Adding Value toPrivate Sector Investment 2004 Annual Report IFC'S ANNUAL REPORT ON THE WEB, THE INTERNATIONAL FINANCE CORPORATION promotes sustainable private sector www.ifc.org/ar2004, is a companion investment in developing countries. IFC is a member of the World Bank Group and is headquartered to this printed edition. It provides easy in Washington, D.C. It shares the primary objective of all World Bank Group institutions: to reduce navigation and downloading of data poverty and improve the lives of people in its developing member countries. related to IFC investment projects. Since its founding in 1956, IFC has committed more than $44 billion of its own funds and has arranged $23 billion in syndications and underwriting for 3,143 companies in 140 developing Note: Management's discussion countries. IFC coordinates its activities with the other institutions in the World Bank Group--the and analysis, the audited financial International Bank for Reconstruction and Development, the International Development Association, statements, and IFC's fiscal year the Multilateral Investment Guarantee Agency, and the International Centre for Settlement of 2004 investment portfolio appear Investment Disputes--but is legally and financially independent. Its 176 member countries provide in Volume 2 of the Annual Report. its share capital and collectively determine its policies. The Corporation defines a commitment to include: (1) signed loan and equity (including quasi-equity) investment agreements; (2) signed guarantee agreements; and (3) risk management facilities that are considered ready for execution as evidenced by a signed ISDA agreement or a signed risk management facility agreement with a client. Currency is given in U.S. dollars throughout unless otherwise specified. All numbers reflect rounding. C O N T E N T S Volume 1 PAGE 2 Overview Operational Highlights 2 IFC Board of Directors 4 LIMA, Message from DE the Executive Vice President 6 PEREIRA ADRIANO ENGLISH RIGHT: TO RICHARD LEFT FROM GUNAWAN, CREDITS MICHAEL PHOTO ENGLISH, COVER, FRONT RICHARD POLLETT TED Investment Operations 22 Technical Assistance 26 Sub-Saharan Africa 30 East Asia and the Pacific 34 South Asia 38 Europe and Central Asia 44 Latin America and the Caribbean 52 Compliance Advisor/Ombudsman 62 Middle East and North Africa 58 IFC Organizational Chart 63 PAGE 14 PAGE 20 Sustainability: Report on Leadership Operations and PAGE 64 and Expertise Regions 2004 Annual Review Operations Evaluation Group 65 T H E M E F E AT U R E Financial Review 67 Portfolio Review 71 PAGE 10 Products and Services 74 Adding Value Project Commitments 76 to Private Sector Technical Assistance and Advisory Projects 92 Investment Appendixes 105 O V E R V I E W Operational Highlights OPERATIONAL RESULTS SUMMARY, FY04 New projects committed 217 Total financing committed $5.63 billion Financing committed for IFC's own account $4.75 billion IFC's MISSION To promote sustainable Total committed portfolio* $17.9 billion private sector investment Loans as a % of committed portfolio 74% Equity as a % of committed portfolio 20% in developing countries, Structured finance products (includes guarantees) as a % of committed portfolio 5% helping to reduce poverty Risk management products as a % of committed portfolio 1% and improve people's lives. *Includes off-balance-sheet products, such as structured finance and risk management products; for IFC's own account as of June 30, 2004. RESOURCES AND INCOME, FY04 Operating income $982 million Net income $993 million Paid-in capital $ 2.4 billion Retained earnings $ 5.4 billion Borrowings for the fiscal year $ 3.0 billion Net worth $ 7.8 billion Where IFC invests in companies and financial institutions in all developing regions. These activities are detailed in the regional reports, beginning on p. 30, and in the table of project commitments (see p. 76). Projects involving more than one developing region are classified as "Global." COMMITMENTS BY REGION, FY04 INVESTMENT PORTFOLIO BY REGION, FY04 Includes IFC's account and syndications (millions of U.S. dollars) For IFC's account (millions of U.S. dollars) TOTAL $5,633 TOTAL $17,938 Global Global 91 124 Middle East Sub-Saharan Africa2 Middle East Sub-Saharan Africa2 and North Africa2 405 and North Africa2 1,603 236 1,156 East Asia and East Asia and the Pacific the Pacific 763 2,897 Latin America Latin America and the Caribbean South Asia and the Caribbean 1,593 514 6,076 South Asia 1,529 Europe and Europe and Central Asia1, 2 Central Asia1, 2 2,030 4,554 1. Includes BTC pipeline, which is officially classified as a global project. 2. Includes regional share of LNM Holdings investment, which is officially classified as a global project. Note: All numbers reflect rounding. 2 IFC 2004 ANNUAL REPORT How What IFC offers a full range of investment products; for further details on IFC is active in all commercial sectors in its developing member these operations, see p. 22. IFC also increasingly provides technical countries. Funding is often accompanied by assistance on industry assistance and advisory services to private sector enterprises and related best practice, corporate governance, environmental and social issues, government agencies (see p. 26). and links with local small businesses. COMMITMENTS BY PRODUCT, FY04 COMMITMENTS BY SECTOR, FY04 Includes IFC's account and syndications (millions of U.S. dollars) Includes IFC's account and syndications (millions of U.S. dollars) TOTAL $5,633 Finance and insurance $1,675 29.7% Utilities 739 13.1 Oil, gas, and mining 630 11.2 Loan syndications 880 Information 312 5.5 Risk management Industrial and consumer products 295 5.2 products Transportation and warehousing 249 4.4 60 Loans 3,396 Nonmetallic mineral product manufacturing 238 4.2 Structured finance Collective investment vehicles 207 3.7 products* 171 Pulp and paper 206 3.7 Chemicals 200 3.5 Equity and quasi-equity Primary metals 173 3.1 1,126 Agriculture and forestry 166 2.9 Wholesale and retail trade 125 2.2 Food and beverages 123 2.2 Textiles, apparel, and leather 75 1.3 Health care 63 1.1 Accommodation and tourism services 50 0.9 Plastics and rubber 37 0.6 *Includes guarantees. Professional, scientific, and technical services 36 0.6 Construction and real estate 25 0.4 Education services 10 0.2 TOTAL COMMITMENTS $5,633 100.0% Why Impact IFC emphasizes five sectors that have a high impact on the economies IFC also targets much of its effort to frontier countries, where there is of developing countries, because they reach large numbers of people little or no foreign capital flow. For all new investments, IFC projects the or benefit many other sectors of the economy. Together, these impact on development. In addition, each year a sample of mature projects priority sectors represent nearly two-thirds of IFC's operations. are assessed by OEG to determine their contribution to development. COMMITMENTS BY STRATEGY, FY04 SNAPSHOT OF DEVELOPMENT IMPACT Includes IFC's account and syndications (millions of U.S. dollars) Commitments for IFC's account and syndications (percentages) 2,000 Financial 33.4% FY02 FY03 FY04 Priority sector commitments 77 76 64 1,500 Financial sector 34 50 33 Infrastructure* 17.5% Frontier country commitments1 22 22 22 1,000 Information and communication technologies 5.5% Commitments with projected high impact 2 47 583 61 500 Small and medium enterprises** 5.8% Positive contribution to Health and education 1.3% development 4 613 57 58 0 FY04 Commitments 1. Excludes firms in regional and global projects. IFC considers countries "frontier" if they * Not including information and communications. ** are low income, as defined by the World Bank, or high risk, with a rating of 30 or SME investments are derived from all industry sectors. below or unrated by Institutional Investor. Financial consists of finance and insurance, and funds. 2. For criteria, see p. 16. Infrastructure consists of utilities and transportation. 3. Adjusted number. 4. For discussion of OEG evaluations, see p. 65. IFC 2004 ANNUAL REPORT 3 O V E R V I E W Board of Directors Perspective and Oversight for IFC This year the Board of Directors approved a number of investments and maintained close oversight of development and implementation of IFC strategy. The Board was heavily involved in discussion of IFC's strategic directions, which outline the overall framework for future IFC activities. The Board urged IFC to collaborate more closely with other World Bank Group institutions, especially in providing technical assistance on the business climate and private sector development. In this regard, Directors were Letter to the Board of Governors pleased to note the increased cooperation between IFC and IDA in Africa. The Board also reviewed country-specific operations and discussed 15 joint World Bank­IFC­MIGA The Board of Directors of the International Finance country assistance strategies and related products. Corporation has had this annual report prepared in Directors noted the challenges in both maintaining profitability and increasing accordance with the Corporation's by-laws. James development impact, and they reaffirmed their support of IFC's focus on frontier D. Wolfensohn, president of IFC and chairman of markets, with a particular emphasis on small and medium enterprises; innovative the Board of Directors, has submitted this report financing mechanisms; "south-to-south" investments; long-term partnerships; with the accompanying audited financial infrastructure; and health and education. statements to the Board of Governors. Specific issues Directors discussed with IFC management include the update of The Directors are pleased to report that the IFC's Safeguard Policies and associated guidelines, the review of IFC's Policy on for the fiscal year ended June 30, 2004, IFC Disclosure of Information, an assessment of IFC's strategy and procedures for donor- expanded its sustainable development impact funded operations, and, in conjunction with other units of the World Bank Group, the through private sector project financing Extractive Industries Review. These discussions were ongoing into FY05, along with a operations and advisory activities. proposal to establish a technical assistance and advisory fund to provide sustainable financial support for the Corporation's growing technical assistance activities. In keeping with its oversight responsibility, the Board discussed the annual review on operations evaluation and the IFC management response. The Board appreciated the continued positive dialogue between IFC management and the Operations Evaluation Group. With respect to the Corporation's performance, the Board welcomed IFC's achievements, most notably its high operating income and the significant growth, diversification, and improvement in quality of its portfolio. DEBORAH CAMPOS IFC Governance The International Finance Corporation's member countries, through a Board of Governors and a Board of Directors, guide IFC's programs and activities. Each country appoints one governor and one alternate. IFC corporate powers are vested in the Board of Governors, which delegates most powers to a board of 24 directors. Voting power on issues brought before them is weighted according to the share capital each director represents. The directors meet regularly at World Bank Group headquarters in Washington, D.C., where they review and decide on investment projects and provide overall strategic guidance to IFC management. Directors also serve on one or more of five standing committees, which help the Board discharge See also related sections on its oversight responsibilities through in-depth examinations of policies and procedures. The Audit Committee advises on financial and risk management, corporate governance, and oversight issues. the Office of the Compliance The Budget Committee considers certain aspects of business processes, administrative policies, Advisor/Ombudsman (p. 62) and standards, and budget issues that have a significant impact on the cost-effectiveness of Bank Group the Operations Evaluation Group operations. The Committee on Development Effectiveness advises the Board on selected issues concerning operations and policy evaluation and development effectiveness with a view to (p. 65), both of which function monitoring progress on poverty reduction. The Personnel Committee advises the Board on independently of IFC management. compensation and other significant personnel policies. Directors also serve on the Committee on Governance and Executive Directors' Administrative Matters. James D. Wolfensohn is president of IFC and the other World Bank Group institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). Mr. Wolfensohn also serves as chairman of the boards. Peter Woicke is executive vice president of IFC, overseeing its day-to-day operations. He is also a managing director of the World Bank, charged with the Bank's private sector operations and with formulation of a coordinated private sector development strategy for the World Bank Group. Directors and Alternates as of June 30, 2004 PICTURED OPPOSITE DIRECTORS ALTERNATES DIRECTORS ALTERNATES FROM LEFT TO RIGHT: Tanwir Ali Agha Sid Ahmed Dib Alieto Guadagni C. Veronica Querejazu Vidovic (Standing) Per Kurowski, Terry O'Brien,* Mahdy Ismail Aljazzaf Mohamed Kamel Amr Thorsteinn Ingolfsson Inkeri Hirvensalo Otaviano Canuto, Paulo F. Gomes, Yahya Abdullah M. Alyahya Abdulrahman M. Almofadhi Louis A. Kasekende J. Mills Jones Nuno Mota Pinto,* Pierre Duquesne, Rapee Asumpinpong Hadiyanto Per Kurowski Maria Jesus Fernandez Thorsteinn Ingolfsson, Tanwir Ali Agha, John Austin Terry O'Brien Alexey Kvasov Eugene Miagkov Tom Scholar, Kurt Bayer, Eckhard Deutscher, Kurt Bayer Gino Alzetta Marcel Masse Gobind Ganga Alexey Kvasov, Toshio Oya,* Louis A. Kasekende, Biagio Bossone Nuno Mota Pinto Ad Melkert Tamara Solyanyk Yahya Abdullah M. Alyahya, Rapee Asumpinpong. Carole Brookins Robert B. Holland, III Tom Scholar (vacant) (Seated) Zhu Guangyao, Pietro Veglio, Otaviano Canuto Gil S. Beltran Chander Mohan Vasudev Akbar Ali Khan Carole Brookins, Mahdy Ismail Aljazzaf, Eckhard Deutscher Walter Hermann Pietro Veglio Jakub Karnowski Gobind Ganga,* Tamara Solyanyk,* Pierre Duquesne Anthony Requin Zhu Guangyao Wu Jinkang Alieto Guadagni. Paulo F. Gomes Louis Philippe Ong Seng (vacant) Toshio Oya (Not pictured) Chander Mohan Vasudev. * Alternate director; some directors or alternates were not available for this photograph. IFC 2004 ANNUAL REPORT 5 O V E R V I E W Message from The Executive Vice President People often talk about the "tipping point" phenomenon. It is the point at which a critical mass is reached--when people, trends, and ideas realign to create a wholly new way of understanding or adapting to the world. It happens everywhere: a product revolutionizes a market, new research recasts a prevailing scientific consensus, a demographic shift changes cultural attitudes. One such tipping point arrived here, at the International Finance Corporation, in the last few years. During the late 1990s, we began to realize that IFC's market--and thus our business model--might be reaching a pivotal moment. Clients were beginning to expect more from us than one-time project finance deals and syndications. Governments were asking for help on private sector issues that went far beyond issues of privatization or the structuring of concessions. Local companies were asking for long-term partnerships based not just on capital but on expertise in environmental, social, and corporate governance issues. An increasing number of companies in developing nations were readying themselves to compete on a broader scale, regionally or even globally. Timing, as always, was an issue. By 2001, a series of emerging market crises had pummeled IFC's portfolio and posed challenges for our traditional lines of business. Was it really the right time for a major restructuring and reorientation? This past fiscal year's operational results are a strong indicator that the timing was right. Indeed, I believe IFC may be onto something big. Commitments for IFC's account increased by 23 percent this past year, and our operating income reached a new high of $982 million. New investments more than doubled in Sub-Saharan Africa, and we set departmental records in LITTLEHALES Europe and Central Asia as well as South Asia. Encouragingly, this new business BRETON Executive Vice President Peter Woicke (left) and was widely distributed across sectors. President James D. Wolfensohn Converging Goals More important, we have worked toward--and increasingly witnessed--a shift that has aligned more closely than ever our strategic approach, our institutional capacity, the demand from clients and governments in developing countries, and the views of our shareholder nations. IFC has moved beyond its tipping point, and in many ways we are very well positioned for long-term success. Our comparative advantages are broad ranging. A global presence. The popular impression is that north-to-south foreign direct investment--that is, cross-border investment from rich nations into the emerging markets--is the leading edge of economic globalization. In fact, recent research indicates that while such FDI doubled during the late 1990s, south- to-south investment increased tenfold. This informed our difficult decision to accelerate the decentralization of IFC and place our regional departments at the forefront of business development, through hub offices in seven developing 6 IFC 2004 ANNUAL REPORT IFC is well positioned for long- term success. Our comparative advantages are broad ranging. KEITH MARTIN Reconstruction in Kabul, Afghanistan. regions and an expanded network of country offices. This change is already reaping dividends, as demonstrated by the many intraregional and south-to- south investments detailed in this report. Broad capabilities in technical assistance. As more developing nations achieve macroeconomic stability, they are turning their attention to the challenges of microeconomic reform, especially efforts to improve their investment climate and to help small and medium entrepreneurs create new ventures and jobs. Our project development facilities assist entrepreneurs in many business sectors of "frontier" countries and regions--places with low incomes or that present high risks for private investors. From corporate governance and supply-chain synergies to investment climate reform, the activities funded through our partnerships with generous donor nations are a crucial catalyst for entrepreneurial growth, especially among small and medium enterprises. This network of donor partnerships continues to grow, and IFC has also secured approval from its Board for a new funding formula that will help us keep building capacity. Innovative financial products. IFC has restructured its treasury operations and has been energetic in developing local currency financing and structured finance products to help build local capital markets. This positions us to meet IFC 2004 ANNUAL REPORT 7 rapidly emerging needs, as pension funds and other institutional investors in developing nations look to diversify their portfolios with long-term local currency instruments and as local companies look to manage cross-border currency risk. Environmental expertise. As more developing nations struggle with the environmental implications of rapid industrialization, IFC's extensive expertise in such areas as energy efficiency, renewable energy, and biodiversity will help us remain a preferred partner for sustainable private sector development. Leadership on sustainability. IFC has become a global standard-setter on project finance through the Equator Principles, as well as a repository of best practice on corporate governance. This strengthens our ability to help clients, particularly as shareholder and stakeholder scrutiny of performance on environmental, social, and corporate governance issues plays a larger role in company valuations. Expansion into municipal finance. As developing nations continue to urbanize and municipalities assume more responsibility for providing essential infrastructure services, IFC and the World Bank are creating capacity and building expertise in municipal finance. Hard-Won Results YOUNG IFC has not developed this more diversified mission by happenstance. It is the LINDA A marketplace in Mali. result of years, even decades, of hard work and proven developmental results, successes that have gradually won the respect of our shareholder nations and strengthened our collaboration with other institutions of the World Bank Group. A similar long-term relationship has informed the broad adoption of the IFC has tailored its lending and Equator Principles, whereby a growing number of major financial institutions technical assistance programs to have chosen to anchor their environmental and social standards with IFC. local needs. Strong past performance is a necessary condition for building stakeholder support, but it is not sufficient to ensure future success. That requires the ability to discern the trends shaping global markets and to make a compelling and coherent case for strategic, adaptive change. If anything, this has been the story of IFC over the past few years. The reality in today's emerging markets is that investment capital is becoming more of a commodity, while expertise in managing nontraditional risks and issues--environmental, social, corporate governance, or supply-chain performance--is becoming a more decisive factor in determining long-term viability for private enterprises. At the same time, as costs for transportation and information technology fall, small and medium local companies are rapidly increasing their ability to compete effectively in the global economy. The net result is that companies, and development officials within countries, are less interested now in one-off projects and transactions. They are focusing instead on strategic partnerships that will enhance private firms' capacity, improve their knowledge base, and expand their long-term potential. This is why, in region after region, IFC has looked forward, refocused its efforts, and tailored its lending and technical assistance programs to local needs. We have fostered corporate governance for Central and Eastern Europe's 8 IFC 2004 ANNUAL REPORT pioneering generation of young businesses, raised awareness of environmental and social sustainability for a wide range of Chinese companies, structured municipal finance for the infrastructure needs of South Africa's largest city, and begun working with the World Bank's International Development Association on public-private partnerships in Sub-Saharan Africa, among many other efforts. All of this work has been augmented by the groundbreaking, comparative research on investment climate that IFC has supported in the Doing Business report; the first edition of this annual publication is already IFC approaches the future with guiding countries' reform efforts and helping companies compete. a reenergized staff, a broader Without question, IFC faces challenging years ahead. Emerging markets, mandate, and unprecedented by their very nature, are volatile. Some periods may not witness the level of profitability and degree of developmental impact that we have seen this year. leadership potential. But IFC approaches this future with a reenergized staff, a broader mandate, robust capacity, and unprecedented leadership potential. I want to congratulate and thank the many talented and energetic people at IFC who continue to demonstrate the depth of their dedication, the breadth of their creativity, and the power of their teamwork. Their efforts give us much brighter prospects for achieving our main mission--to reduce poverty and improve people's lives in our client countries. Peter Woicke Executive Vice President Executive Vice President Peter Woicke and the IFC vice presidents FROM LEFT TO RIGHT: (Standing) Michael Klein Nina Shapiro Assaad Jabre (Seated) Farida Khambata Peter Woicke Dorothy Berry Not pictured: Carol Lee For IFC organizational chart, see p. 63. LITTLEHALES BRETON IFC 2004 ANNUAL REPORT 9 T H E M E F E AT U R E Adding Value to Private Sector Investment The International Finance Corporation promotes sustainable economic development through the private sector. Our focus is global and our resources are unique. Improving Bank Lending to Small Businesses Through investments and technical assistance to the financial sector, IFC is addressing the constraints to finance for smaller businesses. In Bangladesh, for example, the SouthAsia Enterprise Development Facility is working with eight partner financial institutions to introduce a range of new products and tools that will increase the quality and quantity of their SME portfolio. Already, 3,000 new small and medium enterprises have access to finance, with five of the financial institutions reporting a $50 million increase in SME term lending over the past year. SEDF is also working with the Central Bank of Bangladesh to provide training to about a thousand bankers in core risk areas such as credit analysis, asset and liability management, treasury functions, internal controls, and anti­money laundering. These are all issues identified by local bankers and authorities as crucial to the sustainability of the financial sector. In combination with the Netherlands Development Finance Company and IFC's Global Financial Markets group, SEDF also organized workshops on corporate governance with local financial institutions. The resulting recommendations were accepted by the Central Bank and incorporated in recent government legislation. IFC's Strategic Objectives... Investing in Frontier Markets Much of our work focuses on countries that are low income or high risk. We work with governments to improve investment climates and pay special attention to the needs of smaller businesses. CAINES 10 IFC 2004 ANNUAL REPORT RICHARD This year the BTC Pipeline demonstrated the difference IFC's involvement makes in a major investment, from consulting with affected communities and arranging supply contracts for local entrepreneurs to ensuring transparency in the reporting of oil revenues and collaborating with other multilateral institutions. For details, see p. 48. TED POLLETT RYAN OLIVER Developing Local Leading on Financial Markets Sustainability We strengthen financial institutions IFC has unmatched capacity to help companies and through investments and capacity financial institutions improve their environmental and social building. Among areas of emphasis performance as well as corporate governance. A growing are housing finance, microfinance, number of commercial banks have adopted the Equator and innovative financial products. Principles, agreeing to adhere to our environmental and social standards in their investments in developing countries. ENGLISH RICHARD IFC 2004 ANNUAL REPORT 11 From the capital markets of Latin America and manufacturers of East Asia to the emerging business sectors of Afghanistan and Iraq, IFC's financing and technical assistance are critical to private sector development. We continue to serve as a catalyst for other investors and to exert a positive influence on practice in a wide range of commercial sectors. Central Europe: IFC's Support to EU Accession In May 2004, eight Central European countries joined the European Union, less than 15 years after the fall of the Berlin Wall. This achievement reflects tremendous reform efforts that transformed these countries into liberalized market economies. IFC is proud to have supported this transition with more than $2 billion for 265 projects in the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia since they became members of IFC in the late 1980s and early 1990s. IFC also syndicated $745 million for projects in these countries, and, through FIAS, helped remove administrative barriers to investment. The projects are spread across all industries, with the largest share in financial markets, general manufacturing and services, and infrastructure. IFC's projects have contributed to processes essential to EU accession: the privatization of large state-owned companies, the creation and strengthening of new financial institutions and products, and increases in the productivity and competitiveness of firms. Recent financing has supported innovative activities, such as energy efficiency improvements, sale of nonperforming loans, and private health care. IFC is also working to support Central European clients in taking their experience to their eastern neighbors. This year, for example, IFC supported its Polish client Intercell--a leader in recyclable paper products--as it invested in Russia. As these countries integrate into the EU, IFC will continue to play an important, albeit selective, role to address remaining gaps in private sector growth and institutions. Projects will include investments in underdeveloped sectors, participation in difficult privatizations, cutting- COMMISSION edge financial products, and cross-border investments into the region's non-EU neighbors. EUROPEAN THE OF COURTESY Building Long-Term Partnerships with Clients Through repeat investments and assistance in adopting sustainable business practices, we help companies in developing countries emerge as global players. We also encourage intraregional or "south-to-south" partnerships by helping these companies expand into other developing countries. TOSHMATOV BAHODIR 12 IFC 2004 ANNUAL REPORT Celtel International Receives IFC Client Leadership Award This year IFC established an annual Client Leadership Award to recognize a highly successful corporate client that, in line with IFC's mission, has made a significant contribution to sustainable development. The first award goes to Celtel International B.V., a pan-African provider of cellular telephone services that has built a successful business while demonstrating extraordinary development impact in its countries of operation. Celtel provides reliable and affordable cellular services to facilitate communication and business within Africa and with the rest of the world. The company has invested more than $600 million in mobile phone operating companies in 13 countries: Burkina Faso, Chad, the Democratic Republic of Congo, the Republic of Congo, Gabon, Kenya, Malawi, Niger, Sierra Leone, Sudan, Tanzania, Uganda, and Zambia. In 2003, Celtel reached 2.5 million customers, generating revenues of $446 million and a net income of $74 million. IFC's relationship with Celtel began with a 1994 investment in Celtel Uganda, one of the group's first operating companies. IFC has since invested in the holding company and in three other Celtel operating subsidiaries, most recently in the Democratic Republic of Congo and Zambia. These investments have helped modernize networks and increase mobile phone penetration rates. They CELTEL OF have also encouraged competition, which has led to lower tariffs and increased local private participation in the telecommunications sector. COURTESY Celtel has achieved its business goals while committing to strong corporate governance Celtel donated these desks as part of its efforts and the betterment of local communities. Operating in some of the world's most difficult to refurbish schools. markets, Celtel prides itself on its transparent dealings and on promoting the highest standards of ethics and integrity. Celtel has helped improve health and education by refurbishing schools and health centers, providing scholarships, supporting programs for athletes and people with handicaps, and sponsoring the Africa Education Journalism Award. The company has embraced HIV/AIDS as a business and community issue and has worked with IFC Against AIDS on its HIV policy for employees and their families. Celtel has also started a community phone initiative, installed solar panels for recharging of phone handsets, and helped protect endangered species. Celtel embodies the potential that the private sector can harness in frontier markets. It is a highly successful enterprise, a leader in its sector, and a model of good practice in promoting business and development in Sub-Saharan Africa. Promoting the Private Sector in Infrastructure, Health, and Education With our World Bank colleagues, we are helping establish public-private partnerships in these critical sectors and providing innovative financing and advice, including at the municipal level. SODA MAGADI OF COURTESY IFC 2004 ANNUAL REPORT 13 S U S TA I N A B I L I T Y Leadership and Expertise on Sustainability An Integral Aspect of Our Business Sustainability--attention to environmental and social issues and to corporate governance--has become simply IFC's way of doing business. We are integrating the Corporation's environmental, social, and governance due diligence into our core investment functions. We are helping client companies recognize that corporate social responsibility is a central reality of business today and not an add-on to investments. IFC provides solutions to clients through our in-house technical expertise and our ability to identify innovative sources of finance. Socially responsible investors often use broad, portfolio-level screens that steer their funds toward ventures that create public goods. IFC takes that concept one step further, evaluating each individual investment project to ensure that it meets environmental and social standards and scoring its potential positive impact on local communities and developing nations. IFC puts a special emphasis on creating projects in "frontier" sectors and countries where the creation of a vibrant private sector is most needed. Our regional reports, beginning on p. 30, reflect the fact that environmental, social, and governance factors have now become an integral part of IFC's business. The 2004 Sustainability Report, published separately, provides additional information and metrics. Safeguards and Disclosure Policy Review IFC's Safeguard Policies and associated guidelines provide a framework to manage the risk of projects we finance and are the basis of our leadership on environmental and ENGLISH social sustainability--through the Equator Principles they have helped set a new global RICHARD standard. Following a review by IFC's Compliance Advisor/Ombudsman in 2003, this year we began a far-reaching update of the Safeguard Policies to integrate sustainability further into the Corporation's business. With current policies serving as a baseline for minimum standards, the update will articulate our policy