular increase over the levels of invest- ment realized in the past. 2 0 0 3 D O N O R R E P O RT 3 1 them build and develop their SME finance operations and training in areas such as credit evaluation,finance and delivery,basic banking skills;(2) provide training in supply chain / linkage project manage- ment;(3) contribute to the capacity building of business associations to better serve SMEs; and (4) contribute to the development of regulatory environments necessary for the growth of a healthy Middle East & North Africa financial sector. In the region's frontier economies such as Algeria and Syria, IFC Providing Capital and Business continued to focus on strengthening the financial markets sector with an initial assessment of the state of microfinance in Algeria Services to a Developing (Italy). Data gathered during the study will be used by NAED to SME and Microfinance Sector design a longer-term microbanking strategy for the country. Programs in the financial markets sector dominated the portfolio in the Middle East and North Africa (MENA) region in an effort In Syria, the financial services and instruments offered by most to provide capital and financial services to growing SMEs.At the banks are extremely narrow, prompting most Syrians to hold high regional level, a key development was the launch of a program to levels of liquidity outside the banking sector, or even outside the document current housing finance systems and existing legal country. IFC sees the insurance sector providing needed diversifi- frameworks (Switzerland). Another regional initiative took cation, so IFC oversaw the drafting of a modern insurance law to a comprehensive reading of the state of the SME sector ­ docu- govern the activities of private sector insurance companies;the law menting all existing SME programs, evaluating barriers, and will entail the creation of a supervisory authority for the proper spotlighting opportunities to work with European firms in support management and functioning of the sector. Other work in the of SMEs (Italy). sector included a survey of the potential market for life and non- life insurance in Syria, and an assessment of the existing insurance Findings of the study will influence the work of the North African market with a particular emphasis on relevant legal,regulatory,tax, Enterprise Development (NAED) facility, which was officially and institutional factors (Sweden). launched inApril 2003 utilizing $20 million in funding over five years (Belgium,France,Italy,Switzerland,and IFC).The goal is to provide In more developed economies,work in financial markets strength- access to finance and funding services by building the ening remained a top priority. In Lebanon, the Insurance Control capacity of banks and other financial service Commission needed assistance in building organizational capacity providers. A major milestone in the region's and in training staff members to carry out supervision in accor- long-term SME strategy, the facility dance with international standards. IFC designed a program to will focus on Algeria, Egypt, and define, develop, and implement specific supervisory procedures to Morocco, and will (1) provide ensure that international standards are met in the creation of an technical assistance to finan- insurance sector ­ a crucial first step in the drive to create public cial institutions to help confidence in this untested area (Canada). Because credit information is necessary for the application of modern financial technologies to the small business and EGYPT: consumer finance sector, credit bureaus are a key part of IFC's "A Chance to Work"- Training and financial markets strategy.As part of the global thrust in this area (see box), a TA study in Pakistan investigated the possibility of Employment for the Disadvantaged converting an existing SME start-up entity, Datacheck, into a credit bureau (New Zealand). Datacheck will need additional Originally started in Washington, D.C., by IFC's Legal capital in order to broaden its service offerings and expand into Department in 1997, this project worked primarily with a full-service credit bureau.The potential development of a credit the homeless and was based on the premise that one of bureau in Pakistan will in turn provide the necessary framework the best ways to break the cycle of homelessness is to for the creation of future successful retail and small business provide a person with a chance to work. Since then, more finance operations in the country. than 100 people have participated in the project. Hoping to replicate this success, IFC launched a similar initiative Also in Pakistan, the government needed a practical plan to in Egypt. Leveraging its private sector connections, IFC improve the affordability and availability of funds to finance homes established a partnership with the Mansour Group, a for middle and lower income households.To address this need, leading Egyptian company, and a local NGO to provide IFC has begun to undertake a feasibility study on the establish- training for individuals from poor areas in Cairo in skill sets ment of a secondary mortgage market institution (USTDA and for which there is a demonstrated market demand. In this IFCTA Fund). case, the project team identified a strong need for certi- fied plumbers and auto mechanics. The individuals received on-the-job training in the Mansour Group facili- Spurring SME growth at the macro level, FIAS implemented ties. Graduates received certificates and IFC assisted in several investment climate studies in the region,with a total of eight securing proper employment opportunities for program projects in Algeria, Jordan, Kuwait, Pakistan, Saudi Arabia, and graduates. All graduates are now successfully employed. Tunisia. In Saudi Arabia, FDI was examined as a possible tool to The success of this pilot has led to interest by several local address the cyclical nature of an oil-dependent economy and the private sector groups in creating similar partnerships. country's increasing unemployment problem. In Pakistan, FIAS conducted an administrative barriers study that mapped the general steps necessary to create a legally established business and to start operations (USTDA). 2 0 0 3 D O N O R R E P O RT 3 3 Development of Guidelines on Environmental and Social Performance Global Governments, lending agencies, and investors traditionally seek the advice of the World Bank Group to establish reasonable project and development standards. The guide- lines are also useful for investors and local authorities to Cross-Border Technical Assistance identify and address environmental and social issues in a While most of our individual TA activities are carried out in structured way and to monitor performance against targets specific countries or regions,we do have a number of activities that for improvement. are global or regional in nature.The central coordination by the SME Department enables lessons learned in one of the regional IFC applies guidelines to interpret local needs, possible SME facilities (see Chapter 3) to be applied globally. The three impacts, and reasonable environmental and social facilities in the social and environmental areas ­ EOF, SFMF and performance requirements for investors and entire CCF ­ are global in their activities. FIAS is also very active in sectors. The IFC guidelines are also used by other inter- applying the lessons they have learned in one country to other national financial institutions that do not have their own countries.In addition,someTA assignments are global in approach guidelines and by national authorities when no relevant local relevant standards exist. The IFC guidelines are thus and their results are often applied at the country or investment considered to be a significant tool for supporting global project level. sustainable development. One example is IFC's work on business associations. A cross- To remain relevant, the guidelines need to be periodically regional TA builds on an earlier business association needs assess- modified and readily available to stakeholders and the ment (Denmark) and (i) delivers training and TA to business public. IFC has, therefore, initiated a program for contin- associations in Cambodia, Nigeria, andVietnam (as well as South uous development of new guidelines and revision of Africa ­ funded through the CBF) to improve their sustainability; existing ones when needed. (ii) develops tools and best practices to improve the effectiveness of Business Membership Organization projects aimed at devel- A Danish TATF project launched in early 2002 has oping the capacity of business associations; and (iii) provides resulted in a revised strategy for content and layout of the training to staff of the SME facilities on how to assist business asso- IFC guidelines. The project has prepared the new IFC ciations (Denmark).In support of our efforts to reach SMEs through Guidelines on Occupational Health and Safety and has financial intermediaries, we have embarked on a global effort to provided input for the new Guidelines on Health Care. foster the development of private credit bureaus around the world Three more guidelines are currently in preparation: Small supported by multiple donors (see box). Combustion Facilities, Precious Metal Mining, and Aquaculture. Another example is the development of the SME Tookit (see box), which uses technology to help SMEs. 3 4 2 0 0 3 D O N O R R E P O RT Using the Internet to Help Small Businesses www.smetoolkit.org Early in the new millennium, IFC began to develop an electronic toolkit; the objective was to use technology to bring SMEs information on products and services needed throughout their business development cycle, increase their productivity, efficiency and capacity, and improve their access to capital and new markets. In October 2002 IFC launched the English-language version of the SME Toolkit. Funded by the government of Japan, the Toolkit provides small businesses in targeted developing countries with access to Web- and CD-ROM-based interactive tools, training, how-to articles, downloadable forms, and software that will help them to improve operational and management practices necessary to grow their businesses. By July 2003, smetoolkit.org was receiving an average of over 200,000 hits and about 2,700 visitors per month from more than 30 countries. The project has received resoundingly positive feedback from both SME end users and small business service providers, with dozens of requests for localization from all over the world. The SME Toolkit offers a range of rich interactive content to help educate small business owners and managers in seven core business areas: Accounting and Finance, Business Planning, Human Resources, Legal and Insurance, Marketing and Sales, Operations, and Information Technology. The content caters to both novice and mid-level users and has been extremely well-received in target markets. IFC has developed both a Web and CD- ROM-based portal to deliver the SME Toolkit content to small businesses as well as a robust administrative tool that will allow regional partners to translate and manage all of the content and the portal framework in multiple languages simultaneously. In addition to translating the core content into languages, regional partners will supple- ment the content with locally specific material, including local business directories, information about local sources of financing, and relevant product and market data. The first localized version of the Toolkit was launched in December 2002 -- in Vietnamese (www.busi- nessedge.com.vn) produced in collaboration with MPDF. Since then four additional localized and co-branded sites have been launched, and two more -- Mongolian, and Nepalese --are in progress. The sites are: · The Ukrainian and Russian version of the SME Toolkit on www.vlasnasprava.info in cooperation with the Partnership and funded by the government of Norway and IFC TA Fund. · A co-branded GP Toolkit site (www.gptoolkit.org) customized for private equity fund managers providing financing to SMEs. · A Caribbean Business Toolkit site (www.caribbeantoolkit.org) and CD-ROM offered together with a SME work- shop program sponsored by Canada and IFC TA Fund. · A Spanish version of the SME Toolkit on www.mipyme.com in cooperation with FUNDES in Chile and Colombia. Continued on page 36 2 0 0 3 D O N O R R E P O RT 3 5 CONTINUED: Using the Internet to Help Small Businesses: A Localized ToolKit ­ www.vlasnasprava.info "Vlasna Sprava" means "Own Business" or "Private Business" in Ukrainian. The new Web site offers tools for enterprises to assess their financing needs and recommends customized financing options. The Web site links users to all of Ukraine's lending institutions and offers an option to apply for financing on line. But first, businesses can determine whether or not they qualify for credit by using on-line instruments to evaluate their financial position. If enterprises do not qualify for credit, the Web site contains financial management training materials and links to consulting companies where enterprises can get professional business advice. A database of banks and financial service providers has been developed that includes information on regional branches of Ukrainian banks to ensure greater reach throughout Ukraine. Databases of busi- ness training providers and consulting compa- nies are also included. Launched in February 2003, with support from Norway, in its first six months the site has attracted over 1,000 regis- tered users, over 13,000 separate visitors, and over 250,000 hits. In July 2003, the site was ranked 32nd among the most popular business and financial sites in Ukraine. 3 6 2 0 0 3 D O N O R R E P O RT During 2003, IFC's environmental and social safeguards and the collaboration with IFC clients and an NGO consortium (IUCN IFC/World Bank Group environmental and social guidelines were and FFI) that will enable businesses in emerging markets to under- adopted by a number of the world's leading commercial banks and stand and incorporate biodiversity in their operations. made mandatory for their project financing.This initiative,called the "Equator Principles,"is a major milestone for IFC in achieving posi- During FY03 the newly created Global Financial Markets tive development outcomes beyond our investments.This means Department expanded financial markets advisory services and that an increasing number of institutions will be applying strict stan- focused IFC's efforts in the sector. (For further details, see sepa- dards to investment in emergency markets. It also underscores the rate report, Highlights 2002-03: Global Financial Markets value that IFC's environmental and social expertise contributes to Advisory Services.) the sustainability of private sector investment (see box, page 6). In 2003,we also carried out a major study to develop IFC's global Keeping up to date and expanding our guidelines for specific strategy in the electronics manufacturing and related services sectors is an ongoing effort, and in 2003 we continued to benefit subsectors of the high-tech sector.This is expected to facilitate the from donor support in the update and expansion of our guidelines development of IFC investments in several subsectors where there (Denmark) (see box). CCF is also working on the expansion of is a role for IFC investments with global, regional, or local clients our "good practice" series to include biodiversity concerns in (Switzerland and IFCTA Fund). Credit Bureaus Help Underserved People and Small Businesses Get Access to Credit Through the financial technologies global initiative, IFC has been working to enable financial institutions to target consumer and small business lending profitably. One of the constraints faced by lenders in reaching this segment is the lack of ready access to credit information. The basic principle of credit reporting ­ sharing information about borrowers in order to avoid bad credit ­ has been around for some time. It is widely recognized that credit reporting helps lenders make good credit decisions, thus reducing risk and allowing greater extension of credit to previously underserved segments of the population, in particular small businesses. In close collaboration with the World Bank's financial sector restructuring efforts, IFC has embarked on a global program of TA to lay the groundwork for the development of private credit bureau systems. The scope of the TA varies depending on the region/country and may include: 1) feasibility studies for the introduction of consumer and small business credit reporting services; 2) support for the introduction of new small business credit reporting services; 3) preparation of business plans for creation or expansion of credit bureaus; and 4) guidance to governments and financial sector participants on the necessary legal and regulatory environ- ments for credit reporting. Our credit bureau TA was supported by a several donors: Italy for Eastern Europe; Norway for Africa; New Zealand for Indonesia and Pakistan. Moreover, the IFC TA Fund is providing financing to integrate these donor-funded efforts on a global basis. Additional funding is being sought for other countries and regions. 