objectives and the performance we expect of our clients on social and environmental sustainability. It will also address key policy gaps on labor standards and health and safety. IFC is also reviewing its Policy on Disclosure of Information. Since the last update in 1998, procedural changes have taken place within IFC, and external expectations on transparency of publicly owned institutions have changed. In recognition that transparency builds trust, promotes efficiency and accountability, and enhances impact on development, the review is addressing IFC's responsibilities for disclosure. It is also defining areas where we expect clients to be transparent about their activities, particularly on environmental and social aspects of projects. The processes for these major policy updates are designed to ensure broad engagement from the full range of IFC stakeholders--clients, financial partners, governments, local communities, and civil society--on a continuing basis. The revised policies will be presented to the Corporation's management and Board in FY05. Information on both reviews is available online at www.ifc.org/policyreview. GRIFFIN 14 IFC 2004 ANNUAL REPORT JOHN IFC's Sustainability Framework IFC has designed a framework to facilitate assessments of projects for their contributions to sustainable development, in addition to its standard evaluation framework for investment projects (see section on Operations Evaluation Group, p. 65). The Sustainability Framework measures whether expected project performance goes significantly beyond compliance with IFC's safeguard policies, associated guidelines, and economic and governance expectations to create benefits in the following areas: · Economic development · Management commitment and governance - Environmental management, social development commitment, and capacity - Corporate governance - Accountability and transparency · Environment - Eco-efficiency and environmental footprint - Environmental performance of products and services · Socioeconomic development - Local economic growth and partnerships - Community development - Health, safety, and welfare of the labor force IFC is revising the framework as part of an integrated policy update (see above). Sustainability Training for IFC Staff Corporate Governance Reflecting the integral role of sustainability in IFC's business, during FY04 the Sustainability Learning Good corporate governance--effective structures and processes for direction and Program trained 230 IFC staff, using a mixture control of companies--is essential to long-term private sector growth in developing of in-depth cases and interaction with clients, countries. IFC incorporates governance analysis in its investment work and helps lead industry experts, NGOs, and others. Special topics global dialogue on corporate governance in emerging markets. Our corporate governance included the business case for helping client unit has developed a Web-based methodology to provide staff with tools to evaluate companies combat HIV/AIDS. This year 300 staff the governance of potential clients and help improve their practices. The curriculum were also trained in corporate governance. has also been used by the Netherlands Development Finance Company and the Inter-American Investment Corporation, and in June 2004, IFC shared the methodology with other bilateral and multilateral financial institutions at the World Bank Group's offices in Paris. IFC staff provide guidance to regulators, stock markets, members of boards, and other corporate governance advocates, as well as to client companies. IFC has cosponsored the Latin America Corporate Governance Roundtable with OECD since 2000 and provides support to roundtables in Asia, Eurasia, and Russia. IFC houses the secretariat for the Private Sector Advisory Group of the Global Corporate Governance Forum, a joint effort of the World Bank Group, OECD, and donor countries to improve policy and practices in emerging markets. At the local level, IFC staff manage the corporate governance work of the Private Enterprise Partnership in the former Soviet Union and of the China Project Development Facility. In addition to firms served by these projects, this year IFC staff helped more than 40 companies and financial institutions review and enhance their corporate governance practices. GUNAWAN 16 IFC 2004 ANNUAL REPORT MICHAEL IFC Against AIDS In many regions, HIV/AIDS is as much a business issue as it is a health and humanitarian concern. Workforces and consumers alike are being ravaged by the virus, with economic harm likely to extend into future generations. The IFC Against AIDS program works with client companies to accelerate their involvement in fighting HIV/AIDS. The program helps IFC clients analyze the risks the disease presents to their business. It also provides guidance on design and implementation of programs including education, prevention, and care that target the workforce and surrounding communities. This year, IFC Against AIDS provided guidance to a beverage company in Nigeria, a forestry company in South Africa, a microfinance bank in Kenya, and the Kenyan Railways company. A cellular telephone company operating in 13 African countries received guidance to refine its HIV policy and develop an AIDS action plan, including anti-retroviral treatment for employees and dependents (see also the Client Leadership Award, p. 13). The program provided customized tools to support HIV/AIDS workplace policies and community programs to a mining company in Madagascar, a tea company in Kenya, a cotton manufacturer in Zambia, and an electricity company in Jamaica. To address the special challenges small and medium enterprises face, IFC Against AIDS also launched a training program for African SMEs, in cooperation with the Africa Project Development Facility. For more information, see www.ifc.org/ifcagainstaids. GRIFFIN JOHN The Equator Principles Twenty-four financial institutions have now announced their commitment to the Equator Principles, a voluntary set of environmental and social guidelines for project finance lending, since their launch in June 2003. Based on IFC's environmental and social policies and procedures, including the Safeguard Policies, the principles have become the new market standard, transforming project finance on a global scale. The Equator banks are estimated to have arranged about 80 percent of worldwide project finance lending in calendar 2003, and more banks are expected to adopt the principles in the coming months. Adopters now include an emerging market bank, Unibanco of Brazil, and Eksport Kredit Fonden, Denmark's export credit agency. For sponsors raising funds in the project finance market, successful loan syndications are increasingly likely to depend on compliance with the principles. With our policies as the foundation of the principles, IFC has a stake in ensuring that standards are well understood and implemented within each bank. IFC has developed a training program for Equator bank professionals and to date has trained almost 400 staff from these banks. Further tools are planned for the next phase of implementation as the banks gain experience. More than a declaration of intent, the Equator Principles establish a framework of specific procedures and standards for the banks as they engage with borrowers and each other. Each adopting institution is responsible for implementation, but IFC shares a long-term commitment to the success of the principles. (For a list of adopting institutions, see p. 119.) IFC 2004 ANNUAL REPORT 17 Extractive Industries Review The World Bank Group began an Extractive Innovative Solutions for Sustainable Business Industries Review in 2000 to determine how effective its investments in the oil, gas, and mining industries have been in advancing Through commercialization of new technologies, innovative approaches to financing, and sustainable development and to help define the experience few organizations can match, IFC is showing that attention to environmental future role of such investments, which represent and social issues is good business. In addition to the expertise provided to our core about 2 percent of annual lending commitments. investments and highlighted in our regional reports, we continue to innovate in areas The review consisted of two evaluations by where the business case for sustainability is evolving. groups operating independently of Bank Group Examples of IFC's work in promoting sustainable business follow. For more management: one by the operations evaluation information, see the 2004 Sustainability Report. units of the World Bank Group and the Compliance Advisor/Ombudsman for IFC and MAXIMIZING THE ENVIRONMENTAL BENEFITS OF OUR INVESTMENTS MIGA, and the other through a stakeholders' IFC provides technical assistance and financing to help client companies reengineer their consultation process. production processes. Cleaner production reduces use of resources, increases efficiency, The evaluations found that Bank Group and minimizes waste: it increases profitability while reducing environmental impact. IFC involvement in extractive projects has resulted in also works through financial intermediaries to build commercial lending and leasing positive contributions to sustainable development, but not uniformly. The stakeholder report, in businesses that provide capital for energy efficiency investments. The Corporation's particular, suggested reforms in several areas, commitments to energy efficiency projects have exceeded $90 million since 1990. including a greater emphasis on renewable In FY04, we provided advice and, in some cases, financial support from donors to energy sources, more transparent reporting of companies on energy efficiency and cleaner production. For example, we helped a revenue figures, increased consultation with Chinese fiberboard producer reduce its trimming allowances, increasing its salable local stakeholders, and fuller disclosure of output by 6 percent. While consumption of raw material and energy remained the project information. same, the change is expected to increase the company's annual profits by 20 percent. Bank Group management presented its response to the review to its Board in August 2004. The response proposed to continue engagement in the sector while adopting measures to increase developmental impact. This reflects strong support among developing countries for the Bank Group's role in ensuring positive developmental results from extractive industries, including the use of environmental, social, and governance safeguards. The proposed measures included: · using explicit good governance indicators in assessing and designing projects · designing projects to ensure local communities and poorer people benefit · ensuring broad community support for projects before an investment decision · committing to at least 20 percent average growth annually in energy efficiency and renewable energy portfolio commitments, over the next five years · reducing the risk that extractive industry revenues will be misused by requiring disclosure of revenue figures and the key terms of relevant contracts for all large projects that benefit from Bank Group support · increasing investment in natural gas projects The Board agreed with management on the steps necessary to move forward and will be monitoring implementation of these measures, along with management. VESTERGAARD 18 IFC 2004 ANNUAL REPORT NIELS The Philippines: Preserving Habitats through Innovative Investment IFC supports conservation of natural habitats in sectors that have an impact on biodiversity. Our efforts include promotion of organic agriculture and ecotourism. This year, we provided a $1.6 million grant from the Global Environment Facility for a private sector initiative that aims to conserve more than 90,000 hectares of sensitive marine and coastal habitat in the Philippines. The funding will be provided to the El Nido Foundation, a nonprofit organization that will collaborate with local communities to mitigate threats to the marine ecosystem, including illegal fishing, overfishing, and sedimentation. The financial sustainability of this initiative will stem from the Asian Conservation Company, an innovative private equity investment holding company. It purchases stakes in Filipino firms that are located in areas of high biodiversity and that depend on marine resources for their long-term sustainability. ACC has acquired majority control of the El Nido Resorts and will ensure that some of the revenues sustain the foundation's conservation work, thus providing a financial return for investors while helping preserve critical ecosystems. The project combines the skills of professional investment managers with the biodiversity expertise RESORTS of conservation organizations. It should help preserve extensive coral reefs, mangroves, sea grass NIDO EL beds, and tropical forest in a reserve that supports the livelihood of 19 local communities. OF COURTESY IFC also provides financing and leverages donor funds to support renewable energy and other sustainable energy projects, especially those that commercialize new technologies. Total IFC commitments to renewable energy projects have exceeded $765 million since 1990. In fiscal 2004, IFC supported a project that demonstrates combined use of hydroelectric and solar energy for the first time anywhere in the world. The third-largest electric utility in the Philippines, CEPALCO had considered increasing its fossil fuel generation to meet growing demand. Instead, IFC provided a $4 million grant from the Global Environment Facility to help structure an innovative solar photovoltaic project. A new plant on the island of Mindanao will enhance the capacity of CEPALCO's existing hydroelectric facility; the 950-kilowatt project will be the largest distributed, grid-connected photovoltaic installation in a developing country. The project is expected to demonstrate the commercial viability of similar photovoltaic installations for cleaner, more sustainable energy in many parts of the world. Socially Responsible Investment IFC'S ENVIRONMENTAL AND SOCIAL FACILITIES This year, IFC published Toward Sustainable and The Sustainable Business Assistance Program makes highly selective, strategic interventions Responsible Investment in Emerging Markets, in key sectors of the market where demonstrating sustainable business practices offers a report on socially responsible investment in significant benefits. The program consists of three donor-supported facilities: publicly listed companies. It found that in a The Corporate Citizenship Facility helps IFC's client companies improve the worldwide market of $2.7 trillion, less than environmental and social impacts of their business activities. In FY04, CCF committed 0.1 percent of SRI is invested in emerging $690,000 for 31 projects, with a focus on helping clients design and implement markets. The report recommended ways to effective strategies for engaging stakeholders. overcome barriers and increase the flow of The Environmental Opportunities Facility finances innovative projects that promote SRI capital to developing countries. local environmental benefits. In FY04, it made one venture capital investment and six technical assistance grants, with a focus on cleaner production and energy efficiency projects in Asia and Latin America. The Sustainable Financial Markets Facility enhances the environmental and social impact of financial intermediaries. During FY04, it provided environmental risk management training to staff from some 100 banks, investment funds, and other financial institutions in developing countries. With a global market for carbon emissions credits set in motion by the Kyoto Protocol, IFC has collaborated with the Dutch government in the IFC-Netherlands Carbon Facility, which purchases carbon credits that reduce emissions of greenhouse gases from projects in Africa, Asia, and Latin America. A similar facility for purchasing credits from projects in Central and Eastern Europe is being developed with the Netherlands and will be comanaged by IFC and the World Bank. IFC also makes funding available from the Global Environment Facility for innovative projects with global environmental benefits, including preservation of biodiversity. IFC 2004 ANNUAL REPORT 19 Report on Operations and Regions PAGE 30 Investment Operations 22 IFC Regional Technical Assistance 26 Reports Latin America and the Caribbean 52 South Asia 38 East Asia and the Pacific 34 Middle East and North Africa 58 Europe Sub-Saharan Africa 30 and Central Asia 44 PHOTO, LEFT: CAUCEDO Puerto Caucedo, an IFC client PUERTO OF in the Dominican Republic. COURTESY IFC 2004 ANNUAL REPORT 21 O P E R AT I O N S Investment Operations In FY 2004, almost 64 percent of IFC's new investments were in our five priority sectors: the financial industry, infrastructure, information technology, small and medium enterprises, and health and education. The share of our investments in frontier countries, either high risk or low income, was 22 percent. Overview IFC signed investment commitments of $5.63 billion in FY04, including $4.75 billion for its own account, compared with $5.03 billion in IFC commitments for FY03, of which $3.85 billion were for its own account. IFC provides a range of products and services for clients, including loans, equity, quasi-equity, structured finance, and risk management products that are funded through IFC's own financial resources. It also syndicates participations in its loans to international financial institutions. Of the investment commitments IFC signed for its own account, $3.40 billion were for loan POLLETT agreements, $787 million were for equity investments, $339 million were for quasi- equity investments, $171 million were for structured finance products (including TED guarantees), and $60 million were for risk management products. Based on the total project costs of our FY04 projects, each $1 in IFC commitments for our own account resulted in an additional $5.14 in funding from other sources. We committed a total of 217 projects in 65 countries, compared to 204 projects in 64 countries in FY03. Our investment portfolio at June 30, 2004, included $17.9 billion for IFC's own account and $5.5 billion in syndicated loans held for others. We added 171 companies to our portfolio this year, and 179 companies left the portfolio. Five-year data on investment commitments and disbursements appear on the opposite page. Investment projects are detailed in the regional sections and listed in our project CAINES tables beginning on p. 76. RICHARD Syndication and Resource Mobilization IFC continues to play a leading role in providing access to financing from the private sector. Through its B-loan program, the Corporation maintains an active business relationship with leading commercial banks around the world, enabling it to mobilize additional resources for its clients. Signings of new B-loans in FY04 totaled $880 million, compared with $1.18 billion in FY03. IFC's committed syndicated loan portfolio as of June 30, 2004, was $5.5 billion in 204 projects. Of these, 45.4 percent were in Latin America, 26.0 percent in Asia, CHIU 12.8 percent in Europe and Central Asia, and the balance in the Middle East and COPELAND North Africa and Sub-Saharan Africa. ANNE IFC is continually exploring new ways to increase its leverage with capital markets, both through the creative use of existing tools and through the development of new financing techniques, including securitization. 22 IFC 2004 ANNUAL REPORT IFC OPERATIONS BALANCE SHEET HIGHLIGHTS (millions of U.S. dollars) (millions of U.S. dollars) FY00 FY01 FY02 FY03 FY04 FY00 FY01 FY02 FY03 FY04 OPERATIONS ASSETS Investment commitments Liquid assets, excluding derivatives 13,740 14,581 16,924 17,004 18,397 Number of projects1 205 199 204 204 217 Investments 10,940 10,909 10,734 12,002 12,312 Number of countries 78 72 74 64 65 Reserve against losses -1,973 -2,213 -2,771 -2,625 -2,033 Net investments 8,967 8,696 7,963 9,377 10,279 Total commitments signed2 3,867 3,931 3,608 5,033 5,633 Derivative assets 14,224 1,143 1,077 1,734 1,092 For IFC's own account2 2,337 2,732 3,090 3,852 4,753 Receivables and other assets 1,788 1,750 1,775 3,428 2,593 Held for others 1,530 1,199 518 1,181 880 Total assets 38,719 26,170 27,739 31,543 32,361 Investment disbursements Total financing disbursed 3,307 2,370 2,072 4,468 4,115 LIABILITIES For IFC's own account 2,210 1,535 1,498 2,959 3,152 Borrowings outstanding 14,919 15,457 16,581 17,315 16,254 Held for others 1,097 835 574 1,509 964 Derivative liabilities 14,990 1,768 1,576 1,264 1,549 Payables and other liabilities 3,077 2,850 3,278 6,175 6,776 Committed portfolio3 Total liabilities 32,986 20,075 21,435 24,754 24,579 Number of firms 1,333 1,378 1,402 1,378 1,337 CAPITAL Total committed portfolio2 22,168 21,851 21,569 23,379 23,453 Capital stock 2,358 2,360 2,360 2,360 2,361 For IFC's own account2 13,962 14,321 15,049 16,777 17,938 Retained earnings 3,378 3,723 3,938 4,425 5,418 Held for others 8,206 7,530 6,519 6,602 5,515 Other -3 12 6 4 3 Some data from previous fiscal years have been revised. Total capital 5,733 6,095 6,304 6,789 7,782 1. Includes first commitment to projects in the fiscal year. Projects involving financing to more than one company are counted as one commitment. Note: As a result of the adoption of new accounting standards on derivatives and hedging in FY01, 2. Includes structured finance and risk management products. with respect to investments, borrowings, and derivative assets and liabilities, the balance sheets from 3. Total committed portfolio and held for others include securitized loans. FY01 onward are not comparable with prior fiscal-year-end balance sheets. INCOME STATEMENT HIGHLIGHTS (millions of U.S. dollars) FY00 FY01 FY02 FY03 FY04 Interest and financial fees from loans 694 732* 547* 477 518 Interest from time deposits and securities 634 773* 493* 318 278 Charges on borrowings -812 -961 -438 -226 -141 Net interest income 516 544 602 569 655 Net gains and losses on trading activities -38 87 31 157 -104 Income from equity investments 262 222 428 195 584 Release of/provision for losses on investments and guarantees -215 -402 -657 -98 177 Net noninterest expense -145 -210 -243 -295 -330 Operating income 380 241 161 528 982 Net gains and losses on financial instruments -- 11 54 -41 11 Cumulative effect of change in accounting principle -- 93 -- -- -- Net income 380 345 215 487 993 *Reclassified to conform to FY04 presentation. IFC 2004 ANNUAL REPORT 23 Client Risk Management Products IFC provides currency, interest rate, and commodity price hedging products to clients in emerging markets, who usually cannot access them because of credit or country risk. Through its Client Risk Management program, IFC combines its experience in risk management with its traditional role in credit intermediation. Because we can accept our clients' long-term credit risk, IFC can intermediate between them and derivatives markets. Clients who hedge using risk management products protect their financial For a full description of IFC positions. The transactions also improve the quality of IFC's investment portfolio. In the 13 years since the program was established, IFC has committed 76 risk products and services, see p. 74. management projects in 41 countries. The transactions have hedged a notional amount of over $2.5 billion (the potential exposure or future risk of these transactions is a A list of FY04 project fraction of the notional amount). In FY04, the Corporation committed 10 risk management transactions. These commitments begins on p. 76. include a partial credit enhancement for a long-term U.S. dollar­Japanese yen currency swap, enabling Brazil's Unibanco to securitize its future dollar remittance flows, tap the Japanese institutional investor market, and hedge the notes into dollars. In Georgia, IFC executed the country's first swap transaction. We also executed long-term currency and interest rate hedging transactions with firms in Brazil, India, and Mexico. Risk management products are offered to IFC customers solely for hedging purposes and not for speculation. IFC hedges its own market risk on these transactions and monitors exposure on an ongoing basis. Structured Finance Products IFC increasingly offers structured finance solutions to clients, including partial credit guarantees and securitizations. These tools are part of IFC's broader strategy to help build domestic capital markets and expand the local currency financing options for clients in developing countries. The bond issues that result enable clients to raise a significantly larger amount of capital than that represented by IFC's own exposure. By partially guaranteeing the credit risk in financing transactions, we are able not only to lengthen the tenor of the financing, but also to broaden the investor base. In FY04, IFC invested $170.5 million and mobilized a further $528.1 million through PRODEM OF 13 structured finance transactions. These include a securitization of nonperforming mortgage-backed securities in Colombia, the first of its kind in the country and in COURTESY Latin America. Also in Colombia, IFC provided local currency credit enhancement to support the issuance of residential mortgage-backed securities by the first secondary market company in the country. In South Africa, IFC partially guaranteed the country's first structured municipal bond. IFC made its first investment in Argentina's domestic financial markets since the economic crisis, a securitization of preshipment loans to exporters. IFC also partially guaranteed a cross-currency swap with Unibanco in Brazil (see section on risk management, above). GIRARD 24 IFC 2004 ANNUAL REPORT GREG The Municipal Fund IFC and the World Bank have established a pilot program, the Municipal Fund, to make investments in municipalities, municipal entities, and other tiers of local government, without taking sovereign guarantees. This move reflects a market shift, in which national governments have increasingly devolved the provision of essential infrastructure services onto municipalities and other subsovereign entities, which often lack access to financing and the technical expertise they need to fulfill this new responsibility successfully. The Municipal Fund helps address this need by expanding municipal access to private capital markets and arranging technical support. Following last year's groundbreaking investment in a municipal water company in Mexico, this year the Municipal Fund collaborated with the Development Bank of Southern Africa to provide a partial credit guarantee to the city of Johannesburg for a bond issue in the South African capital market that will finance high-priority infrastructure investments in water, energy, and roads. The Municipal Fund is exploring other investments in emerging markets and expects the pace of business to accelerate in the coming year. CARLOS MADRID IFC'S LARGEST COUNTRY EXPOSURES HOUSING FINANCE: A GROWTH SECTOR FOR IFC Portfolio for IFC's own account as of June 30, 2004 (millions of U.S. dollars) Brazil 1,316 166 This year saw significant growth in IFC's Russian Federation 1,188 9 housing finance investments, projects that Number of housing finance projects India 1,136 bring a wide range of economic and social benefits as they broaden home ownership. Mexico 1,068 5 We made investments in this sector in all 4 Turkey 885 3 developing regions, with the highest volume 74 Argentina 817 65 in Latin America and the Caribbean. China 779 28 Thailand 468 Total housing finance commitments (millions of U.S. dollars) Indonesia 467 FY01 FY02 FY03 FY04 Philippines 435 IFC 2004 ANNUAL REPORT 25 O P E R AT I O N S Strengthening Business through Technical Assistance IFC supports private sector development both by investing and by providing technical assistance and advisory services that strengthen businesses. IFC's technical assistance helps strengthen small and medium enterprises, financial institutions, and large companies--and the government entities involved in the private sector--in areas ranging from business capacity to management practices and strategies for growth. Much of our technical assistance work is conducted through facilities managed by IFC but funded through partnerships with donor governments and other multilateral For a list of FY04 technical institutions. This is a fast-growing part of our business: in fiscal 2004 nearly one-third assistance and advisory projects, of IFC's staff worked in 24 donor-funded operations, at headquarters and in the field. see p. 92. Donor-funded operations accounted for about $90 million in expenditures during FY04, including more than $30 million in funding from IFC. This year, IFC aligned its network of SME facilities with its regional departments, reflecting the growing importance of providing technical assistance and advice in all regions. The Corporation is also working to standardize the procedures, data recording, partner relations, and monitoring across all its donor-funded operations. Donor-Supported Technical Assistance The Technical Assistance Trust Funds program finances feasibility studies, sector studies, capacity building, advisory activities on privatization, policies to strengthen the business environment in developing countries, and assessments of environmental and social impacts of investment projects. Selected projects that were supported by TATF are described in the regional sections of this report. This year, TATF-funded projects included development of private credit bureau NHIEN programs in various countries that extend credit to small businesses, development of an SME management training model, and technical assistance for new technologies HONG and management approaches to attract investment in the nonwood pulp and paper THI TRAN sector. Successful projects funded through TATF sometimes lead to ongoing technical assistance programs. The Hungary Energy Efficiency Credit Program, for example, not only resulted in investments by an Austrian bank but also has been replicated in other countries, including soon in Russia. Through FY04, the donor community provided cumulative contributions of $188 million to support the TATF program, which includes a budgeting allocation from IFC's own resources totaling $14.4 million to date. Since inception of the program in 1988, donors have approved more than 1,380 technical assistance projects. Other funds provided by donors assist small and medium enterprise project development facilities, the Sustainable Business Assistance Program focusing on environmental and social issues, IFC's new technical assistance initiatives in the Balkans and the Middle East, and some work carried out by the Foreign Investment Advisory Service, IFC Advisory Services, and the Private Enterprise Partnership. Cumulative contributions to all IFC- managed technical assistance programs reached $931 million through FY04. 