2 0 0 3 D O N O R R E P O RT 3 7 3 Donor-Funded Operations ­ Overview Technical Assistance Trust Funds Program OUTLINE Created in 1988 to provide technical assistance (TA) funded by bilateral and multilateral donors,theTATF program now has a total of 46 active funding agreements from 23 individual donor countries/agencies. Besides providing funding for many one-shotTA projects,TATF provides IFC with the ability to test ideas; successful ones are often spun off into stand-alone programs. NEW TRUST FUNDS Three new trust fund agreements were signed this fiscal year: with the Finnish Ministry of Trade and Industry (initial contribution of $1.1 million to promote the development of the private sector, particu- larly in Russia and China); the German Federal Ministry of Economy ($1.4 million to hire consultants from its eastern states) and the Republic of South Africa -- the first with a country from the African continent (initial contribution of $200,000). COUNTRY COVERAGE TA was carried out in more than 79 countries. POVERTY AND LOW-INCOME FOCUS Overall, more than 90 percent of TA assignments were in low- and lower-middle-income countries. Ninety-seven TA assignments, for a total of $11.3 million, were carried out in countries with a high incidence of poverty (more than 25 percent of the population living on less than $1 a day). COUNTRY RISK FOCUS Eighty-twoTA assignments were carried out in countries with very high country risk ratings. TA in Poorer and Riskier Countries Trends Number (%) of Approvals in FY03 Appropriately, TA activity is skewed more toward the low income The pace of usage has been fairly steady year-to-year, since 2000. The countries, and those with higher country-risk ratings, particu- opening of a number of regional facilities, which carried out a lot of the TA larly compared to IFC's investment activities. done through TATF program, caused the drop after 2000. COUNTRY INCOME IFC INVESTMENT IFC TA ACTIVITY1 ACTIVITY1 Low 44 (28%) 37 (35%) FISCAL YEAR 1999 2000 2001 2002 2003 Lower-middle 73 (46%) 60 (58%) TA projects approved 153 160 128 137 132 Upper-middle 39 (25%) 7 (7%) Value of approvals (US$ m) $19.8 $20.2 $15.6 $14.9 $17.6 High 1 (1%) - Average TA project value (US$ m) $0.129 $0.126 $0.122 $0.109 $0.133 Number of large approvals * 29 26 23 17 26 COUNTRY RISK RATING Annual contributions (US$ m) $25 $14 $14 $22.9 $11.3 <30- Not Rated 36 (23%) 60 (58%) Annual disbursements (US$ m) $13.2 $13.00 $11.8 $12.2 $11.9 30-45 68 (43%) 22 (21%) Number of main trust funds 34 35 37 40 46 >45-60 45 (29%) 22 (21%) >60 8 (5%) 0 (0%) * Large approvals are defined as those in excess of US$200,000 Excluding TAs and Investments carried out in Global/Multi Regions 1 TA ASSIGNMENTS APPROVED ANNUAL CONTRIBUTIONS COUNTRY INCOME FY99­FY03 FY99­FY03 (US$ MILLIONS) 60 200 25 50 40 20 150 30 20 15 10 100 0 Low Low-Middle Upper-Middle High 10 COUNTRY RISK RATING 50 60 5 50 40 0 0 30 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 20 10 0 <30 Not Related 30-45 >45-60 >60 IFC Investment Activity IFC TA Activity 4 0 2 0 0 3 D O N O R R E P O RT Largest Recipient Countries of TAs in FY03 Of the top eleven country recipients of TATF-funded projects, Serbia and Montenegro (previously Former Republic of Yugoslavia), China, and the Russian Federation continued to be the top three recipients. They accounted for 32 percent of the value and 31 percent of the number of approvals. Except for Ukraine, the other countries in the top eleven list are different from last year, illustrating the ability of the TATF Program to provide flexible funding wherever it is needed. RECIPIENT COUNTRY AMOUNT (US$ MILLIONS) NUMBER OF TA APPROVALS Serbia and Montenegro 2.25 18 China 2.21 13 Russian Federation 1.23 10 Mauritius 0.74 3 Vietnam 0.58 4 Pakistan 0.43 4 Ukraine 0.41 5 Afghanistan 0.39 2 Ecuador 0.36 3 Ghana 0.35 2 Albania 0.35 1 APPROVALS BY VALUE, FY03 APPROVALS BY NUMBER, FY03 (percent) (percent) F F E E A A D D B B C C A = Sub-Saharan Africa 14% A = Sub-Saharan Africa 14% B = Asia & the Pacific 23% B = Asia & the Pacific 24% C = Europe & Central Asia 39% C = Europe & Central Asia 38% D = Latin America & the Caribbean 8% D = Latin America & the Caribbean 11% E = Middle East & North Africa 10% E = Middle East & North Africa 9% F = Global 6% F = Global 4% 2 0 0 3 D O N O R R E P O RT 4 1 TA Activity by Region The Sub-Saharan Africa and Middle East & North Africa regions both showed substantial increases in TA, between them accounting for the majority of the total increase in volume. While the absolute levels of TA in Asia and Europe and Central Asia did not decrease in volume terms, their shares did drop in percentage terms, from 74 percent to 62 percent, because of the overall increase. TA Activity by Donor Country and Region ($'000s) SUB-SAHARAN ASIA & EUROPE & LATIN AMERICA & MIDDLE EAST & DONOR COUNTRY AFRICA PACIFIC CENTRAL ASIA THE CARIBBEAN NORTH AFRICA GLOBAL TOTAL Australia - 295 - - - - 295 Austria - - 213 - - - 213 Canada 350 120 250 354 154 - 1,228 Denmark 200 427 - 40 - 365 1,032 Finland - - 338 - - - 338 France - 257 - - - - 257 Germany - - 176 - - - 176 Greece - - 417 - - - 417 IFC TA Fund 230 561 722 572 118 300 2,503 Ireland 30 355 14 - - - 399 Israel - 46 100 - - - 146 Italy 390 355 1,550 - 354 - 2,649 Japan - 265 - - - 45 310 Luxembourg 130 - - - - - 130 Netherlands 597 160 449 35 90 - 1,331 New Zealand - 224 - - 50 - 274 Norway 350 229 170 165 300 - 1,214 Spain - - 600 - - - 600 Sweden - 278 1,178 - 140 - 1,596 Switzerland 232 465 214 143 360 250 1,664 United Kingdom - 21 135 - - - 156 United States - - 400 - 260 - 660 TOTAL ($ thousands) 2,509 4,058 6,926 1,309 1,826 960 17,588 Percent 14% 23% 39% 8% 10% 6% 100% Number of Approvals 18 32 50 14 12 6 132 Percent 14% 24% 38% 11% 9% 4% 100% 4 2 2 0 0 3 D O N O R R E P O RT Types and Sectors of TA Assignments Consistent with IFC strategy, the TATF Program supported TA assignments with broad-based development impact. In the following tables one can clearly see the alignment between the sectors in which TA was carried out and those central to the IFC strategy--financial markets, SME development, infrastructure and the social sectors. Number of Assignments, by TA Type TYPE OF TA* NUMBER OF ASSIGNMENTS IFC Project-Related IFC Project-Related 58 SME Support SME Support 56 Sector Reviews/Identification Sector Reviews/Identification 39 Enabling Environment 33 Enabling Environment Training and Capacity Strengthening 31 Training and Capacity Strengthening Privatization/Corporate Advisory 30 Privatization/Corporate Advisory Post Privatization 3 Post Privatization Others 8 Others *These categories are not mutually exclusive 0 10 20 30 40 50 60 Number of Assignments and Approval Amounts, by Sector SECTOR NAME NUMBER AMOUNT (US$) Financial Services 48 7,119,998 Financial Services Manufacturing & Industry 29 3,092,110 Food & Agribusiness 8 734,950 Manufacturing & Industry Infrastructure 14 3,240,500 Food & Agribusiness Health Care & Education 11 1,184,715 Multisector TA 22 2,215,288 Infrastructure TOTAL 132 17,587,561 Health Care & Education Multisector TA 0 10 20 30 40 50 60 2 0 0 3 D O N O R R E P O RT 4 3 SME Facilities Improving Lives by Creating Africa Project Development Facility Opportunities in Small Business Operational since 1986, the Africa Project Development Facility One of IFC's key tools in small business development is the family (APDF) has five regional offices throughout Sub-Saharan Africa. of SME Facilities1 that it manages on behalf of a broad range of Since 2000, often working alongside its sister organization, the donors.These facilities--plus IFC's Private Enterprise Partnership African Management Services Company, APDF has been working (the Partnership) in the former Soviet Union, which also serves under a five-year strategic plan, set by IFC and approved by the larger companies--offer a variety of important services to the donors.APDF's objectives include: small business community in countries that typically receive little · Building successful SME models by increasing access to capital, in the way of private capital. expanding procurement opportunities, and enhancing entrepre- neurial development assistance There are eight SME Facilities2 now active.The eight facilities,plus · Strengthening the role of SMEs in advocacy AMSCO and the Partnership together have annual budgets of · Developing local capacity to allow for the exit of APDF approximately $60 million, 40 field offices, and a total combined During the year, considerable effort has gone into improving the staff of approximately 600. quality ofAPDF's services.Management information systems,tools, and delivery processes were updated. Staff were trained to work All facilities are engaged in some way or the other in activity areas more effectively in newly identified business areas and to help of:(1) access to finance,(2) capacity building,(3) business enabling transform APDF into a customer-driven organization while environment,(4) company advisory assistance,(5) business support increasing cost recovery. services development,and (6) investment services.This year saw the opening of new facilities in Indonesia, South Asia, and North ACCOMPLISHMENTS IN FY03 Africa, as well as early work on another soon to open Despite the weakening of the US dollar against most African facility in Latin America. currencies, which depleted actual funds available,APDF achieved better results than in any previous year. Currently, APDF is focusing its efforts on countries in the process of reform. It is also responding to the demand for services in postconflict countries, such as Angola and Rwanda. For comprehensive information on all of theWorld Bank Group's SME-related work, 1 visit the department'sWeb site at www.ifc.org/sme or see separate Report onWBG Review of Small Business Activities 2003. APDF, CPDF, IEDF, MPDF, NAED, SEDF, SEED, and SPPF 2 Business Advisory and Enterprise Support Services: APDF China Project Development Facility completed 41 business advisory services projects and 150 enter- The China Project Development Facility (CPDF) commenced prise support services modules in FY03. Training of SME operations in 2002 in China's interior, with an initial focus on personnel,consultants,and the staff of financial institutions has also Sichuan province.Planned and implemented in close collaboration become an increasingly important activity.In Ghana,for example, with the Chinese government and its Western Development APDF helped banks acquire the practical skills to effectively serve Program, the facility builds upon the strongWorld Bank presence SME clients--such as understanding the mindset of the entre- in Sichuan with a comprehensive approach to three important preneur,credit risk assessment,and financial analysis.APDF is also economic challenges: lagging development in Western China, a partnering with other organizations,for example,helping Lusaka- relative lack of strong new commercially oriented financial insti- based NORSAD (a Nordic/Southern African Development tutions, and a struggling SME sector. Community funding vehicle) finance sound, well-planned proj- ects as a way to enhance its own impact. Overall, approximately CPDF has three business lines: 2,500 staff from SMEs attendedAPDF courses and workshops this 1) Access to Finance: CPDF supports partner financial institu- year; 600 financial institution personnel were trained, along with tions through a combination of TA and direct assistance to 540 consultants. SMEs to strengthen their operations and raise finance. Support for Women and Youth Organizations:This year, 20 2) Capacity Building and Sustainable Development women's organizations received assistance.APDF has increased its Initiatives:CPDF strengthens local nonfinancial intermediaries support for such projects, recognizing their potential to represent through innovative"franchising"andTA projects,designing and the needs of women entrepreneurs, who face a wide array of developing short, adapted management education and training obstacles.It is assisting in the start-up and sustainability of SAWEN, initiatives,as well as supporting supply chain linkages,corporate the South African Women Entrepreneurs Network, and also governance, and environmental management programs. working closely with the Nigerian Business Women's Forum. 3) Business Enabling Environment: CPDF participates in a Linkage Programs: APDF is currently working on six supply program with the World Bank, the donor community, and chain linkage projects, with two more in the planning stages. government agencies; supports the government's efforts to Among the current projects: Konkola Copper Mines in South develop a credit reporting system;provides assistance to address Africa engaged APDF to help local SMEs become suppliers to the key constraints,primarily in access to finance;conducts admin- mine,while facilitating diversification strategies so that they do not istrative cost surveys and SME mapping; and supports business become captive suppliers. With the support of the Capacity and industry associations. Building Fund (CBF), this new business area is already showing promising results.The facility is now working to integrate linkage ACCOMPLISHMENTS IN FY03 as a mainstream business activity. In CPDF's first full operational year it has gained recognition in the local private sector services market and successfully completed initial projects for Sichuan SMEs and intermediaries. CPDF has accomplished its goals, and will continue in the coming year to deepen its assistance. FY03 highlights include: · 11 SMEs received financial advice and/or technical assistance; thus far, two SMEs obtained finance and two additional SMEs completed investment plans. 2 0 0 3 D O N O R R E P O RT 4 5 · Eight financial institutions, including three in Mianyang and Mekong Private Sector Leshan, partnered with CPDF.Activities included implementa- Development Facility tion of an ongoing TA program for Chengdu City Commercial The Mekong Private Sector Development Facility (MPDF), Bank (focusing on strengthening management and internal formerly the Mekong Project Development Facility,was launched controls and introducing international accounting standards);and in 1997 to support the establishment and growth of SMEs in assistance to the credit guarantee firm supported by the United Vietnam, Cambodia, and Laos. SME development is a crucial part Kingdom to raise $3 million in new equity. of ongoing efforts in all three countries to overcome widespread · 19 training events on credit analysis, consulting, management poverty and continue the transition from centrally planned to training,and environmental audits were held for 400 participants market-based economies. from financial institutions,consulting firms,government agencies, and others. In its first five years, MPDF provided direct assistance to SME · 30 consultants from five partner firms successfully implemented a companies to improve their access to capital as well as to high- consulting methodology to build capacity in delivering consulting quality business services. Starting this year, MPDF Phase II will services, generating contracts totaling $572,000 with 16 SMEs. focus on extending previous achievements,particularly in bank and management training.The strategy is to develop the capacity of · A large firm partnered with CPDF in Sichuan to launch an SME business development services, build a more conducive business supplier chain linkage program to help generate new markets for environment in general,and carry out more activities in the poorer Sichuan SMEs. and smaller countries of the region. · CPDF conducted market assessments and baseline studies in corporate governance and management training and initiated MPDF II has three basic programs: reviews of the IT, venture capital, pharmaceutical, and automo- 1) Company Advisory Assistance: Working mainly through tive parts sectors in Sichuan. local consultants, MPDF helps SMEs to improve operations, · 24 promotional seminars attracted a total of 1,885 people to raise develop new markets, strengthen management, and develop awareness on SME development issues. sound business plans.This program offers four forms of assistance: · SME mapping work is ongoing in Sichuan and Zhejiang · Operations Reviews look at all aspects of a company's provinces.This work highlights the key constraints facing Chinese management and operations to identify problem areas and SMEs and is expected to provide a basis for follow-up actions on potential solutions. the World Bank Investment Climate Assessment. · Links with Consultants bring together companies with problems and consultants with solutions, and monitor consultant assistance to ensure successful implementation. · Business Consultants' Development helps expand the supply and quality of local SME business development serv- ices by helping them improve their consulting skills, knowl- edge of business management, and expertise in relevant areas. · Finance Raising helps companies develop viable investment proposals and introduces them to potential lenders or investors. 4 6 2 0 0 3 D O N O R R E P O RT North Africa Enterprise Development North Africa Enterprise Development (NAED), IFC's newest operational multidonor SME facility, was formally launched in April 2003.With an initial five-year budget of up to $20 million, the facility brings expertise and assistance to the SME sector in Algeria,Egypt,and Morocco.NAED's core mandate is to improve the lives of people in the NorthAfrica region by strengthening the local SME sector to create jobs and opportunities. It coordinates closely with other government, donor, private sector, and NGO initiatives, seeking lasting results that do not rely on continued external subsidies. NAED's commercially oriented structure is 2) Business Development Programs: MPDF supports four similar to that of its sister facilities--tailoring services to local key initiatives to strengthen the capacity of local institutions that demand and charging appropriate fees to recover costs. provide essential business services to SMEs. · SME Management Training and Flexible Learning Off to a rapid start,the facility already has fully functioning offices builds on MPDF's previous work by developing new training inAlgiers,Cairo,and Rabat,and with office staff receiving training curricula and products,flexible methods of delivery,and part- and ongoing support from other SME facilities and from IFC nerships with key training providers. headquarters. Activities target three key areas, seen as central to · Bank Training Center builds on the capacity already devel- breaking down SME constraints: oped in the banking sector through MPDF's programs, and · Access to capital recruits and trains local instructors to take over the provision · Business development services of the quality training that is increasingly in demand. · Business enabling environment · Business Associations Support Initiative helps improve the capacity of business associations by providing manage- ACCOMPLISHMENTS IN FY03 ment training, assisting with strategic and action plans, and NAED staff completed an in-depth assessment of retail/SME promoting linkages with other countries. operations of four banks in Morocco and Egypt and signed advi- · Export Development addresses the growing need of SMEs sory mandates with two Egyptian and one Moroccan commercial for export marketing assistance by focusing on training and bank to assist them in developing retail and SME operations.The publications, raising awareness among potential exporters facility initiated a partnership with Al Amana,a leading Moroccan about international standards, and promoting e-commerce. microfinance institution, to develop individual loan packages for small business owners. In Algeria and Morocco, NAED worked 3) Business Enabling Environment: The Business Enabling with several business associations, and the Cairo office completed Environment program researches and analyzes the critical prob- training of 30 management consultants who can assist small busi- lems faced by businesses and government agencies in areas rele- ness owners in Egypt. vant to SME growth. Results are widely shared, to encourage better understanding of the issues and collaboration among Other business development activities in FY03 included surveys of stakeholders in developing and implementing business-friendly 23 business associations in Algeria, 40 training institutes in Egypt, policies and practices. and 15 service providers in the Tangiers region. 