26 IFC 2004 ANNUAL REPORT BAHODIR TOSHMATOV Small and Medium Enterprises Small and medium enterprises--companies with 10 to 300 employees and annual sales Private Enterprise Partnership of $100,000 to $15 million--are the lifeblood of developing economies, especially The Private Enterprise Partnership is IFC's technical those that attract little foreign direct investment. Along with microenterprises--firms assistance program in the former Soviet Union. with fewer than 10 employees and less than $100,000 turnover--they are a key source of employment and a critical engine of economic growth and poverty reduction. The partnership is funded jointly by IFC, which Strengthening smaller firms is a strategic priority for IFC. Efforts center on business- has allocated an annual budget of $4.6 million enabling environments, access to capital, access to business development services, through FY06, and donor governments, which and links to large-scale investment projects. The primary tools include a network of have provided a total of $48.5 million from the multidonor SME facilities; the pilots and partnerships program funded through our partnership's founding in 2000 through the end SME Capacity Building Facility (CBF); and the new IFC-IDA pilot program for of FY04. The partnership implements programs micro, small, and medium enterprise development in Sub-Saharan Africa. to build financial markets, link local companies Rather than provide financing themselves, the SME facilities tailor products and into supply and distribution chains of larger services to meet local demand and seek to recover costs by charging appropriate fees companies, improve corporate governance to clients. The CBF has funded 117 pilots and partnerships in four years of operations. practices, and strengthen business support To complement its work with SMEs--most of which are government-registered, services and the regulatory environment for tax-paying businesses in the formal sector--IFC this year started laying the groundwork small enterprises. This serves the partnership's for a new initiative to strengthen grassroots business organizations that create jobs in the objective to build and strengthen the private poorest, most marginalized communities. This segment includes abused women, people sector and economic growth in these countries. with HIV/AIDS, landmine victims, subsistence farmers, and others who can rarely enter The partnership's technical assistance has facilitated the mainstream economy. Whether for-profit or nonprofit, grassroots organizations do $781 million in investment, including $68 million much to raise incomes and economic opportunity for these people. These organizations from IFC. Its success has provided a model for a can grow and become stronger and more sustainable with ongoing support from IFC's new partnership that IFC is spearheading in the specialists in business development. Middle East (see box, p. 61). IFC 2004 ANNUAL REPORT 27 Investment Climate Improving the climate for private sector investment and business development is a priority for IFC's work in developing countries. Many of the Corporation's technical assistance programs address investment climate issues, and our loans, equity investments, and innovative financial products are an effective catalyst for private sector funding from other sources. Reflecting the collaborative nature of this work, a joint vice presidency for Private Sector Development coordinates investment climate efforts for both IFC and the World Bank. NGUYEN The publication of the first Doing Business report, with comparative data on countries' HOA business regulations, was the key development of fiscal 2004 (see box). Doing Business complements the Bank Group's Investment Climate Surveys, which have been launched with private firms in 52 countries as of FY04, and related Investment Climate Assessments IFC Facilities Working with SMEs that use survey data to identify policy, regulatory, and institutional constraints to private Africa Project Development Facility investment and firms' performance. The Bank Group also works with governments to Sub-Saharan Africa increase foreign direct investment, assists with privatization of state-owned enterprises, China Project Development Facility and supports improvements in corporate governance. Sichuan Province, China Findings from Investment Climate Assessments and Doing Business are informing Bank Group approaches and the countries' own poverty reduction strategies. IDA has Latin America and the Caribbean SME Facility adopted policy reform targets based on Doing Business indicators in its lending process, Bolivia, Honduras, Nicaragua, Peru and many national and international agencies are using the indicators to help determine Mekong Private Sector Development Facility how to allocate aid or monitor progress in specific countries. Cambodia, Laos, Vietnam North Africa Enterprise Development Algeria, Egypt, Morocco Foreign Investment Advisory Service Pacific Enterprise Development Facility A joint service of IFC and the World Bank, the Foreign Investment Advisory Service helps Pacific islands developing country governments design initiatives to improve the business environment Private Enterprise Partnership and attract foreign direct investment. FIAS advises on laws, institutions, and strategies to Armenia, Azerbaijan, Belarus, Georgia, help countries increase the amount and enhance the benefits of FDI. Founded in 1985, Kazakhstan, Kyrgyz Republic, Mongolia, FIAS has assisted more than 130 countries, many on a continuing basis over the years. Russia, Tajikistan, Ukraine, Uzbekistan Increasingly, FIAS is coordinating its efforts with IFC's small business facilities. Private Enterprise Partnership for the Middle East Afghanistan, Iraq, West Bank and Gaza, Yemen Program for Eastern Indonesia SME Assistance Financial Markets Advisory Services Eastern islands of Indonesia IFC's Financial Markets Advisory Services focuses on improving access to finance for smaller SouthAsia Enterprise Development Facility businesses, strengthening core operations of banks to improve their quality and sustainability, Bangladesh, Bhutan, northeast India, Nepal and helping countries diversify their financial sector through nonbank sources of local currency Southeast Europe Enterprise Development finance. Many of its projects, which are funded by donors and IFC, address more than one of Albania, Bosnia and Herzegovina, Kosovo, these objectives. FYR Macedonia, Serbia and Montenegro The program arranged funding for 49 new projects worth nearly $23 million during FY04, and its portfolio totals 86 projects in 60 countries worth more than $41 million. About 75 percent of the work was in frontier market countries. Southern Europe and Central Asia received the largest shares by region. About two-thirds of the portfolio supports capacity building in financial institutions where IFC has existing or planned investments. Almost 70 percent of FMAS activity involves strengthening finance for micro, small, and medium enterprises. IFC is helping establish microfinance banks in several countries and supporting the Global Credit Bureau Program, which helps consumers and micro and small businesses. About 35 percent of FMAS activity involves nonbank financial services, including leasing and housing finance. Almost 28 percent of the portfolio aims to strengthen core banking operations. A new initiative is also underway to create regional strategic programs for financial sector technical assistance, with IFC's project development facilities more fully integrated into the design and delivery of these programs. IFC also enhances the environmental and social impact of financial intermediaries through the Sustainable Financial Markets Facility (see p. 19). 28 IFC 2004 ANNUAL REPORT How Red Tape Stifles Businesses Why does it take 210 days to register a business in Angola, but only four in Puerto Rico? Why does the process cost five times per capita income in Cambodia but less than 1 percent in Canada? Doing Business in 2004: Understanding Regulation, a report published this year by IFC and the World Bank, offers groundbreaking research that makes a complex issue accessible to the general public. It provides microeconomic data from 133 countries, allowing comparisons on five key indicators of the business climate: starting a company, hiring and firing workers, enforcing a contract, obtaining credit, and closing a business. Doing Business finds that poor countries regulate business in ways that are associated with less efficient government, more corruption, higher unemployment, and less investment. It also maintains that best practices are transferable. What works in industrial countries can work in developing countries, and innovations from developing countries can be broadly replicated. The report has garnered worldwide attention and is helping aid agencies and multilateral institutions determine how to allocate funds and monitor progress. Twelve countries have undertaken new regulatory reforms in the last year; countries as varied as Ethiopia, Morocco, and Turkey have reduced the time and cost of starting a business by more than a third as a result of this newly available data. Planned as an annual publication, Doing Business will add indicators on property titling, corporate governance, and bureaucratic hassles in its 2005 report and indicators on taxes, trade, and law and order in 2006. A database of indicators is online at http://rru.worldbank.org/doingbusiness. FIAS completed 60 advisory projects in FY04, with the largest programs in Europe and Central Asia (17) and Asia and the Pacific (16), of which five were in the Pacific. First-time clients included Botswana, Grenada, Malta, Seychelles, and Syria. This year, FIAS initiated a multiphase approach to implementation of its recommendations to streamline administrative procedures, particularly in postconflict countries. As part of its long-term program in Turkey, FIAS set up an Investment Advisory Council composed of high-profile international executives to help strengthen the country's investment climate. FIAS also integrated gender issues into its administrative barriers project in Kenya and sponsored capacity building programs for businesswomen in Iraq (see box, p. 60). IFC Advisory Services IFC Advisory Services advises governments and state-owned enterprises on the privatization of state-owned infrastructure assets and other transactions that promote sustainable public-private partnerships, especially in the infrastructure and social sectors. Since 1996 the group has closed 16 such transactions worldwide, generating over $3.2 billion in sales proceeds or concession fees. In FY04, the group worked on 15 transactions in health, mining, power, water and sanitation, solid waste, irrigation, ODEBRECHT and several sectors of transportation: airlines, airports, ports, railways, and urban transit. OF Advisory staff draw on the World Bank Group's understanding of development COURTESY issues to ensure that private infrastructure arrangements meet government goals-- while still being bankable. IFC also puts a premium on transparency in transaction design and implementation and is committed to social and environmental sustainability. Private investors and lenders are increasingly aware of the risks associated with infrastructure, and bringing mandates to successful closure has become more challenging. Advisory Services has responded by changing transaction design to integrate more fully policy advice and implementation, as well as public and private financing. It is also working closely with other parts of IFC and in many cases becoming involved earlier in project development. With support from the United Kingdom's Department for International Development and the Netherlands' Ministry of Foreign Affairs, it has put in place a multidonor trust fund, DevCo Advisory, to support this work. DevCo cofunds analysis of opportunities and the implementation of privatization transactions in frontier countries. IFC 2004 ANNUAL REPORT 29 I F C R E G I O N A L R E P O R T S Sub-Saharan Africa A Renewed Commitment ANGOLA LESOTHO A challenging external environment, poor weather, and homegrown problems held BENIN LIBERIA real growth in Sub-Saharan Africa to 2.4 percent for calendar 2003, down from BOTSWANA MADAGASCAR 3 percent for the two previous years. This level of growth does not match rates in BURKINA FASO MALAWI the late 1990s and remains significantly below the 7 percent needed to reach the BURUNDI MALI Millennium Development Goals. Development of the region continues to face CAMEROON MAURITANIA immense domestic challenges from HIV/AIDS, low savings and investment, poor CAPE VERDE MAURITIUS infrastructure, conflict, shortages of human capital, and the negative perceptions CENTRAL AFRICAN MOZAMBIQUE of international investors. IFC's committed investments rebounded from last year's REPUBLIC NAMIBIA depressed levels to $405 million for IFC's account, including some large projects CHAD NIGER that had been in development for several years. COMOROS NIGERIA Recognizing the need to address Africa's development more comprehensively, DEMOCRATIC REPUBLIC RWANDA OF CONGO IFC initiated a new strategy for the region in FY04. It expands our programs for the SENEGAL REPUBLIC OF CONGO smaller businesses that constitute much of Africa's private sector. For larger projects, SEYCHELLES CÔTE D'IVOIRE the strategy targets more support at the formative stages of project development, SIERRA LEONE DJIBOUTI thus expanding IFC's role significantly beyond provision of finance. To improve the SOMALIA EQUATORIAL GUINEA overall investment climate, it focuses IFC's global knowledge and local experience on SOUTH AFRICA ERITREA removing the investment constraints that governments and the private sector face. SUDAN ETHIOPIA The Corporation is also expanding the IFC Against AIDS program, which helps SWAZILAND GABON the private sector respond to the economic and social challenges of HIV/AIDS, TANZANIA THE GAMBIA particularly in Africa (see p. 17). TOGO GHANA All but the largest African firms lack the resources and capacity to sponsor projects UGANDA GUINEA that, in project size and capitalization, meet IFC's norms for direct financing. ZAMBIA GUINEA-BISSAU To reach the African private sector and respond to its needs, IFC is establishing ZIMBABWE KENYA a different product mix, involving both investment and noninvestment services. IFC is working with the World Bank's International Development Association to launch comprehensive programs targeted to micro, small, and medium enterprises in 10 countries. The proposed MSME Program aims to reduce constraints to growth and competitiveness by increasing access to finance, helping firms find new markets IFC'S LARGEST COUNTRY EXPOSURES by building their technical capacity, and reducing regulation to enable more private Portfolio for IFC's own account as of June 30, 2004 sector participation. In FY04 the first new IDA credits to support the program (millions of U.S. dollars) were introduced in Nigeria. A key resource for capacity building is IFC's Africa Project Development Facility. Nigeria 290 To make it more effective in meeting demand, IFC is increasing the scale of APDF's operations under a new and more flexible funding model. In addition, IFC is South Africa 225 piloting a new model for delivering its services to smaller businesses through SME Solutions Centers. Each center will be an integrated "storefront" of services and Mozambique 147 financing for SMEs, including short- and long-term finance, capacity building, access Cameroon 147 to information, and approaches to improving the business-enabling environment. The first SME Solution Center opened this year in Madagascar. To help develop Kenya 127 local expertise on environmentally and socially responsible finance, IFC made a grant to the African Institute of Corporate Citizenship to create the Center for Sustainability Finance, which is working directly with IFC clients, including African Bank, to implement strategies and management systems. 30 IFC 2004 ANNUAL REPORT JOHN GRIFFIN PROJECT FINANCING AND PORTFOLIO COMMITMENTS (millions of U.S. dollars) (millions of U.S. dollars) FY03 FY04** 405 Financing committed for IFC's account 140 405 Loans 91 189 Equity and quasi-equity* 29 135 252 Structured finance and risk management 20 82 Loan syndications signed 26 1 Financing for IFC's own account TOTAL COMMITMENTS SIGNED 167 407 140 Syndications and underwriting Committed portfolio for IFC's account 1,442 1,603 26 Loans 973 1,010 0 1 Equity 409 455 Structured finance and risk management 60 138 FY02 FY03 FY04 Committed portfolio held for others 254 226 PROJECT COMMITMENTS AND COUNTRIES (loan participations) FY02 FY03 FY04 TOTAL COMMITTED PORTFOLIO 1,696 1,829 Number of projects 37 21 25 * Includes loan and equity-type, quasi-equity investments. Number of countries 23 13 12 ** Includes regional share of LNM Holdings investment, which is officially classified as a global project. Note: All numbers reflect rounding. IFC 2004 ANNUAL REPORT 31 For larger investment projects, IFC adds value by engaging farther upstream in project development. This also means working with governments to improve the business climate. In Mozambique and its neighbors, IFC is working through the South East Africa Tourism Investment Program to help develop a strategic and collaborative approach to private sector investment in a sustainable and responsible tourism industry. While IFC is initially providing technical assistance, our support will include financing for key projects as the program progresses. We are also promoting more interaction between public and private sectors in Cameroon and have worked with governments in Ghana, Kenya, and Senegal to establish an appropriate regulatory framework for key private infrastructure investments. IFC is concentrating similar efforts on potential new projects in infrastructure, CAINES the financial sector, and competitive export industries. IFC made a $100 million RICHARD investment in MTN Nigeria, helping serve one of the world's fastest-growing cellular markets (see box). Also in telecommunications, we made a repeat investment in Celtel, the winner of IFC's first Client Leadership Award (see p. 13). IFC continued Africa: Broader Markets for to support other successful existing clients, with new investments in a major soda Agricultural Commodities ash producer in Kenya, a flour mill in Mozambique, a hotel operator in Mali, and This year IFC made an equity investment of $15 million a textile exporter in Madagascar. IFC also supported the sustainable development in Olam, a supply chain manager of food and raw of Africa's natural resources through expansion of a ferrochrome mine in South materials, to support its operations in Sub-Saharan Africa and $18 million in equity financing for the Mozambique­South Africa gas Africa and in Asia. IFC also provided a $50 million pipeline. We also helped a group of black South Africans acquire a major stake in one partial credit guarantee for a multicountry working of the country's leading gold mining firms (see box) and worked with the city of capital facility, increasing Olam's flexibility in financing Johannesburg on the country's first structured municipal bond. With the Financial its operations. Based in Singapore, Olam first began Times, IFC sponsored a major regional conference on improving the investment exporting cashews from Nigeria in 1989. Today it climate and promoting new models of private participation in infrastructure. is a $1.1 billion company, with operations in over A more proactive engagement by IFC is particularly relevant in Africa's postconflict 30 countries and products ranging from cocoa and countries, where we can support a rapid resumption of private sector activity. For coffee to nuts and spices. The company has become example, IFC has invested a 15 percent shareholding in NovoBanco Enterprise a global leader in many of these businesses. Bank of Angola. The bank will provide credit and other financial services to micro Olam's growth in Africa reflects widespread and small enterprises. IFC also financed expansion of local banks in Cape Verde, liberalization of marketing monopolies for export Mauritania, and Nigeria. commodities, which allows private firms to fill the gap left by former government marketing boards. It also derives from two core business principles: purchasing near the start of the supply chain whenever this is economically feasible and building strong relationships with community-based suppliers. Olam has established a presence across the supply chain, from farms in producing countries to factories in consuming markets. Kenya: A Successful Firm Committed to Its Community Olam assists local growers through extension services, IFC has made a repeat investment in Magadi Soda, a successful supplier of soda ash, which is prefinancing, and better pricing. It also focuses on used mainly for glass manufacturing in other emerging markets. IFC first financed the company market niches for commodities produced by higher-risk in 1996 and, to help it stay competitive in a demanding international market, is now helping countries. In Africa, for example, Olam helped develop fund a $98 million expansion that will upgrade product quality, raise environmental standards, new export markets for sheanuts. Grown in the Sahel and enlarge capacity. Already Kenya's second-largest foreign exchange earner, the company and other semiarid regions, this product had been will strengthen its market position and increase the country's exports. underutilized despite its value in the manufacture of Drawing on a renewable raw material source, the project is the only substantial economic cosmetics. IFC's investment will help Olam improve activity in a remote part of Kenya, providing employment and other economic benefits for local access to international markets for local producers. Maasai communities. A subsidiary of the U.K.­based Brunner Mond Group, Magadi Soda has demonstrated a strong commitment to the community by providing housing, schooling, hospital services, and drinking water for local people. These actions have earned it the Corporate Citizenship Award from the Kenya Institute of Management for three years in a row, recognizing Magadi Soda's social responsibility and sensitivity to the community's needs. The company and IFC are also helping the local community establish a development plan to diversify its economic base, including through supply contracts with Magadi Soda. 32 IFC 2004 ANNUAL REPORT South Africa: Transforming Ownership of the Mining Industry South Africa is the largest, most diversified, and most advanced economy in Africa, with more than a third of the Sub-Saharan region's output. Mining is a dominant source of economic activity, generating about 6 percent of GDP, 30 percent of exports, and 400,000 jobs. Mining companies represent 42 percent of the capitalization of the Johannesburg Stock Exchange and are key earners of foreign exchange. The South African government is committed NIGERIA MTN to transforming ownership of the mining industry OF to reduce income inequality and raise economic COURTESY participation by the black population. It has set targets for mining companies to achieve 15 percent Nigeria: Getting Connected ownership by historically disadvantaged South The World Bank Group's strategy for Nigeria seeks to foster rapid, private sector­led growth Africans within five years and 26 percent within in sectors other than oil in order to reduce poverty. IFC's $100 million investment in MTN 10 years. To support this effort, IFC has lent Nigeria's mobile telecommunications network will add to the infrastructure throughout the the equivalent of $28 million to Mvelaphanda country, improving the environment for private sector development across Nigeria. It is also Resources Limited as part of the largest black our first infrastructure investment in the country. economic empowerment transaction to date. In 2001, MTN Nigeria Communications Limited won one of three new 15-year cellular Mvelaphanda Resources will apply the loan to licenses in Nigeria, which were auctioned as part of ongoing liberalization of the sector led an upfront payment of 4.1 billion rand (about by the World Bank. MTN, one of Africa's leading cellular companies, owns some 75 percent $590 million) for the right to subscribe in five of MTN Nigeria, with the remainder held by Nigerian investors and IFC. MTN Nigeria began years to a 15 percent interest in the South African operations in August 2001, and by March 2004 it had reached almost 2 million subscribers. gold mining assets and business operations of Gold It has already connected more people to telephone service than Nigeria's parastatal utility Fields Limited. This purchase will help the company had in 50 years of operation. reach the goal of increasing black ownership. IFC invested in this project to promote competition in the cellular market, which will IFC is also developing a partnership with lower tariffs, improve quality of service and responsiveness to customers, and expand access Gold Fields to maximize the sustainability of its to telecommunications. We are also supporting liberalization of the sector and increasing operations. This is expected to include supply private sector involvement through a fair and transparent process. Part of IFC's investment contracts for small and medium enterprises, will back up MTN Nigeria's financing in local currency, reducing the impact of exchange rate assistance with HIV/AIDS programs, and outreach fluctuations on its operations and helping develop local capital markets. The project is IFC's in education, health care, and agricultural support largest to date for its own account in Nigeria and our most significant investment in the for mine-worker communities in South Africa country since the return of democracy. and Mozambique. Global Business School Network: Strengthening Managerial Capacity Through its Global Business School Network, IFC is developing pilot projects to strengthen business schools in Sub-Saharan Africa by linking them with their counterparts in developed countries. The projects aim to build schools' capacity to provide high-quality and sustainable management training programs, as well as establish a network of skills and knowledge that can be shared throughout Africa and other regions. The first pilots are in Ghana, with the Ghana Institute of Management and Public Administration; Kenya, with the U.S. International University; Nigeria, with the Lagos Business School; and South Africa, where the Wits Business School is establishing a program for business trainers from throughout Africa. The GBSN is also providing technical assistance in the pilot IFC-IDA initiative in Kenya. Here GBSN is helping the country's business schools develop local case studies and short courses targeted at the training needs of smaller businesses, as well as establishing a national business plan competition to bring students, entrepreneurs, innovators, academics, and investors together. The competition will have a strong training component that will allow all participants to benefit from the resources of the local business schools. Development of the pilot projects is driven by the needs of local institutions and the communities they serve. Each pilot is designed to strengthen links between business schools and local business communities and to be financially sustainable within a three-year period. Implementation of projects will begin in FY05, and milestones and results will be evaluated on an ongoing basis. BURES LAURA IFC 2004 ANNUAL REPORT 33 I F C R E G I O N A L R E P O R T S East Asia and the Pacific Despite Challenges, Outlook Is Optimistic CAMBODIA Business sentiment in East Asia and the Pacific was upbeat this year, despite a serious CHINA health scare and political uncertainty. Stronger growth in the United States and FIJI Japan, increased intraregional trade, and robust consumer spending all contributed INDONESIA to this positive trend. International capital flows and domestic bank lending increased, KIRIBATI financial markets performed well, and there was a modest revival in investment REPUBLIC OF KOREA spending in some countries. Nonetheless, the region has long-term challenges that LAO PEOPLE'S DEMOCRATIC must be addressed to maintain a strong and vibrant private sector. These include REPUBLIC persistent overcapacity in manufacturing, continuing high levels of nonperforming MALAYSIA loans, and concerns about overheating in asset markets. MARSHALL ISLANDS For IFC, East Asia presents an enormous opportunity, as our strengths are FEDERATED STATES OF MICRONESIA suited to the region's needs. IFC has a unique capacity to help companies achieve MONGOLIA international best practice in corporate governance and environmental and social MYANMAR practices. We have increased our staff in the region and are adapting our approach PALAU to meet changing business conditions. This year, we scaled up our activities in PAPUA NEW GUINEA China, doubling the size of our program there. We also allocated more specialized PHILIPPINES SAMOA resources for financial sector activities. In infrastructure, we began exploring new SOLOMON ISLANDS models for public-private partnerships to help ensure that the private sector can THAILAND increase its contribution to the delivery of public goods. We are also expanding TONGA our technical assistance programs. VANUATU In fiscal 2004, IFC undertook investments totaling $730 million across the VIETNAM region. We maintained our focus on high-impact sectors, especially financial markets and infrastructure. Our financing of Industrial Bank is IFC's first investment in a Chinese state-owned bank, and it will help shape the future of the banking sector in an increasingly competitive environment. We also helped establish the Shanghai International Banking and Finance Institute (see box) and worked with Colony Capital to introduce an alternative approach to distressed asset resolution in China. In the Philippines, IFC provided Globe Telecom with a series of long-term hedging transactions, helping the company better manage its exposure to currency and IFC'S LARGEST COUNTRY EXPOSURES interest rate changes. IFC's debt and equity financing for Xinao Gas complements Portfolio for IFC's own account as of June 30, 2004 the Chinese government's efforts to develop the natural gas industry. Our support (millions of U.S. dollars) for China Green Energy will help address pollution caused by inefficient coal-fired plants and inadequate waste management. China 779 East Asia's rapid growth poses environmental challenges, putting at risk clean air and water, biodiversity, fisheries, fertile soils, and quality of life. IFC is actively Thailand 468 demonstrating the business benefits of sustainable development. To further this agenda, IFC supported pioneering research and cosponsored a conference on Indonesia 467 sustainable business in East Asia (see box). Our investment in Olam, a commodity Philippines 435 sourcing and processing company active throughout Asia, will promote sustainable development in agribusiness and complement World Bank efforts to liberalize Republic of Korea 230 commodity export markets (see related box, p. 32). In a region with inadequate controls of waste products and haphazard disposal practices, IFC's support for Modern Asia Environmental Holdings, a waste management company, will help reduce pollution and associated diseases. 34 IFC 2004 ANNUAL REPORT MIGUEL NAVARRO PROJECT FINANCING AND PORTFOLIO COMMITMENTS (millions of U.S. dollars) (millions of U.S. dollars) FY03 FY04 730 Financing committed for IFC's account 573 730 673 Loans 130 424 Equity and quasi-equity* 183 242 573 Structured finance and risk management 260 64 Loan syndications signed 10 33 Financing for IFC's own account TOTAL COMMITMENTS SIGNED 583 763 Syndications and underwriting Committed portfolio for IFC's account 2,791 2,897 67 Loans 1,354 1,503 10 33 Equity 850 961 Structured finance and risk management 587 433 FY02 FY03 FY04 Committed portfolio held for others 1,138 907 PROJECT COMMITMENTS AND COUNTRIES (loan participations) FY02 FY03 FY04 TOTAL COMMITTED PORTFOLIO 3,929 3,804 Number of projects 33 31 40 * Includes loan and equity-type, quasi-equity investments. Number of countries 7 7 7 Note: All numbers reflect rounding. IFC 2004 ANNUAL REPORT 35 China: Pioneering Investments Frontier markets--those with embryonic private sectors--are an important area of IFC's work program in the region. Building on earlier technical assistance China continues its rapid progress toward a market provided by the Mekong Private Sector Development Facility and IFC's own economy, reforming its business and financial sectors equity investment, the Corporation invested further equity in Cambodia's Acleda and instituting regulation to promote and police a Bank, following it with a credit line to help the bank diversify its asset base. With dynamic and increasingly competitive private sector. partners, MPDF established the Cambodia Institute of Banking to provide training IFC continues to support this transition with funding in international banking standards (see box). IFC also made a loan to finance and innovation. expansion of Cambodia's two international airports, helping improve access to the This year we made a $52 million equity investment unique cultural assets of the Angkor temple complex. in Industrial Bank, a rapidly expanding joint-stock IFC remains committed to building long-term partnerships with clients, including commercial bank headquartered in Fujian province and several in Indonesia this year (see box). Following an earlier equity investment in active nationwide. This is IFC's first project involving Vietnam's Sacombank, IFC subscribed to a rights issue to support the bank's capital progressive privatization and strategic reorientation increase program and provided technical assistance to build capacity in the bank's of a state-owned bank in China, and we will help operations and risk management. the bank rationalize its ownership structure, improve We are also working to promote intraregional investments. IFC's investment in corporate governance, and adopt international Southern Aluminum Industry, an Indonesian­Hong Kong firm producing aluminum standards and banking best practices. The project sheets and foil in China's Fujian province, will help transfer skills to the local creates a model of privatization for China's state- workforce and set higher environmental standards for the local industry. Our owned banks. investment in Wilmar, a leading regional processor and merchandiser of oilseeds IFC also invested $13 million in Chenming, a and edible oil, will increase exports of Indonesian palm oil and benefit other greenfield facility producing lightweight coated paper companies along the supply chain. in an economic development zone of Nanchang city. Four of IFC's project development facilities are located in East Asia and the Pacific The project will establish a state-of-the-art plant and (see box). These facilities help smaller businesses incorporate best practices, gain help meet the growing demand for this type of paper access to capital, and form links to IFC's larger investments in the region. IFC in China and the Asia-Pacific region. It will help has also established technical assistance programs targeted to the region's business Chenming become a major player in the global paper sectors. A key example is the new Regional Corporate Governance Initiative, market and reduce costs for end-users, especially which trains directors at financial institutions and brings in experts to consult on those in advertising and print media. IFC is advising their operations. the company on sustainable business practices, In East Asia and the Pacific, IFC remains committed to an improved legislative including certification of plantations and promotion and regulatory environment for foreign investment. This year, FIAS advised on a of good environmental and social standards. new investment law in Cambodia and on suspension of exporter duties in Fiji. FIAS also helped establish a national working group on reducing impediments to private sector activity in Papua New Guinea. Cambodia and China: Upgrading Banking and Finance Skills China's accession to the WTO is increasing competition in the country's financial sector. Although the upgrading of skills has become crucial, there are few institutions in the country that focus on professional education in banking and finance. Hence, IFC has helped establish the Shanghai International Banking and Finance Institute to provide world-class training to Chinese financial institutions. The institute will offer courses, conduct and apply research, and hold seminars and conferences, both domestically and internationally, to improve networking among banking and finance practitioners and academics. It is expected to develop into a full- fledged business school, focusing on continuing education and professional certification. Cambodia's commercial banking sector has also assumed a critical role as the country emerges from years of internal strife and makes the transition to a market economy. Recognizing this fledgling sector's importance, IFC's Mekong Private Sector Development Facility, in collaboration with the Association of Banks in Cambodia and the ASEAN Bankers Association, has established the Cambodia Institute of Banking. The institute will meet a growing demand for training at locally affordable prices. It will provide tailor-made courses for local banks, seminars for top banking executives on latest trends in banking, and consulting services. GIRARD GREG Indonesia: Long-Term Relationships IFC remains committed to building long-term partnerships with clients. This year in Indonesia, we found new opportunities with companies we already know well. Our repeat investments in a manufacturer of synthetic fiber, South Pacific Viscose, will help the firm achieve self-sufficiency in power