2 0 0 3 D O N O R R E P O RT 4 7 SouthAsia Enterprise Development Facility 3) Business Enabling Environment Reform: SEDF promotes The SouthAsia Enterprise Development Facility (SEDF) was greater inter-regional and international trade and removes key launched in October 2002. Headquartered in Dhaka, Bangladesh, policy obstacles standing in the way of SME growth.A business- it also serves Nepal, Bhutan, and Northeast India. to-business program linking 18 companies in Bangladesh and Canada resulted in $17 million worth of investment and exports SEDF has four major strategic priorities: between the two countries. 1) Access to Finance: SEDF provides support to partner finan- cial institutions through a combination of technical assistance 4) Special Projects: These include linkages, environment and and policy-related work.This year it carried out institutional social projects, among others. Up to 40 million people in strengthening programs with 250 participants from 30 Bangladesh are at risk of arsenic poisoning from drinking Bangladeshi and Northeast Indian banks, and signed memo- water sources, creating a demand for a low-cost, effective randa of understanding with a bank training institute and devel- household solution for decontamination of groundwater. opment finance institution in Northeast India.Training in SME SEDF has responded by preparing a business plan for a local credit analysis was offered in collaboration with the Bhutan SME that maybe considered for financing by the Environment National Bank, the Bank of Bhutan, and the Bhutan Chamber Opportunities Facility. of Commerce and Industries. Southeast Europe Enterprise Development 2) Business Development and Capacity Building Services: The Southeast Europe Enterprise Development (SEED) facility is Efforts focus on priority subsectors such as ready-made a five-year, $25 million multidonor initiative to strengthen SMEs garments,light engineering,agribusiness,and information tech- in Albania, Bosnia and Herzegovina, FYR Macedonia, and Serbia nology,basing its responses on both demand and supply analysis. and Montenegro.The facility focuses on improving the quality of SEDF has built partnerships with local and international firms consulting and training available to and for the SME sector, and and training institutions to deliver high-quality training to helping meet the demand for such services. SMEs.In the garment sector,SEDF is helping several medium- size Bangladeshi firms benchmark themselves against potential To better meet these overarching objectives,SEED has introduced competitors from other developing countries, then build their the"PlatformApproach"as a new way of doing business.This inte- productivity.In agribusiness,a sectoral"map"has been prepared grated approach to client services includes requirements to clearly and shared with other stakeholders as a way of identifying define scope,integration (in-house and/or external),impact,mobi- SEDF's most useful programs of assistance. The study lization, and replicability prior to project approval and implemen- revealed, for example, that Bangladesh has untapped tation. Five operational objectives have been set: linkage work, spice production potential and that with access to finance, business membership organizations, institutional training and technical assistance,the quan- building, and capacity building. tity and quality of output could be considerably increased. ACCOMPLISHMENTS IN FY03 South Pacific Project Facility During FY03, SEED delivered 65 internal enhancement plans; The South Pacific Project Facility (SPPF) aims to reduce poverty 67 post-internal enhancement plans including 55 investment by assisting with the development of a viable small to medium-size plans/investment overviews; 5 marketing plans; and 2 technical private sector in the Pacific.This year, the facility set challenging plans. Nine projects were financed for a total of $5.6 million. targets and has come close to fulfilling or has exceeded most of SEED also completed 31 capacity building projects,training more them, all while spending nearly 25 percent less than planned. In than 300 local service providers, nearly 700 employees/managers addition, SPPF completed a major strategic project that will from SMEs,270 employees of financial institutions,and more than provide a framework for its efforts and for many others working 800 youths. SEED undertook 16 business enabling environment in the Pacific region for years to come. initiatives, including surveys and studies, publications, and input into donor/government strategies on SME development and Key themes this year were: poverty reduction. · SME finance A key recent project involves Serbia'sTigar Rubber Products Co.,a · A strategic review of private sector needs in 12 countries 4,000-employee privatized automobile tire and tube maker, which ·The transition and scaling back of the facility's direct-to-SMEs undertook a large investment program (a=C45 million transaction) finance raising product financed by IFC alongside Michelin of France.That transaction was the single largest investment in a private Serbian company in more ACCOMPLISHMENTS IN FY03 than a decade. Thus far, SEED has provided Tigar with strategic ·Yaukuve Island Resort in Fiji: SPPF developed the concept advice on new supply and distribution chain linkages with local for this proposed resort and helped raise the necessary finance. SMEs.Part of the work focuses on structuring the upcoming sale of Not only willYaukuve be a unique and exclusive tourist desti- Tigar's noncore assets in a way that will create several viable new nation bringing in revenue for Fiji,but it has a strong indigenous SMEs in the town of Pirot, whose economy depends heavily on Fijian component. Tigar and might otherwise be hit hard by layoffs stemming from the · TA in Timor-Leste: There is an urgent need for appropriate restructuring (Sweden). structures at the governmental level to facilitate the flow of private sector investment in tourism. At the request of the SEED is also working with IFC's Corporate Citizenship Facility government,and funded by theWorld Bank,SPPF recommended on a new Balkans Herbal Development Initiative to promote a initiatives to support the promotion of investment in the tourism more effective, profitable, and sustainable herbal sector through industry and presented results at a workshop in Dili. analysis of key issues and support to local herbal businesses. · TA to National Bank of Samoa: SPPF provided an exten- sive technical assistance program designed to improve the National Bank of Samoa's performance.The assistance covered credit risk, management, information technology, and strategic planning.To further improve the bank's management and corpo- rate governance,SPPF assisted with the appointment of a recog- nized banking and finance specialist as an independent, nonexecutive director on the institution's board (New Zealand). 2 0 0 3 D O N O R R E P O RT 4 9 Private Enterprise Partnership Building Partnerships for Sustainable Economic Growth IFC's Private Enterprise Partnership (the Partnership) is IFC's technical assistance program in the former Soviet Union. IFC The Partnership at a Glance established the Partnership in 2000 with a three-year administra- tive budget of $12.6 million as a continuation of the technical assis- tance programs IFC has been carrying out in the region since · 28 projects in nine countries ­ Armenia, Azerbaijan, Belarus, 1992.The Partnership has consolidated IFC's technical assistance Georgia, Kyrgyz Republic, Russia, Tajikistan, Ukraine, and programs across the former Soviet Union under a single manage- Uzbekistan. ment structure, expanded these activities, and integrated them · Nine capital city offices and 15 regional offices. more closely with IFC's investment work. Designed as a partner- · Over 250 staff, 90 percent of whom are local professionals. ship among donors, private sector investors, local companies and · Funded jointly by IFC and donor governments of Canada, governments, and IFC, the Partnership creates greater synergy in Finland, Germany (Bavaria), the Netherlands, Norway, Sweden, development efforts and enables IFC to react quickly to emerging Switzerland, the United Kingdom, and the United States. development challenges. RUSSIA: Impact On the Ground: Healthier Forests for a Healthier Economy Russia's forests are one of the country's most valuable resources. To help Russia gain a great advantage from the proper management of this resource, IFC works with Russian forestry companies on sustainable forestry and environmentally sound business practices and facilitates links with investors. In 1995, OOO Progress was a medium-size company. Now it is the largest wood harvesting company in Northwest Russia's Leningrad region. With 1,000 employees and more than $11 million in annual revenues in 2002, Progress is the largest employer and one of the top taxpayers in Podporozhie, a city of 21,000 people. By the end of 2003, the company plans to increase its harvesting volume by more than 20 percent. The Partnership's Northwest Russia Forest Investment Project, funded by the govern- ment of Finland, has played an important role in this growth. IFC has been working with Progress since 1999. The Partnership's Northwest Russia Forest Investment Project advised and trained the company's management in corporate governance, modern business prac- tices, product marketing, financial management, and modern production technologies. The project also advised the company on its long-term business development strategy and helped it find a foreign partner ­ Thomesto (Metsaliitto Group) ­ that acquired a significant stake in Progress in 2002. Progress' growth and outside financing allowed it to invest in new modern equipment for selective cutting to improve its harvesting operations. To secure the company's further long-term growth, the Partnership is now working with Progress to improve its sustainable forestry management and enhance environ- mentally sound wood-harvesting practices. Progress' success and reputation have enabled it to develop valuable contacts with several European sawmills and pulp companies. The company's operations have become more integrated into those of Metsaliitto Group, one of the world's leading forestry companies. In cooperation with the Group, Progress developed a joint project to build a new sawmill. The new joint company, Svir-Timber, is already regis- tered and is expected to produce about 120,000 cubic meters of sawn timber per year. Progress is one of a dozen forestry companies in which the Partnership has helped to improve manage- ment and production practices and match with European partners. 2 0 0 3 D O N O R R E P O RT 5 1 UKRAINE: Minority Shareholder Rights Protected: IFC's Partnership's corporate governance advice helps a Ukrainian manufacturer survive and save hundreds of jobs Established in 1947, the Ukrainian company Kashtan (Ukrainian for chestnut tree, a symbol of the national capital, Kyiv) is one of the country's oldest garment producers. Privatized in 1993, the company is a leader in clothing production. It manufactures for the local market, as well as exports under such globally known brands as Burberry and Marks & Spencer. It employs nearly 500 workers, paying some of the highest salaries in the industry. A year ago, Kashtan faced a hostile takeover. An auto company, interested in Kashtan's location, offered to buy its shares. It offered very low value, and if successful, would have halted production and laid off all the workers. When the offer was rejected by company management, the auto company began aggres- sively buying shares from the employees who owned 80 percent of Kashtan. With an illiquid market, no information on valuation, and no legislation regulating takeovers, many employees were easily manipu- lated into selling their shares at low prices. After first trying to buy shares in an effort to outbid the auto company, Kashtan's management turned to the Partnership's Ukraine Corporate Development Project for help. The project advised Kashtan to be transparent with the minority shareholders-employees, and inform them about the takeover attempt, the true value of the company, and their right to make their own decision. It also advised Kashtan on a media campaign to inform the public about the company's activities, future plans, and the attempted takeover. As a result a majority of the workers supported the continued existence of the company and decided to either keep their shares or sell them to management. Today, management owns a 64 percent stake, the workers own 11 percent, and the auto company has 25 percent. Kashtan has begun discussions to buy back the auto company's stake. Prompt action and management's commitment to transparent practices helped save Ukraine's leading garment producer and preserved hundreds of jobs. Overall the Partnership's Ukraine Corporate Development Project has conducted over 30 seminars on corporate development for 1,500 participants and provided over 600 consultations to more than 270 companies across Ukraine. To ensure good corporate governance among future managers, the project works with educational institutions on their corporate governance curricula. The project also works with the government of Ukraine to improve legislation regulating the country's corporations. The project has advised the Ukrainian government on 11 pieces of legislation, three of which have been adopted. 5 2 2 0 0 3 D O N O R R E P O RT The Partnership works with its partners to achieve the following RUSSIA: objectives: · Attract private direct investment. Leasing Development Project · Stimulate the growth of small and medium enterprises. · Improve the business-enabling environment. This year the Partnership concluded its Russia Leasing To achieve these objectives, the Partnership implements programs Development Project, funded by Canada and the United in four distinct, complementary areas: Kingdom. This project played a key role in developing a · Building supply and distribution chains to link smaller compa- competitive $2.3 billion leasing market in Russia. The nies to major investors. project's major contributions include drafting and advo- cating amendments to Russia's Tax Code and the Law on · Developing financial markets. Leasing to strengthen leasing legislation, training thou- · Improving corporate governance practices and regulations. sands of people across 35 of the 89 regions of Russia, and · Building business support services and improving the regulatory providing more than 1,400 consultations to Russian and environment for SMEs. foreign companies on the legal, accounting, and taxation aspects of leasing operations to build leasing expertise. IFC The Year in Review also invested $19 million of its own resources and mobi- This year the Partnership expanded its programs toAzerbaijan and lized an additional $45 million in four Russian leasing companies. With funding from Finland, the Partnership Georgia and is currently implementing 28 projects in nine coun- continues to promote increased investment in the sector by tries.Eleven of these projects were launched in FY03.In addition, matching Russian leasing companies in the northwest with the Partnership completed six projects during the fiscal year. European investors. Thus far, the Partnership's technical assistance work has facilitated The expertise gained by the Russia Leasing Development $799 million in investment, including $68 million from IFC. Project gave a quick start to the IFC's Central Asia Leasing Project (Switzerland). The project has already contributed The Partnership's projects are made possible with support from the to leasing and tax legislation passed in the Kyrgyz governments of Canada,Finland,Germany (Bavaria),the Netherlands, Republic, Tajikistan, and Uzbekistan. The project also Norway, Sweden, Switzerland, the United Kingdom, and the United supported IFC's offices in Armenia and Georgia in drafting States, which have together contributed over $41 million over the leasing legislation, the passage of which led to IFC's invest- last three years, including $8.4 million in FY03. Based on the ment in Armenia's first private leasing company. This year Partnership's strong performance,IFC extended its funding of $4.6 the Partnership launched leasing development projects in million per year through the end of FY06.IFC's contribution covers Azerbaijan (Switzerland) and Georgia (Canada). the Partnership's management costs, including project develop- ment, financial management, human resources management, and project impact assessment.This allows for the vast majority of the donor funding (95 percent) to go directly to projects.IFC's renewed funding of the Partnership testifies to IFC's continued commitment to technical assistance programs in the former Soviet countries and © DiskArtTM 1988 its commitment to maximize the value of donor contributions. 2 0 0 3 D O N O R R E P O RT 5 3 FIAS works only at the request of governments, on topics identi- fied by governments and agreed to by both parties.This ensures the relevance of the assistance and lays the foundation for active part- Foreign Investment nership.The Service offers much more than one-way advice and written reports: through interactive workshops and roundtable meetings that often include business executives and other stake- Advisory Service holders,it helps governments chart paths to change,which are both technically and politically practical. FIAS has the unique strength of being a joint service of two of the world's largest multilateral development institutions: IFC and the Introduction World Bank.FIAS staff can--and do--call on the expertise of the The Foreign Investment Advisory Service (FIAS) program helps entire Bank Group in designing coordinated assistance packages for the governments of developing countries design initiatives to client countries. attract foreign direct investment (FDI).FIAS advises on laws,poli- cies, regulatory procedures, incentives, institutions, and strategies. FIAS completed 49 advisory projects in FY 2003: 12 projects in The objective of advisory projects supported by the FIAS program Sub-Saharan Africa, with Eritrea as a first-time client; 11 projects is to strengthen a country's investment environment by improving in Europe and Central Asia; 11 projects in Asia and the Pacific, of existing policies, regulations, and institutional arrangements so as which 3 were in the Pacific; 9 projects in the Middle East and to enhance their capabilities to attract foreign and domestic private North Africa; and 6 projects in Latin America and the Caribbean. investment in support of the country's overall development process. Since its founding in 1985,FIAS has assisted more than 125 coun- Advisory Services tries--many of them on a continuing basis over the years.Its broad FIAS offers a comprehensive range of services tailored to govern- experience has helped it identify the essential attributes of a sound ments' needs to help them attract FDI. Some common topics for investment environment. Its staff tailors this knowledge to the assistance include: circumstances of client countries to help them reach their poten- tial for attracting foreign direct investment. DIAGNOSTIC STUDIES FIAS undertakes diagnostic studies to identify a country's main policy impediments to productive foreign direct investment.The issues typically identified include: prohibitions on foreign invest- ment in many sectors or locations; restrictions on the share of foreign ownership in the equity of domestic companies; difficult administrative approval processes; restrictions on repatriating divi- dends and capital; taxes; the character and functioning of legal systems; and problems foreign firms have in gaining access to land and bringing in technical and managerial staff. 5 4 2 0 0 3 D O N O R R E P O RT POLICY, LEGAL, AND REGULATORY ENVIRONMENT FOREIGN DIRECT INVESTMENT DATA SYSTEMS In any country, the rules of the game are critical to attracting Governments require accurate data about investment flows--for worthwhile investments.FIAS can review a country's policy,legal, their own use,and to provide information to the marketplace.FIAS and regulatory environment and recommend measures in such can help governments design nonintrusive systems for collecting areas as screening of projects, capital restrictions and repatriation, data on direct investment,including measuring the impact of invest- access to land, competition policy, corporate responsibility, and ments on such key variables as job creation and export growth. investment protection under national laws and international conventions. Working with FIAS ADMINISTRATIVE BARRIERS An advisory project begins with a high-level request from a One important tool FIAS has developed is its analysis of bureau- government, FIAS management's agreement to do the work, and cratic barriers that snarl and slow both the establishment and subse- mutual agreement on the terms of reference, including clients' quent operation of businesses. Detailed flowcharts that pinpoint contributions to the cost of the project.Assignments typically take problems have helped governments identify and eliminate coun- three to six months to complete. FIAS may communicate its terproductive procedures and streamline the necessary ones. recommendations in a written report or by other means, such as a workshop.Whatever the vehicle,FIAS does its best to deliver assis- INVESTMENT INCENTIVES tance in a timely, practical, and nonbureaucratic style. In a competitive world, countries often grant benefits to entice investors. FIAS can analyze incentives to ensure they are compet- The IFC and theWorld Bank contribute roughly 30 to 40 percent itive and cost-effective. of the funding needed to cover FIAS' annual costs.The remainder comes from about a dozen bilateral and multilateral sources, and INVESTMENT PROMOTION fees paid by the governments with which FIAS has worked. Effective investment promotion can influence investor decisions and affect the amount and kind of investments a country receives. The advice that FIAS gives is confidential to its government clients, Efficient agencies are needed to attract FDI and help manage who are under no obligation to accept that advice. This helps investment policy.FIAS helps these agencies formulate promotion establish a relationship of trust in which FIAS can provide a frank strategies that identify competitive advantages and target specific assessment of a country's strengths and weaknesses for attracting opportunities.Strategies can be conceived on national,regional,or foreign investment. FIAS has a strong record of putting forth sectoral levels. FIAS also helps countries design promotion insti- recommendations that client countries recognize as valuable-- tutions,often by adapting models that have proven successful else- and subsequently implement. Reforms recommended where in implementing investment promotion strategies. by FIAS have contributed to the success that many of its client countries have achieved in BUILDING LINKAGES attracting more foreign investment. The benefits of FDI are often enhanced by increasing business links with the domestic economy. FIAS can help governments design policies and programs that foster spillovers, such as supply and other linkages, between foreign-owned and domestic companies. Social and Environmental Facilities Promoting Environmental and Social Sustainability in Partnership with Donors IFC launched its Sustainability Initiative to help the private sector from past experience and to disseminate best practice. In addition in developing countries improve practice and performance on to an IFC commitment of US$10 million over the initial five-year environmental,social,and corporate governance issues.This effort duration of the facilities, IFC has received funding from the builds on IFC's experience in ensuring the long-term financial and governments of the Netherlands, Switzerland, and Norway, and is economic viability of its investments and requiring compliance actively seeking support from other donors. with baseline environmental and social standards. Donor support has been crucial in helping IFC promote its Sustainability Initiative. CORPORATE CITIZENSHIP FACILITY (CCF) The CCF works with IFC clients who see business opportunities through enhanced environmental and social performance (e.g., Social and Environmental Facilities value-added markets for sustainably harvested products, and Since their establishment on July 1, 2002, IFC's three social and improved access to international supply chains). Essentially, the environmental facilities have expanded IFC's support for environ- CCF is a source of technical assistance that aims to clarify the busi- mental and social sustainability in the private sector in emerging ness case for corporate social responsibility (CSR) in emerging economies.The facilities address three key areas of IFC's work: markets. It is clear that CSR drivers are rapidly affecting many · Mainstream, project-related work ­ the Corporate Citizenship sectors and operations,and are increasingly affecting international Facility competitiveness, market access, and reputational risk for many IFC clients. · Capacity building in financial markets ­ the Sustainable Financial Markets Facility Demand for CCF assistance is rising rapidly and covers three core · Environmental projects and project components ­ the Environmental areas of the "corporate social responsibility" agenda: environ- Opportunities Facility mental stewardship, stakeholder engagement, and employ- ment practices. In delivering the CCF program, IFC client The facilities enable IFC to respond to a growing demand from companies work proactively with CCF staff and cover part of the its clients and the private sector to provide environmental and program costs. CCF support helps pay some of the costs of testing social services in a more cohesive and coordinated way.They work markets,defining approaches,and promoting corporate citizenship in close collaboration with other parts of the World Bank Group, initiatives. The conclusions of all CCF projects are collated and such as the SME Department, and with external partners to learn disclosed to maximize the "lesson learning" capacity of the facility. 5 6 2 0 0 3 D O N O R R E P O RT Examples of recently funded CCF projects include: SFMF's FY03 approvals include: · Biodiversity Good Practice Guide: a biodiversity manual will be · Competitive EnvironmentalAdvantageWorkshops: SFMF is delivering developed jointly with the International Union for Conversation a series of three-day training courses to financial institutions in of Nature and Natural Resources and others to help businesses emerging markets around the world, and completed two such understand biodiversity and manage it in their business activities. courses in June 2003 in South Africa and Nigeria, in association · Fair Trade Certification for Honey Production in Kenya: IFC is with local financial institutions, the Lagos Business School and working with a Kenyan cooperative to develop fair trade markets the African Association for Corporate Citizenship (AICC) . for honey.Access to price premium fair trade markets in Europe · Sustainable Banking in Africa: In association with AICC and the will help to reinforce the business benefits of sustainable produc- UNEP Finance Initiative, IFC is supporting research to assess tion and improve the livelihood of rural honey collectors. current sustainability drivers and practices in theAfrican banking sector and identify priorities for further cooperation. SUSTAINABLE FINANCIAL MARKETS FACILITY (SFMF) · Russia Leasing Training: This one-day course on environmental The SFMF works with IFC's financial intermediaries and the risk management, tailored to leasing companies and delivered in broader financial sector in developing countries and transitional Moscow in Russian,was attended by 20 Russian leasing compa- countries to maximize the sustainable development impact of IFC's nies, including three IFC clients. SFMF also held a one-day financial markets investments; help create sound, efficient, and "train-the-trainers" course for staff of IFC's Private Enterprise responsive financial institutions and services;and promote increased Partnership (the Partnership) to enable local replication of the private sector investment in the emerging countries. course. · ASrIA SRI Country Profiles: This project, prepared by the SFMF is organized around three distinct programs: The Association for Sustainable & Responsible Investment in Asia Responsible Institutions Program addresses the needs of the (ASrIA) will provide comprehensive analysis on SRI and related banking, leasing, insurance and microfinance sectors. The activity in selected Asian emerging markets. Market reports will Sustainable Inward Investment Program focuses on private be prepared on seven Asian emerging market countries (China, equity and venture capital funds. The Strategic Market India, Indonesia, Malaysia, Philippines, South Korea, and Development Program undertakes strategic initiatives aimed at Thailand) and a regional overview report. creating incentives and know-how within the broader financial sector.This includes work with rating agencies,central banks,stock exchanges, business schools, local consulting and professional service firms,and industry initiatives and voluntary codes of prac- tice. SFMF's products and services under these programs include: training courses and workshops; business advisory and support services; technical assistance for project development and imple- mentation;market intelligence and information resources;strategic partnerships and business networks; and support and input to voluntary industry initiatives and codes of practice. Global Environment Facility IFC undertakes a number of private-sector projects with assistance from the Global Environment Facility (GEF). At present, IFC has an active portfolio of 12 projects with $136.2 million in GEF funding. IFC employs GEF funding to explore new business models that IFC could not support independently due to high risk factors and/or marginal rates of return, such as financing for energy efficiency improvements or using solar photovoltaic energy to provide off-grid power. In this way, GEF resources enable IFC to expand its activities supporting sustainable development. IFC designs and implements its GEF projects carefully in order to accelerate market acceptance of sustainable businesses without providing excess subsidies. In particular, although GEF typically provides grants for public-sector projects, IFC adjusts the concessional element in its private-sector GEF projects in order to use the most market-appropriate type of financing, ranging from grants to partial guarantees to high-risk equity. This approach is consistent with the GEF requirement to fund only the "incremental" costs associated with achieving its global environmental objectives. By working through IFC, GEF obtains direct access to the capital, technology, and management skills available in the private sector. Also, by working directly with the private sector, IFC's GEF projects typically provide high leverage for GEF funding and a strong potential for replication. IFC's GEF activities aim to catalyze, appraise, and implement innovative private sector projects that fall primarily in three of the GEF's six major thematic areas: (i) climate change mitigation; (ii) biodiversity conservation; and (iii) international waters protection. IFC is also involved, along with IBRD, in advising the GEF Secretariat on formulation of policies for engaging the private sector and mobilizing private sector capital to achieve GEF objectives. IFC approved four new GEF projects in FY03: · Mongolia, Eg-Uur Watershed Conservation Initiative: $1 million in funds to catalyze a partnership among local communities, government agencies and tourism companies to support sustainable management of the Eg-Uur watershed in northwest Mongolia, an area rich in biodiversity. · Philippines, CEPALCO Distributed Generation PV Power Plant: $4 million to support installation of a grid-connected 1 MW solar PV power plant that will operate in conjunction with an existing 7 MW hydroelectric power plant. The PV plant will use the available surplus water storage of the hydro project to opti- mize conjunctive PV-hydro peak load power supplies, while reducing distribution losses due to proximity to load. · Latin America, Eco-Enterprises Fund: $1 million to support an innovative $10 million fund and technical assistance facility focused on small and medium businesses that work with NGOs and/or the local community in environmentally and socially beneficial partnerships. The GEF funding will be used to maximize the biodiversity conservation benefits of the fund's activities. · Central and Eastern Europe, Commercializing Energy Efficiency Finance (CEEF): Building on the model demonstrated in the Hungary Energy Efficiency Co- Financing Program, CEEF is using $18 million in GEF funds, plus $1.3 million in bilateral support from US, Finnish, and Spanish Trust Funds, to provide partial risk guarantees and targeted technical assistance grants to support the financing of energy efficiency projects by local commercial financial institu- tions, as well as by private project sponsors. The donor funds have leveraged additional IFC's commitments up to $75 millions for guarantees. CEEF became fully operational in the Czech and Slovak Republics, Estonia, Latvia, and Lithuania in March 2003. 5 8 2 0 0 3 D O N O R R E P O RT ENVIRONMENTAL OPPORTUNITIES FACILITY (EOF) In FY03, the EOF approved project preparation funding for three The EOF supports private-sector ventures that have a strong ventures: potential to increase environmental sustainability but must over- · Water Health International ­ Development, manufacturing, and come the uncertainty associated with new markets, new tech- marketing of proprietary, scalable water purification and disin- nologies, and new ways of doing business.The EOF focuses on fection devices that deliver more affordable potable water, espe- innovative solutions to environmental issues,such as ensuring clean cially to underserved populations in Asia and Africa. water supply or minimizing air pollution, which are local and, · TWI Conch ­ Reduction of pressure on wild stocks of conch, a therefore, do not benefit from funding from the Global high-protein mollusk widely consumed in the Caribbean, Environment Facility.The EOF works closely with selected partner through development of alternative, sustainable harvesting organizations to identify and implement projects. methods. · Calidra Eco-Efficiency ­ Co-financing for the installation of an The EOF provides project preparation funding and flexible invest- innovative water recovery facility for one of Mexico's largest ment financing support to environmental projects. Priority is producers of lime (Calidra is an existing IFC client). given to projects that need extra assistance in the development phase, after which they are likely to be financed on commercial In addition to these projects, which may result in further EOF terms by IFC or other market-rate investors.The EOF seeks to and/or IFC financing,the EOF is actively considering investments leverage its investment funding with co-financing from project in several other ventures, including: a pioneering technology that sponsors and other sources. treats pollution from pulp mills using straw and other non-wood raw material (such plants are a major source of water pollution in Two main types of projects are eligible for EOF support: China); a new type of electric vehicle manufactured in India that (1) Projects that produce goods or services with specific environ- will help reduce pollution in congested cities;and a household-size mental benefits. Priority sectors include environmental services filter to remove arsenic from drinking water, a major health risk (such as clean drinking water, wastewater treatment, and the recy- in Bangladesh. cling or disposal of solid waste) and pollution reduction or abate- ment (including industrial air or water emissions and indoor air pollution).If other funding cannot be found,the EOF will consider funding projects in sustainable resource use (such as organic farming or certified sustainable forestry) and sustainable energy (including renewable energy and energy efficiency), and (2) Projects that promote eco-efficiency through cleaner production and pollution abatement. 