and increase the sustainability of its production. We helped the Wings Group expand into the food and beverages sector, creating supply chain links with smaller businesses that benefit the local community. A $35 million loan also continued our support for Bank NISP, one of the most dynamic private sector banks in Indonesia. The funding will help diversify the bank's liability GUNAWAN structure, support its core lending to smaller businesses, and help it scale up other activities, such as mortgage lending, that require longer-term funding. MICHAEL Driving the Sustainability Agenda in East Asia The changes underway in East Asia are daunting, with rapid economic expansion, population growth, and urbanization imposing heavy demands on social and environmental resources. But managing this growth also offers huge business opportunities. IFC is helping private firms understand the issues, especially how raising environmental and social standards can improve a company's access to capital and increase its financial returns in the long term. This year IFC sponsored a report published by the Association for Sustainable and Responsible Investment in Asia that demonstrates the value of a socially responsible approach to investment. With the Financial Times, we sponsored a conference on sustainable business in East Asia that examined trends in sustainable practices, business benefits, and the role of stakeholders. Attention to sustainability is also integral to IFC's investments in the region. For example, a rise in domestic consumer awareness and the emergence of international standards are rapidly increasing East Asia's demand for integrated, responsible waste management. Our investment this year in Modern Asia Environmental Holdings, a firm operating in several countries, will support the company's waste collection, transportation, recycling, treatment, and disposal services for industrial and commercial clients in Indonesia, the Philippines, and Thailand. This in turn GUNAWAN will promote environmentally compliant technology and practices for collection and waste-handling, helping reduce MICHAEL pollution of the air, soil, and water, as well as incidence of related diseases. In other examples from the Philippines, IFC provided donor funds for development of solar energy and preservation of coastal habitats (see p. 19). Project Development Facilities: Strengthening Smaller Businesses IFC operates special multidonor project development facilities in areas of East Asia and the Pacific where support for small and medium enterprises is especially crucial to economic development: the Mekong region, the Pacific islands, China's Sichuan province, and eastern Indonesia. In FY04, the Corporation increased its efforts to integrate the work of these facilities with other IFC and World Bank Group activities. A good example of this approach is the facilities' technical assistance to help incorporate small businesses into the supply chains of larger firms in which IFC invests. The strong synergy between the facilities and IFC investments is also particularly important in the financial sector, where training in lending and credit analysis for smaller businesses complements IFC loans, equity investments, and strategic and operational guidance in many areas, such as data management, corporate governance, and compliance with international accounting standards. In Vietnam, for example, IFC has become a strategic investor in two leading commercial banks, Asia Commercial Bank and Sacombank, to which the Mekong Private Sector Development Facility NAVARRO had first provided extensive training through its Bank Training Center. Both banks have significantly increased their MIGUEL lending portfolios for small and medium enterprises. IFC 2004 ANNUAL REPORT 37 I F C R E G I O N A L R E P O R T S South Asia Becoming a Global Player BANGLADESH Regional growth in South Asia gained momentum in FY04, led by accelerating BHUTAN expansion in India. The private sector remains at the forefront of this strong INDIA performance, as entrepreneurs throughout South Asia strive for international MALDIVES competitiveness and identify opportunities to expand operations within the region NEPAL and beyond. IFC has supported this trend with a record level of new investments, SRI LANKA $405 million, as well as $109 million in loan syndications. IFC has also provided technical assistance to help companies improve competitiveness, access longer-term funding, and reach new markets. This assistance includes facilitating investments between developing countries and strengthening links between small businesses and larger IFC clients. IFC is helping build internationally competitive enterprises throughout South Asia. The year saw a second investment in India's largest producer of writing and printing paper, Ballarpur Industries Limited, to help raise the efficiency of its local operations and support expansion of its farm forestry program, with substantial benefits for rural farmers (see box). IFC has also helped RAK Ceramics, a United Arab Emirates­based company that was already a client in Bangladesh, invest in new capacity for manufacturing ceramic tiles in India. Other IFC investments that increase competitiveness include United Phosphorus Limited, one of India's largest producers of crop protection products and among the top five generic agrochemical companies in the world; and Crompton Greaves Limited, a key player in India's electrical equipment and engineering industry and the country's largest exporter of transformers. IFC's investment in CMS Computers, one of the largest IT service companies serving the domestic Indian market, will support the company's efforts to increase competitiveness and expand operations within India. Better infrastructure is essential to sustaining the region's economic growth, but fiscal constraints on governments have hampered them in meeting this need. Hence, IFC is encouraging private participation in key infrastructure sectors, such as telecommunications and power. This year IFC established the first partnership IFC'S COUNTRY EXPOSURES in India's power transmission sector following the government's decision to open Portfolio for IFC's own account as of June 30, 2004 (millions of U.S. dollars) it to private participation. Powerlinks, a joint venture between the Tata Power Company and Power Grid Corporation of India, will facilitate transmission of India 1,136 power from a hydropower project in Bhutan and surplus power from other regions to the north of India. In mobile telecommunications, IFC has financed the expansion Bangladesh 133 of leading providers GrameenPhone in Bangladesh and Dialog in Sri Lanka (see box). In oil and gas, IFC is financing development of the region's resources through Sri Lanka 129 support of Cairn Energy PLC (see box). IFC is helping build strong institutions that widen access to financial services. Nepal 51 IFC made a loan to Sundaram Finance, which will expand its lending to commercial Maldives 28 vehicle owners and operators in rural and semirural areas, thus helping small business development. With improved availability of mortgage finance stimulating Bhutan 10 38 IFC 2004 ANNUAL REPORT RICHARD ENGLISH PROJECT FINANCING AND PORTFOLIO COMMITMENTS (millions of U.S. dollars) (millions of U.S. dollars) FY03 FY04 Financing committed for IFC's account 386 405 405 386 Loans 349 332 Equity and quasi-equity* 34 64 Structured finance and risk management 3 9 Loan syndications signed 37 109 Financing for IFC's own account 165 TOTAL COMMITMENTS SIGNED 422 514 Syndications and 109 underwriting 37 Committed portfolio for IFC's account 1,447 1,529 15 Loans 929 1,101 Equity 345 265 FY02 FY03 FY04 Structured finance and risk management 172 163 Committed portfolio held for others 140 237 PROJECT COMMITMENTS AND COUNTRIES (loan participations) FY02 FY03 FY04 TOTAL COMMITTED PORTFOLIO 1,587 1,765 Number of projects 9 18 19 * Includes loan and equity-type, quasi-equity investments. Number of countries 4 4 5 Note: All numbers reflect rounding. IFC 2004 ANNUAL REPORT 39 construction throughout India, IFC helped HDFC access international markets for longer-term funding of its mortgage finance business and assisted Birla Home Finance in broadening its housing finance operations, particularly those aimed at middle-income households in India. Owned by BHW, a German firm, Birla Home Finance has successfully introduced a savings-linked housing loan in India, providing opportunities for lower-income households to obtain loans based on their savings performance over a three- to five-year period. Small and medium enterprises are a key component of sustainable growth and development. IFC continues to support SMEs through development of the financial markets in South Asia. In Bangladesh, IFC has invested in United Leasing Company and BRAC Bank, a new bank set up by IFC, Shorebank, and BRAC, a leading Bangladeshi NGO, to promote financial services to smaller businesses. We are also supporting local entrepreneurs and their businesses through our regional SME facility, the SouthAsia Enterprise Development Facility. SEDF takes a multifaceted approach, working to improve the business-enabling environment, increase access to finance, and make business services for SMEs more widely available (see box and p. 10). The private sector also plays a central role in delivering health services in the region. In India, IFC is helping Max Healthcare build the first integrated health care delivery network in the New Delhi area. Bhutan became IFC's newest member in December 2003, a development swiftly followed by our first commitment in the country's tourism sector (see box). SEDF is working with the client, Bhutan Resorts Corporation Limited, to establish links with small businesses, while FIAS is helping the government frame policies to guide private investment. IFC also invested in the tourism sector in the Maldives through Taj Maldives, an affiliate of the Taj Group of India. Both tourism projects represent "south-to-south" investments, simultaneously helping South Asia's two ENTERTAINMENT DQ smallest countries and providing longer-term funding for larger firms' expansion OF within the region. COURTESY IFC is an investor in DQ Entertainment, an Indian company that provides animation and multimedia services to North American and European film production houses. India and Bangladesh: Developing Domestic Energy Resources Cairn Energy PLC, a U.K.­based oil and gas company, has focused its operational strategy on South Asia, including India, the sixth-largest energy consumer in the world, and Bangladesh, a country with the potential to become a major gas producer. IFC recently provided Cairn with a long-term revolving corporate facility to finance growth in its production capacity and exploration activities in the region. By increasing the availability of domestic gas for power generation and industry, Cairn's activities will enable the use of a cleaner, more cost-efficient fuel to replace naphtha and coal. Cairn has also introduced new technology to raise oil recovery rates: in its Ravva oil field, for example, recovery has risen from 30 to 55 percent. Cairn is working with IFC's environmental staff to ensure that new fields in Rajasthan, India's largest oil discoveries on land in the past two decades, are developed with protections for the fragile ecology and social systems of this region. 40 IFC 2004 ANNUAL REPORT Bangladesh and Sri Lanka: Increasing Access to Telecommunications IFC's investments are aiding the rapid growth in South Asia's mobile communications industry, with broad economic benefits. In Bangladesh, GrameenPhone was the first operator to adopt a mass-market, low-tariff strategy and has quickly built a subscriber base, reaching 1 million by the end of 2003. Other companies have followed suit. The availability of affordable, reliable service has increased cellular penetration from 0.1 percent in 1999 to 1.25 percent today, more than double the rate of fixed-line use. This growth has also spurred reforms in the country's telecommunications sector, including the establishment of an independent regulator. The company has significantly increased rural connectivity through its Village Phone program, in which local individuals, often supported by a microfinance loan from Grameen Bank, operate a pay telephone in their communities. About 50 million people benefit from cellular services provided through this program, which has won numerous awards as an effective model for increasing access to telecommunications in rural areas. It has also improved the economic position of women operators in these areas. IFC has been able to replicate the model in Uganda and is embarking on a similar initiative in Nigeria. DIALOG IFC made its second investment in GrameenPhone Ltd. in 2004, a $30 million loan for OF nationwide expansion of its network and refinancing of debt. In 1999, IFC made a loan and COURTESY equity investment as part of a $124 million project to build the firm's network over its first four years of operations. The cellular phone operator is sponsored by Telenor of Norway and Grameen Telecom, an entity established by Grameen Bank. In Sri Lanka, which saw the number of mobile subscribers increase by nearly half during 2003, IFC has invested in Dialog, the local brand name for MTN Networks. Launched in 1995 as the fourth mobile operator in the country, Dialog reached a 50 percent market share by 2002. Following the country's ceasefire, Dialog has increasingly focused its growth on the northern and eastern provinces, where telecommunications infrastructure remains weak as a result of the civil war. IFC's $50 million investment will support the company's expansion plans and help it upgrade its network to offer new services. GRAMEENPHONE OF COURTESY IFC 2004 ANNUAL REPORT 41 Bhutan: High-Value, Low-Impact Tourism Bhutan, which became IFC's newest member this year, seeks economic development that preserves the country's pristine environment and unique culture. The government first began working with FIAS in 2000 to establish policies and regulations that enable foreign direct investment. This collaboration helped lay the groundwork for IFC's first investment in the country, a resort sponsored by Bhutan Resorts Corporation Limited and Silverlink Holdings of Singapore, owner of the Amanresorts brand name. The project will support the government's concept of "high-value, low-impact" tourism by attracting BANK a small number of high-income, environmentally conscious, and culturally interested WORLD visitors, minimizing the impact on Bhutan's environmental, social, and cultural fabric. IFC is providing $10 million as well as comfort to government and investors in what Bangladesh: will be the largest foreign direct investment in Bhutan in many years. IFC's experience Building Competitive in managing the social and environmental impacts of private enterprise is also helping Smaller Enterprises maximize the benefits to the local community by developing sustainable ecotourism products and services. IFC's SouthAsia Enterprise Development Facility is also working The garment industry is a cornerstone of the with the resort to establish links with smaller businesses, including local supply chains for Bangladeshi economy, accounting for 75 percent food. This project is expected to create a strong demonstration effect for other foreign of total export earnings and employing more direct investment in Bhutan. than 1.8 million people, mostly women working in small and medium enterprises. This income raises living standards, including health care, housing, and education of the workers' children. Gaining entry into international markets is critical, with competition rising from China and other countries that have high labor productivity and with phaseout of the Multi Fibre Arrangement, a system of quotas restricting the quantity of textiles and clothing from developing countries into industrialized countries. IFC's SouthAsia Enterprise Development Facility has helped the country's SME garment manufacturers find new buyers in Canada, which agreed in late 2003 to drop all trade barriers on Bangladeshi apparel imports. SEDF partnered with the Canadian Manufacturers and Exporters Association and the Trade Facilitation Office of Canada to arrange successful trade fairs in Montreal and Toronto. Industry leaders expect garment exports to Canada to double as a result, reaching US$300 million in the coming year. GRIFFIN 42 IFC 2004 ANNUAL REPORT JOHN RICHARD ENGLISH India: Investing in Sustainable Farm Forestry Programs In FY04, IFC invested in Ballarpur Industries Limited (BILT), India's largest producer of writing and printing paper and a repeat client. While this investment supports the modernization and expansion of production capacity, it also furthers the development of the company's farm forestry program. Targeting small farmers with land unsuitable for other cash crops, BILT raises and distributes seedlings to the farmers at subsidized costs, provides free technical advice, develops high-yield tree varieties, and operates purchase depots to secure a fair price for the produce. This ensures that farmers receive a stable income despite seasonal variations in revenue. In addition, BILT has started a pilot program to provide the farmers in their first crop rotation with an assured buyback of pulpwood. The company has arranged for commercial banks to make cash disbursements ENGLISH to the farmers until the crops reach maturity. The banks are paid by BILT when the RICHARD pulpwood is delivered to the company. Since BILT's farm forestry program began in 2000, over 15,000 farmers have participated, spanning a combined plantation area of 10,000 hectares. With IFC's help, BILT plans to expand its program, increasing annual seedling distribution to an estimated 100 million and reaching over 25,000 farmers by 2008, ensuring that a large share of the company's raw material comes from local farmers. IFC 2004 ANNUAL REPORT 43 I F C R E G I O N A L R E P O R T S Europe and Central Asia Increasing Investment and Innovation ALBANIA FORMER YUGOSLAV Activity in Europe and Central Asia this year reflects the full range of products and ARMENIA REPUBLIC OF services IFC offers, from investments in key sectors such as financial institutions, MACEDONIA AZERBAIJAN infrastructure, and health, to technical assistance that helped improve investment MOLDOVA BELARUS climates, expand financing for smaller enterprises, and strengthen companies' POLAND BOSNIA AND corporate governance. HERZEGOVINA ROMANIA BULGARIA RUSSIAN FEDERATION Central and Eastern Europe CROATIA SERBIA AND MONTENEGRO CZECH REPUBLIC SLOVAK REPUBLIC ESTONIA PROGRESS IN MANY AREAS SLOVENIA GEORGIA TAJIKISTAN IFC's commitments in Central and Eastern Europe reached a record high of HUNGARY TURKEY $825 million in FY04, with an additional $68 million syndicated from partner KAZAKHSTAN TURKMENISTAN banks. The largest share of this funding went to Russia, reflecting the country's KYRGYZ REPUBLIC UKRAINE growth and stability and our increasing work with local companies and firms based LATVIA UZBEKISTAN outside of Moscow. We also increased commitments in Ukraine to $57 million, LITHUANIA with investments in agribusiness, the financial sector, and general manufacturing. We continued to support the private sector in the smaller Eastern European economies through advisory work and investment, with a focus on strengthening small businesses. Our latest investment in the Baltics, which helped deepen mortgage markets through the first cross-border securitizations in the region, reflects the more selective role IFC is playing in the EU-accession countries (see box, p. 12). In Russia, we are investing in an increasing number of sectors, reflecting our strategy to help diversify the country's economy beyond oil and gas. Particularly notable is the increase this year in investments in infrastructure, especially transport and logistics. IFC financed large-scale projects in the railway and air transport sectors. These investments strengthen the country's transport system, which is essential to economic growth, and demonstrate the benefits of increasing the private sector's role in infrastructure. Our investments in Kulon and Russkiy Mir IFC'S LARGEST reflect the growing demand from local businesses for logistical services and COUNTRY EXPOSURES warehousing to improve efficiency in cargo storage, handling, and transportation. Portfolio for IFC's own account as of June 30, 2004 (millions of U.S. dollars) All of these are investments in local Russian firms. IFC is also helping its long-standing clients reach new markets. This year in Russian Federation 1,188 Russia, IFC had several repeat investments with clients from elsewhere in the region. The glass manufacturer Sisecam first became an IFC client in the 1970s in Turkey 885 its home country, Turkey, and more recently has partnered with us in Georgia and Russia. This year, its Russian affiliate, Ruscam, received its third IFC loan since Romania 280 beginning its operations in Russia three years ago--funding that will further increase its bottle-producing capacity. IFC has held an equity investment since Bulgaria 266 1994 in Intercell, one of Poland's key packaging producers and its leader in wastepaper recycling. This year, IFC helped Intercell invest in Russia, where Kazakhstan 167 it will manufacture paper sacks. In the Russian regions beyond Moscow, the financial sector remains crucial to spurring development. We choose leading institutions that can set standards, and we add value through a combination of investment and advisory work. Our commitment is long-term and often results in repeated transactions. We are 44 IFC 2004 ANNUAL REPORT RICHARD ENGLISH PROJECT FINANCING AND PORTFOLIO COMMITMENTS (millions of U.S. dollars) (millions of U.S. dollars) FY03 FY04** 1,667 Financing committed for IFC's account 1,203 1,667 Loans 968 1,330 Equity and quasi-equity* 141 336 1,203 Structured finance and risk management 95 1 Loan syndications signed 190 363 Financing for IFC's 664 own account TOTAL COMMITMENTS SIGNED 1,394 2,030 Syndications and 363 underwriting 190 74 Committed portfolio for IFC's account 3,581 4,554 Loans 2,898 3,768 FY02 FY03 FY04 Equity 527 672 Structured finance and risk management 156 114 Committed portfolio held for others 785 935 PROJECT COMMITMENTS AND COUNTRIES (loan participations) FY02 FY03 FY04 TOTAL COMMITTED PORTFOLIO 4,366 5,489 Number of projects 60 59 65* * Includes loan and equity-type, quasi-equity investments. Number of countries 19 18 17 ** Includes BTC pipeline and regional share of LNM Holdings investment, which are officially classified as global projects. Note: All numbers reflect rounding. * Includes BTC pipeline. IFC 2004 ANNUAL REPORT 45 Ukraine: Fresh Chicken on the Table When Yuriy Kosyuk, a young entrepreneur, currently working with four locally owned financial institutions outside Moscow. acquired several bankrupt poultry assets in 1996, IFC's advisory arm in the region, the Private Enterprise Partnership, also helped he was determined to build them into Ukraine's some of our clients improve their corporate governance (see box). largest poultry producer. By mastering delivery Throughout Russia, we are helping introduce innovative products for financial of fresh chilled products to retailers, the firm, intermediation, including local currency financing and securitization. This year we made Mironovsky Khleboprodukt, has also increased our first ruble-linked loan to Russian Standard Bank (see box). With stakeholders its competitiveness against frozen imports. from Russia's public and private sectors, we also created a working group to identify To help strengthen Mironovsky's market position, IFC provided a $30 million loan to expand the impediments to securitization transactions. the firm's production and distribution system In Ukraine, investments in a leading poultry producer (see box) and the country's and improve efficiency. Totaling $120 million, top producer of juices, Sandora, will help local companies expand and modernize while the project should nearly triple production by creating jobs for local farmers. IFC also supported construction of two Nova Liniya home 2005, lower production costs by 20 percent, improvement retail stores, which will boost local production and employ 300 workers. and create 450 new jobs. IFC is also providing Our activity reflects the country's improving investment climate, opportunities in many technical assistance on corporate governance sectors, and stronger interest from foreign investors. Similarly, in Belarus, we supported and helping implement food safety and quality the first privatization in the country's beverage sector that involves foreign investors. management systems in accordance with In frontier markets, we continue to help financial institutions increase the access of international standards. Among operational small businesses to credit. In Georgia, the Private Enterprise Partnership helped introduce improvements, Mironovsky will construct a high- legislation critical to the development of financial leasing, which will provide a new source protein sunflower plant to produce feed for broilers, helping reduce costs. The plant will be the first of of financing for SMEs. IFC established its first partnership with an Armenian bank, its kind in the former Soviet Union and a model Armeconombank, through a loan that broadens the bank's funding base for on-lending for a sector that has been lagging technologically. to smaller businesses. In Ukraine, IFC lent to one of the country's first leasing companies, To expand distribution, Mironovsky plans to First Lease, to support equipment leases to SMEs. The Private Enterprise Partnership add 900 franchise retail outlets to its existing 400. also helped draft new leasing legislation for Ukraine; the bill was passed by parliament An initial investment of $2,000 per franchise this year. In Belarus, to strengthen the financial sector, we organized a workshop for the generates a minimum of one job and a monthly government on development of the banking sector and the role of foreign banks. We profit of about $300, in a country where the also continue to work with business associations to improve the environment for SMEs. average monthly salary in 2003 was $94. We provided ongoing support and market innovations to partner banks in frontier countries, with new financing for ProCredit Bank in both Ukraine and Georgia and for TBC in Georgia. The deal with TBC introduces interest rate and currency swaps to Georgia (see box). Georgia: IFC Introduces Risk Management This year IFC signed an International Swaps and Derivatives Association Master Agreement with TBC Bank of Georgia. The agreement allows for interest rate and currency swaps, two sophisticated financial instruments that are common in developed financial markets but rarely seen in developing markets. The bank will now be better able to hedge the dollar interest rate risk and dollar­euro currency risk arising from its outstanding term borrowings. Hence, TBC can balance its assets and liabilities more efficiently and improve its risk management capabilities. IFC is the first to introduce this financial instrument in Georgia. Established in 1992, TBC is Georgia's oldest private commercial bank and the largest in total assets and market share of deposits. It has been an IFC partner since 1998. We provided two earlier loans of $3 million each, for on-lending to small and medium enterprises and for residential mortgage finance. We also purchased a 10 percent equity stake and have provided technical assistance to strengthen the bank's credit underwriting procedures, improve its corporate governance, and raise its financial reporting to international standards. The swaps agreement is part of IFC's strategy to develop new financial products in Georgia. In KHLEBOPRODUKT 2000, we introduced housing finance through a $3 million credit line and technical assistance on mortgage operations to the Bank of Georgia. IFC is also providing technical assistance to develop MIRONOVSKY OF the country's legal and commercial infrastructure for leasing. COURTESY The Business Value of Corporate Governance Attracting strategic investors, raising funds in capital markets, increasing operational efficiency, protecting minority shareholder rights--these are gains companies make by improving their corporate governance. With donor support, the Private Enterprise Partnership, IFC's technical assistance program in the former Soviet Union, helps businesses and governments in Russia, Ukraine, and, more recently, Georgia develop sound corporate governance practices and strengthen corporate regulations. The goal is to build investor confidence and trust in locally owned and managed businesses, which is essential to revitalizing production and furthering reforms. Through the partnership, IFC has provided advice and training on corporate governance to almost 2,400 companies, ranging from Russia's major corporations in the forestry, telecommunications, and chemical sectors to mid-size Ukrainian manufacturers and Georgian banks lending to small businesses. In addition, 30 Russian and 34 Ukrainian universities have launched corporate governance courses in the last year. IFC also cooperates with local securities commissions to promote policy reform. The partnership has also helped develop and promote corporate governance codes in Russia and Ukraine. This year IFC surveyed corporate governance practices in the Russian and Ukrainian banking sectors. The partnership will help guide the banks in strengthening their practices and evaluating clients' corporate STAFF governance when making financing decisions. IFC Russia: Thank You for Choosing Siberia Airlines Based in Novosibirsk, Siberia's largest city, Siberia Airlines was created in 1992 through the reorganization of Aeroflot and was privatized in 1994. Today, it is Russia's second-largest airline, carrying 3.5 million passengers annually to more than 50 destinations in Russia and abroad. Recently, Russia's demand for air travel has increased dramatically. To take advantage of emerging business opportunities, Siberia Airlines needs to expand and improve its fleet, yet no affordable financing is available for such a long-term project. IFC's $25 million loan will help the company replace the existing short- and medium-term loans the company assumed earlier to acquire and AIRLINES refurbish aircraft, increase its working capital, and expand its route network. IFC's financing of Siberia Airlines helps develop competition in an airline industry that had been SIBERIA OF dominated by government-owned Aeroflot. It follows IFC's $30 million loan to the Volga-Dnepr cargo airline in FY02, the first significant foreign investment in Russia's civil aviation sector. Expanding COURTESY air transportation in a country that spans eight time zones and where some regions can be reached only by air helps establish business, cultural, and private links among communities across Russia. IFC's commitment will demonstrate the viability of investing in Russia's air transportation sector and attract other foreign financiers. Russia: Developing the Market for Consumer Lending A few years ago, Russian consumers were forced to pay in cash even when buying household appliances and cars. Today, they can access credit just like consumers in Western markets, thanks largely to the Russian Standard Bank, which pioneered its retail credit program in 2000. IFC has worked with RSB since 2001 to build Russia's consumer lending market. This year we extended our first ruble-linked loan of $40 million to the bank. Using the offshore ruble swap market, IFC structured the financing so that RSB can borrow funds on a revolving basis in U.S. dollars or as ruble-linked financing. BANK Being able to repay its loan in ruble terms enhances the bank's ability to make local currency loans to consumer clients, thus expanding its portfolio. STANDARD Our previous investments with RSB included Russia's first partial guarantee of ruble bond and promissory note issues, as well as IFC's first equity investment in a Russian bank after the 1998 financial crisis. RSB's RUSSIAN OF strengthened funding base and its increased access to capital markets have helped it grow strategically in Moscow and elsewhere. Its consumer loan portfolio has more than doubled each year since 2001, exceeding COURTESY $465 million in January 2004. With some 3,000 partner retail outlets across Russia, the bank is gaining about 15,000 new clients a day. By the end of 2004, it projects an increase in its customer base to 2.3 million. IFC 2004 ANNUAL REPORT 47 BTC Pipeline Project: Innovation, Transparency, and Local Engagement IFC's involvement in a major regional investment helps ensure that emerging markets maintain standards for channeling wealth from natural resources toward sustainable development. This year we played a crucial role in mobilizing $2.4 billion in financing from a variety of sources, including $310 million in loans from IFC and 15 commercial banks, for the Azeri-Chirag-Deepwater Gunashli Phase 1 oil field, a $3.2 billion project in the Caspian Sea off Azerbaijan, and the Baku-Tbilisi-Ceyhan pipeline, which will run through Azerbaijan and Georgia to the Mediterranean coast of Turkey. The projects will generate significant income for the three countries, while setting precedents for project financing in challenging environments and encouraging transparency and engagement with local people and businesses. The projects will also adhere to high environmental and social standards. IFC and the World Bank have taken the lead to ensure that the countries report oil revenues fully; in Azerbaijan a fund is being set up to see that revenues contribute to economic development. We are also helping local entrepreneurs benefit through assistance with supply contracts, training of local consultants to provide business services, leasing, and financial products that improve access to capital. To date, more than $1 billion has been spent in the project countries on contracts related to MILLER the oil field and pipeline. SHAWN IFC has been instrumental in conducting multistakeholder meetings in each country, convening local people, nongovernmental organizations, and others to hear concerns about the pipeline's route and other issues. A report published jointly with EBRD is available online in English and the local languages. The pipeline covers 1,760 kilometers without displacing any households; compensation packages for land have been consistently above market rates and are being independently monitored. During construction, $37 million is being spent on community and environmental investments. POLLETT TED POLLETT TED Southern Europe and Central Asia STRENGTHENING BUSINESSES AND FINANCIAL INSTITUTIONS With the private sector growing, dynamic local businesses emerging, and interest from foreign investors on the rise, the Southern Europe and Central Asia region is changing rapidly. IFC's investments in the region have more than doubled within two years, from $345 million in FY02 to $842 million in FY04, with an additional $295 million syndicated from partner banks. This year, the financial sector remained the focus of our strategy to enhance development of private financial institutions and, through them, small and medium enterprises. We also increased our emphasis on private sector investment in infrastructure at the regional and country levels. In general manufacturing, we continued to invest in the restructuring and modernization of previously state-owned enterprises. IFC continues to facilitate privatization of the region's financial sector and the engagement of strategic foreign investors. With EBRD, we took an equity stake to support future privatization of BCR, Romania's largest bank. IFC is also helping the bank review its strategy and operations and improve its corporate governance and risk management. IFC's largest equity investment in a bank to date, the project is expected to catalyze investor interest and improve the terms and conditions for the bank's privatization. It has been hailed as critical to development of Romania's economy. In Bosnia and Herzegovina, IFC has continued to assist in the restructuring and privatization of the country's largest banking group (see box). In Albania, IFC and EBRD each acquired a 19.5 percent stake in the country's largest insurance company, also to support privatization. This investment will improve the company's corporate governance, policies, and procedures, making it more attractive to investors. Fostering the development of nonbank financial institutions, especially in housing finance and leasing, is another priority. IFC helped establish a specialized company to originate and service primary mortgages for Romanian households. In Turkey, where key financial sector reforms are beginning to take root, IFC continued to provide financial institutions, including an important leasing company, with longer-term funds. IFC is also focusing on strategic support to small and medium enterprises in the region. IFC provided funding to Raiffeisen International, a leading SME lender in the region. In Bosnia and Herzegovina, Bulgaria, Moldova, and Romania, we established credit lines to banks that lend primarily to small businesses. After investing equity Balkan Infrastructure Development Facility Deficiencies in infrastructure continue to discourage private investors and hinder economic growth in the Balkan region. To support growth and meet the urgent need for private capital to invest in infrastructure, IFC is establishing the Balkan Infrastructure Development Facility in cooperation with USAID and European donors. The facility will help public sector entities in the region attract private sector investments, focusing on the energy, transportation, and water and sanitation sectors. The countries covered by the facility are Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania, and Serbia and Montenegro. Managed by IFC and based in Sofia, Bulgaria, the facility reflects the World Bank Group's strategy to broaden engagement in infrastructure to ensure efficient, affordable, and sustainable delivery of STOMANA infrastructure services. The facility will help identify, develop, structure, and reach financial closure OF on infrastructure projects, so that committed public sector entities in the Balkan countries can engage COURTESY more effectively with the private sector and attract investments critical to the region's economic development. The facility will become fully operational in FY05. IFC 2004 ANNUAL REPORT 49 in Microfinance Bank Romania last year, IFC set up a credit line to help it become the country's market leader in micro and small business. In addition to its financial sector investments, IFC makes its products and services available to smaller businesses through SEED, its project development facility (see box), and the Private Enterprise Partnership (see box, p. 27). Our investments in previously state-owned enterprises are helping increase efficiency, improve competitiveness, and raise standards for management, corporate governance, and environmental performance. Our clients in FY04 included a steel mill and a glass container company in Bulgaria. As part of a strategy to encourage Turkish companies with global ambitions to invest in the region, IFC is helping one of Turkey's leading glass manufacturers construct two state-of-the-art plants in Bulgaria. These facilities will also contribute to Bulgaria's export base. In health and infrastructure, IFC is working to facilitate public-private partnerships, providing innovative financing and technical assistance to local private sector players and subsovereign public entities (see boxes). IFC made its first investment in Turkey's health sector, providing long-term financing to MESA, an Ankara-based industrial group, to establish a hospital as part of its strategy to become a player in health care. IFC also invested in Euromedic, a leading provider of diagnostic imaging and dialysis services in Central, Eastern, and Southern Europe and an existing IFC client, to help expand its network in the region. In Albania, IFC and EBRD financed Vodafone's development of a nationwide cellular network, which will improve telecommunications in many places where the current service is inadequate. This is Albania's largest debt-financed project to date and the country's first syndicated long-term loan to the private sector. IFC also supported one of Turkey's leading IT companies, Meteksan Sistem. A major project in the oil and gas sector shows how we deliver value to clients by integrating sustainability into IFC's core business. With loans of $155 million for its own account and syndicated loans of $155 million, IFC supported the second stage of development of the ACG oil field in Azerbaijan and the associated Baku-Tbilisi-Ceyhan pipeline, which will carry crude oil through Georgia and Turkey to the Mediterranean. In addition to providing long-term financing, IFC provided leadership for developing the projects in an environmentally and socially sustainable manner (see box). KILICOZLU ARZU COMMISSION EUROPEAN THE OF 50 IFC 2004 ANNUAL REPORT COURTESY SEED: New Horizons for Smaller Businesses IFC's Southeast Europe Enterprise Development is building the capacity of local institutions to provide sustainable support to small and medium enterprises. This assistance includes alternative forms of financing for these businesses, including leasing, factoring, and commercial mediation. The rapid growth of leasing in Serbia and Montenegro, where SEED has provided significant help, shows that the market is eager for innovative and practical options in financing. The launch of an alternative dispute resolution program in Bosnia and Herzegovina will help businesses avoid lengthy, expensive court proceedings. SEED is also working with the region's larger companies to increase their competitiveness by integrating small businesses into their supply chains and outsourcing more activities to smaller firms. A pilot program with Tigar, a leading producer of tire and rubber goods in Serbia and Montenegro, is being extended to other large companies in the region, in industries as varied as cement production, car parts manufacturing, steel reprocessing, and food and beverages. To empower smaller businesses, enhance their sustainability, and promote their collective interests, SEED is working with sectoral groups, cooperatives, regional networks, and business membership associations in the countries it serves. Through these associations, SEED is reaching over 1,500 small businesses with its training and consulting services. In FY04, SEED came under the direct management of the regional hub in Istanbul, helping ensure full integration of its technical assistance with IFC's regional strategy. Bosnia and Herzegovina: Innovative Approaches Achieve Results The privatization of the successor banks to United Privredna Banka Sarajevo, formerly Bosnia's largest banking group, continues to demonstrate the benefits of an innovation that IFC pioneered in cooperation with the World Bank and the IMF. In December 2001, the Bosnian Ministry of Finance, IFC, and the Austrian investment company BPIC jointly established a special-purpose vehicle called Sarajevo Privatization Venture (SPV). With 10.5 million in funding from IFC and 1 million from BPIC, this new entity paid off the foreign prewar creditors of the former United PBS, liabilities that had made it impossible to attract strategic investors in time to meet a privatization deadline set by the IMF. In return, SPV acquired majority stakes in three successor banks, Privredna Banka Sarajevo, Central Profit Banka, and Travnicka Banka. Thus, after many years, the three successor banks could finally be privatized. Upon acquisition, SPV merged Central Profit Banka and Travnicka Banka. In FY04, SPV sold the merged bank to Bank Austria Creditanstalt, a leading corporate and retail banking group in Austria, proving that privatization had made the successor banks commercially viable and attractive for acquisition. BANK WORLD Romania: Public-Private Partnerships for Health Care With costs rising and demand increasing, health care is an important frontier for public-private partnerships. In these arrangements, a government or national health insurer contracts with a private medical firm to provide specific medical services to publicly funded patients. Such partnerships can expand patients' access and improve the quality of health care services, while reducing costs to governments. In Romania, IFC Advisory Services has assisted the Ministry of Health in designing and implementing a program of public-private partnerships for health care. The pilot transactions, covering a range of medical services, will be replicated nationwide using IFC-prepared contracts and tender procedures. With IFC's help, the ministry successfully completed two initial tenders in FY03 for private medical firms to provide HOSPITAL radiology and laboratory services in a major Bucharest public hospital. Two additional tenders were APOLLO completed in FY04, one to contract out several dialysis centers to qualified private providers and the other OF to establish a private wing at a women's hospital. Additional transactions, involving private management of a major public hospital and private construction and management of ambulatory surgery centers for COURTESY public patients, are under preparation. All transactions are publicly tendered and include contractual safeguards to ensure the highest-quality care and universal access. IFC 2004 ANNUAL REPORT 51 I F C R E G I O N A L R E P O R T S Latin America and the Caribbean Brighter Prospects, Continuing Challenges ARGENTINA GUYANA Economic prospects for Latin America and the Caribbean brightened through ANTIGUA AND HAITI FY04, with interest rates low, commodity prices high, and demand rising for the BARBUDA HONDURAS region's goods, both internally and abroad. Bond and equity market developments THE BAHAMAS JAMAICA were positive, and policy adjustments that many countries had made during the BARBADOS MEXICO slowdown of recent years helped reduce fiscal deficits. Net private capital flows to BELIZE NICARAGUA the region increased to $24 billion in calendar 2003 (still about half the level of BOLIVIA PANAMA two years earlier), and remittances reached $38 billion. With many countries BRAZIL PARAGUAY regaining access to the international capital market, especially short-term funding, CHILE PERU IFC is refocusing on providing longer-tenor funding. Our strategy centers on COLOMBIA ST. KITTS AND NEVIS added-value services tailored to specific market segments and on addressing social COSTA RICA ST. LUCIA inequality through investments and technical assistance. We continue to emphasize DOMINICA TRINIDAD AND TOBAGO increasing competitiveness, supporting intraregional and "south-to-south" investments DOMINICAN REPUBLIC URUGUAY that help build strong global players in the region, and providing countercyclical ECUADOR REPÚBLICA support to viable projects in countries with a difficult investment climate. EL SALVADOR BOLIVARIANA DE In FY04, we provided $1.6 billion in financing to the region, including GRENADA VENEZUELA GUATEMALA $374 million through syndications. Demand for our financing remained strong, particularly in infrastructure, energy, and manufacturing; syndications decreased after IFC helped set up several trade facilities with large syndications in FY03. Some project sponsors were refinancing or restructuring to secure longer-term funding after the prolonged downturn in the region. Two examples from Mexico are Copamex, a paper products company (see box), and the port in Manzanillo. Other firms sought IFC financing for new investments, including Thames Chile, whose projects will provide water to over 900,000 Chileans, about 30 percent of whom are below the poverty line. We also made a major investment in two power plants in Mexico (see box). With an emphasis on sustainability and technical assistance, IFC is expanding its role as a long-term partner to the region's private sector. This year we launched the work program of the LAC SME Facility, a multidonor effort to strengthen IFC'S LARGEST COUNTRY EXPOSURES the competitiveness of smaller businesses, simplify business regulations, broaden Portfolio for IFC's own account as of June 30, 2004 companies' access to finance, and foster indigenous and socially responsible (millions of U.S. dollars) enterprises. Initially serving Bolivia, Honduras, Nicaragua, and Peru, the facility embarked on pilot programs, helping simplify administrative procedures in La Paz, Brazil 1,316 Bolivia, and studying the microfinance sector in Peru and the wood sector in Bolivia and Nicaragua. FIAS also provided advice to help strengthen investment environments Mexico 1,068 in Central America and Peru and is collaborating with the new facility. We are supplementing financing with technical assistance to companies in the Argentina 817 region, for example Marlin in Guatemala (see box) and two repeat clients, Calidra, Colombia 401 a Mexican lime manufacturer, and Metrocentro, a Salvadoran retail firm. IFC is also providing technical assistance to help specific business sectors. This year we Peru 338 created an Internet-based business training program and related workshops for SMEs in the English-speaking Caribbean. On a pilot basis, IFC also continued to help Brazil's Zero Hunger initiative, where last year we began helping match municipalities' needs with private sector contributions (see box). 52 IFC 2004 ANNUAL REPORT COURTESY OF ANSM PROJECT FINANCING AND PORTFOLIO COMMITMENTS (millions of U.S. dollars) (millions of U.S. dollars) FY03 FY04 Financing committed for IFC's account 1,262 1,218 Loans 908 996 1,262 Equity and quasi-equity* 309 184 1,218 1,144 Structured finance and risk management 45 38 918 Loan syndications signed 918 374 Financing for IFC's own account TOTAL COMMITMENTS SIGNED 2,180 1,593 330 374 Syndications and underwriting Committed portfolio for IFC's account 6,145 6,076 Loans 4,966 5,035 FY02 FY03 FY04 Equity 1,099 928 Structured finance and risk management 79 112 Committed portfolio held for others 3,447 2,504 PROJECT COMMITMENTS AND COUNTRIES (loan participations) FY02 FY03 FY04 TOTAL COMMITTED PORTFOLIO 9,592 8,580 Number of projects 47 54 45 * Includes loan and equity-type, quasi-equity investments. Number of countries 16 16 16 Note: All numbers reflect rounding. IFC 2004 ANNUAL REPORT 53 We are helping financial markets in areas ranging from exports to housing, pension funds, and smaller businesses, and we continue to innovate with structured finance and risk management transactions. We participated in a currency swap transaction with Unibanco, a leading Brazilian bank. To help develop housing finance, which brings broad social and economic benefits, we provided mortgage credit lines in El Salvador, Mexico, Panama, and Peru; undertook studies in Central America; and sponsored a conference on the topic in the Andean region. The credit lines included IFC's first-ever support for residential construction finance and for mortgages backed by worker remittances. In Colombia, we partially guaranteed the region's first securitization of nonperforming mortgage-backed securities by Titularizadora Colombiana, a secondary mortgage company, with very favorable response from investors. This $67 million equivalent peso-denominated issuance creates a new instrument that could greatly accelerate the resolution of MADRID nonperforming loans in the country's banking sector and provide liquidity to CARLOS participating banks. IFC's continuing support to leading microfinance institutions included credit lines to Confia in Nicaragua and Sociedad Financiera Ecuatorial in Mexico and Central America: Ecuador, as well as loans to BancoSol and Prodem in Bolivia. IFC also provided Comprehensive Help to a a credit line for supplier financing to Odebrecht, a leading Brazilian construction Leading Manufacturer firm and existing client (see box). To strengthen private sector participation in the social sector, IFC made a IFC's investment in Copamex, a leading Mexican $20 million loan to Brazil's Fleury, a clinical diagnostic company and repeat client, manufacturer of paper goods also operating to help it enter the lower-income market and strengthen its market position. A in Costa Rica and Nicaragua, demonstrates $5 million loan to the University of the West Indies' Institute of Business in Trinidad the wide range of assistance we can offer to and Tobago will finance construction of campus buildings. firms in emerging markets. Working with Banco IFC plays a key countercyclical role in the region, supporting investment and Nacional de Mexico, a unit of Citigroup, we job creation in countries whose investment climates suffer from economic, political, arranged $175 million to support restructuring or social crises. In Venezuela, for example, IFC lent $105 million to a hydrocarbons and global debt refinancing for Copamex and its company to help develop oil reserves. In Argentina, IFC has made significant progress subsidiary, CPG, a joint venture with a Swedish in restructuring its portfolio and is providing access to long-term financing. Here IFC company. We also helped the company mitigate provided a $1 million guarantee to support exports, a $40 million equity investment its foreign exchange risk and find ways to improve to support acquisition and restructuring of a retail chain, and an $80 million long- its sustainability. term financing package, including $30 million for syndications, for a soy exporter. The financing consists of $75 million in loans Despite signs of recovery, the region remains vulnerable to shocks, with a low from IFC and a multicurrency syndicated facility savings rate, limited access to domestic credit, and reliance on external borrowings. equivalent to $100 million. The facility includes a IFC will continue to play a countercyclical role, tailoring its work to clients' needs $46 million loan from foreign banks participating and helping devise innovative approaches to business. Amid increasing competition, in IFC's B-loan program and a $54 million equivalent clients in the region face new opportunities, as evidenced by the intraregional Mexican peso loan from local banks. The U.S. investments that IFC is helping fund. A conference on investment opportunities dollar portion of the facility and $50 million from between Brazil and China, which we cosponsored in Sao Paulo in May 2004, also IFC have been swapped into Mexican pesos to exemplifies our efforts to help the region achieve sustainable growth. hedge against currency risk. In all, 10 commercial banks participated in the syndicated facility. IFC's assistance to Copamex extends beyond innovative financing. We will help the company strengthen its corporate governance and conserve energy and water in its operations. We will advise on bringing a recently acquired paper mill in Nicaragua into compliance with World Bank Group environmental policies and guidelines. IFC will also help the company to improve operating standards, including health and safety, for the company's suppliers in wastepaper collection and transportation. LIMA DE PEREIRA 54 IFC 2004 ANNUAL REPORT ADRIANO AZEVEDO BIANCA VIEIRA MARICY Brazil: Setting an Example on Corporate Social Responsibility Last year, IFC established a key role in the Brazilian government's Fome Zero (Zero Hunger) program, with funding and technical support to two nonprofit groups that developed a database, call center, and Web site to match the needs of Brazil's poorest municipalities with private companies willing to fund antipoverty projects. This year, on the initiative of administrative staff in Rio de Janeiro and Sao Paulo, IFC also became a program participant, sponsoring projects in four municipalities. A project in Brejao is now piping potable water to more than 1,300 people in a rural area. In Setubinha, IFC funded a laboratory for pathological testing in a newly built clinic. Granjeiro municipality will receive modern agricultural machinery to harvest sisal hemp, a project that could benefit 500 people. And in Aimores, small-scale farmers are receiving agricultural assistance. LIMA DE Each project has strong developmental impact, with a community and municipal government willing to share costs and collaborate to build and PEREIRA maintain the improvements. ADRIANO There has also been strong participation from Brazil's private sector in adopting projects. Management of the program's Web site and database has been transferred to Associacao Apoio Fome Zero Empresarial, a newly formed association of private companies in Brazil. IFC 2004 ANNUAL REPORT 55 Brazil: Investing in a Large Company's Supply Chain Construtora Norberto Odebrecht, S.A., is a leading engineering and construction company in Latin America and Brazil's largest exporter of these services. It is also a repeat client for IFC. In FY02, we provided $245 million in financing, including $165 million in syndicated loans to refinance the company's maturing debt, and helped the company set up an education, prevention, and care program to fight AIDS among the workforce and communities of its operations in Angola. This year, IFC provided a $25 million corporate loan to help the company fund advances to its small and medium suppliers and subcontractors in Latin America and build the capacity of these smaller firms. In addition, IFC is working closely with the company to build the capacity of these firms. The concept of this project, which emerged at the time of the earlier financing, developed into an innovative investment, fully integrated with the capacity building component. Odebrecht conducts business with more than 7,000 smaller firms across a wide array of sectors in Latin America. It provides a market for the firms' services, ENERGIA CPFL while benefiting from a loyal and dedicated OF supplier base. Advances from Odebrecht are COURTESY typically the main source of funding for the firms to run their day-to-day operations, as they have little or no access to bank financing. IFC's loan will allow Odebrecht to continue Latin America: A Leading Role in Corporate Governance to support its small and medium contractors, Throughout Latin America, IFC works with publicly listed firms, financial institutions, founder- improve their competitiveness through training, and family-owned companies, policymakers, securities regulators, stock exchanges, and other and demonstrate to them the benefits of market participants to strengthen governance in the private sector. With OECD, we cosponsor sustainable business practices. the Latin America Corporate Governance Roundtable, which in FY04 published its White Paper on Corporate Governance, a comprehensive strategy for public and private action on governance in the region. We are helping clients in the region meet new legal requirements and market expectations on governance so that they can access new sources of domestic and international capital. We have also advised the governments of Brazil, Chile, and Colombia on governance reforms central to developing broader and deeper public capital markets. IFC promotes mechanisms that help companies with good governance communicate this to investors, including BOVESPA's Novo Mercado, a special listing segment that we helped design and launch in Brazil. IFC has worked with large firms in the region, such as Odebrecht and CPFL Energia in Brazil and Suramericana Group in Colombia, on improvements in governance that distinguish them in their markets. Many of these companies have become active participants in the regional roundtable. We also provide assistance on topics tailored to the needs of smaller, privately held firms, including establishing management incentives, building strong boards of directors, and planning for succession. IFC trains all investment staff in a corporate governance methodology that was developed from operational experience, particularly in Latin America. ODEBRECHT OF COURTESY Guatemala: Sustainable Benefits from a Gold Mine IFC is making a $45 million loan to Montana Exploradora de Guatemala S.A. to develop the Marlin gold project in western Guatemala. The country's first major mining investment in over 20 years, the Marlin mine is expected to produce an average of 217,000 ounces of gold and 3.3 million ounces of silver annually for up to 15 years. In addition to providing financing, IFC will help plan and implement environmental and social programs in collaboration with Montana, nongovernmental organizations, local municipalities, and community members. IFC will help the company train indigenous communities to develop and manage nurseries for reforestation around the mine, as well as identify other potential markets that these nurseries can supply. The programs will help raise the standard of living of local people and provide sustainable economic opportunities that could outlast closure of the mine. The project supports Guatemala's efforts to invigorate investment and improve the competitiveness of the mining sector. It will also set the standard for social, environmental, and technical management for future mining projects in the country. The partnership with IFC is expected to strengthen the company's positive working relationship with the Guatemalan government and regulators. RUITEN VAN ANTON Mexico: Cleaner Energy, Ongoing Partnership Most international energy investors withdrew from Latin America as the region's slowdown was compounded by an energy crisis in California and a fall in world stock markets. In Mexico, the number of investors bidding for independent power producers declined significantly, and power generation lagged behind the growth in demand. Amid these conditions, IFC provided $484 million in financing, including $340 million in syndications, for construction and operation of two natural gas-fired power plants, Rio Bravo III and Rio Bravo IV. The project supports Electricité de France International S.A., one of the few major power companies still investing in emerging markets. It also signals an evolving partnership for building reliable power infrastructure in the region: IFC provided financing for two nearby plants with the same sponsor in 2000. IFC's participation was critical because of the large amount of long-term financing that the project needs to mobilize in a short period and the regulatory uncertainty for the sector in Mexico. The output from the two plants will be sold exclusively to the country's state-owned electric utility, Comision Federal de Electricidad, under a 25-year power purchase agreement. The projects will help provide reliable, environmentally sound power generation capacity to address Mexico's growing demand at a very competitive price. In line with the strategy of the Ministry of Energy and the electric utility, the plants will increase the country's gas-fired, combined-cycle capacity--currently less than 10 percent of the total--which should result in lower-cost generation and positive environmental impacts. BRAVO RIO OF COURTESY IFC 2004 ANNUAL REPORT 57 I F C R E G I O N A L R E P O R T S Middle East and North Africa Meeting Diverse Needs in a Complex Region AFGHANISTAN Fiscal 2004 was a year of major challenges and important new initiatives for ALGERIA IFC in the Middle East and North Africa. Working in a diverse region, ranging BAHRAIN from Morocco in the west to Pakistan in the east, IFC's MENA team tailored its ARAB REPUBLIC OF EGYPT approaches to match the differing needs of each market. While some countries ISLAMIC REPUBLIC OF IRAN enjoyed a strong year economically and considerable liquidity in their financial IRAQ markets, others struggled with conflict. IFC pursued a broad range of activities JORDAN that included technical assistance and advisory assignments as well as investment. KUWAIT IFC initiated its program in Iraq, made its first commitments in Afghanistan in LEBANON decades, and launched a facility to provide technical assistance in frontier markets. LIBYA IFC also invested in Egypt Housing Finance Company, the first private housing MOROCCO finance institution in Egypt (see box). OMAN In FY04, IFC committed $236 million in 18 investments. The focus of the PAKISTAN program was on the financial sector (including micro and small business and SAUDI ARABIA housing); manufacturing (with emphasis on the building materials sector); and oil SYRIAN ARAB REPUBLIC and gas. Rounding out the sectoral range were investments in infrastructure and TUNISIA information technology. In addition to its Afghan, Egyptian, and Iraqi activities, UNITED ARAB EMIRATES IFC invested in Algeria, Iran, Pakistan, and Tunisia. WEST BANK AND GAZA IFC paid particular attention to its technical assistance program for the region, REPUBLIC OF YEMEN with an emphasis on creating greater synergies between this work and its more traditional investment activities. The North Africa Enterprise Development facility, which operates in Algeria, Egypt, and Morocco, completed its second year of work with small and medium enterprises. Specific initiatives included targeted support for the banking sector to develop SME lending capacity; notably, a broad-based public workshop on best practices for SME lending, held in Egypt in April 2004, drew 250 attendees from financial institutions and governments. Other initiatives included linkage programs, where IFC helps its larger industrial clients build supplier relationships with smaller local businesses. An example of this is our work with SEKEM, a manufacturer of organic pharmaceuticals in Egypt that has established IFC'S LARGEST COUNTRY EXPOSURES supply contracts with family-owned farms. Portfolio for IFC's own account as of June 30, 2004 During FY04, IFC launched the Private Enterprise Partnership for the Middle East, (millions of U.S. dollars) a facility to support private sector development in four frontier markets: Afghanistan, Iraq, West Bank and Gaza, and Yemen. This initiative will focus on four broad areas: Pakistan 354 the financial sector, the business-enabling environment, smaller businesses, and the privatization or restructuring of state-owned enterprises (see box). Egypt 307 IFC also made two investments that bring Afghanistan into our portfolio and help promote the country's economic recovery. An equity commitment of $1.25 million Morocco 84 for the First Microfinance Bank of Afghanistan represents IFC's first investment Jordan 83 in the country in almost 30 years. In addition to the investment, IFC will provide technical assistance for the FMBA. This groundbreaking deal will provide access to Algeria 74 finance for the smallest businesses in a country that, despite recent years of 58 IFC 2004 ANNUAL REPORT KEITH MARTIN PROJECT FINANCING AND PORTFOLIO COMMITMENTS (millions of U.S. dollars) (millions of U.S. dollars) FY03 FY04** 279 Financing committed for IFC's account 279 236 236 Loans 158 125 Equity and quasi-equity* 8 74 189 Structured finance and risk management 113 37 Loan syndications signed 0 0 Financing for IFC's own account TOTAL COMMITMENTS SIGNED 279 236 Syndications and underwriting Committed portfolio for IFC's account 1,326 1,156 32 Loans 803 840 0 0 Equity 242 191 FY02 FY03 FY04 Structured finance and risk management 281 125 Committed portfolio held for others 837 706 (loan participations) PROJECT COMMITMENTS AND COUNTRIES TOTAL COMMITTED PORTFOLIO 2,163 1,862 FY02 FY03 FY04 Number of projects 17 17 18* * Includes loan and equity-type, quasi-equity investments. ** Includes regional share of LNM Holdings investment, which is officially classified as a global project. Number of countries 5 6 8 Note: All numbers reflect rounding. * Includes LNM Holdings. IFC 2004 ANNUAL REPORT 59 Egypt: Increasing Home Ownership Builds Capital Markets Egypt has strong pent-up demand for long-term conflict, has an entrepreneurial history and culture (see box). We also committed housing loans. Up to now, consumers' options have a second investment in Afghanistan: the Kabul Serena, the first business hotel been limited to relatively small loans from just a few to be developed in the country in many years. The project will restore and expand public sector banks. People buying nonsubsidized a hotel facility that had fallen into disrepair, allowing it to play a vital role in housing units have faced the choice of paying development of business infrastructure and, over the longer term, tourism. the whole amount up front or making short-term In Iraq, IFC began a significant initiative in the financial sector. In a country installments to property developers at high interest torn by turmoil, the needs of the private sector have not been met for decades. rates. Hence, IFC has invested in the Egypt Housing Together with donors, IFC is establishing the Small Business Finance Facility Finance Company, the country's first private housing