2 0 0 3 D O N O R R E P O RT 5 9 By July, the end of its first three years of operation in 2003, CBF had approved $21.3 million in grant funding for about 100 proj- ects. Africa,where IFC continues to face challenges in meeting the Capacity needs of SMEs,receives the most CBF funding of all IFC regions. A number of projects are global in nature, allowing IFC and its partners to roll out successful projects across multiple regions. Building Facility REGIONAL DISTRIBUTION G EF A A = Global 20% Three Years of Innovation and Results B = Sub-Saharan Africa 41% D C = East Asia & the Pacific 11% Established in July 2000,the Capacity Building Facility (CBF) was D = Latin America & the Caribbean 14% set up to provide a flexible funding complement for the SME E = South Asia 3% Department's work. It is funded by annual contributions from C F = Central & Eastern Europe 1% IFC's net income, has enhanced IFC's understanding of how best B G = Southern Europe & Central Asia 10% to help SMEs, and has provided a flexible vehicle for the expan- sion of IFC's support to SMEs. In its first three, years many of CBF's pilots and partnerships have demonstrated impressive results, CBF projects have focused on finding solutions in five expanding IFC's outreach to many more SMEs than could have areas: been reached through investments alone. CBF has enabled IFC to develop strong and lasting relationships with important best prac- · Micro and small business finance tice partners such as Accion,ShoreBank,and FUNDES.It has also · Capacity building for SMEs enabled IFC to take the lead on improving the development · Linking large and small companies impact of its investments in projects such as Mozal,ACG-BTC,and the Chad-Cameroon pipeline. Moreover, it has enabled IFC to · Improving the business environment develop innovative solutions to SME challenges, through pilots · Information technology for SME with cutting edge organizations such as SEWA in India, Hagar in Cambodia,and FATE in Nigeria.CBF's projects are sustainable, In FY03 in particular, linkages have become an important area of scalable, and strategic for IFC and will continue to reap growth and innovation. benefits for the SMEs that we serve as we look to replicate, scale up, and learn lessons from our existing projects, and continue to search E LINE OF BUSINESSES for new partners going forward. D A A = SME Linkages 21% B = Access to Capital 36% C = Capacity Building 31% C D = IT 5% E = Business Environment 7% B Cluster Objectives and Metrics CLUSTER OBJECTIVES PROJECT EXAMPLES METRICS MICROFINANCE NETWORKS Internationale Projekt · Investments in FIs by new vehicles (e.g., AIM, Rapidly expand the number of institutions IFC can assist, Consult, ACCION, ShoreCap); and build the capacity networks to reach MFIs through ShoreBank FINCA · Improvement in financial performance ratios of FIs; financing, TA, and governance. · Growth in number and volume of deposits and loans. MICROFINANCE CONVERSION TO BANKS K-REP, Basix, · Completion of the conversion process; Convert MFIs to bank status as a means of creating fully XAC Bank of Mongolia, · Improvement in financial performance ratios of FIs; sustainable institutions that can absorb deposits and Microfinance Bank · Growth in number and volume of deposits and loans. rapidly expand outreach and impact. of Pakistan ACCESS TO MARKETS/NGO COMMERCIALIZATION Self Employed Woman's · New sales generated for the artisan groups; Develop models to help linking artisans to world markets Association Trade Facilitation · Numbers of new artisans participating in production; through capacity building, IT, finance, and market links. Center, Aid to Artisans, · Number of new and repeat buyers of artisan wares. Novica Crafts Center LINKAGES Mozal, Konkola Copper · New procurement orders for local SMEs; Deepen the development impact of IFC's investments on Mines, ACG/BTC, · Number of new SMEs involved in the supply chain; local communities through linking SMEs into supply Yanacocha, · Repeat or standing orders after one and two years. chains of large projects. Chad-Cameroon BUSINESS ASSOCIATIONS Danish Industries, Canadian · Number of new paying members per association; Build the capacity of member-based BAs to provide Manufacturers & Export, · New revenue generated through member services; sustainable technical and advocacy services to members. Center for International · Key improvements to the business environment. Development Agency CONSULTING AND TRAINING STEP Swisscontact, · Improvement in cost recovery for consultants; Build sustainable models for delivering technical services FUNDES Vouchers · Number of SMEs trained/advised; to SMEs on an affordable and sustainable basis. · Number of services modules/products developed; · Improvement in client performance. 2 0 0 3 D O N O R R E P O RT 6 1 CBF has broadened IFC's experience and provided new tools for SME development. Clusters of projects allow CBF to focus attention on specific challenges to developing SMEs and draw lessons across projects and share experiences among different partners. CBF has funded, for example, three leaders in the strengthening of business associations internationally: Danish Industries, the Center for International and Private Enterprise, and Canadian Manufacturers and Exporters.In January,this group convened a conference with World Bank, IFC, and PDF staff to develop common tools and best practices, which are now being introduced internationally,including through IFC's PDFs.Dozens of business associations are being trained to strengthen the services they provide to their members, impacting hundreds of thousands of small businesses. Approximately 60 percent of CBF's projects contribute to CBF funding has catalyzed significant additional grant the expansion of IFC's investment pipeline, primarily in financing for important SME projects. CBF funds no more the financial sector, linkages in the oil, gas and mining than 40 percent of a project's cost.The $21.3 million that CBF has sector, with some in the information, communication, and approved has leveraged $110.5 million in additional funding. For technology sector. This was the case with Novica United, a example,CBF has provided $400,000 to Swisscontact for initiatives company that sells crafts produced by artisans in developing coun- in five countries to develop the capacity of local consulting and tries. Novica began as a CBF pilot project and is currently under training institutions.Swisscontact has leveraged IFC's contribution consideration as an IFC investment. Novica is a direct source of with another $1.1 million from other donors. income and market information for 10,000 artisans across seven countries and enables local communities to thrive economically in CBF has enabled IFC to partner with many of the leading a socially and culturally sustainable manner. players in SME development, helping them to significantly expand outreach to thousands more SMEs around the world. CBF, for example, is providing the critical TA funds to support the Accion and ShoreBank investment vehicles,AIM and E LINKS TO IFC INVESTMENTS D ShoreCap. This TA will enable each of them to invest in and provideTA to over a dozen micro and small business finance insti- A = FM Investments 36% B = ICT Investments 4% tutions, expanding their outreach by hundreds of thousands of C = Linkage Investments 20% micro and small businesses. D = PDF Product & Services 24% C A E = Other 16% B 6 2 2 0 0 3 D O N O R R E P O RT CBF has also enabled IFC to develop innovative solutions CBF Strategy Going Forward to intractable problems in the field of SME development. Key objectives for FY04: For example, with $200,000 in CBF funding, IFC became a · Improved supervision founding member of the Institute for SME Finance.In its first two years, the Institute has been a leader in developing new, more · Replication and scaling of successful projects viable models for risk capital finance for SMEs.The Institute is · Development of additional pilots and partnerships currently engaged in developing new models for risk capital · Deepening existing partnerships finance in Rwanda, Zambia, Pakistan, Qatar, and Azerbaijan, and · Widening sources of funding is advising the Funds Department in IFC, the World Bank and other IFIs on new SME risk capital vehicles.It is expected that this · Improved impact measurement work will catalyze hundreds of million of dollars in new risk capital finance in developing countries. CBF allows IFC to develop in-house solutions to SME challenges that are valued by its clients. For example, CBF has enabled IFC to take a leadership position on developing new, better ways to expand the development impact of large investment projects in the local communities.With ACG-BTC, Mozal, and Chad-Cameroon,the programs that are being developed integrate supplier development, financing, development of local training and consulting skills,and broader community development initia- tives. Already, dozens of small suppliers have been able to win millions of dollars'worth of contracts from the large companies as a result of these initiatives.With these projects, a model is being developed that will have a deep impact on local economic devel- opment, can be easily replicated across many of IFC's investment projects, and can boost IFC's value-added to its clients. Annexes, Directory, and Glossary 66 86 88 90 92 Technical Assistance IFC Donor-Supported Cumulative Financial Directory Glossary and Advisory Projects Technical Assistance Support Programs: Purpose/Strategy 2 0 0 3 D O N O R R E P O RT 6 5 Technical Assistance CBF Capacity Building Facility CCF Corporate Citizenship Facility EOF Environmental Opportunities Facility FIAS Foreign Investment Advisory Service PEP Private Enterprise Partnership and Advisory Projects SFMF Sustainable Financial Markets Facility TATF Technical Assistance Trust Funds program NOTE: Projects done through the SME Facilities are not included in the Annex. Donors are not separately identified for multidonor facilities. PROJECT DESCRIPTION DONOR PROGRAM SUB-SAHARAN AFRICA Regional Action Plan for Integrated To establish a model for sustainable social and economic development in communities Luxembourg TATF Community Development to help local communities cope with employment and infrastructure issues when Netherlands confronted with eventual closures of the gold mines in Ghana and Mali. African Bank Training To assist the Belgian Bankers Academy roll out training centers in five African coun- CBF Consortium tries and provide standardized training materials under the African Training Module Standardization program. APDF Training Module To assist APDF develop a standardized training methodology, train-the-trainers manuals, CBF Standardization and a fixed set of modules for training SMEs, consultants, business associations, and bankers. Development of Sector-Specific To assist Technoserve develop sector-specific agricultural interventions and work with CBF Agricultural Sector Linkage local small agricultural enterprises in Tanzania, Mali and Uganda to provide technical Projects assistance, financing and linkages for these enterprises to grow. Diagnostic/Investment To assist the South African Development Community Secretariat in developing an FIAS Promotion instrument for soliciting the views of policy-makers and bureaucrats in member coun- tries on foreign direct investment related policies and implementation. Establishment of Target Group To help establish a bank with a commercial banking license to serve micro and small CBF Oriented Bank enterprises and prepare a business plan, legal framework, administrative structure, and operating guidelines. Indian Ocean SME Support To support the development of an information package and standardized training tools CBF in French and the creation of the SME Solutions Center that offer capacity building, information services and ultimately finance and advocacy on behalf of SMEs and could be used in numerous locations. 6 6 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM Mozal Community Development To strengthen Mozal's linkages with SMEs as well as support the community outreach CBF ­ Linkages with SMEs work of the Mozal Community Development Trust in access to working capital finance, consultant capacity building, agricultural product development, small business devel- opment, health clinic, promotion, and replication. New Business Model To assess existing AMSCO products and services and train regional managers to imple- Switzerland TATF for AMSCO ment new approaches to marketing and sales. Support for Entrepreneurs To assist Endeavor transfer and adapt its unique model, developed in Latin America, CBF through Endeavor to three countries­introduction of the full Endeavor model in South Africa, and a modi- fied version in Ghana and Uganda. Sustainable Banking in Africa To collaborate with the United Nations Environment Program's Finance Initiative and SFMF African Institute for Corporate Citizenship to benchmark current sustainability practice in African financial sector and to set up self-sustaining local networks to promote wider adoption of good practice. Textile Sector Study To help government agencies and the private sector in Kenya, Tanzania, and Uganda Switzerland TATF expand apparel exports under the U.S. African Growth Opportunity Act and help attract export-oriented investment to the region. Burkina Faso Administrative Barriers to To conduct an administrative and regulatory survey. FIAS Investment CapeVerde Administrative Barriers To implement previous work on investment promotion strategy and tax and incentives. FIAS to Investment An action plan has been developed by local stakeholders. Eritrea Investment Promotion To conduct a survey of potential international and diaspora investors to help the govern- FIAS ment understand their perceptions of the country. Ghana Administrative Barriers To conduct a survey of existing investors to assess the administrative and regulatory FIAS to Investment costs of doing business. Administrative Barriers To update the 1995 Investor Roadmap to identify the existing administrative barriers and FIAS to Investment underlying policy issues affecting investment and make recommendations for reform. Expansion of Soft To assist the company in its expansion plans in scaling up and achieving greater market CBF Ghana's R&D Function and share in the IT industry. Management Capacity Ghana Voucher Program To support the documentation and preparation of Kenya Voucher program for replica- CBF tion in Ghana and assist in the adaptation of the Kenyan manuals and installation of the MIS, provide training, and help monitor and evaluate the program. 2 0 0 3 D O N O R R E P O RT 6 7 PROJECT DESCRIPTION DONOR PROGRAM Local Entrepreneurial To help a food retailer improve the local production potential, quality standards, and Netherlands TATF Development: Feasibility Study commercial relationships of local food producers, particularly growers of tropical fruits and vegetables. Guinea-Bissau Administrative Barriers To assess reforms and assist the government in developing an action plan. FIAS to Investment Kenya Fair Trade Certification To work with a Kenyan cooperative to develop fair trade markets for honey and to help CCF for Honey Production reinforce the business benefits of sustainable production. Insurance Premium Financing: To assess the viability and development of the Kenya's insurance premium financing Ireland TATF Viability Assessment business and sector. Kenya Tea Development To develop a corporate governance review and recommendations report to help Netherlands TATF Agency: Corporate Governance strengthen its business practices. Labor and HIV Issues in the To assess HIV/AIDS issues and establish a policy and action plan for the tea company. CCF Kenyan Tea Sector Railways Privatization To maximize the developmental impact of the Kenyan Railways privatization and help Denmark TATF ensure that privatization of the railways is sustainable. Mali Development of Local To develop a local service provider to adopt the working models of FUNDES for CBF Service Provider consulting and outreach to SMEs for the local markets. Trickle-Up To assist Trickle-up start or expand businesses of low-income earners, implement a CBF microenterprise and saving program, and establish community-based revolving funds. Mauritius Transaction Advisory Mandate: To provide technical support services in the analysis and implementation of private Canada, Italy TATF Water and Sanitation sector participation in the provision of water and sanitation services. IFC TA Fund Mozambique Tourism Investment Program To assess the effectiveness of the South East African Tourism Investment Program and Netherlands TATF how it has affected the local communities; help implement a new tourism policy and IFC TA Fund complete a new tourism strategy. Nigeria Competitive Environmental To deliver a 5-day environmental management training course for Nigerian banks and SFMF Advantage Workshop local consultants in June 2003, in association with Lagos Business School. Enterprise Development To support the expansion of Enterprise Development Services in the provision of advi- CBF Services sory services, professional services, networking services, consulting services from MBAs and affiliated consultants, and research and analysis from the Lagos Business School. 