for Iraq. The facility will provide financing and technical assistance for financial finance institution. With our equity investment of institutions in Iraq that on-lend to small businesses. $1.6 million, EHFC will begin to address the scarcity The need for IFC's assistance to the financial sector is not limited to countries of long-term loans for potential homeowners. There in crisis. In more developed and stable markets, IFC is also making a difference, will also be spillover effects from its mortgage particularly in expanding lending to SMEs. Responding to a need expressed financing--improved quality of housing stock and more readily available and affordable housing, by Pakistani financial institutions, IFC has launched a capacity building initiative particularly for Egypt's burgeoning middle class. EHFC that trains commercial banks' senior management and loan officers in lending is expected to play a catalytic role in developing a to smaller businesses. The curriculum will address skill gaps in assessing the housing finance industry that will ultimately lead to SME market, identifying lending opportunities, evaluating creditworthiness, economic growth and job creation. The economy will and developing risk management systems to monitor small business portfolios. get a sustained lift from higher output and job growth Other financial sector investments supporting SMEs this year included in the construction sector and other downstream Banque Internationale Arabe de Tunisie in Tunisia, with funding aimed at industries, while financial markets will deepen as smaller businesses and consumer finance. BIAT marks IFC's first investment more savings held by local and expatriate Egyptians in Tunisia since 1998. It introduces a new financial instrument in the Tunisian pass into the formal economy. banking sector in the form of tier II capital. IFC's work supports ongoing efforts IFC's investment in EHFC demonstrates our by the World Bank and the IMF to strengthen the country's financial sector. commitment to developing Egypt's financial markets through technical assistance and institution building, while at the same time creating an outlet for affordable housing finance that will help a vast number of Egyptians attain a higher standard of living. Iraq: Business Training for Women IFC and the World Bank are working to establish a global network of women entrepreneurs and business associations that can share best practices and press for improvements in the business climate that benefit women in developing countries. As part of this initiative, a delegation of Iraqi businesswomen and policymakers interested in women's business issues, led by Dr. Rajaa Khuzai of the Governing Council, attended a capacity building training program in Vancouver, Canada, in early 2004. Women entrepreneurs from Jordan, representing business associations in their country, accompanied the delegation to present possible models for associations in Iraq. Discussions also focused on ways of delivering financial services to women entrepreneurs. The program featured a workshop cosponsored by FIAS to help translate the event into tangible commitments that advance the business agenda for women in Iraq. These include a workshop for other women entrepreneurs in Iraq to share key concepts from the Vancouver event; the Iraqi Businesswomen's Association is also establishing a program to help women learn entrepreneurial skills. Dr. Rajaa and her group are exploring connections with the U.S. National Women's Business Council as a potential model for Iraqi businesswomen to provide input to policymakers on improving the climate for private investment. WOOD 60 IFC 2004 ANNUAL REPORT BETTY Afghanistan: A Pioneering Investment in Microfinance In FY04, IFC made its first commitment in Afghanistan since 1973, with an investment in the First Microfinance Bank of Afghanistan. Recently incorporated as the first full-service financial institution in the country, FMBA is providing credit and savings products to micro and small enterprises, a segment of the economy with great potential for growth given Afghanistan's culture of entrepreneurship. These businesses generally depend on funds from family and friends, limited supplier financing, or high-cost loans from informal money lenders. FMBA will initially operate in Kabul and the northeastern provinces, but it expects to grow and operate across the country through a network of regional hubs, allowing it to serve rural and semi-urban areas. IFC seeks to encourage the growth of strong private sector enterprises and believes that investing in financial intermediaries is an effective way to reach entrepreneurs and small business owners. IFC entered into this transaction with the Aga Khan Fund for Economic Development, with Kreditanstalt für Wiederaufbau of Germany to join as a future shareholder. IFC's investment of $1 million will result in a 17 percent shareholding following KfW's investment. MARTIN KEITH Private Enterprise Partnership for the Middle East IFC launched the Private Enterprise Partnership for the Middle East in FY04. Patterned after the successful, multidonor Private Enterprise Partnership that IFC operates in the former Soviet Union, PEP-ME aims to provide broad-based technical assistance to support private sector development. The program focuses on four markets in the MENA region--Afghanistan, Iraq, West Bank and Gaza, and Yemen--that face particularly challenging economic circumstances, due either to conflict or to their overall level of development. PEP-ME is being managed through IFC's regional hub in Cairo, where sector specialists will be located, and there will also be staff in World Bank offices in all four markets. PEP-ME's specific activities will depend on the particular circumstances and needs of each location, but the focus, in keeping with larger IFC strategy, will be to develop the financial sector; support small and medium enterprises; address the business-enabling environment, including regulatory and legal issues; and support the restructuring or privatization of state- owned enterprises. The PEP-ME program will be supported by funds from IFC and other donors. Initial work is underway on training for financial institutions, as well as for businesswomen in Iraq. In June 2004, the partnership collaborated with the Arab Academy for Banking and Financial Services to MARTIN conduct a three-day workshop in Amman, Jordan. To help build technical capacity for 50 senior managers KEITH of Iraqi private sector and public sector banks, training topics ranged from credit risk management to asset-liability management, strategic planning, foreign risk management, and marketing. Attendees, whom the Iraq Bankers' Association helped assemble, were mostly from private financial institutions. They included heads of units dealing with risk management, retail banking, marketing, and auditing. IFC 2004 ANNUAL REPORT 61 A C C O U N TA B I L I T Y Remaining Accountable Compliance Advisor/Ombudsman The Office of the Compliance Advisor/Ombudsman is the independent accountability mechanism of IFC and MIGA, established in 1999 and reporting directly to the president of the World Bank Group. The CAO serves as an ombudsman who responds to complaints from people affected or likely to be affected by projects; as an auditor who assesses IFC's and MIGA's compliance with environmental and social safeguards; and as an advisor, providing independent advice to the organizations' president and senior management on policies and systemic issues, including those that arise in complaint investigations and compliance audits. During FY04, the CAO received 15 new complaints and continued work on ongoing cases. The CAO works to resolve complainants' issues and avoid future problems through mediation, negotiation, or fact-finding involving IFC or MIGA staff, project sponsors, and affected persons. There has also been one compliance audit, and guidelines for the audit process and other functions have been revised and updated. An external review of the CAO by a team of independent consultants was also released in FY04. While praising the CAO's integrity and progress to date, the review recommended improving communications about how the CAO operates, strengthening internal management systems, and initiating audits. It also recommended further review of the compliance audit function; audits can be initiated in response to an ombudsman complaint, at the request of the president or senior management, or when the CAO deems it necessary. The CAO makes its operational guidelines and all other public documents available in print and on its Web site, www.cao-ombudsman.org. The guidelines are available in Arabic, Chinese, English, French, Portuguese, Russian, and Spanish. Peru: Studying Water Quality with Local People's Help This year, the CAO managed an extensive, independent water study of the Cajamarca region of Peru, the site of a mercury spill in 2000 that involved Minera Yanacocha, a gold mine in which IFC is an investor. The study assessed the mine's impacts on the watershed, a key concern of local communities, and grew out of the Mesa de Dialogo, a mediation effort between the mine and affected communities that the CAO started in 2001. The CAO hired independent hydrologists to carry out the work, which was innovative in involving local people, veedores, to help monitor and verify data collection. Data gathering and analysis were completed in the summer of 2003; the results were presented to the Mesa de Dialogo in October and to IFC in December 2003. Although the report is completed, water study work is ongoing, as the Mesa de Dialogo works to address the issues and problems raised. The effort has identified important lessons for IFC in best practices and participatory planning. MAEST 62 IFC 2004 ANNUAL REPORT ANN IFC Organizational Structure BOARD OF GOVERNORS BOARD OF DIRECTORS James D. Wolfensohn President Gregory Ingram W. Paatii Ofosu-Amaah Meg Taylor Director-General Vice President & Compliance Advisor/ Operations Evaluation Corporate Secretary Ombudsman1 William E. Stevenson Peter L. Woicke Director Managing Director, WBG Operations Evaluation Executive Vice President, IFC Group2 Joseph O'Keefe Rachel Kyte Declan J. Duff Manager Director Director Corporate Relations Environmental & Municipal Fund Social Development Michael Klein Assaad J. Jabre Farida Khambata Dorothy H. Berry Jennifer Sullivan Nina Shapiro Vice President Vice President Vice President Vice President General Counsel Vice President Private Sector Operations Portfolio & Risk Human Resources & Director Finance & Treasurer Development Management & Administration & IFC Chief Economist3 Neil Roger Jean-Paul Pinard Edward A. Nassim Allen F. Shapiro Director Director Director Director Treasury Investment Climate & Agribusiness Central & Eastern Controller's General Manager FIAS3 Europe & Budgeting Jonathan Hakim Laurence Carter Jyrki Koskelo Javed Hamid Guy-Pierre de Poerck Director Director Small & Director Director Chief Information Officer Resource Mobilization Medium Enterprises3 Global Financial East Asia & the Pacific Corporate Business Markets Informatics Teresa Barger Dimitris Tsitsiragos Atul Mehta Marc Babin Director Director Director Director Corporate Governance4 Global Manufacturing Latin America Corporate Portfolio & Services & the Caribbean Management Guy Ellena Sami Haddad Sakdiyian Director Director Kupasrimonkol Toshiya Masuoka Health & Education Middle East Director Senior Manager & North Africa Credit Review Details of IFC organization Operational Strategy and management on p. 111. Francisco Tourreilles Iyad Malas Avi Hofman Bernard Sheahan Director Director Director Director Infrastructure South Asia Financial Operations Advisory Services Lakshmi Motoharu Fujikura Haydée Celaya Khosrow K. Zamani Shyam-Sunder Director Director Director Associate Director Tokyo Office 1. Vice presidential rank; serves same role for MIGA. Private Equity & Southern Europe Risk Management 2. Reports to the Director-General, Operations Investment Funds & Central Asia & Financial Policy Harold Rosen Evaluation; to Peter Woicke for administrative Director purposes. Grassroots Business Mohsen Khalil Richard Ranken Maria da Graca 3. Jointly IFC and World Bank. Organizations3 Director Director Domingues 4. Also reports to Vice President, Portfolio & Global Information Sub-Saharan Africa Director Risk Management. & Communication Special Operations 5. Also reports to World Bank Vice President Technologies3,5 for Infrastructure. Rashad-Rudolf Kaldany Udayan Wagle Director Director Oil, Gas, Mining Trust Funds & Chemicals3,5 IFC 2004 ANNUAL REPORT 63 2004 Annual Review and Appendixes Operations Evaluation Group 65 Financial Review 67 Portfolio Review 71 Products and Services 74 Project Commitments 76 Technical Assistance and Advisory Projects 92 PAGE 105 Appendixes PAGE 65 2004 Annual Review Board of Governors 105 Board of Directors 109 IFC Organization and Management 111 IFC Field Contacts 115 IFC Addresses 117 Participants in Loan Syndications 119 Equator Principles: Adopting Institutions 119 Acronyms, Notes, and Definitions 120 64 IFC 2004 ANNUAL REPORT 2 0 0 4 R E V I E W Operations Evaluation Group OEG evaluates IFC's investment projects and programs, as well as the Corporation's related strategies, policies, and procedures. OEG reports to IFC's Board of Directors, who discuss its evaluations. Many evaluations are carried out jointly with OEG's counterparts in the World Bank and MIGA. In FY04, IFC's Board discussed a sector evaluation on extractive industries, as well as country evaluations on Brazil and China, two of the Corporation's largest client countries. OEG also completed evaluations of IFC's project development facilities and the investment climate for private sector development, in addition to chairing a task force that is developing an evaluation framework for technical assistance and advisory services. Findings from OEG's Annual Review Each year, IFC's investment staff evaluate a representative DEVELOPMENT OUTCOMES random sample of investments that have reached operating Based on a synthesis of their performance ratings, 58 percent maturity. OEG analyzes the results and presents its findings of operations made positive contributions to development. in its Annual Review. This year's review covers 1995­97 The indicators for each project were: investment approvals and identifies four main drivers of IFC's development and investment results: the relative level · Private sector development (72 percent success rate): of a project's intrinsic risk and IFC's associated instrument A positive demonstration effect in creating sustainable selection; IFC's work quality; IFC's strategic choices of a enterprises capable of attracting finance, increasing sector, thematic, or country focus; and the quality of the competition and linkages, or bringing about country or global business climate and the prospects for its improvements in the regulatory environment. improvement. Of these, project risk intensity and IFC · Environmental impacts (64 percent success rate): work quality were the factors most closely associated with IFC's environmental, social, and health and safety the quality of development and investment outcomes. requirements achieved or exceeded. Collectively, the four factors accurately predicted the quality of about two-thirds of the outcomes. · Economic sustainability (61 percent success rate): Acceptable economic returns to society, taking WIN-WIN OUTCOMES into account net gains or losses by nonfinanciers, nonquantifiable impacts, and contributions to Among the evaluated operations, 41 percent achieved widely held development objectives. "win-win" outcomes because they fulfill IFC's mandate at the individual investment level, contributing both to · Project business success (39 percent success rate): development objectives within a country and to IFC's Returns equal to or greater than the project cost of own financial capacity for future development outreach. capital (in the real sector) or, for projects in the IFC achieved these results against a backdrop of relative financial sector, subportfolios that contributed to adversity in the emerging markets. During 1995-97, the intermediary's profitability, financial condition, private capital flows to emerging markets were at their and business objectives. peak, and IFC faced a challenge to find viable investment Examples of successful and unsuccessful development opportunities where it had a demonstrable role. At the outcomes are given on the next page. same time, it faced pressure from its stakeholders to stimulate capital flows more widely in higher-risk environments. In response, in 1998 IFC formulated a strategic focus on frontier country markets and strategic sectors where its impact was greatest. IFC 2004 ANNUAL REPORT 65 IFC'S INVESTMENT OUTCOME ASSESSING THE PROSPECTS FOR Relative to development outcomes, fewer operations RECENT IFC INVESTMENTS (49 percent) yielded satisfactory investment outcomes The prospective quality of IFC's most recent investments for IFC. This has been a consistent relationship across all cannot be assessed reliably until their commercial OEG's Annual Reviews and is not surprising considering performance has been demonstrated sufficiently to support that a private sector enterprise must pay its employees, a sound projection of results over a project's full operating suppliers, and the government (through taxes) before the life. Having established the strong link between a project's owners and investors receive their return. OEG found that intrinsic risk intensity and its investment performance, as the number of high-risk factors in projects increased, their however, OEG studied a sample of recently committed investment outcome success rates were reduced (see figure). investments to assess their risk levels relative to the mature evaluated sample and their prospective investment performance going forward. OEG found that the recent THE EFFECT OF HIGH-RISK FACTORS investments generally featured lower levels of risk and that ON PROJECT INVESTMENT OUTCOMES IFC's choices of investment instrument were better tailored to the projects' risk characteristics. Rate Further information on OEG reports can be found at 77% www.ifc.org/oeg. 63% Success 36% 29% Outcomes: 16% <=2 3 4 5 >=6 Investment Number of High-Risk Factors A Project with a Highly Successful A Project with an Unsuccessful Development Outcome Development Outcome The project was a two-year capital expenditure program to The project was a renovation and upgrading of a company's meat rehabilitate and expand a recently privatized water and sewerage processing plants, aiming to enhance the quality of export products, system in a major capital city. expand the product range, and improve hygiene standards. Project Business Performance: Excellent. The project was Project Business Performance: Unsatisfactory. The project completed below budget and on time. Capacity increased by failed financially, having been unsuccessful in positioning the 26 percent, resulting in nearly 1 million new water customers and company to expand into the domestic market at a critical time about 400,000 additional sewerage customers in a city of 9.4 million when export markets collapsed. The project helped improve the people. The company has been operating profitably throughout. company's overall efficiency, but the firm remained exposed to raw Economic Sustainability: Excellent. The project made available material price volatility given that the dominant domestic operators a reliable, 24-hour, clean water supply for the first time in many controlled cattle supply. disadvantaged neighborhoods. The project's economic return of Economic Sustainability: Unsatisfactory. The company 36 percent reflected taxes paid and the consumer surplus. Also, benefited from an export subsidy, which helped its owners and company employees benefited from secure employment, improved financiers more than other members of society. A cattle disease working conditions, better pay. They could also own company shares. outbreak overseas caused the company to restructure and reduce Environmental Impacts: Satisfactory. Without the project, the its labor force by closing two old plants in low-income areas. adverse impacts on health associated with unsafe water would have Environmental Impacts: Satisfactory. The project created high remained a burden to people's lives and the economy. The project safety standards for employees at one plant. Management ensured helped the company work toward full compliance with local compliance with IFC environmental guidelines and local regulations environmental obligations. including air emissions, safety, and hygiene. Private Sector Development: Excellent. The project engaged Private Sector Development: Partly Unsatisfactory. The project several contractors with about 11,000 workers. Some of these were failed to stimulate a large-scale modernization of the domestic meat small and medium enterprises set up by former employees. The processing industry, which continued to be dominated by fragmented provision of water enabled the establishment of schools and clinics and inefficient operators who often violate hygiene standards. in areas the company served. 66 IFC 2004 ANNUAL REPORT 2 0 0 4 R E V I E W Financial Review Operating income1 in fiscal year 2004 was $982 million, above the $528 million earned in FY03 and $161 million in FY02 (operating income excludes the effects of accounting standards for derivatives and hedging activities; including these effects, IFC's net income totaled $993 million in FY04). Operating income in FY04 comprised income of $915 million from the Corporation's client services operations compared to $205 million in FY03 and income from treasury services of $67 million, after administrative expenses, below the $323 million treasury contribution in FY03. Overall, the Corporation's operating return on average net worth rose from 8.2 percent in FY03 to 13.1 percent in FY04. The strong growth in profit on client services operations New investment commitments for IFC's account reflected significant realized gains on sales of investments amounted to $4.8 billion (including $0.2 billion in signed and robust dividend income from the equity portfolio, guarantees), and an additional $880 million in loan stronger loan portfolio income, and the positive impact of a syndications were signed. The disbursed investment portfolio release of loss reserves in FY04. The loan portfolio generated was $12.3 billion at June 30, 2004, up 3 percent from its operating income of $304 million in FY04 (after charges for level at June 30, 2003. The Corporation's administrative nonaccruals, specific loss provisions, internal administrative expenses grew 8 percent to $360 million in FY04. As a expenses, borrowing costs, and loan hedging costs). This share of the average disbursed investment portfolio, total follows an operating profit of $174 million in FY03. administrative expenses rose to 3.0 percent in FY04, up The liquid asset portfolios outperformed their investment from 2.9 percent in FY03. Administrative expenses include benchmarks by a record amount in FY04 and earned a the grossing-up effect of certain revenues and expenses positive return for the year. Reflecting the rise in U.S. attributable to the Corporation's reimbursable program Treasury yields during the fiscal year, however, income from liquid assets fell to $67 million, of which $104 million were IFC'S FINANCIAL PERFORMANCE HIGHLIGHTS realized and unrealized losses ($323 million and $157 million gain, respectively, in FY03). (millions of U.S. dollars) The equity and quasi-equity portfolios--that is, the FY03 FY04 portfolios funded from net worth--recorded operating Client services--operating income 205 915 income of $585 million in FY04, significantly above the Loan--operating income 174 304 operating income of $114 million in FY03. Capital gains Equity/quasi-equity--operating income 114 585 on equity sales totaled a record $381 million in FY04, up Technical assistance (9) (7) from $52 million in FY03. Contributions to facilities (28) (29) Operating income from IFC's treasury services was lower in FY04, reflecting lower short-term yields and realized and Corporate charges and other (46) 62 unrealized trading losses in a more adverse bond market. IFC treasury services--operating income 323 67 Income from liquid assets totaled $67 million in FY04, of IFC treasury services--liquid assets 323 67 which $104 million was realized and unrealized losses. IFC operating income 528 982 ($323 million and $157 million gain respectively in FY03). 1. Certain amounts in the prior years have been reclassified to conform to the current year's presentation. IFC 2004 ANNUAL REPORT 67 ($32 million in FY04, as compared with $30 million in adequacy framework adopted by the Board of Directors in FY03). IFC's borrowings continued to keep pace with its May 1994. IFC's leverage ratio--which is outstanding lending activities. New borrowings in the international borrowings and guarantees measured in relation to the sum markets totaled $3.0 billion equivalent in FY04. of subscribed capital and retained earnings--was 2.3 to 1, well within the limit of 4.0 to 1 prescribed by the Articles of Agreement. Financial Performance of Major Product Lines Funding Management Disbursed and outstanding loans (excluding loan-type quasi- In FY04, IFC borrowed $3.0 billion equivalent in the equities), or straight loans, rose 5 percent from $7.8 billion international capital markets. In FY04, IFC also in FY03 to $8.3 billion in FY04. IFC's loan portfolio repurchased $33 million in outstanding debt. These recorded operating income in FY04 of $304 million, repurchases were undertaken as part of IFC's strategy of compared to operating income of $174 million in FY03. enhancing the liquidity of its outstanding bond issues. Lower nonaccrual rates, higher recoveries of interest past IFC issued securities in nine currencies during FY04-- due, stronger financial fee income, and a release of specific U.S. dollars, Japanese yen, Australian dollars, euros, loss reserves all contributed to the improved performance of Colombian pesos, Hong Kong dollars, Peruvian soles, the straight loan portfolio. Operating income on the straight Hungarian forints, and British pounds. The largest loan portfolio was equivalent to 22.9 percent of capital borrowing of the year was a US$1 billion global bond issue. employed, compared to a return of 14.5 percent in FY03. IFC raised 45 percent of total new borrowings in FY04 The equity and quasi-equity portfolio (including loan- through U.S. dollar­denominated issues, 35 percent via type quasi-equities), IFC's net worth­funded portfolio, structured Japanese yen issues, 8 percent in Australian dollars, contracted by 3 percent in FY04 to $4.0 billion. This 4 percent in Hong Kong dollars, 3 percent in Colombian portfolio recorded a record operating income of $585 million pesos, 1.5 percent in British pounds, 2.0 percent in in FY04, compared to operating income of $114 million in Hungarian forint, 1.0 percent in euros, and 0.5 percent in FY03, because of significant capital gains from sales of Peruvian soles. Over 60 percent of the total funding was equities, strong dividend income, and a release of specific raised in the Japanese capital markets, and all borrowings reserves. Capital gains totaled $381 million compared with were swapped into floating-rate U.S. dollars. Most loans $52 million in FY03. Due in part to rising global markets for made by IFC are denominated in U.S. dollars on a floating- energy and resources, dividend income also grew strongly, rate basis. The below-LIBOR cost achieved through the use totaling $207 million in FY04, up from $147 million in FY03. of currency and interest rate swaps as well as the income Operating income on this portfolio (net of custody fees and generated through debt repurchases contributed to derivatives gains and losses) amounted to a return on capital maintaining IFC's low funding cost in FY04. employed of 17.6 percent in FY04, after 3.4 percent in FY04. In FY04 there was a release of loss provisions totaling $177 million, compared to a charge of $98 million provided in FY03. The accumulated reserve against losses on loan and OPERATING INCOME AND RETURN equity investments declined to 16.5 percent of the year-end ON AVERAGE NET WORTH disbursed and outstanding portfolio, significantly below the level of 21.9 percent in FY04. Operating Income Return on Average Net Worth Capital and Retained Earnings 1,000 15 IFC's net worth consists of retained earnings and paid-in 800 12 capital. IFC's paid-in capital was $2.4 billion, unchanged from the end of FY03, while net income of $993 million Dollars 600 9 increased retained earnings to $5.4 billion. The Corporation's U.S. cent of Per net worth at the end of FY04 was $7.8 billion. 400 6 On June 30, 2004, IFC's capital adequacy ratio (paid- Millions in capital, retained earnings, and adjusted general reserves 200 3 compared with risk-weighted assets, both on- and off- balance sheet) stood at 48 percent. This is well above the 0 0 FY00 FY01 FY02 FY03 FY04 policy minimum of 30 percent, defined under the capital 68 IFC 2004 ANNUAL REPORT Liquid Management borrowing transactions, as well as to fund all of IFC's administrative expenses. P0 outperformed its overnight Liquid assets on the balance sheet totaled $13.1 billion at effective U.S. Federal Funds benchmark, delivering a return June 30, 2004, up from $13.0 billion from a year earlier. of 1.11 percent compared to 1.03 percent on the benchmark. The majority of liquid assets are held in U.S. dollars, with The P1 portfolio consists of funded liquidity, namely, small euro and yen balances held to support operational the proceeds of variable-rate borrowings, which are invested disbursements. Total liquid assets held are determined by in high-quality investments pending disbursements of constraints associated with IFC's AAA/Aaa credit ratings approved loans. IFC's objective is to outperform the total and, notably, by the pace of new market borrowings and return of its benchmark--three-month USD deposits-- new loan and equity disbursements to clients. within the interest rate and credit risk limits allowed. The In FY04, IFC's liquid asset portfolios performed well in total return was 1.76 percent as compared to the benchmark difficult and volatile financial markets. In the first quarter, return of 1.03 percent, with an excess return of 0.73 percent, U.S. Treasuries sold off sharply as previous fears of deflation up from 0.5 percent in FY03. abated, the geopolitical situation improved, and the global-- The P2 portfolio corresponds primarily to the and particularly the U.S.--economy accelerated sharply. Corporation's paid-in capital and accumulated earnings. Reflecting the improved outlook, investor risk appetite rose P2 is managed against a three-year duration benchmark significantly in the financial markets, boosting stock (including the residual fixed-rate loan portfolio). The markets. Bond yields then remained in a broad range over portfolio is actively managed on a total return basis against the following two quarters as investors waited for evidence this benchmark. The return for FY04 was 0.65 percent that the U.S. recovery was self-sustaining and generating versus a benchmark return of -0.44 percent--a margin of employment. Doubts about this--which led to a bond 1.09 percent over benchmark. The favorable performance market rally early this calendar year--were finally alleviated relative to benchmark was mainly the result of relative value in the final quarter of the fiscal year as jobs growth picked strategies, selling conventional U.S. bonds and buying up sharply. This, plus an uptick in inflation, led the U.S. particularly U.S. real (inflation-protected) bonds but also Federal Reserve's Federal Open Market Committee to begin conventional bonds in Europe; and active securities lending. removing its accommodative monetary stance, beginning The P3 portfolio consists of funded liquidity, originally with a 0.25 percent rate hike at its June 30, 2004, meeting. taken from the P1 portfolio. This portfolio is now actively Growth also picked up abroad, particularly in Japan but managed by six external managers against the P1 benchmark. also more modestly in Europe. In this environment, the At the end of FY04, assets in the P3 portfolio totaled liquid asset portfolios generated $67 million in operating $1.053 billion--approximately 8 percent of the Corporation's income, with $39 million in spread income from funded total liquid assets. The portfolio consists of a Global Fixed liquidity and $35 million from net worth liquidity, Income (GFI) program allocated to two asset managers comprising interest income net of realized and unrealized with $311 million under management and a mortgage- losses. This compares with $323 million during FY03, backed securities (MBS) program allocated to two asset which included $36 million in spread income from funded managers with $371 million under management. The liquidity and $293 million in interest and gains income remaining $371 million is managed by two asset managers from net worth liquidity. as a hybrid GFI/MBS mandate. The P3 portfolio delivered IFC's liquid assets are invested in line with policies and an absolute return of 1.27 percent for FY04, outperforming standards set under the Investment Authority granted by the benchmark by 0.24 percent. the Board of Directors. The authority specifies the types of The P4 portfolio is the outsourced portion of the P2 instruments and entities eligible for investment. IFC is portfolio. The P4 external managers' program was started authorized to invest its liquid assets in the obligations of at the beginning of this fiscal year. IFC treasury appointed highly rated governments, agencies, corporations, and three managers with an initial allocation of $100 million commercial banks. Within the authority's framework, IFC's each, effective July 1, 2003. At the end of FY04, assets in senior management has established prudent guidelines for the P4 portfolio totaled $300 million--approximately managing the different dimensions of risk inherent in a large, 2 percent of the Corporation's total liquid assets. The P4 diversified bond portfolio with particular regard to market portfolio uses the Lehman Brothers U.S. Intermediate (interest rate) risk and credit risk. For management and Treasury Index as its benchmark, an industry standard for reporting purposes, IFC's liquid assets are separated into five comparable portfolios. For FY04, the P4 portfolio lost distinct portfolios and invested globally in the highest-quality 0.12 percent but beat its benchmark by 0.4 percent. assets, including sovereign and triple-A-rated corporate bonds. Starting in FY05, the P2 portfolio will also be judged The P0 portfolio is a cash account to process all of IFC's versus the Lehman Brothers benchmark, which will make operational loan and equity disbursements and receipts and performance exactly comparable going forward. IFC 2004 ANNUAL REPORT 69 Risk Management and the matched-funding policy, loans are funded by liabilities with similar interest rate and currency characteristics. Financial Policies Under the liquidity policy, IFC is required to maintain a level of liquid assets of not less than 65 percent of the next In keeping with industry best practice, risk management three years' projected net cash flow requirements at all times. and financial policies are administered by a separate group IFC's liquid asset holdings are made up of market-funded under the Vice Presidency of Portfolio and Risk Management. portfolios and a net worth­funded portfolio. Interest rate The unit is independent from all transaction groups and is risks are managed against duration benchmarks for each of responsible for recommendations on financial policy and the portfolios, and currency risks are managed by using risk management issues, formulation and maintenance of derivatives to hedge the currency exposure. Credit risks are internal financial policy guidelines (and monitoring managed through eligibility requirements for investments compliance with these guidelines), and rating-agency issues. and issuer limits based on size and rating as well as It covers business operations, treasury activity, and the concentration limits on asset classes. newer area of active portfolio management with a view to IFC uses derivatives in the areas of funding, liquidity ensuring coherence and consistency in policies and an management, asset-liability management, client risk integrated financial framework for all business activities. management products, and active portfolio management. IFC's overall activities are governed by a set of financial With the exception of the use of derivatives for active policies on exposure, capital adequacy, leverage, asset-liability portfolio management, and some positions taken in liquid management, liquidity, and derivatives. Specific activities in assets management, other uses of derivatives do not entail treasury and portfolio management are subject to detailed market risk, as they are used only for hedging purposes. internal management guidelines for each area of activity. Market risk arising from derivative use in liquid assets and IFC has policies that set guidelines on exposure to portfolio management activities is subject to the respective countries, sectors, products, and groups as well as single guidelines for such activities. While the other derivatives obligors. While these guidelines serve to limit and monitor used only for hedging do not entail open-market risk, business exposures, IFC also limits its financial risks they create credit exposure that arises from the potential through a set of conservative financial polices. These counterparty default when the derivative contract has include a minimum capital adequacy ratio of 30 percent positive value to IFC. of risk-weighted assets and a maximum ratio of debt plus To manage these counterparty exposures, IFC has credit outstanding guarantees to net worth of 4:1 as long as IFC risk polices relating to eligibility criteria and credit limits has any outstanding borrowings from the International Bank that are coordinated with those of the IBRD. Limits are set for Reconstruction and Development (IBRD). In addition, in terms of the total potential exposure to the counterparty. IFC has conservative approaches to asset-liability, liquidity, To protect against counterparty downgrades subsequent to and derivatives exposure management as described below. undertaking contracts, IFC has entered into mark-to-market Funding, interest rate, and currency exposure is collateral agreements with most of its derivative counterparties. controlled through the matched funding policy that The active portfolio management program enables IFC requires loan assets to be funded by liabilities that have to hedge and manage the aggregate financial risk, returns, matching interest rate and currency characteristics. In and exposures incurred in connection with its portfolio of order to accommodate client needs for loans in nondollar loan, quasi-equity, and equity investments through the currencies in fixed or floating rates and to allow for proactive use of risk management techniques, hedging flexibility in borrowing and investment of liquid assets in instruments, and income-enhancement strategies tailored various currencies and alternative interest rate bases, IFC to IFC's financial risk tolerance and income objectives. makes use of derivatives, primarily over-the-counter swaps, to transform both assets and liabilities into synthetic variable-rate dollar assets and liabilities. Equity and quasi- TREASURY CREDIT RISK ALLOCATION equity assets are funded from net worth and are limited by the polices that require such investments not to exceed AAA or AA+ Rated 39% AA or AA- Rated 61% 100 percent of net worth. Mismatches that arise over the course of a loan's life due to provisioning, prepayments, reschedulings, receipt of spread or fee income in nondollar currencies, and possible differences in LIBOR reset dates between assets and liabilities are monitored and hedged on an ongoing basis subject to operational limits. IFC's liquidity requirements are governed by the A+ or A Rated 0.1% matched-funding policy and the liquidity policy. Under 70 IFC 2004 ANNUAL REPORT 2 0 0 4 R E V I E W Portfolio Review IFC's committed portfolio at the end of FY 2004 increased by 6.9 percent to $17.9 billion, from $16.8 billion in FY03.1 Nearly 74 percent of the committed portfolio was in loans amounting to $13.3 billion, and 20 percent was in equity investments amounting to $3.6 billion. Structured finance products (including guarantees) of Many of the Corporation's investments are denominated $908 million accounted for 5 percent of the committed in U.S. dollars, but IFC borrows in a variety of currencies portfolio, and risk management products of $177 million to diversify access to funding and reduce borrowing costs. accounted for 1 percent. In addition, IFC held and managed The currency breakdown of the disbursed loan portfolio for participants $5.5 billion in loans it had syndicated. At on June 30, 2004, is shown in the notes to the financial the end of FY04, the committed portfolio included loan statements (see Volume 2 of IFC's 2004 Annual Report). and equity investments, risk management products, and The Corporation minimizes its risk exposure to off-balance- guarantees in 1,337 companies in 119 countries. sheet transactions by entering into offsetting swap, option, The net increase in committed portfolio was $1.2 billion or forward contract positions with highly rated market after taking into account new commitments, repayments, counterparties and by performing thorough credit reviews sales, cancellations, prepayments, write-offs, and translation of all counterparties. adjustments. Loan principal repayments totaled $1.9 billion, and $585 million in equity investments were sold or redeemed. The total disbursed portfolio for IFC's own account Commitments and increased to $12.3 billion at the end of FY04, from Disbursements $12.0 billion in FY03. During the fiscal year, the disbursed loan portfolio grew by 5.5 percent, whereas the disbursed New commitments for IFC's own account were concentrated equity portfolio contracted by 7.3 percent. in the Europe and Central Asia (35 percent), Latin America and Caribbean (26 percent), and East Asia and Pacific (15 percent) regions. The business sectors with the largest volume of new commitments were finance and insurance with 31 percent and oil, gas, and mining with 10 percent. BREAKDOWN OF IFC PORTFOLIO Disbursements in FY04 were $3.2 billion, up from June 30, 2004 $3.0 billion in FY03. Loan disbursements were $2.7 billion (millions of U.S. dollars) and equity disbursements were $468 million. IFC also disbursed $964 million on behalf of financial institutions Committed loans and equity 16,853 participating in its syndicated loans. Loans 13,260 Equity 3,592 Off-balance-sheet exposure 1,085 Portfolio Management (on risk management and structured finance products) As part of its supervision efforts, IFC closely monitors Total committed portfolio for IFC's own account 17,938 compliance with investment agreements, visits sites to Total committed portfolio held for participants 5,515 check on project status, and helps find solutions to Total disbursed portfolio 12,297 problem projects. To strengthen portfolio supervision, the Total undisbursed portfolio 4,556 Corporation has in place portfolio management units in all investment departments, each under a portfolio manager. 1. Committed portfolio includes structured finance and risk management products, which are off-balance sheet. IFC 2004 ANNUAL REPORT 71 COMMITTED PORTFOLIO FOR IFC'S OWN ACCOUNT By Sector on June 30, 2004 (millions of U.S. dollars) Professional, Scientific, and Technical Services 72 (0.4%) Education Services 79 (0.4%) Finance and Insurance 4,914 (27.4%) Plastics and Rubber 143 (0.8%) Construction and Real Estate 157 (0.9%) Health Care 228 (1.3%) Agriculture and Forestry 378 (2.1%) Textiles, Apparel, and Leather 395 (2.2%) Accommodation and Tourism Services 414 (2.3%) Wholesale and Retail Trade 419 (2.3%) Utilities 1,798 (10.0%) Pulp and Paper 420 (2.3%) Chemicals 647 (3.6%) Primary Metals 736 (4.1%) Nonmetallic Mineral Product Manufacturing 841 (4.7%) Oil, Gas, and Mining 1,309 (7.3%) Food and Beverages 867 (4.8%) Industrial and Consumer Products 926 (5.2%) Collective Investment Vehicles 1,098 (6.1%) Information 1,028 (5.7%) Transportation and Warehousing 1,068 (6.0%) TOTAL IFC PORTFOLIO $17,938 Note: Numbers include structured finance and risk management products. This structure helps identify problems early and address Following successful implementation of a pilot program, them in a timely manner. The maintenance of an IFC's Corporate Portfolio Management Department (CPM) investment credit risk-rating system also supports this in May 2004 received authority from the Board to manage process. Furthermore, headquarters staff has continued to financial risks and exposures in connection with the portfolio be both rotated and relocated to the field, and local staff of loan and equity investments through market-based risk members in resident missions have increasingly been management instruments, tools, and strategies. Portfolio assigned to supervisory tasks. IFC makes special efforts to management activities approved include the use of market- ensure that banks participating in IFC loans are kept based instruments to perform hedging transactions on the regularly informed of project developments through the IFC loan and equity portfolio as well as equity buyback B-Loan Management Division. There is always a close and strategies. All transactions and strategies share the common continuing consultation between IFC and its participants. goal of protecting the portfolio against downside risk. Operational departments evaluate projects case by case CPM is now mainstreaming and refining the set of risk when difficulties arise. For projects with particularly severe limits and control mechanisms that were established under problems, the Special Operations Department determines the pilot program. appropriate remedial action. In such situations, it seeks to During FY04, loan and equity portfolio income was negotiate agreements with all creditors and shareholders $1.1 billion, up 64 percent from FY03, largely due to higher to share the burden of restructuring so that problems can capital gain and dividend income from the equity portfolio. be worked out while the project continues to operate. In Principal outstanding on nonperforming loans as a percentage exceptional cases, when the parties reach an impasse in of the disbursed loan portfolio was 11.5 percent on June 30, negotiations, IFC takes all necessary and appropriate 2004, compared with 16.7 percent on June 30, 2003. During measures to protect its interests. the same period, principal in arrears as a percentage of the 72 IFC 2004 ANNUAL REPORT IFC COMMITTED PORTFOLIO, FY00­FY04 (millions of U.S. dollars) 20,000 15,000 10,000 5,000 For IFC's Own Account* Held for Others 0 FY00 FY01 FY02 FY03 FY04 *Totals for IFC's own account include risk management and structured finance. disbursed loan portfolio declined to 5.1 percent, from Reserves against losses decreased to $2.0 billion in FY04, 7.3 percent. Furthermore, the risk level of the loan portfolio representing 16.5 percent of the disbursed portfolio, down declined in FY04 due to the combined effect of: (1) growth from 21.9 percent in FY03. The decrease was due to a in the outstanding portfolio with lower credit risk investments $94 million reduction in specific reserve, a $40 million entering the portfolio; (2) reductions in credit risk levels of reduction in general reserve, and write-offs of $458 million. existing investments due to workouts, reschedulings, and Management determines specific reserves against losses restructurings; (3) reductions in some country risk ratings; on the basis of portfolio reviews and recommendations and (4) write-offs of deadwood investments. by the Portfolio Management Units in the investment Estimated unrealized gains on the equity portfolio rose departments. For this purpose, the entire portfolio is during FY04. Capital gains of $375 million were realized, a reviewed quarterly. Management determines general substantial increase from $48 million in FY03.2 IFC received reserves using a Monte Carlo­based simulation technique. dividends of $207 million, compared with $147 million The Corporation's external auditors examine closely the during FY03. Dividends in FY04 were higher than in FY03, recommendations, policies, and methods for determining primarily as a result of higher commodity prices. the reserves against losses. 2. Capital gains income reported in the Financial Statements includes gains and losses realized on equity buybacks performed by the Corporate Portfolio Management Department. IFC 2004 ANNUAL REPORT 73 2 0 0 4 R E V I E W Products and Services Investment Products EQUITY AND QUASI-EQUITY IFC risks its own capital by buying shares in project companies, other project entities, financial institutions, and portfolio or private equity funds. We generally subscribe to between 5 and 20 percent of a project's equity. We will not normally hold more than a 35 percent stake or be the largest shareholder in a project. We are a long-term investor in our projects. When it comes time to sell, we prefer to exit by selling shares either in a trade sale or, if liquidity permits, in a capital market following a public offering. With quasi-equity instruments we invest through products that have both debt and equity characteristics. Some instruments, like subordinated loans and convertible debt, impose fixed-repayment schedules. Others, such as preferred stock and income notes, do not require such rigid repayment arrangements. LOANS AND INTERMEDIARY SERVICES We finance projects and companies through our A-loans, which are for IFC's own account. IFC cannot accept government guarantees. Maturities of A-loans generally range between 7 and 12 years at origination, but some loans have been extended to as long as 20 years. While most IFC loans are provided in major currencies, we are expanding our capacity to offer local currency loans. We carry out comprehensive due diligence before investing in any project. Because of our extensive lending experience in developing countries, we are uniquely qualified to evaluate the risks associated with projects. We are willing to extend loans that are repaid only from the cash flow of the project, with only limited recourse or without recourse to the sponsors. We also make loans to intermediary banks, leasing companies, and other financial institutions through credit lines that result in further on-lending. These credit lines are often targeted to small businesses. SYNDICATED LOANS Syndicated loans, or B-loans, are a key part of IFC's efforts to mobilize private sector financing in developing countries, thereby broadening our development impact. Through this mechanism, financial institutions share fully in the commercial credit risk of projects, while IFC remains the lender of record. Participants in IFC's loans share in the advantages that IFC derives as a multilateral development institution, including preferred access to foreign exchange. Where applicable, these participant banks are also exempted from the mandatory provisioning requirements that regulatory authorities may impose. 74 IFC 2004 ANNUAL REPORT STRUCTURED FINANCE IFC also offers structured finance solutions to clients, enabling them to raise a significantly larger amount of capital than that represented by IFC's own exposure. This is especially important for mobilizing local currency funds in the domestic market from institutional investors and financial institutions. Through partial credit guarantees of debt instruments, IFC uses its triple-A credit rating to help clients diversify their funding sources, extend maturities, and obtain financing in their currency of choice. IFC also helps clients structure securitizations and risk-sharing facilities, transactions that allow a client to sell off part of the risk associated with a pool of assets. IFC is continuing to develop other structured products in response to clients' financing needs. RISK MANAGEMENT IFC's risk management products provide clients with access to long-term derivatives markets. Currency-hedging instruments allow clients to hedge their foreign exchange exposures, typically related to foreign currency borrowings. With the development of emerging market derivatives, IFC offers hedges into local currency where these markets exist. IFC also provides derivative products to enable clients to manage their interest rate and commodity price risks. Technical Assistance and Advisory Services IFC advisory services are designed to improve the investment climate in member countries and the business practices of companies in which we invest. They play an increasingly important role in the way IFC approaches its investment activities. We undertake a wide array of financial market advisory assignments, specializing in securities markets and in banking and credit institutions. Assignments address areas such as local debt market development and capacity building at financial institutions. IFC collaborates with the World Bank through several joint units dealing with aspects of private sector development, including policy issues, sector advice, and specific transactions. Our activity in this area includes advice on competition policy, privatization structuring, and policy analysis of foreign investment issues. Technical assistance further complements IFC's investment activities by offering advisory and training services to governments and private companies. IFC manages the Technical Assistance Trust Funds program, which is supported by donor governments and an allocation from IFC's own budget. These funds sponsor feasibility and sector studies, training initiatives, environmental and social review of projects, and advisory assignments to governments. IFC also manages project development facilities that help small and medium enterprises, as well as facilities focusing on environmental and social issues. IFC 2004 ANNUAL REPORT 75 SUB-SAHARAN AFRICA 76 2 0 0 4 R E V I E W EAST ASIA AND THE PACIFIC 78 SOUTH ASIA 81 EUROPE AND CENTRAL ASIA 82 LATIN AMERICA AND THE CARIBBEAN 87 Project Commitments MIDDLE EAST AND NORTH AFRICA 90 GLOBAL 91 (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization* SUB-SAHARAN AFRICA REGIONAL Africa International Financial Holdings, LLC will acquire, ­ 13.38 ­ ­ ­ ­ 13.38 ­ restructure, and sell commercial banks in Sub-Saharan Africa, especially those being privatized. Africa Media Group Limited will benefit from a rights issue for ­ 0.22 ­ ­ ­ ­ 0.22 ­ its investment in TV Africa, which broadcasts throughout Africa. Industrial Promotion Services Ltd. will restructure to become ­ 4.50 ­ ­ ­ ­ 4.50 ­ the first fully pledged equity investment company in East Africa. Olam International, a supplier of agroindustrial commodities, ­ 7.50 ­ ­ ­ ­ 7.50 ­ will strengthen its balance sheet, improve its processing capabilities, and expand its operations in the region. Olam Multi Country Multi Commodity Facility will restructure ­ ­ ­ 30.00 ­ ­ 30.00 60.00 and increase working capital lines to expand Olam International's trading volume from Africa. Pan African Investment Partners Ltd. will invest in high-growth, ­ 15.00 ­ ­ ­ ­ 15.00 ­ regionally expanding companies with proven management and established revenue streams in Africa. COUNTRY Angola Enterprise Bank of Angola will provide credit and other financial ­ 0.70 ­ ­ ­ ­ 0.70 ­ services to micro and small enterprises. Cameroon Pecten Cameroon Company will finance the ongoing development ­ ­ ­ ­ 1.45 ­ 1.45 ­ of offshore oil fields. Cape Verde Caixa Económica de Cabo Verde, S.A. will channel foreign 6.08 ­ ­ ­ ­ ­ 6.08 ­ exchange denominated term finance to the private sector. Côte d'Ivoire Pétro Ivoire S.A., a petroleum products distributor, will build gas 0.33 ­ ­ ­ ­ ­ 0.33 ­ stations and networks to increase its retail presence. Kenya Magadi Soda Company Ltd. will build a new plant and associated 22.00 ­ 4.00 ­ ­ ­ 26.00 ­ facilities to produce soda ash for export, primarily to the glass packaging sector. Note: This table includes projects signed and processed by IFC during FY04. Certain transactions signed in FY03 for which processing was not completed until FY04 are also included. *Mobilization number covers full amount at project commitment date (projects may involve tranches in multiple years). 76 IFC 2004 ANNUAL REPORT (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Madagascar Cottonline S.A. will establish an apparel factory specializing in 5.00 ­ ­ ­ ­ ­ 5.00 ­ products for U.S. and European markets. Mali Société Industrielle d'Emballage et de Conditionnement will 0.27 ­ ­ ­ ­ ­ 0.27 ­ increase its production of plastic bags and bottles. Mauritania Générale de Banque de Mauritanie pour l'Investissement et ­ ­ 10.00 ­ ­ ­ 10.00 ­ le Commerce will finance the mining and oil sectors. Mozambique Empresa Nacional de Hidrocarbonetos de Mocambique will develop ­ 18.50 ­ ­ ­ ­ 18.50 ­ the Pande and Temane gas fields and associated processing facilities. Merec Industries, Lda. will expand its milling and coconut oil ­ ­ ­ 1.20 ­ ­ 1.20 1.19 operations by acquiring and installing a mill and silos near Maputo. NovoBanco, a microfinance bank, will expand its outreach to micro ­ 0.20 ­ ­ ­ ­ 0.20 ­ and small enterprises. Nigeria Guaranty Trust Bank Plc. will address the country's scarcity of 20.00 ­ ­ ­ ­ ­ 20.00 ­ term finance. MTN Nigeria will expand its network, making cellular 85.00 15.00 ­ ­ ­ ­ 100.00 ­ telecommunications affordable to more of the country's population. Nigeria Trade Enhancement Facility will enable the increase of ­ ­ ­ 20.00 ­ ­ 20.00 20.00 confirmation limits available to local banks that are otherwise constrained due to country exposure limits. South Africa African Bank Limited will improve the attractiveness of its unsecured 4.94 ­ ­ ­ ­ ­ 4.94 ­ redeemable debentures on the local secondary debt market. City of Johannesburg will use proceeds from a bond issuance for ­ ­ ­ 30.44 ­ ­ 30.44 119.30 infrastructure investments and to restructure existing debt. Hernic Ferrochrome (Pty) Limited will increase its production 24.17 4.70 1.56 ­ ­ ­ 30.43 ­ capacity by developing an underground mine and installing a furnace and pelletizing plant. Mvelaphanda Gold (Pty) Limited will purchase a stake in Gold ­ ­ 28.00 ­ ­ ­ 28.00 ­ Fields Limited's South African assets as a step toward becoming an operator in its own right. South African Home Loans will increase its capital base and fund ­ 0.58 ­ ­ ­ ­ 0.58 ­ growth in its mortgage originations. South African Home Loans will expand its capital base and fund ­ 0.64 ­ ­ ­ ­ 0.64 ­ growth in its mortgage originations. United Bank for Africa (plc) will develop alternative sources of ­ ­ 10.00 ­ ­ ­ 10.00 ­ long-term capital, helping diversify and strengthen its operations. IFC 2004 ANNUAL REPORT 77 Project Commitments (continued) (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization UPDC Hotels Ltd. will convert a privatized hotel complex into a 11.00 ­ ­ ­ ­ ­ 11.00 ­ hotel, apartments, conference facilities, a business center and health club, and retail and commercial office space. Zambia Celtel Zambia Limited will consolidate its market position and ­ 0.25 ­ ­ ­ ­ 0.25 ­ increase its cellular penetration in the country. EAST ASIA AND THE PACIFIC REGIONAL Avenue Asia Special Situations Fund III, L.P. will target single ­ 40.00 ­ ­ ­ ­ 40.00 ­ credits in a pool of U.S. dollar and local currency denominated distressed debt instruments. Modern Asia Environmental Holdings, an industrial solid and 15.00 ­ ­ ­ ­ ­ 15.00 ­ hazardous waste company, will expand activities in the region. Olam International, a supplier of agroindustrial commodities, will ­ 7.50 ­ ­ ­ ­ 7.50 ­ strengthen its balance sheet, improve its processing capabilities, and expand operations in the region. COUNTRY Cambodia Acleda, a microfinance company, will transform into a licensed 6.00 ­ ­ ­ ­ ­ 6.00 ­ commercial bank, allowing expansion of its regional network and an increase in mobilization of deposits. Acleda, a microfinance company, will benefit from new equity ­ 1.10 ­ ­ ­ ­ 1.10 ­ capital to expand its operations. Société Concessionnaire de l'Aéroport will manage and operate 10.00 ­ ­ ­ ­ ­ 10.00 ­ the Phnom Penh and Siem Reap-Angkor International Airports. China Anjia Group Holdings will expand its operations in housing finance ­ 2.00 ­ ­ ­ ­ 2.00 ­ and strengthen its staff and systems. Asian Strategic Investments Corporation Group will develop its ­ 10.00 ­ ­ ­ ­ 10.00 ­ franchise as a supplier of auto components. China Construction Bank will promote liquidation of nonperforming 28.00 ­ ­ ­ ­ ­ 28.00 ­ loans and their transfer from the public to the private sector. China Green Energy Limited will develop, own, and operate a 20.00 ­ ­ ­ ­ ­ 20.00 ­ portfolio of cogeneration power plants. China Re Life will privatize its operations by establishing separate ­ 15.34 ­ ­ ­ ­ 15.34 ­ business entities for its operations in life and non-life reinsurance and direct property insurance. Colony China Opportunity Fund will act as a distressed asset ­ 17.31 ­ ­ ­ ­ 17.31 ­ investment fund. CSMC Technologies Corporation Limited will expand capacity of ­ 12.00 ­ ­ ­ ­ 12.00 ­ its semiconductor wafer manufacturing facility and build an additional plant. 78 IFC 2004 ANNUAL REPORT (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization CUNA Mutual Group will provide mortgage, credit life and disability, ­ 12.00 ­ ­ ­ ­ 12.00 ­ credit unemployment, and gap insurance. Guangxi Fenglin Forestry Development Co. Ltd. will finance a 15.00 6.00 ­ ­ 18.00 4.00 43.00 ­ wood plantation and a fiberboard production plant to be developed by a subsidiary. Industrial Bank will diversify its ownership, improve corporate ­ 52.18 ­ ­ ­ ­ 52.18 ­ governance, and adopt international standards. Jiangxi Chenming Paper Co. Ltd. will install and operate a ­ 12.90 ­ ­ ­ ­ 12.90 ­ lightweight coated paper facility, including a pulp plant and a cogeneration power plant. Jilin Huazheng Agribusiness Development Co., Ltd. will process ­ ­ ­ ­ 7.00 ­ 7.00 ­ pork in Jilin province and market fresh, frozen, and prepared meats. Nanjing Kumho Tire Co., Ltd. will expand its tire production capacity. 34.00 2.23 ­ ­ ­ ­ 36.23 ­ Ningxia Darong Chemical Industry Joint Stock Co. Ltd., a 10.00 1.50 ­ ­ 8.00 ­ 19.50 ­ chemical manufacturer, will expand capacity, improving economies of scale to help meet global demand. Shanghai International Banking and Finance Institute will train ­ 0.08 ­ ­ ­ ­ 0.08 ­ finance professionals in international best practices for banking and finance. Shanxi Antai Group Corporation will establish a metallurgical 40.00 ­ ­ ­ ­ ­ 40.00 ­ coke production plant in Shanxi province. Southern Aluminum Industry (China) Co., Ltd. 12.00 ­ ­ ­ ­ ­ 12.00 ­ will expand and modernize its operations by installing an aluminum rolling mill and related equipment. Wumart Stores will expand in northern and eastern China; enhance ­ 6.48 ­ ­ ­ ­ 6.48 ­ its operating, information, and logistic systems; and increase staff training. Xinao Gas Holdings Limited will expand into municipal gas 25.0 10.0 ­ ­ ­ ­ 35.00 ­ distribution projects. Yangtze Special Situations Fund L.P. will act as a distressed asset ­ 0.96 ­ ­ ­ ­ 0.96 ­ investment fund. Zhong Chen Energy Storage Co. Ltd. will operate a liquid ­ 5.00 ­ ­ ­ ­ 5.00 ­ petroleum gas terminal and review a proposed expansion of the facility. Indonesia Bona Vista School will expand its educational facilities in Jakarta. 1.00 ­ ­ ­ ­ ­ 1.00 ­ Medan National Plus School will establish preprimary, primary, and 1.75 ­ ­ ­ ­ ­ 1.75 ­ secondary schools in major cities. PT Bank Buana Indonesia will become a medium-size bank, playing ­ 0.36 ­ ­ ­ ­ 0.36 ­ a more significant role in the country's restructured banking sector. PT Bank NISP Tbk. will diversify its capital structure and expand its 35.00 ­ ­ ­ ­ ­ 35.00 ­ lending operations. IFC 2004 ANNUAL REPORT 79 Project Commitments (continued) (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization PT Ecogreen Oleochemicals will set up a fatty acid production unit 30.00 ­ ­ ­ ­ ­ 30.00 ­ and realign its working capital. PT Karunia Alam Segar will expand its noodle production to supply 18.10 ­ ­ ­ ­ ­ 18.10 ­ the East Java market. PT Prakrsa Alam Segar will expand its noodle production to supply 16.90 ­ ­ ­ ­ ­ 16.90 ­ the West Java market. P.T. South Pacific Viscose, a fiber producer, will increase and 9.50 ­ ­ ­ ­ ­ 9.50 ­ diversify production. Wilmar Trading, an oil and oilseed processor and distributor, will ­ ­ ­ 20.00 ­ ­ 20.00 10.00 reinforce its financial structure for sustainable long-term growth. Mongolia Agricultural Bank of Mongolia will expand and strengthen 1.80 1.20 ­ ­ ­ ­ 3.00 ­ operations following privatization. Trade and Development Bank of Mongolia will privatize its ­ 1.50 3.50 ­ ­ ­ 5.00 ­ operations, strengthen its capital base, and expand its market reach. Philippines Globe Telecom, Inc., a telecommunications company, will engage ­ ­ ­ ­ ­ 20.00 20.00 ­ in a currency swap to help manage its foreign exchange exposure risk. Land Registration Systems, Inc. will computerize and connect the 22.00 2.70 ­ ­ ­ ­ 24.70 ­ offices of the Land Registration Authority to establish a land database. Manila Water Company will extend its pipelines, improve 30.00 15.00 ­ ­ ­ ­ 45.00 ­ its network, develop sanitation services, and develop deep wells. Thailand Fabrinet Thailand will invest in fiber optic component production 3.00 ­ ­ ­ ­ ­ 3.00 ­ lines, helping to increase sales. Thai Middle Market Facility will provide long-term, fixed-rate 40.00 ­ ­ ­ ­ ­ 40.00 ­ funding to middle-market companies. Vietnam Olam Multi Country Multi Currency Facility Vietnam will ­ ­ ­ 20.00 ­ ­ 20.00 40.00 restructure and increase working capital lines to expand Olam International's trading volume from Vietnam. Saigon Thuong Tin Commercial Joint Stock Bank will strengthen ­ 3.23 ­ ­ ­ ­ 3.23 ­ its capital base and institutional capacity. 80 IFC 2004 ANNUAL REPORT (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization SOUTH ASIA REGIONAL Cairn Energy PLC will help develop India's domestic gas reserves 40.00 ­ ­ ­ ­ ­ 40.00 ­ and Bangladesh's domestic gas market. COUNTRY Bangladesh BRAC Bank will focus on niche credit markets and the domestic ­ 1.63 ­ ­ ­ ­ 1.63 ­ and international remittance market. GrameenPhone Limited will increase access to telecommunications 30.00 ­ ­ ­ ­ ­ 30.00 ­ throughout the country. United Leasing Company Limited will use longer tenor, local ­ ­ ­ 5.00 ­ ­ 5.00 ­ currency funding to promote its leasing business and on-lend at competitive rates. Bhutan Bhutan Resorts Corporation Limited will build guest houses in the 10.00 ­ ­ ­ ­ ­ 10.00 ­ Himalayan valleys of western Bhutan. India Ballarpur Industries Limited will modernize and upgrade its ­ ­ 15.00 ­ ­ ­ 15.00 ­ facilities to increase production of paper and pulp. Birla Home Finance will expand its mortgage loans to creditworthy 10.61 ­ 10.61 ­ ­ ­ 21.22 ­ clients that build, acquire, and improve residential properties. CMScomputers will expand its IT capacity beyond India's technology 10.00 10.00 ­ ­ ­ ­ 20.00 ­ hubs to more than 100 cities in the country. Continental Carbon India Limited will restructure the debt of a recently ­ ­ ­ ­ ­ 1.50 1.50 ­ acquired carbon black plant and proceed with an investment program. Crompton Greaves Ltd., an electrical equipment and engineering 15.00 ­ ­ ­ ­ ­ 15.00 ­ industry firm, will continue its modernization and financial and operational restructuring efforts. DQ Entertainment Limited, a multimedia company, will increase ­ ­ 1.00 ­ ­ ­ 1.00 ­ coproduction contracts from firms in Canada, France, and Italy. Housing Development Finance Corporation Limited will expand ­ ­ ­ ­ 100.00 ­ 100.00 ­ its lending to middle- and lower-income people. Max Healthcare Institute Limited will build the first integrated 19.64 ­ ­ ­ ­ ­ 19.64 ­ health care delivery network in the New Delhi area, offering primary, secondary, and tertiary services. NewPath Ventures LLC will develop operating companies in custom ­ 3.00 ­ ­ ­ ­ 3.00 ­ semiconductor chip design and embedded software. NIIT Student Loan Program will provide applied IT education for ­ ­ ­ 2.10 ­ ­ 2.10 71.10 adult students. Powerlinks Transmission Ltd., India's first public-private partnership 74.56 ­ ­ ­ ­ ­ 74.56 ­ in the transmission sector, will build, own, and operate a high voltage line between east and north India. IFC 2004 ANNUAL REPORT 81 Project Commitments (continued) (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization RAK Ceramics India Pvt. Ltd. will construct a facility for production 20.00 ­ ­ ­ ­ ­ 20.00 ­ of high-end vitrified ceramic tiles and sanitary ware. Sundaram Finance Limited will expand its commercial vehicle and 43.61 ­ ­ ­ ­ ­ 43.61 ­ automobile financing in rural and semirural markets. United Phosphorus Limited will expand production capacities in 17.50 ­ ­ ­ ­ ­ 17.50 ­ India and increase its global presence by acquiring product registration rights in developed markets. Maldives Maldives Finance Leasing Company Limited will use long-term 3.00 ­ ­ ­ ­ ­ 3.00 ­ funding to extend leases to private sector businesses. Taj Maldives Private Limited will refinance short- and medium- 8.50 ­ ­ ­ 8.50 ­ 17.00 ­ term debt on its holiday resorts. Sri Lanka Commercial Bank of Ceylon will strengthen its capital base. ­ 2.89 ­ ­ ­ ­ 2.89 ­ MTN Networks Limited will expand its network and improve its 30.00 ­ 20.00 ­ ­ ­ 50.00 ­ coverage, network quality, and customer service. EUROPE AND CENTRAL ASIA REGIONAL Advent Central and Eastern Europe III L.P. will make expansion ­ 15.15 ­ ­ ­ ­ 15.15 ­ stage and buyout investments in the region. Baku-Tbilisi-Ceyhan Pipeline will transport up to 1 million barrels 125.00 ­ ­ ­ 125.00 ­ 250.00 ­ of oil a day, primarily from the Azeri Chirag Deepwater Gunashli fields. Euromedic Group will expand its network of diagnostic and dialysis 12.64 ­ ­ ­ ­ ­ 12.64 ­ centers in Bosnia, Hungary, Poland, and Romania and establish operations elsewhere in the region. Poteza Adriatic Fund B.V. will make equity and equity-related ­ 13.68 ­ ­ ­ ­ 13.68 ­ investments, through majority or significant minority stakes, in companies in the region. Raiffeisen International Bank-Holding AG will promote lending 60.00 60.78 ­ ­ ­ ­ 120.78 ­ to small and medium enterprises in Central Europe. Raiffeisen International Bank-Holding AG will promote lending 60.00 60.78 ­ ­ ­ ­ 120.78 ­ to small and medium enterprises in Southern Europe. COUNTRY Albania Insurance Institute of Albania will strengthen its operations, ­ 5.47 ­ ­ ­ ­ 5.47 ­ management, and information systems and increase its domestic investment. Vodafone Albania Sh.A. will develop a nationwide cellular network, 41.39 ­ ­ ­ 8.92 ­ 50.31 ­ including in places where telephone service is inadequate. 