6 8 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM Expansion and Development To provide R&D and capacity building support to Support & Training Entrepreneurship CBF Strategies of STEP Program (STEP) through targeted seminar and MSE training outreach to remote regions, develop a training program for STEP field officers, and introduce the Management Skill Improvement program to facilitate STEP expansion and the production and publication of mapping and research findings for the informal sector. Leasing Regulations To assist the government in creating legislation for development of the domestic Netherlands TATF and Legislation leasing industry. IFC TA Fund Sao Tome and Principe Investment Incentives To assist the government by reviewing the proposed tax code. FIAS Senegal Administrative Barriers To update an earlier study, giving new impetus to the reform process. FIAS to Investment Investment Incentives To assist the government in implementing FIAS recommendations on taxation. FIAS Sierra Leone Investment Law To review the draft investment law, drawing on international best practice. FIAS South Africa Bricks for Houses To help identify target SME and operator groups to develop their business plan options, CBF and develop training programs and organize training sessions on testing a brick-making machine and its products. People Project Foundation To assist People Project Foundation achieve its objectives in strengthening and CBF expanding entrepreneurial programs that train and prepare disadvantaged women for meaningful and sustainable self-employment and ownership through craft production. South African To identify opportunities for building capabilities of SABCO third-party partners, develop CBF Bottling Company appropriate training programs and prepare an easy-to-use manual. Umbrella for SME Investments To explore the feasibility of creating innovative SME investment vehicles in Africa by CBF designing and developing a replicable, commercially viable model for investing in African SMEs through risk-oriented instruments, and another model for the capitaliza- tion of such SME investment vehicles. To help identify appropriate countries in Africa to be considered for the establishment of Small-and Medium Enterprises Investment Companies (SMEICs) as well as the key issues particular to those countries which must be fully addressed by the investors and fund managers of those SMEICs. Tanzania Kilombero Business Linkage To help improve the quality of life of the wider community through the development of CBF Outgrowers Scheme sugar cane farming and help SMEs provide supporting services such as access to capital, taking advantage of immediate/captive market, institution / capacity building, and creation of sustainable income. 2 0 0 3 D O N O R R E P O RT 6 9 PROJECT DESCRIPTION DONOR PROGRAM Institutional Capacity Building To bring the bank's operations level up to international banking standards, specifically Norway TATF of an SME Bank­EXIM Bank in credit appraisal, risk management, operational policies, portfolio monitoring, and asset liability management. Zambia Administrative Barriers To advise on investment climate and business environment issues related to growth and FIAS to Investment poverty alleviation. Copperbelt SME To work to develop SMEs and build their commercial links with a privatized copper Canada TATF Development Program conglomerate. ASIA & THE PACIFIC Regional Association for Sustainable & To sponsor the 2002 annual conference of AsrIA in Tokyo to raise awareness of SFMF's SFMF Responsible Investment in Asia role, contact key Asian SRI actors, and provide guidance on SFMF's broader (ASrIA) 2002 Conference SRI strategy. Comprehensive Analysis of To provide funding to Sustainable & Responsible Investment in Asia (ASrIA) for a compre- SFMF ASrIA SRI Country Profiles hensive analysis of sustainable and responsible investment (SRI) markets and related activity in China, India, Indonesia, Malaysia, Philippines, South Korea, and Thailand. Corporate Governance and To help develop a training program to build capacity in governance and revenue New Zealand TATF Benefit Streams Management: management for the natural resource industries. Capacity Building Investment Promotion To conduct the last in a series of training programs on data collection and management FIAS Institution for staff from Pacific Investment Promotion Institutions. Investment Promotion To prepare and present papers on investor fraud and private public partnerships and Institution provide general support to the Forum Secretariat on this presentation. FIAS Regional Business To analyze the supply and demand of business development services to the private Australia TATF Development Services sector. IFC TA Fund EAST ASIA Cambodia Assistance to an NGO: To help increase production capacity and high-quality market-driven products produced CBF Hagar Design by Hagar Design by providing appropriate training to the women, market access to arti- sans, and implementing new MIS for tracking production and sales data. 7 0 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM GRET To support Research and Technological Exchange Group's (GRET) micro insurance CBF program to upscale services in two provinces (Takeo and Kandal), and to improve micro insurance business to make it self-sustainable. Quality Management in To help Norton University improve its quality management systems and achieve full New Zealand TATF Higher Education university status; provide training to faculty and staff. China Accounting, Auditing, To conduct a financial audit of Zhejiang Babei Necktie & Weaving Company and Ireland TATF and Training Program help upgrade its knowledge and skills in International Accounting Standards and internal controls. Agribusiness Company: To carry out a needs assessment for critically needed MIS and help develop an inte- Denmark TATF Resource Planning Program grated Enterprise Resource Planning System Implementation Plan for an agribusiness development company. Capacity Building for a To help Citic Securities improve its practices in corporate governance, risk management, Switzerland TATF Securities Company and management information systems. Commercial Bank To help Nanjing City Commercial Bank strengthen use of business methods conforming Italy TATF Technical Assistance to international best practices, specifically in credit/investment management and risk management. Consulting Capacity To help CPDF provided local consulting firms with a comprehensive, highly standard- CBF Building Project ized, fully tested turnkey consulting methodology with an innovative franchise approach. Corporate Governance for an To assist in setting standards for asset management companies to follow international France TATF Asset Management Industry best practice in corporate governance. Financial Review To provide advisory assistance and a financial review for Chengdu City Commercial Bank Norway TATF and Advisory Service to improve credit and risk management policies. Private Higher Education: To assess the situation in private colleges, universities, and vocational training institu- Sweden TATF Market Survey tions, and identify potential investment opportunities. Privatization of To help formulate a strategy for privatization of SOEs in small and medium enterprises Australia TATF State-Owned Enterprises at national and local levels. Sichuan Environment To help develop the capacity of consultants and specialists to undertake social, envi- Denmark TATF Capacity Building Project ronmental, and health and safety reviews and mitigation work in accordance with inter- national standards. Social Security Program: To assist the National Council for Social Security Funds in formulating policies and Ireland TATF Internal Risk Management guidelines and help strengthen its internal knowledge base by introducing fiduciary best IFC TA Fund System practices. 2 0 0 3 D O N O R R E P O RT 7 1 PROJECT DESCRIPTION DONOR PROGRAM Solid Waste Utilization To assist local farmers in switching from inorganic to organic fertilizer and assess their Israel TATF willingness to use this alternative. Wharton Joint Capacity To deliver training and other services to SME owners using Wharton teaching materials CBF Building Project through Wharton consultants and MBA students and CPDF staff, focusing on building the capacities of local trainers through formal and on-the-job training. Indonesia Investment Promotion To advise on establishment of the proposed National Investment Team, in association FIAS with the Asian Development Bank. Supply Chain Linkages To help smaller businesses in Kalimantan participate in the supply chain of large firms Ireland TATF in the region, focusing on the mining sector. Malaysia Linkages To evaluate the spillover effects from multinational companies to local suppliers over FIAS the past decade. Mongolia Investment Policy and To provide training for staff from the national investment promotion agency; to help FIAS Promotion prepare a new investment policy statement. Palau Policy: Investment Law To review a draft implementing regulations on foreign direct investment. FIAS Philippines Rural and Small To assess the prospect of establishing a rural and small business finance wholesale Netherlands TATF Business Finance facility or bank holding company that will invest in substantial minority stakes in local and regional rural banks. Sustainable Mineral Resources To improve awareness and appreciation among key stakeholders and help increase Japan TATF private investment for sustainable development of mineral resources. Timor-Leste Investment Law To review a draft investment law. FIAS Investment Policy To participate in a World Bank mission to review the environment for private sector FIAS investment. Vietnam Consumer and Small To help two Vietnamese banks develop viable consumer and small business finance oper- Netherlands TATF Business Banking ations by improving their credit underwriting processes and strengthening their risk Switzerland management and introducing a scoring system for their retail and small business lending. IFC TA Fund 7 2 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM E-Finance Global Initiative To assist Asia Commercial Bank and Sacombank develop their SME strategies and CBF strengthen their operational capabilities to demonstrate that SME financing can be prof- itable and sustainable, and help assess and develop risk management and risk grading systems, review and improve current data management practices and procedures, improve collections practices and procedures in retail and small business banking, conduct IT/Systems review, and develop alternative distribution channels. Ha Tien Wetlands To work with multiple stakeholders to assess conservation priorities and impacts of lime- CCF Sustainable Land Use stone mining from wetlands, and develop a sustainable use management plans with the company/NGOs and local municipality. SOUTH ASIA Bangladesh Investment Promotion Strategy To help the country's board of investment develop its first investment promotion FIAS strategy; conduct a strategic planning workshop. Bhutan Investment Policy To assist with the country's first investment policy decree; help prepare drafts of rules, FIAS regulations, procedures, and criteria. India Kvishi Gram Vikas Kendra To support community development through capacity building of a foundation to help CCF Women's Enterprise Development rural poor women develop sustainable economic activities. Mahindra Ecomobiles: To assist in the development of required infrastructure facilities associated with manu- EOF Eco Efficiency facturing and marketing of electric vehicles and introduce an innovative indigenous technology to help reduce pollution in congested cities in India. Market Study on SME Sector To assemble data on education enterprises in the states of Madhya Pradesh and Andhra United Kingdom TATF Pradesh to help quantify the size of the market in need of financing and to identify IFC TA Fund potential partners and recommend a financing mechanism structure. Mortgage Guarantee Products: To study how mortgage guarantee companies can estimate the demand for their product, Canada TATF Market Assessment establish a pricing mix, determine eligibility criteria for lenders, and encourage lenders to use standardized loan documents. Maldives Environmental Management To provide environmental impact training to strengthen domestic capacity and manage- Japan TATF and Sustainable Tourism ment in tourism and commercial sectors. Insurance Industry Legislation To help set up viable and transparent legislation for the domestic insurance industry. Ireland TATF Investment Policy and To review the existing investment law and implementation guidelines; comment on the FIAS Promotion current institutional arrangements for investment promotion. 2 0 0 3 D O N O R R E P O RT 7 3 PROJECT DESCRIPTION DONOR PROGRAM EUROPE & CENTRAL ASIA Balkan Region Herbal Development Initiative To assist SEED in the development of an environmentally and socially sustainable herbal CCF sector in the Balkans. SEED Linkage To assist SEED in developing a program with a set of technical tools and training Italy TATF modules to support its new linkages program working through FDIs to targeted SMEs. Support for Entrepreneurs - To assist academic faculty in creating training courses and university-level curriculum CBF Faculty Development Program in areas of entrepreneurship in countries covered by SEED. Central Asia Region Microfinance Legislation To advise governments on legislation to stimulate microfinance development. USA PEP Europe Region Administrative Barriers To conduct a pilot survey of consulting firms, law firms, and accounting and audit firms FIAS to Investment regarding the experiences of their clients with administrative procedures. European Conservation To analyze the markets, policy, institutional status and potential partners/competitors Netherlands TATF Farming Initiative for a conservation farming initiative. Medical Device and To carry out a study to get an overview of the medical device sector in Poland and Israel TATF Equipment Sector: Ukraine, to identify investment opportunities, and to assess market structures. Investment Opportunities Public-Private Partnerships To help implement pilot public-private partnership transactions in public hospitals in Austria TATF for Public Hospitals Poland and the Slovak Republic. Support for Commercialization To help reduce the financing barriers to investments in energy efficiency projects. Spain, Finland, USA TATF of Energy Efficiency Finance Southern Europe & Central Asia Region Multistakeholder Forum To support a series of consultation meetings to address macrodevelopment issues CCF (revenue management, economic development, and regional protected areas) for the Baku-Tbilisi-Ceyhan Oil Pipeline. Linkages To ensure local SMEs benefit from the development of integrated oilfield complex in CBF the Caspian Sea by improving Azeri firms' performance in participating in contracts, encouraging diversification of firm's revenue streams, addressing difficulties related to access to finance, facilitating access to wider opportunities outside the oil and gas sector, and working with Azeri International Oil Consortia Enterprise Center and Business Development Alliance. 7 4 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM Albania Administrative Barriers Study To help the government conduct a regulatory and administrative cost survey among FIAS existing firms and provide advice on needed improvements. Privatization of Albania To assist the government in privatizing the country's state-owned power company. Greece TATF Power Company Armenia Investment Law To review the existing and proposed investment law, based on best practices and FIAS previous advice from FIAS. SME Risk Capital Fund To promote the development of the SME sector through facilitating enterprise access USA PEP to term risk capital. Azerbaijan Corporate Governance Project To advise and train companies on corporate governance, and advise government on Switzerland PEP better legislation. Leasing Development Project To promote new legislation and build local expertise in leasing. Switzerland PEP Investment Law To review a new draft law on investment activity and provide a set of guidelines for FIAS drafting in line with international best practices. SME Banking To help create systems and procedures for prudent assessment of small business loan CBF applications, generate new lending opportunities, create and implement sound portfolio management and compliance tracking function, and implement a training program for branch managers, loan officers and credit analysts of Azerigazbank and Rabitabank. Belarus Business Association To promote business-friendly policies and equip entrepreneurs with skills needed in a Sweden PEP Development country with a limited private sector. Bosnia and Herzegovina Administrative Barriers To follow up on an earlier study; to focus on strengthening the dialogue between the FIAS to Investment public and private sectors and develop a monitoring system to assess the impact of reforms. Bulgaria Administrative Barriers To update an earlier study, including a comprehensive business survey of administra- FIAS to Investment tive and regulatory costs. Croatia Mapping of Small and To map distribution and characterize small and medium enterprises in order to help Austria TATF Medium Enterprises analyze the business enabling environment and identify opportunities for programs. 2 0 0 3 D O N O R R E P O RT 7 5 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Georgia Georgia Business Development To promote improved legislation and build local expertise in leasing; to advise compa- Canada PEP nies on corporate governance and carry out a survey of the SME sector. Latvia Administrative Barriers Updated an earlier study and conducted a business survey of administrative and regu- FIAS to Investment latory costs. Linkages To contribute to a larger World Bank Labor Market Study by assessing training poli- FIAS cies provided at the firm level and their contribution to technology development within the country. Linkages To provide policy recommendations to develop the country's knowledge-intensive sectors FIAS over the next decade. FYR Macedonia Administrative Barriers To conduct a study of administrative barriers to investment, including a business survey FIAS to Investment of administrative and regulatory costs. Food Processing: To train local businessmen in the food processing sector to implement the Hazard Greece TATF Implementation of Analysis Critical Control Point procedures. HACCP Standards Implementation of To strengthen the Small and Medium Enterprises department of the Ministry of Economy Ireland TATF SME Strategy and help turn the SME strategy into a realistic action plan for implementation. IFC TA Fund Romania Administrative Barriers To help the government implement an action plan to remove administrative barriers. FIAS to Investment National Environment Fund To help strengthen the National Environment Fund by providing advisory services to the Canada TATF Environment Ministry on how to improve other operational procedures and reorganize the Fund. Secondary Market To assess the legislative framework for mortgage bonds and mortgage-backed securi- Canada TATF Legislative Project ties and the need to harmonize with countries in the region. Russian Federation Advisory Support To advise public and private sector officials on identifying obstacles in securitization United Kingdom TATF on Securitization transactions. IFC TA Fund Banking Sector: To analyze the extent to which the country's banks follow corporate governance best Switzerland TATF (PEP / TATF) Corporate Governance Study practices in internal operations. Development of Forestry To promote sustainable development of forestry and facilitate foreign direct investment. Finland PEP Finance and Accounting 7 6 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM Departments of an To help Stavropolsky Broiler establish a new management information system, train Netherlands TATF Agribusiness Company staff, and hire and train a chief financial officer. Financing Options for Private To identify several pilot projects for energy efficiency investments, considering market Netherlands TATF (PEP / TATF) Energy Efficiency Projects conditions, financing structures, and the regulatory environment. Information and To provide technical assistance to companies in the offshore programming sector and Finland PEP Communications Technologies link them to counterparts in Western Europe. Mobile Telecommunications To examine the mobile telecommunications market in order to determine appropriate Sweden TATF Market financing needs. Identifiy competitive candidates, and advise on ways to serve the IFC TA Fund market effectively. Northwest Russia Leasing To promote leasing development in the Northwest of Russia, and match companies with Finland PEP Development Western European investors and equipment manufacturers. Review of Mortgage-Backed To review the draft law for mortgage-backed securities to help establish the country's Norway TATF Securities Law first secondary mortgage company. Russia Leasing To conduct a training course on environmental risk management for 20 Russian leasing SFMF Training companies, including three IFC clients and a "train-the-trainers" course for PEP staff to enable replication by PEP. Waste Gas Utilization To determine the viability of capturing waste gas and developing a business based on Bavaria TATF (PEP / TATF) Feasibility Study its commercial utilization. Serbia and Montenegro Advice on Bank Credit Policies To finance an advisor to reengineer Vojvodjanksa Banka's credit process and develop a Sweden TATF and Strategy strategy for its credit operations. IFC TA Fund Feasibility Study and Business To help Hotel Metropol, a leading hotel, choose a modernization strategy and identify United Kingdom TATF Plan for Hotel Modernization strategic partners. IFC TA Fund Feasibility Study and Business To carry out a technical, market, and commercial assessment of the proposal to estab- Sweden TATF Plan for Polyclinic Hospital lish a polyclinic hospital and to develop a comprehensive business plan. Finance Expert to Assist State To finance an expert for the capital market center in the Privatization Agency who will Italy TATF Privatization Agency assess the portfolios held by the State Share Fund of Serbia, strengthen the capacity of its staff, and identify and correct potential weaknesses in program delivery. Internet and IT Sector: Survey To identify investment opportunities in the Internet and IT sector. Italy TATF of Investment Potential Market Study of Tissue To analyze the current market for tissue products and identify the potential for development. Sweden TATF Products and Recycled Paper IFC TA Fund 2 0 0 3 D O N O R R E P O RT 7 7 PROJECT DESCRIPTION DONOR PROGRAM Oil and Gas Industry To strengthen the reform agenda of the Serbian government in the energy sector and Italy TATF to address the need for reorganization and restructuring of Nafta Industrija Serbije prior to privatization. Privatization To help the government of Montenegro introduce private sector participation into the Austria TATF operations of the Dr. Simo Milosevic Institute. Restructuring Business Group: To assist in the restructuring of the Tigar rubber footwear and consumer goods busi- Sweden TATF Community Development ness and support the development of a viable dairy operation. Program Strengthening the Insurance To review the draft legal and regulatory framework for insurance and assist the govern- Italy TATF Supervisory Authority ment's insurance supervisory services. Support to Privatized Banks To address the need to restructure nonperforming assets, assist in the preparations for Sweden TATF privatization, and provide advisory services. Tajikistan Creation of a To assess the feasibility of establishing a microfinance bank, focusing on the under- IFC TA Fund TATF Microfinance Institution served population of the Ferghana valley. Local Capacity Building: To provide training in financial management services to staff of a first local private IFC TA Fund TATF International Standard Audit consulting firm and its business clients. Turkey To provide assistance in revising the draft laws on foreign investment and on setting FIAS Investment Law up an investment promotion agency. Investment Promotion To develop a strategic and institutional framework to improve the environment for FIAS foreign direct investment in the country. Ukraine Advisory Expert on Mortgage To draft a law on mortgage securities, including authorization to issue off-balance United Kingdom TATF Securities Law sheet, multitranche mortgage-backed securities. IFC TA Fund Diagnostic on Policy Covering To analyze major obstacles faced by local entrepreneurs and to help improve govern- Norway TATF (PEP / TATF) Small and Medium Enterprise mental regulatory activities to encourage private sector growth. IFC TA Fund Firms 7 8 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM LATIN AMERICA & THE CARIBBEAN Latin America Region Business-to-Business To finance a workshop for IFC's clients. The partnering of enthusiastic sponsors with CCF Sustainability Workshop those who have adopted sustainable practices in their operations has proved a signifi- cant and powerful agent for change in IFC's client base. Competitive Environmental To deliver a 3-day environmental management training course for Latin American finan- SFMF Advantage Workshop cial institutions in association with the Inter-American Investment Corporation. Promotion of To assist small agro-extractive producers in the Amazon Basin strengthen their business, CBF Sustainable Businesses managerial, and technical skills; develop bankable business plans; and convert from subsistence production to more environmentally sustainable entrepreneurial enterprises. Student Financing Programs: To examine student financing programs and establish a case book on successes and Switzerland TATF Case Studies for Future failures. Investments Utilization of Sustainable To help Conch in the expansion of farming conch by adding ponds to increase EOF Resources production, and to assist in improving sales and marketing techniques and distri- bution channels. Central America Region Exit Strategies for SME To help Aureos Capital Limited, a global fund manager of private equity funds special- Switzerland TATF Venture Capital Funds izing in SMEs, improve its exit opportunities. Eastern Caribbean Region Business Development and To help increase local business capacity in delivering services and to provide training Canada TATF Training for Smaller to small and medium enterprises. IFC TA Fund Entrepreneurs Bolivia Prodem Finance: To link microenterprises with medium-size businesses that are investees of Prodem and CBF a Microenterprise to help raise their income levels through training and other forms of capacity building. Development Program Prodem Foundation To assist Prodem implement intelligent ATM technologies in rural areas and to develop, CBF construct and install 22 ATMs throughout the region and introduce 20 autonomous sales points in locations such as gas stations and markets to increase accessibility. 2 0 0 3 D O N O R R E P O RT 7 9 PROJECT DESCRIPTION DONOR PROGRAM Brazil Aguas de Amazonas: To develop local capacity to establish communal water access points, to build a CBF Provision of Affordable Water financing structure to enable poor communities get access to water, and to create a revolving guarantee fund for these activities through a local microfinance institution. SEBRAE Assistance to To provide training programs geared to small entrepreneurs. CBF Micro and Small Enterprises Colombia Diagnostic and To increase the efficiency of the distribution system for a beverage company, Bavaria IFC TA Fund TATF Recommendations on de Colombia, and create a training program. Distribution Network Investment Promotion Strategy To advise the country's investment promotion agency on international experience FIAS regarding structural arrangements between export and investment promotion. Sustainable Microfinance: To assess the feasibility of setting up a commercial microfinance/small business Canada TATF Feasibility Study lending facility. Ecuador Banana Supply Chains To implement an extensive program of supplier training and to improve Favorita's social CCF equity and environmental sustainability performance throughout its supply chains in order to maintain continued access to international markets. Business Plan for a Gas To prepare and submit a business and project financing plan for Amazonia Gas, a private Norway TATF Processing and Power Plant company owned by a confederation of indigenous peoples. IFC TA Fund Dairy Company Processing To assist Agricola Ganaderia Reysahiwal S.A., a dairy company, with its milk processing Denmark TATF and Marketing and product marketing, including a plan for new product development and distribution. Honduras Competition Policy To review draft legislation to help the government design a best practice framework on FIAS competition policy. Strengthening the To help develop a detailed business plan for capacity building for enterprises in the Netherlands TATF Horticulture Sector horticulture sector. Mexico Calidra: Eco-Efficiency To help install a new water recovery system in one of Calidra's manufacturing facilities EOF on a pilot basis. Public-Private To aid the government of Mexico in the development and implementation of its Public- United Kingdom TATF Partnership Program Private Partnership program. IFC TA Fund 8 0 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM Wastewater Recycling Plant To support the design and implementation of a wastewater recycling plant to provide IFC TA Fund TATF industrial-grade water for manufacturing. Wastewater Recycling Plant To strengthen the environmental and social development components of a municipal CCF wastewater management program and to help develop a sustainable waste management plan for the region. Nicaragua Administrative Barriers To evaluate and propose a comprehensive administrative reform program to eliminate FIAS to Investment barriers to entry. Competition Policy To assess the constraints to competition and their impact on competitiveness of the FIAS country's economy. Housing Finance Market To analyze the housing finance system capital market and legal framework to promote Canada TATF Feasibility Study development of the residential housing market. IFC TA Fund Peru Investment Promotion Strategy To conduct a study and develop a strategic framework for promoting foreign direct FIAS investment. SME Development in To assist in the scaling up of SME development by focusing on SME finance, supply CBF Cajamarca Region chain linkages and artisan development. Suriname Investment Promotion Strategy To review the government's initiative and to create a new investment law and promo- FIAS tion agency. 2 0 0 3 D O N O R R E P O RT 8 1 PROJECT DESCRIPTION DONOR PROGRAM MIDDLE EAST & NORTH AFRICA Regional Algeria and Morocco To evaluate the SME sector and propose interventions to support commercially sustain- Italy TATF SME Evaluation able initiatives. Primary Housing Finance To document the current system and legal framework and to create a specialized Switzerland TATF lending institution and build a long-term plan to include the development of mortgage securitization and a secondary mortgage market. Afghanistan Commercial Banking To assess the need for commercial banking operations and to create the first microfi- Netherlands TATF Operations: Feasibility Study nance bank within the existing framework. Microfinance Banking To provide capacity building to a microfinance bank and to address the shortage of Norway TATF trained staff, the limited physical infrastructure, and the management of social issues. Algeria Foreign Direct Investment To cosponsor a survey of potential foreign investors from three Western European coun- FIAS tries, focusing on constraints to private sector development. Investment Climate To identify the policy and regulatory constraints affecting the country's investment FIAS climate and to recommend specific changes. Microfinance Sector To assess the microfinance sector for the North African Enterprise Development facility. Italy TATF Assessment Jordan Investment Law To review a draft investment law. Investment Opportunities Study To provide an overview of the health care sector, with emphasis on identifying invest- Sweden FIAS ment opportunities. Kuwait Administrative Barriers To assess impediments to investment and to provide recommendations for change. FIAS to Investment Foreign Direct Investment To help draft a new bylaw on foreign direct investment and to provide recommenda- FIAS tions on automating fiscal incentives and information on screening and licensing. Lebanon Insurance Regulatory To help implement supervisory procedures so international standards are met and to Canada FIAS Framework help build organizational capacity in the insurance sector. 8 2 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM Pakistan Credit Bureau Development To aid the development of Datacheck, a credit bureau, to expand its services and attract New Zealand TATF a strategic partner. Secondary Mortgage Market: To assess the feasibility of establishing a secondary mortgage market and to help the USA TATF Feasibility Study government identify steps to improve the affordability and availability of funds. IFC TA Fund Study on Administrative To identify the steps needed to complete an investment approval and start a legally USA TATF Barriers established business. Saudi Arabia Administrative Barriers To examine foreign direct investment as a tool to address the cyclical nature of the FIAS to Investment economy and the problem of unemployment. Syrian Arab Republic Insurance Law To draft an updated law to govern the activities of private sector insurance companies. Sweden TATF Tunisia Investment Incentives To assess the tax system and investment incentive regimes. FIAS 2 0 0 3 D O N O R R E P O RT 8 3 PROJECT DESCRIPTION DONOR PROGRAM GLOBAL Better Management Practices To work with agribusiness commodity buyers/producers and banks that invest in CCF agribusiness commodities to develop better management practices that can be used as investment screens. Biodiversity Good To commission the development of a practical guide for businesses in emerging markets CCF Practice Guide and to understand and incorporate biodiversity in their operations. This guide will be the fourth publication in the good practice series. CIPE in the Balkans, To help build the institutional capacity of membership-based business associations by CBF Africa, and Asia strengthening the capacity of business associations, improving a better business envi- ronment, and increasing access to services for SMEs. Credit Bureau Program To foster the development of private credit bureaus, and to facilitate the extension of Italy, New Zealand, TATF credit to previously underserved segments of the population. Norway, IFC TA Fund Development of IT To assess drivers of growth performance and the private sector information technology Norway TATF Industry in India and China services, and to identify opportunities and constraints for future development in these IFC TA Fund countries. Electronics Manufacturing: To define a role for subsectors of the industry, focusing on a positive economic and Switzerland TATF Global Strategy developmental impact. IFC TA Fund Environmental and To help develop environmental and social performance technical guidelines to comple- Denmark TATF Social Guidelines ment investments in countries with emerging or transitional economies. Mining and Biodiversity To sponsor the participation of a mining junior at the International Council on Mining CCF Best Practice Forum and Metals / International Union for Conservation of Nature and Natural Resources meetings on biodiversity-related best practices. Partnership with German To help develop bank training programs and to build up the capacity of local bankers CBF Agency for Technical and provide training for a number of selected SME finance institutions. Cooperation Quality Improvement of To fund a pilot internship program by assisting the Global Business School Network with CBF Professional Business Managers its sponsor internships, preparation of business cases, institution-building for business schools in developing countries, and joint research, and to identify clients and help with the placement process. SME Toolkit To provide small businesses access to Web and CD-ROM based interactive tools, CBF training, how-to articles, downloadable forms, and software that will enable them to improve operational and management practices and to help translate international content and develop local content. 8 4 2 0 0 3 D O N O R R E P O RT PROJECT DESCRIPTION DONOR PROGRAM Strengthening of Business To help improve the functioning of potentially sustainable and independent local busi- CBF Associations in Africa and Asia ness membership organizations (BMOs) through training and technical assistance covering management, development of membership services, and advocacy; and to increase the effectiveness of BMO projects by gathering lessons learned and developing products/tools and training for BMO project managers. Support for Business To deliver training and technical support to business associations in Cambodia, Nigeria, Denmark TATF Associations South Africa, and Vietnam. Sustainable Private Equity To provide a one-day sustainability training course to investment professionals from SFMF Workshop Aureos, a private equity fund management group. Sustainable, Responsible To research report into current and future potential for sustainable and responsible SFMF Investment in Emerging investment in emerging market equities, including an analysis of investor appetite, key Markets barriers/incentives, and capacity building needs. World Health International: To develop a market line of proprietary, scalable water purification and disinfection EOF Environmental Services & devices and to deliver affordable potable water, especially to underserved populations Infrastructure (Bangladesh, Mexico, and Philippines), and to establish point-of-sale leasing to SMEs for water treatment equipment in the LAC region. 2 0 0 3 D O N O R R E P O RT 8 5 IFC DONOR-SUPPORTED TECHNICAL ASSISTANCE PROGRAMS: PURPOSE/STRATEGY ACTIVITY / DFO PURPOSE / STRATEGY INCEPTION DATE FIAS To assist governments to improve their policies, regulations, and institutions in order to attract more and more beneficial foreign direct investment. 1985 APDF To respond to the need for project preparation & assistance to entrepreneurs in Sub-Saharan Africa. 1986 PEP To provide focused technical assistance, with the goal of helping build successful private businesses in the former Soviet Union region. In operation since 1987. The Partnership was formally created in May 2000 TATF To develop TA projects to help strengthen the business environment in all IFC client countries, focusing on TAs to promote private sector growth. 1988 AMSCO To assist SMEs with substantial African ownership to become more sustainable and competitive in national and international markets. 1989 SPPF To assist and accelerate the development of productive, self-sustaining SMEs in Pacific Island countries. 1990 MPDF To foster growth in the number and size of domestic private firms in the Mekong region. 1996 CPDF To support the development of private SMEs in the interior of China, with an initial focus on Sichuan province. 2000 SEED To help support the development of the private sector in Albania, Bosnia, Macedonia, and Serbia and Montenegro. 2000 CBF To fund partnerships and programs that support the WBG SME strategy. 2002 CCF To support best environmental and social practices in individual businesses in developing countries and actively disseminate those practices 2002 throughout the private sector in emerging markets. EOF To provide catalytic project development funding and flexible investment financing for innovative projects that address primarily local environmental 2002 issues. To overcome the barriers to investments in these sectors and move projects toward commercial viability. IEDF To help develop a growing and viable SME sector that will generate sustainable employment and economic growth, thereby contributing to poverty 2002 alleviation and social stability. To develop a sustainable and commercially viable domestic capacity to support the SME sector. NAED To support the development of markets and institutions that are key to SME growth in (initially) Algeria, Egypt, and Morocco. To develop SME finance 2002 instruments and expertise, improve the business and regulatory environment, and provide support for intermediary organizations. SEDF To increase competitiveness, performance, and growth of the SME sector, which is expected to contribute to an improvement in economic and 2002 social conditions. SFMF To enhance the environmental and social impact of financial intermediaries (FIs) operating in developing countries, and to strengthen FIs' compet- 2002 itiveness by improving their capacity to manage environmental risk and the opportunities arising from increased sustainability; and to have a strategic impact on the sustainability agenda of the broader financial community. LACP To promote private sector development through support to SMEs with the aim of fostering job creation and reducing poverty in Latin America and 2003 the Caribbean region. 8 6 2 0 0 3 D O N O R R E P O RT IFC DONOR-SUPPORTED TECHNICAL ASSISTANCE PROGRAMS: LOCATIONS PEP CBF IEDF FIAS LACP SEF (includes CCF, EOF and SFMF) TATF 2 0 0 3 D O N O R R E P O RT 8 7 IFC DONOR-SUPPORTED TECHNICAL ASSISTANCE PROGRAMS CUMULATIVE FINANCIAL COMMITMENTS IN US$ MILLIONS EQUIVALENT UP TO JUNE 30, 2003 CUMULATIVE FINANCIAL DONOR TATF SME FACILITIES FIAS PEP SEF CBF TOTAL SUPPORT BY PROGRAM IFC Donor Community African Development Bank - 12.06 - - - - 12.06 F ADB - 1.50 - - - - 1.50 EBRD - 1.22 - - - - 1.22 E A European Community 3.50 12.48 - - - - 15.98 Inter-American Devt Bank - 3.40 - - - - 3.40 D UNDP 1.14 15.69 8.43 - - - 25.26 C Australia 4.44 12.07 2.91 - - - 19.42 Austria 1.05 2.27 - - - - 3.32 Belgium - 3.11 0.17 - - - 3.28 Canada 7.37 17.56 1.65 16.14 - - 42.72 B Denmark 5.64 13.75 - - - - 19.39 Finland 5.71 8.08 0.47 2.71 - - 16.97 A = TATF 22% France 1.88 7.16 0.79 - - - 9.83 Germany 3.62 5.92 - - - - 9.54 B = SME Facilities 47% Greece 1.85 0.25 - - - - 2.10 C = FIAS 9% India # - - - - - - - D = SEF 2% Ireland 2.03 1.52 0.15 - - - 3.70 E = PEP 17% Israel 0.90 - - - - - 0.90 F = CBF 3% Italy 18.72 4.50 0.57 - - - 23.79 Japan 30.65 13.92 3.56 - - - 48.13 Luxembourg 0.50 - 0.52 - - - 1.02 Mexico - 0.50 - - - - 0.50 Netherlands 23.69 33.27 2.35 12.85 5.17 - 77.33 CUMULATIVE FINANCIAL New Zealand 1.49 1.79 0.92 - - - 4.20 SUPPORT BY DONOR Norway 6.69 19.57 0.54 0.01 0.40 - 27.21 Poland - 0.50 - - - - 0.50 Portugal - 4.84 0.25 - - - 5.09 K Slovenia - 0.20 - - - - 0.20 South Africa 0.20 - - - - - 0.20 J Spain 2.85 - 0.30 - - - 3.15 Sweden 14.06 14.53 2.42 2.71 - - 33.72 I A Switzerland 13.77 30.64 3.67 10.52 1.50 - 60.10 United Kingdom 7.25 18.59 2.12 36.67 - - 64.63 H United States 7.25 20.00 3.74 39.07 - - 70.06 G ICDS - 2.65 - - - - 2.65 F Caribbean Devt Bank - 0.10 - - - - 0.10 E B D C Others 0.65 2.81 - - - - 3.46 166.90 286.45 35.53 120.68 7.07 - 616.63 A = Others 41% B = Canada 5% World Bank Group* IBRD - 5.85 10.09 - - - 15.94 C = UNDP 3% IFC 10.71 77.18 21.23 12.60 10.00 21.30 153.02 D = Italy 3% MIGA - - 2.91 - - - 2.91 E = Japan 6% 10.71 83.03 34.23 12.60 10.00 21.30 171.87 F = Netherlands 10% G = Norway 3% GRAND TOTAL 177.61 369.48 69.76 133.28 17.07 21.30 788.50 H = Sweden 4% By Program (percent) 22.6% 46.8% 8.9% 16.8% 2.2% 2.7% 100% I = Switzerland 8% J = United Kingdom 8% TATF includes one-time funding for specific projects (excluding EC/IFC equity line of ECU 5 million). SME Facilities comprise AMSCO,APDF, BAS, CPDF, ESSA, IEDF, K = United States 9% MPDF, NAED, PBAS, SEDF, SEED, SPPF, and SME Initiatives. FIAS is a joint service supported by IFC and theWorld Bank. PEP is the Private Enterprise Partnership and also refers to IFC's earlier privatization activities & technical assistance in the former Soviet Union. SEF comprises CCF, SFMF, and EOF. CBF refers to the SME Capacity Building Facility to fund pilots and partnerships and programs that support theWBG SME strategy. # Indicates contribution-in-kind from EximBank, India. * Includes contribution-in-kind from IBRD, IFC and MIGA. 8 8 2 0 0 3 D O N O R R E P O RT SME FACILITIES: IFC DONOR-SUPPORTED TECHNICAL ASSISTANCE PROGRAMS CUMULATIVE FINANCIAL COMMITMENTS IN US$ MILLIONS EQUIVALENT UP TO JUNE 30, 2003 SME CLOSED DONOR APDF AMSCO CPDF IEDF MPDF NAED SEDF SEED SPPF INITIATIVES PDFS TOTAL IFC Donor Community African Development Bank 8.06 4.00 - - - - - - - - - 12.06 ADB - - - - 0.75 - 0.75 - - - - 1.50 EBRD - - - - - - - - - - 1.22 1.22 European Community - - - - - - 11.58 - - - 0.90 12.48 Inter-American Devt Bank - - - - - - - - - - 3.40 3.40 UNDP 10.00 4.69 - - - - - - - - 1.00 15.69 Australia - - 1.48 2.68 2.90 - - - 5.01 - - 12.07 Austria - - - - - - - 2.27 - - - 2.27 Belgium 2.20 0.31 - - - 0.60 - - - - - 3.11 Canada 2.50 - - - 1.92 - 5.84 1.36 0.77 - 5.17 17.56 Denmark 7.73 5.64 - - - - - - - - 0.38 13.75 Finland 2.20 2.62 - - 3.26 - - - - - - 8.08 France 5.50 1.66 - - - - - - - - - 7.16 Germany 2.30 1.02 - - - - - - - - 2.60 5.92 Greece - - - - - - - 0.25 - - - 0.25 India # - - - - - - - - - - - - Ireland - 1.50 - - - - - - - - 0.02 1.52 Israel - - - - - - - - - - - - Italy 1.00 1.00 - - - 1.72 - - - - 0.78 4.50 Japan 4.00 - - 0.50 2.03 - - - 6.14 - 1.25 13.92 Luxembourg - - - - - - - - - - - - Mexico - - - - - - - - - - 0.50 0.50 Netherlands 9.26 6.32 1.02 1.87 0.57 - 2.03 5.00 - 5.22 1.98 33.27 New Zealand - - - - - - - - 1.79 - - 1.79 Norway 5.37 0.60 - - 2.92 - 7.03 3.20 - 0.35 0.10 19.57 Poland - - - - - - - - - - 0.50 0.50 Portugal 1.90 2.94 - - - - - - - - - 4.84 Slovenia - - - - - - - 0.20 - - - 0.20 Spain - - - - - - - - - - - - Sweden 5.37 3.66 - - 1.91 - - 2.10 - 0.46 1.03 14.53 Switzerland 7.30 2.77 2.33 3.65 6.81 3.48 - 4.00 - - 0.30 30.64 United Kingdom 3.77 1.92 3.29 - 2.32 - 5.68 0.91 - - 0.70 18.59 United States 11.50 2.70 - - - - - - - - 5.80 20.00 ICDS - 2.65 - - - - - - - - - 2.65 Caribbean Devt Bank - - - - - - - - - - 0.10 0.10 Others - 0.62 - - - - - - 0.88 - 1.31 2.81 89.96 46.62 8.12 8.70 25.39 5.80 32.91 19.29 14.59 6.03 29.04 286.45 World Bank Group IBRD - 5.85 - - - - - - - - - 5.85 IFC 23.10 6.87 5.00 5.00 9.00 5.00 5.00 6.00 4.41 - 7.80 77.18 MIGA - - - - - - - - - - - - 23.10 12.72 5.00 5.00 9.00 5.00 5.00 6.00 4.41 - 7.80 83.03 GRAND TOTAL 113.06 59.34 13.12 13.70 34.39 10.80 37.91 25.29 19.00 6.03 36.84 369.48 Note 1 - IEDF was approved by the Board of Directors of IFC in October 2002. Note 2 - SME Initiatives comprise various initiatives.The first one was created in May 2002. Note 3 - Closed PDFs comprise BAS, established in 1981 & closed during FY97; PBAS, established in 1991 & closed in June 1996; and ESSA, established in 1994 & closed in January 2002. # indicates contribution-in-kind from EximBank, India. 2 0 0 3 D O N O R R E P O RT 8 9 INTERNATIONAL CHINA PROJECT NORTH AFRICA ENTERPRISE FINANCE CORPORATION DEVELOPMENT FACILITY DEVELOPMENT FACILITY Mr. Udayan Waglé Mr. Eric J. Siew Mr. Antoine Courcelle-Labrousse Director, Trust Funds Department General Manager Program Coordinator & Program Manager International Finance Corporation (IFC) R. 2716, 27th floor World Trade Center Bldg., 19th Floor 2121 Pennsylvania Ave., N.W. Minxing Financial Tower 1191 Corniche El Nile Street, Boulac Directory Room F 6K-102 No. 88 Tidu Street Cairo, Egypt Washington, DC 20433 Chengdu, Sichuan Province Tel: (20-2) 579-59 12, 579-58 12, 579-64 68 USA P.R. China 610016 Fax: (20-2) 579-64 47 Tel: (1-202) 473-0535 Tel: (86-28) 676-6622 Fax: (1-202) 974-4344 Fax: (86-28) 676-7362 SOUTHASIA ENTERPRISE DEVELOPMENT FACILITY INDONESIA ENTERPRISE Mr. Anil Sinha SME FACILITIES: DEVELOPMENT FACILITY General Manager AFRICAN MANAGEMENT Mr. Chris Richards United House SERVICES COMPANY General Manager 10 Gulshan Avenue Mr. Nkosana Moyo Bali Jeff House Dhaka 1212, Bangladesh Managing Director Jalan Puputan Raya 488 Tel: (880-2) 986-1714-6 Eva Bakonyi Renon Bali, Indonesia Fax: (880-2) 989-4744 Chief Operations Officer Tel: (62-361) 265-350 Hyde Park Lane Fax: (62-361) 265 352 SOUTHEAST EUROPE ENTERPRISE Marlborough Gate, Ground Floor DEVELOPMENT FACILITY Hyde Park LATIN AMERICA Mr. Alexander Paine Johannesburg, South Africa SME FACILITY General Manager Tel: 27-11-341-9030 Ms. Anita Bhatia c/o The World Bank Fax: 27-11-325-0319 Sr. Private Sector Development Specialist Hamdije Kresevljakovica 19/5 c/o International Finance Corporation 71000 Sarajevo AFRICA PROJECT Edificio Victor, Piso 9 Bosnia and Herzegovina DEVELOPMENT FACILITY Calle Fernando Guachalla No. 342 -Sopocachi Tel: (387-33) 251-555 Mr. Nkosana Moyo La Paz, Bolivia Fax: (387-33) 217-762 Associate Director Tel: (591-2) 244-3133 Hyde Park Lane Fax: (591-2) 212-5065 SOUTH PACIFIC PROJECT FACILITY Malborough Gate, Ground Floor Ms. Denise Jean Aldous Hyde Park MEKONG PRIVATE SECTOR General Manager Johannesburg, South Africa DEVELOPMENT FACILITY Level 18, CML Building Tel: (27-11) 341-9030 Mr. Mario Fischel 14 Martin Place Fax: (27-11) 325-0319 General Manager Sydney, NSW 2000 7th Floor, 63 Ly Thai To Australia Hanoi, Vietnam Tel: (61-2) 9223-7773 Tel: (84-4) 824-7892 Fax: (61-2) 9223-2533 Fax: (84-4) 824-7898 9 0 2 0 0 3 D O N O R R E P O RT PRIVATE ENTERPRISE SOCIAL & ENVIRONMENTAL PARTNERSHIP FACILITIES Mr. Christian Grossmann Director CORPORATE CITIZENSHIP FACILITY International Finance Corporation (IFC) Mr. Mark Eckstein 36, Building 1, Bolshaya Molchanovka Street, Senior Environmental Specialist 3rd Floor International Finance Corporation (IFC) 121069 Moscow 2121 Pennsylvania Ave., N.W. Russian Federation Room F 3K-322 Tel: (7-095) 411-7555 Washington, DC 20433 Fax: (7-095) 411-7556 USA Web site: www.ifc.org/pep Tel: (1-202) 473-8022 Fax: (1-202) 974-4389 FOREIGN INVESTMENT ENVIRONMENTAL OPPORTUNITIES FACILITY ADVISORY SERVICE Mr. Louis Boorstin Mr. Frank Sader Manager Coordinator, Trust Funds International Finance Corporation (IFC) Investment Climate Department 2121 Pennsylvania Ave., N.W. The World Bank Group Room F 3K-254 1818 H St., N.W. Washington, DC 20433 Room I 9-101 USA Washington, D.C. 20433 Tel: (1-202) 473-6684 USA Fax: (1-202) 974-4389 Tel: (1-202) 473-3921 Fax: (1-202) 522-3262 SUSTAINABLE FINANCIAL Web site: www.fias.net MARKETS FACILITY Mr. Daniel Siddy Environmental Specialist International Finance Corporation (IFC) 2121 Pennsylvania Ave., N.W. Room F 3K-282 Washington, DC 20433 USA Tel: (1-202) 458-9899 Fax: (1-202) 974-4389 2 0 0 3 D O N O R R E P O RT 9 1 ACG-BTC Azeri, Chirag and Deepwater Gunashi / Baku-Tbilisi-Ceyhan IMF International Monetary Fund ADB Asian Development Bank LAC Latin America and the Caribbean AfDB African Development Bank LACP Latin America and the Caribbean Program AMSCO African Management Services Company MDBs multilateral development banks APDF Africa Project Development Facility MENA Middle East and North Africa Glossary BDS Business Development Services MFI microfinance institution CBF Capacity Building Facility MIGA Multilateral Investment Guarantee Agency CCF Corporate Citizenship Facility MIS management information systems CDB Caribbean Development Bank MPDF Mekong Private Sector Development Facility CDC Commonwealth Development Corporation NAED North Africa Enterprise Development facility CEE Central and Eastern Europe NGO nongovernmental organization CIDA Canadian International Development Agency NORAD Norwegian Agency for Development Cooperation CPDF China Project Development Facility OECD Organization for Economic Cooperation and Development DFO Donor-Funded Operations PDF project development facility EAP East Asia and Pacific PEP Private Enterprise Partnership EBRD European Bank for Reconstruction and Development PPP Public Private Partnership EC European Community SEAF Small Enterprise Association Funds EOF Environmental Opportunities Facility SECA Southern Europe and Central Asia ESSA Enterprise Support Service for Africa seco State Secretariat for Economic Affairs of Switzerland EU European Union SEDF SouthAsia Enterprise Development Facility EXIM Export-Import Bank of India SEED Southeast Europe Enterprise Development facility FATE Fate Foundation SEF Social and Environmental Facilities FDI foreign direct investment SFMF Sustainable Financial Markets Facility FIAS Foreign Investment Advisory Service Sida Swedish International Development Agency FM financial market SME small and medium enterprise FMTA IFC Financial Markets Technical Assistance SOE state-owned enterprise FY fiscal year SPPF South Pacific Project Facility FYR former Yugoslav Republic TA technical assistance GEF Global Environment Facility TATF Technical Assistance Trust Funds program IADB Inter-American Development Bank TF Trust Fund IAS International Accounting Standards UNDP United Nations Development Programme IBRD International Bank for Reconstruction and Development UNEP United Nations Environment Programme ICDS Industry Council for Development Service USAID United States Agency for International Development IDA International Development Association USTDA United States Trade and Development Agency IEDF Indonesia Enterprise Development Facility $ US$ IFC International Finance Corporation =C EURO IFI international financial institution 9 2 2 0 0 3 D O N O R R E P O RT Contributors and ProductionTeam (IFCTrust Funds Department) Veronica Banez, Leslie Christensen, Lloyd Corwin, Maria Cussianovich,Yves de Rosée, Margaret Ghobadi, Mariko Higashi, Reina Kawaguchi, Aminata Mbodj,Tran Nguyen, Michael O'Neill, Bayo Oyewole, Richard Patenaude, Sophana So, Francis Tamakloe, Luz Tatlonghari, Anton van Ruiten, Michael Voronenko, Uday Wagle,Wai-Keen Wong, Fred Wright SPECIAL THANKS TO PRIMARY CONTRIBUTORS The Financial Markets team - Alison Harwood, Lory Camba Opem The SME team ­ Ramon Cabo, Rose Tan, Rob Wright The PEP team - Irina Likhachova, Heather Matson, Irina Scherbakova The FIAS team - Teresa Andaya, Danilo Anzures, Frank Sader The Environment team - Louis Boorstin, Timothy Collins, Mark Eckstein, Alexandre Leite, Natalie Magradze, Dan Siddy, Russell Sturm The CBF team - Stella Korir, Elena Lee, Wendy Teleki Other contributors: Jacqueline Coolidge, Rob Horner, Anne Lagomarcino, Aleksandra Skoric, Stoyan Tenev, Niels K. Vestergaard SPECIAL THANKS TO THE FOLLOWING FOR THEIR TECHNICAL ADVICE Brigid Holleran, Aichin Lim Jones, Dana Lane, Arthur Levi DESIGN Design Army, Washington D.C. PRINTING ColorCraft of Virginia, Inc. PHOTO CREDITS Zenaida Chavez, Courtesy of Ford Russia, Courtesy of the Foreign Investors Council, Courtesy of Medicover, Nukten Ersoy, John Graham, Michele Iannacci, Reina Kawaguchi, Alexandre Leite, Jeffrey Liebert, Greg Maggio, Anvar Meliboev, Matluba Mukhamedova, PEP project staff, Ravi Ruparel, Luz Tatlonghari, Anton van Ruiten, Michael Voronenko, Wai-Keen Wong, Linda Young, Jose Zevallos INTERNATIONAL FINANCE CORPORATION 2121 Pennsylvania Ave., N.W. Washington, DC 20433 USA Tel: 1-202-473-0535 Fax: 1-202-974-4344 www.ifc.org www.ifc.org/tatf