82 IFC 2004 ANNUAL REPORT (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Armenia Armeconombank will on-lend to private small and medium 2.00 ­ ­ ­ ­ ­ 2.00 ­ enterprises and provide residential mortgage loans to individuals. Armenia Hotel Closed Joint Stock Company will complete ­ 1.25 ­ ­ ­ ­ 1.25 ­ renovation of a business and tourist hotel in Yerevan. Azerbaijan Amerada Hess Corporation will develop the Central Azeri field with 1.68 ­ ­ ­ 1.68 ­ 3.36 ­ a processing facility, a gas compression and water platform bridge, a subsea oil pipeline, and expansion of onshore production facilities. BP Corporation NA, Inc. will develop the Central Azeri oilfields, 10.00 ­ ­ ­ 10.00 ­ 20.00 ­ including the expansion of onshore production facilities at Sangachal. Statoil will develop the Central Azeri field with a processing facility, 8.75 ­ ­ ­ 8.75 ­ 17.50 ­ a gas compression and water platform bridge, a subsea oil pipeline, and expansion of onshore production facilities. Unocal--Union Oil Company of California will develop the Central 10.00 ­ ­ ­ 10.00 ­ 20.00 ­ Azeri field with a processing facility, a gas compression and water platform bridge, a subsea oil pipeline, and expansion of onshore production facilities. Belarus Detroit Belarus Brewing Company will upgrade its facilities, 7.00 3.00 ­ ­ ­ ­ 10.00 ­ strengthen its distribution system, and improve its management. Bosnia and Herzegovina Central Profit Banka will provide term loans to small and 11.47 4.70 ­ ­ ­ ­ 16.17 ­ medium enterprises. Raiffeisen Bank Bosnia will refinance working capital loans to small 8.87 ­ ­ ­ ­ ­ 8.87 ­ and medium enterprises, extend term loans, and lend to individuals who are buying or refurbishing housing. Bulgaria Drujba AD, a manufacturer of glass containers, will modernize 24.26 ­ ­ ­ ­ ­ 24.26 ­ operations and improve environmental performance. Pasa Bulgaria will construct a tableware plant. 12.55 2.50 ­ ­ ­ ­ 15.05 ­ ProCredit Bank AD will provide credit and other financial services 12.16 ­ ­ ­ ­ ­ 12.16 ­ to micro and small enterprises. ProCredit Bank AD will increase its working capital through a ­ 1.24 ­ ­ ­ ­ 1.24 ­ rights issue. Stomana Industries AD will refurbish its steel production plant, 21.23 ­ ­ ­ ­ ­ 21.23 ­ improving production methods and environmental performance. Trakya Glass Bulgaria EAD will build the country's first float glass plant. 22.61 5.00 ­ ­ ­ ­ 27.61 ­ Estonia Kreenholm Valduse AS will strengthen its textile business, offering 0.96 ­ ­ ­ 1.24 ­ 2.20 ­ customers a broader product range. IFC 2004 ANNUAL REPORT 83 Project Commitments (continued) (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Georgia ProCredit Bank will use a rights issue to increase its capital base. ­ 0.67 ­ ­ ­ ­ 0.67 ­ ProCredit Bank will provide credit and other financial services on 4.00 ­ ­ ­ ­ ­ 4.00 ­ commercial terms to micro and small enterprises. TBC Bank will engage in risk management transactions to improve ­ ­ ­ ­ ­ 0.50 0.50 ­ its currency and interest rate positions. Kazakhstan Nelson Resources Limited will augment its working capital and fund ­ 1.72 ­ ­ ­ ­ 1.72 ­ exploration, development, and production at its oil and gas projects. Kyrgyz Republic Demirbank Kyrgyz International Bank will increase its capital base. ­ 0.11 ­ ­ ­ ­ 0.11 ­ Joint Stock Commercial Bank Kyrgyzstan will increase the 1.50 ­ ­ ­ ­ ­ 1.50 ­ availability of credit to micro and small enterprises and enhance its lending capacity. Joint-Stock Company Investment Export-Import Bank (Inexim) 1.50 ­ ­ ­ ­ ­ 1.50 ­ will on-lend to micro and small enterprises. Moldova FinComBank S.A. will use a credit line to on-lend to small and 1.50 ­ ­ ­ ­ ­ 1.50 ­ micro enterprises. Moldinconbank S.A. will provide long-term funding for small and 4.00 ­ ­ ­ ­ ­ 4.00 ­ medium enterprises, stimulating investment, business growth, and job creation. Victoriabank will finance local companies in sectors including 5.00 ­ ­ ­ ­ ­ 5.00 ­ wine and food exports, leasing, real estate, and construction. Poland Intercell S.A., a pulp and paper mill, will expand operations in 50.42 ­ ­ ­ ­ ­ 50.42 ­ Poland and build two new paper sack plants in Russia. Lidl Polska sp. z.o.o. will expand its discount food store operations. 48.63 ­ ­ ­ ­ ­ 48.63 ­ Romania Banca Comerciala Romana S.A., a state-owned bank, will use funding ­ 111.00 ­ ­ ­ ­ 111.00 ­ to support its future privatization and comply with EU standards. Banca Transilvania will expand its portfolio of residential mortgages. 24.31 ­ ­ ­ ­ ­ 24.31 ­ Microfinance Bank (MIRO) S.A. will revise its business strategy and 10.00 ­ ­ ­ ­ ­ 10.00 ­ use a credit line to achieve its profitability targets. Ro-Fin Mortgage Loan Company will originate and service primary 5.00 ­ ­ ­ ­ ­ 5.00 ­ mortgages to households. Romanian-American Enterprise Fund will on-lend through a credit 3.00 ­ ­ ­ ­ ­ 3.00 ­ line to three microlending partners. 84 IFC 2004 ANNUAL REPORT (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Russian Federation Banque Societe Generale Vostok will expand its mortgage 75.00 ­ ­ ­ ­ ­ 75.00 ­ lending operations. BSGV Leasing will provide lease financing to Russian corporate clients. 19.45 ­ ­ ­ ­ ­ 19.45 ­ Delta Lease Far East will specialize in leasing to small and medium 4.00 ­ ­ ­ ­ ­ 4.00 ­ enterprises in Siberia and Russia's Far East. Independent Network Television Holdings, Ltd. will fund the ­ 3.50 7.00 ­ ­ ­ 10.50 ­ expansion of TV3 Russia, increasing distribution, improving programming, and enhancing promotional activities. JSC Lebedyansky, a manufacturer of juices and baby food, will 35.00 ­ ­ ­ ­ ­ 35.00 ­ expand production capacity and enter the mineral water business. KronoGruppe Schweiz will modernize a hardboard plant and build 49.34 ­ ­ ­ 49.34 ­ 98.68 ­ a panel plant in Sharja. Kronospan Holding Limited will build two fiberboard lines and a 51.06 ­ ­ ­ ­ ­ 51.06 ­ resin plant. NBD Bank will finance medium enterprises in key sectors of the ­ ­ 2.00 ­ ­ ­ 2.00 ­ economy and strengthen its balance sheet. OOO Ruscam will install a third furnace at its glass bottle plant and 17.50 ­ ­ ­ ­ ­ 17.50 ­ build four bottle forming lines and a raw materials batch plant. Pilkington Float Glass Russia will build a float glass plant to meet 53.74 ­ ­ ­ ­ ­ 53.74 ­ growing domestic demand. Russian Standard Bank will expand its consumer lending and 40.00 ­ ­ ­ ­ ­ 40.00 ­ securitize some of its consumer loans. Severstaltrans; Balttranservis; Sevtekhnotrans will expand their 40.00 ­ ­ ­ ­ ­ 40.00 ­ fleet of transportation tank cars and acquire new locomotives. Siberia Airlines will expand its fleet, refurbish newly acquired 20.00 ­ 5.00 ­ ­ ­ 25.00 ­ aircraft, and increase its working capital. Sveza Holding, a birch plywood producer, will modernize three plants, 40.50 ­ ­ ­ ­ ­ 40.50 ­ expand its harvesting infrastructure, and refinance its short-term debt. ZAO Kulon Development, ZAO Kulon Estate will build and 2.50 ­ 5.00 ­ ­ ­ 7.50 ­ operate commercial warehousing, logistical, and office centers in the Moscow area. ZAO Russkiy Mir will purchase railroad tank cars and associated 15.00 ­ ­ ­ ­ ­ 15.00 ­ infrastructure for leasing to oil companies. Tajikistan SEF SugdAgroServe will expand its Farmers Ownership Model to 0.50 ­ ­ ­ ­ ­ 0.50 ­ finance crop inputs and sell more cotton on better terms. Turkey Akbank will increase term lending to small and medium enterprises ­ ­ ­ ­ 100.00 ­ 100.00 ­ and develop new retail products, including mortgages and consumer loans. IFC 2004 ANNUAL REPORT 85 Project Commitments (continued) (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Borusan Holding A. . will improve productivity in manufacturing steel 30.00 ­ 10.00 ­ ­ ­ 40.00 ­ and pipe and distributing automobiles and construction equipment. Garanti Finansal Kiralama A. . will expand leasing for small and 10.00 ­ ­ ­ ­ ­ 10.00 ­ medium enterprises that lack long-term funding for capital investment. Koc Finansal Kiralama A. . will expand its leasing business with 30.00 ­ ­ ­ ­ ­ 30.00 ­ small and medium enterprises. Kusadasi Port will build a new passenger terminal, renovate other 10.00 ­ ­ ­ 8.00 ­ 18.00 ­ terminal facilities, and purchase equipment. MESA Hospital will offer medical and surgical care, emergency 11.00 ­ ­ ­ ­ ­ 11.00 ­ services, and outpatient consultations in Ankara. Meteksan Sistem, an IT services company, will replace some of its 8.50 ­ ­ ­ ­ ­ 8.50 ­ short-term debt with longer-term financing to position itself for growth. Opet Petrolcülük A. ., a retail distributor of petroleum products, 25.00 ­ ­ ­ 40.00 ­ 65.00 ­ will build a marine terminal and tank storage facility and expand its retail distribution network. Oyak Bank A. . will lengthen the maturity of its liabilities, increase 50.00 ­ ­ ­ ­ ­ 50.00 ­ its consumer finance activities, and make acquisitions. Ukraine CJSC Mironovsky Khleboprodukt will expand its poultry operations 20.00 ­ 10.00 ­ ­ ­ 30.00 ­ and improve production efficiency. First Lease will expand its leasing of transport vehicles and enhance 2.00 ­ ­ ­ ­ ­ 2.00 ­ its internal management and technical systems. Joint Stock Commercial Bank HVB Bank Ukraine will exercise ­ 0.53 ­ ­ ­ ­ 0.53 ­ subscription rights to strengthen its equity base and expand growth. Microfinance Bank of Ukraine will expand its loan portfolio and ­ 1.02 ­ ­ ­ ­ 1.02 ­ increase the number of branches and outlets. Nova Liniya will build two large new retail stores in Kiev. ­ ­ 5.00 ­ ­ ­ 5.00 ­ ProCredit Ukraine will expand the scope and tenor of its lending to 8.50 ­ ­ ­ ­ ­ 8.50 ­ micro and small enterprises. Sandora Limited Liability Company will modernize and expand its 10.00 ­ ­ ­ ­ ­ 10.00 ­ juice factory and refinance some of its debt. 86 IFC 2004 ANNUAL REPORT (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization LATIN AMERICA AND THE CARIBBEAN REGIONAL Construtora Norberto Odebrecht will provide capacity building 25.00 ­ ­ ­ ­ ­ 25.00 ­ training to its small and medium suppliers and subcontractors. Digicel Eastern Caribbean Limited will expand mobile telephone 10.00 0.85 3.41 ­ ­ ­ 14.26 ­ services in Aruba, Barbados, Grenada, St. Lucia, and St. Vincent. Salutia.com, Inc. will pioneer the use of technology in the region's ­ 0.08 ­ ­ ­ ­ 0.08 ­ health care market. COUNTRY Argentina Aceitera General Deheza S.A. will build warehouses; increase 50.00 ­ ­ ­ ­ ­ 50.00 ­ crushing capacity for its soybean, sunflower, and groundnut products; and invest in high-protein meal production. Banco de Galicia y Buenos Aires, S.A. will reenter the trade line 7.50 ­ ­ ­ ­ ­ 7.50 ­ market to support a key and profitable area of its business and strengthen its financial position. Export Trust, a securitization vehicle, will support expansion of 1.00 ­ ­ ­ ­ ­ 1.00 ­ preshipment export financing to Argentine corporates. Jumbo Argentina S.A. will acquire, restructure, and operate the Disco ­ 40.00 ­ ­ ­ ­ 40.00 ­ supermarket chain, merging it with its Jumbo hypermarket operations. Bolivia BancoSol will increase its on-lending operations and extend the 6.00 ­ ­ ­ ­ ­ 6.00 ­ tenor of its small business and microenterprise loan portfolio. Prodem Fondo Financiero Privado S.A. will increase the reach of 3.00 ­ ­ ­ ­ ­ 3.00 ­ its lending operations and educate institutional investors on the role of microfinanciers. Brazil Comgas will expand the country's use of natural gas as a more 45.00 ­ ­ ­ ­ ­ 45.00 ­ cost-effective and environmentally friendly fuel option. Laboratorio Fleury, a clinical diagnostic company, will expand 20.00 ­ ­ ­ ­ ­ 20.00 ­ operations and diversify its business. Macae, a gas-fired power plant, will increase its thermal ­ ­ ­ ­ 50.00 ­ 50.00 ­ generation capacity. Queiroz Galvao Perfuracoes S.A. will transform variable-rate ­ ­ ­ ­ ­ 0.60 0.60 ­ liabilities into fixed-rate liabilities to take advantage of low interest rates. Tecon Rio Grande S.A. will expand capacity of the container 8.10 ­ ­ ­ 8.10 ­ 16.20 ­ terminal at the port of Rio Grande. Unibanco--Uniao de Bancos Brasileiros S.A. will benefit from ­ ­ ­ ­ ­ 20.00 20.00 ­ long-tenor and favorably priced financing for its banking operations. IFC 2004 ANNUAL REPORT 87 Project Commitments (continued) (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Chile Aguas Nuevo Sur Maule, S.A. will provide water, sanitation, 33.00 ­ ­ ­ 33.00 ­ 66.00 ­ and sewage treatment in Chile's VII Region. San Vicente Terminal Internacional S.A. will operate and expand 15.00 ­ ­ ­ ­ ­ 15.00 ­ the port of San Vicente. Sociedad Nacional de Procesamiento de Datos S.A., an ­ 10.00 ­ ­ ­ ­ 10.00 ­ independent IT services provider, will expand within Latin American markets. Colombia Banco Davivienda S.A., a mortgage originator, will expand and ­ ­ ­ 0.03 ­ ­ 0.03 35.00 diversify its assets and loan portfolio. Cartones America S.A., a manufacturer of paper packaging, will 22.00 ­ ­ ­ ­ ­ 22.00 ­ refinance its debts and build a cogeneration plant. Colombian Home Mortgage Corp. will acquire and securitize ­ ­ ­ 1.46 ­ ­ 1.46 107.80 residential mortgage loans, developing the country's secondary mortgage market. Colombian Home Mortgage Corp. will support a securitization ­ ­ ­ 3.30 ­ ­ 3.30 63.70 of nonperforming mortgage assets in a transaction sponsored by Titularizadora Colombiana. Costa Rica Banco Interfin S.A. will provide long-term financing to small and 15.00 ­ 5.00 ­ ­ ­ 20.00 ­ medium enterprises and increase its regional competitiveness through capitalization of its subsidiaries. Dominican Republic Domicem S.A. will complete construction of its dry process 24.00 ­ ­ ­ 24.00 ­ 48.00 ­ cement plant. Grupo M will upgrade operations and expand its apparel production 20.00 ­ ­ ­ ­ ­ 20.00 ­ into a free trade zone in Haiti. Ecuador Sociedad Financiera Ecuatorial S.A., an institution providing credit 2.00 ­ ­ ­ ­ ­ 2.00 ­ and other financial services to micro and small enterprises, will expand its portfolio and outreach. El Salvador Banco Agricola S.A. will expand its mortgage finance operations 50.00 ­ ­ ­ ­ ­ 50.00 ­ and on-lend to companies in the manufacturing, commerce, and export sectors. Confia AFP S.A. will help the Cuscatlan Group diversify its revenue ­ 7.50 ­ ­ ­ ­ 7.50 ­ stream and reinforce its image as a regional provider of financial services. Financiera Calpia S.A. will expand its loan portfolio and extend its 5.00 ­ 5.00 ­ ­ ­ 10.00 ­ operations within Central America. Metrocentro, S.A. de C.V. will construct a new shopping mall to 25.00 ­ ­ ­ ­ ­ 25.00 ­ meet increasing demand for retail complexes. 88 IFC 2004 ANNUAL REPORT (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Guatemala Montana Exploradora de Guatemala S.A. will develop a gold 45.00 ­ ­ ­ ­ ­ 45.00 ­ deposit and associated processing facilities and infrastructure in western Guatemala. Mexico Central Lomas de Real S.A. de C.V. will generate electricity for sale 50.00 ­ 20.00 ­ 106.17 2.00 178.17 ­ to the government-owned utility. Central Valle Hermoso S.A. de C.V. will generate electricity for sale 50.00 ­ 20.00 ­ 107.09 2.00 179.09 ­ to the government-owned utility. Copamex Productos Al Consumidor, S.A. de C.V. will undertake 50.00 ­ ­ ­ 46.00 7.00 103.00 ­ financial restructuring using a combination of long- and short- term debt. Corporativo Copamex, S.A. de C.V. will develop a debt reduction ­ ­ 25.00 ­ ­ ­ 25.00 ­ and refinancing strategy, enhancing its financial flexibility and competitiveness. Grupo Calidra, S.A. de C.V. will upgrade and diversify its limestone 20.00 ­ ­ ­ ­ 2.00 22.00 ­ quarrying operations. Hipotecaria Nacional, S.A. de C.V. will service mortgage loans. 99.65 ­ ­ ­ ­ ­ 99.65 ­ Hipotecaria Su Casita, S.A. de C.V.--SOFOL, a nonbank housing 15.94 ­ ­ ­ ­ ­ 15.94 ­ finance company, will fund bridge loans to developers for construction of low-income housing. Inversionistas en Autotransportes Mexicanos S.A. de C.V. 37.00 ­ ­ ­ ­ ­ 37.00 ­ will expand its bus fleet, improve operational efficiency and service quality, and strengthen its market position. Pan American Silver Corporation will rehabilitate and expand a ­ 1.87 ­ ­ ­ ­ 1.87 ­ silver mine. SSA Mexico Holdings, S.A. de C.V. will expand the Manzanillo 45.00 ­ ­ ­ ­ ­ 45.00 ­ container port terminal to keep it competitive within the region. Nicaragua Confia will on-lend to entrepreneurs and microenterprises with 5.00 ­ ­ ­ ­ ­ 5.00 ­ limited access to formal credit institutions. Panama BancoContinental will better match maturities of its assets and 40.00 ­ ­ ­ ­ ­ 40.00 ­ liabilities and improve its evaluation of clients' financial and environmental sustainability. Corporacion UBC Internacional, S.A. will increase its capital to ­ 0.33 ­ ­ ­ ­ 0.33 ­ offset recent acquisitions and support its growth. La Hipotecaria will expand its mortgage origination business into 15.00 ­ ­ ­ ­ ­ 15.00 ­ El Salvador. Peru Banco Internacional Del Peru will strengthen its medium- and 40.00 ­ ­ ­ ­ ­ 40.00 ­ long-term mortgage lending. IFC 2004 ANNUAL REPORT 89 Project Commitments (continued) (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Edpyme Edyficar S.A. will expand its lending to low-income 3.00 ­ ­ ­ ­ ­ 3.00 ­ microentrepreneurs in poor neighborhoods throughout the country. Gloria S.A. will expand its food, paper products, and pharmaceuticals 25.00 ­ ­ ­ ­ ­ 25.00 ­ businesses beyond its base in southern Peru. Trinidad and Tobago Caribe Hospitality Trinidad and Tobago will build and operate a 3.80 ­ ­ ­ ­ ­ 3.80 ­ Marriott Courtyard hotel in Port of Spain. U.W.I., St. Augustine--Institute of Business will construct a 5.00 ­ ­ ­ ­ ­ 5.00 ­ facility to consolidate, improve, and expand its operations. Venezuela Petrobras Energia Venezuela will increase production in its oil and 80.00 ­ 25.00 ­ ­ ­ 105.00 ­ gas fields. MIDDLE EAST AND NORTH AFRICA COUNTRY Afghanistan First Microfinance Bank of Afghanistan, the first full-service ­ 1.00 ­ ­ ­ ­ 1.00 ­ financial institution in the country, will provide credit and savings products to micro and small businesses. Tourism Promotion Services (Afghanistan) Ltd. will renovate and ­ ­ 7.00 ­ ­ ­ 7.00 ­ expand the Kabul Serena Hotel. Algeria Algerian Cement Company will double its cement production 10.00 ­ ­ ­ ­ ­ 10.00 ­ capacity. Egypt Alexandria Fiber Co., SAE will build and operate an acrylic fiber plant. 8.00 ­ ­ ­ ­ ­ 8.00 ­ Commercial International Life Insurance Company S.A.E. will use ­ 0.33 ­ ­ ­ ­ 0.33 ­ a capital increase to comply with regulatory requirements of its business. Egypt Housing Finance Company will provide long-term debt ­ 1.62 ­ ­ ­ ­ 1.62 ­ financing for housing investments. Lecico Egypt (S.A.E.) will expand its production capacity for sanitary 9.75 ­ ­ ­ ­ ­ 9.75 ­ ware and ceramic tiles. Merlon Petroleum Company of Egypt will develop three gas 15.00 ­ 5.00 ­ ­ ­ 20.00 ­ discoveries in the El Mansoura concession and acquire additional seismic data. Sokhna Port Development Company will build and operate container, 20.00 ­ ­ ­ ­ ­ 20.00 ­ bulk, general cargo, and fertilizer terminals at North El-Sokhna Port. Iran RAK Ceramics Joint Stock Company will set up a facility to 7.00 ­ ­ ­ ­ ­ 7.00 ­ produce high-end vitrified ceramic tiles. 90 IFC 2004 ANNUAL REPORT (millions of U.S. dollars) Structured Finance IFC Products Risk Total Structured IFC IFC Quasi- (Includes Management FY04 Finance Project Description Loan Equity Equity Guarantees) Syndications Products Committed Mobilization Lebanon The Lebanese Ceramic Industries, subsidiary of Lecico Egypt, will 5.25 ­ ­ ­ ­ ­ 5.25 ­ refinance debt and improve its balance sheet structure. Pakistan BSJS Balanced Fund will exercise subscription rights. ­ 0.59 ­ ­ ­ ­ 0.59 ­ Dewan Investment and Finance Company will provide financial ­ 1.03 ­ ­ ­ ­ 1.03 ­ services to small and medium enterprises, with a focus on developing the supply chain to Dewan Group. Dewan Salman Fibres Limited will convert its outstanding ­ ­ ­ 30.00 ­ ­ 30.00 ­ unhedged U.S. dollar loan to a local currency loan. First UDL Modaraba, a lease financing business, will restructure an ­ ­ ­ 7.00 ­ ­ 7.00 ­ income notes facility. Sarah Textiles will restructure its business. 0.13 ­ ­ ­ ­ ­ 0.13 ­ TRG Pakistan II Limited will expand local call center operations ­ 5.00 ­ ­ ­ ­ 5.00 ­ and invest overseas to diversify its activities. Syrian Arab Republic Bank of Syria and Overseas will assist private enterprises and ­ 3.09 ­ ­ ­ ­ 3.09 ­ increase the level and efficiency of financial intermediation. Tunisia Banque Internationale Arabe de Tunisie will bolster its capital ­ ­ 49.34 ­ ­ ­ 49.34 ­ base to facilitate growth, particularly with consumer and small and medium enterprise clients. GLOBAL AIG Global Emerging Markets Fund II L.P., a private equity fund, ­ 45.00 ­ ­ ­ ­ 45.00 ­ will invest in restructurings and expansion-stage and early- stage companies. Capital International Private Equity Fund IV, L.P. will focus on ­ 30.00 ­ ­ ­ ­ 30.00 ­ investing expansion-stage capital in companies in a wide range of sectors that are dominant in their respective markets. Emerging Markets Global Small Capitalization Fund will invest ­ 10.00 ­ ­ ­ ­ 10.00 ­ in companies with market capitalization of less than $500 million that are listed on stock exchanges in emerging markets. Global Microcredit Facility will serve as a microcredit enhancement ­ ­ 4.00 ­ ­ ­ 4.00 ­ facility to support microfinance institutions throughout the world. LNM Holdings N.V. will fund the environmental, assets 100.00 ­ ­ ­ ­ ­ 100.00 ­ rehabilitation, and working capital requirements of its subsidiaries in developing countries. ShoreCap International will provide financing and assistance with ­ 2.50 ­ ­ ­ ­ 2.50 ­ governance to institutions that fund small and microenterprises in Africa, South Asia, and Eastern Europe. IFC 2004 ANNUAL REPORT 91 SUB-SAHARAN AFRICA 92 2 0 0 4 R E V I E W EAST ASIA AND THE PACIFIC 95 Technical Assistance SOUTH ASIA 97 EUROPE AND CENTRAL ASIA 98 LATIN AMERICA AND THE CARIBBEAN 101 and Advisory Projects MIDDLE EAST AND NORTH AFRICA 103 GLOBAL 104 Project Project Description Donor Program SUB-SAHARAN AFRICA REGIONAL Africa Bank Training Consortium To develop bank training centers in five African countries supported by European CBF and U.S. bank training institutions. Business Development Services To support programs increasing the productivity of small firms in Kenya Netherlands TATF and Madagascar. Center for Sustainability Investing To promote environmentally and socially sustainable lending and investment in Norway SFMF in Africa the private financial sector. Entrepreneurship Program: To support training for advisors, local trainers, and coaches in the support and Netherlands TATF Capacity Building training entrepreneurship program. Glass Packaging and Tableware: To assess the glass industry and prepare a strategy for modernization. Sweden TATF Sector Study HIV/AIDS Workplace Training To assist the pilot phase of the HIV/AIDS workplace training initiative. Netherlands TATF Horus Investments To offer training to staff of microfinance institutions in Benin, Chad, and Togo CBF in Microfinance and select university graduates. Investment Climate, To assess the investment climate and prospects for regional integration of eight FIAS Regional Integration West African Economic and Monetary Union countries. Investment Opportunities: To analyze the information technology market and the investment outlook in Finland TATF IT and Internet Sectors eastern and southern Africa. Telecommunications Network: To assess the viability of a long-distance telecommunications network. Sweden TATF Feasibility Study COUNTRY Angola Banking: Postconflict Support To help the Enterprise Bank of Angola build capacity to operate in a Norway TATF postconflict environment. Botswana Administrative Barriers To review the commercial legal framework, administrative and registration costs, FIAS and barriers to investment. Burkina Faso Diagnostic and Competition Policy To advise on competition policy and related investment. FIAS Gambia, The Investment Climate To study the country's investment climate. FIAS Ghana Private School Association To provide business planning and training to private primary and secondary schools. CBF Sustainable Agribusiness To help an agricultural commodities merchandiser develop sustainable timber Norway CCF Commodities certification protocols for harvesters. Guinea-Bissau Tax System Review To review and recommend improvements of the tax and incentive systems. FIAS 92 IFC 2004 ANNUAL REPORT CBF: Capacity Building Facility CCF: Corporate Citizenship Facility EOF: Environmental Opportunities Facility FIAS: Foreign Investment Advisory Service PEP: Private Enterprise Partnership SFMF: Sustainable Financial Markets Facility SME: Small and medium enterprise TATF: Technical Assistance Trust Funds program Project Project Description Donor Program Kenya Administrative Barriers To study administrative barriers to investment. FIAS Cooperative Bank To build the bank's capacity in corporate governance, systems, and marketing. CBF Honey: Fair Trade Certification To help a cooperative develop fair trade markets for honey. Norway CCF Investment Policy To review the country's legal framework for business. FIAS Magadi Soda Community To assess needs and provide capacity building or community development around Norway CCF Development the Magadi soda mine site. Lesotho Administrative Barriers To help design a computerized company registry and reform the licensing system FIAS for private enterprises. Madagascar Leasing Services Support To review the potential to expand financial leasing operations and draft new laws Italy TATF and to conduct seminars on benefits of leasing. SME Support Center To establish an SME Solutions Center and develop an information package and CBF French language training tools. Mali Entrepreneurship: Endeavor II To help roll out a successful entrepreneurship promotion model to South Africa. CBF Microbusinesses: Trickle-Up To set up community-based funds and training to help extremely poor people CBF establish microbusinesses. Mauritius Water and Sanitation: Transaction To advise on private sector participation in water and sanitation services. IFC TATF Advisory Mandate Mozambique Capital Markets To help enable individuals and institutions to acquire the government's stake in the Switzerland TATF Development Study Southern Africa Regional Gas Project. Carbon Finance: Feasibility Study To examine the feasibility of using natural gas and carbon finance in the electricity, Norway TATF industrial, transport, and domestic sectors. Tourism Investment Program To implement a new tourism policy and strategy. Netherlands TATF Nigeria Administrative Barriers/ To assist in reform of business registration as part of a micro, small, and medium FIAS Promotion Strategy enterprise program. Bond Markets To advise the country's securities commission and stock exchange on developing Canada/IFC TATF Development Program the local bond market. Power Generation and Distribution To provide technical, commercial, environmental, investment banking, and legal Ireland TATF services to develop private power generation and distribution. Senegal Private Power Project To help the government review the legal structure for an independent power plant. Switzerland/IFC TATF Seychelles Investment Climate To review the environment for domestic and foreign direct investment. FIAS IFC 2004 ANNUAL REPORT 93 Technical Assistance and Advisory Projects (continued) Project Project Description Donor Program Sierra Leone Postconflict Investment Climate To review the country's investment climate and make recommendations for a FIAS postconflict environment. South Africa Forest Products: Export Market To assess the export market for a forest product company and prepare a strategy Canada TATF Assessment for the country's forest product sector. Forest Products: Revenue Streams To help a forest products company develop new revenue streams from its timber Norway EOF and land holdings. Municipal Finance Company To help establish an institution providing finance and advisory and capacity building Norway TATF services for municipal infrastructure in Africa. Sustainable Mining To conduct an executive development course on competitiveness and corporate Netherlands CCF social responsibility. Tanzania Agriculture Promotion To improve opportunities for local growers to supply a sugar company and help CBF replicate the model within Africa. Competition Policy To analyze the relation between productivity, competitiveness, economic growth, FIAS and poverty reduction. Irrigation Foot Pumps To provide technical capacity to develop a distribution chain. Netherlands/Norway EOF Uganda Administrative Barriers To review the administrative barriers to investment with a focus on key export- FIAS oriented sectors. Uganda Village Phone To establish village phone microenterprises in rural areas. CBF Zambia Administrative Barriers To help the government reform administrative barriers to increase investment and FIAS business activity. Investment Policy: Law To assist the Zambia Investment Center's efforts to amend the Investment Act and FIAS reintroduce investment incentives. 94 IFC 2004 ANNUAL REPORT Project Project Description Donor Program EAST ASIA AND THE PACIFIC REGIONAL Bank South Pacific To expand services and financing to small businesses through improved systems CBF and data scoring. General Manufacturing and To assess the viability of links between manufacturers and local small and Japan TATF Services Needs Assessment medium businesses. Investment Opportunities Survey To analyze the business process outsourcing market and its regional Ireland TATF investment outlook. Linkages To examine the impact of investment policies on links between foreign FIAS investors and domestic businesses, especially micro and small enterprises. Pacific Islands Investment Policy Two projects: to assess screening practices and approvals mechanisms used by FIAS Pacific countries and their impact on foreign investment, and to review progress made by these countries on investment policies that comply with APEC principles. Southeast Asia Trade Promotion To enhance trade finance practices among banks in southeast Asia and promote Switzerland TATF regional growth through "south-to-south" trade. COUNTRY Cambodia Investment Policy: Law To help the government prepare implementing regulations. FIAS Marketing Plan To provide training and help develop a marketing plan for silk crafts production CBF and a restaurant operation. Private Sector Forum To improve government­private sector dialogue and monitor progress on issues Australia TATF raised by the private sector to improve the investment climate. China Automotive Industry: Sector Study To assess the automotive market, including major players and potential investments. Sweden/IFC TATF Banking: Corporate Governance To strengthen the corporate governance of Lotus Bank to support its growth in Ireland/IFC TATF retail and SME finance. Bond Market To help develop the local nongovernmental bond market. Canada/IFC TATF Development Program Business Planning and To help Minsheng Shipping Company plan an expansion of its business and Norway TATF Capacity Building improve its financial management standards. Evaluations and IT To help the National Council for Social Security Funds evaluate its liquid assets and Ireland/IFC TATF Systems Development formulate policies for investment and information technology. Financial Audit Assistance To help two private universities carry out an audit based on international Sweden/IFC TATF accounting standards. Glass Industry Transformation To develop a strategy for the country's float glass sector. Sweden/IFC TATF IT Sector: Strategy and To help develop the IT sector. Sweden TATF Market Analysis Leasing Company To help the New Century Finance Leasing Company strengthen capacity and Netherlands TATF compliance with standards. Mining Supplier To facilitate local suppliers for the mining operations of Sino Gold and develop CBF Development Program other sectors for economic growth after mine closure. Paper Mill Wastewater To develop commercial pilots of a technology to treat the wastewater from straw IFC EOF Treatment Technology pulp plants, a major source of pollution. Pharmaceutical Industry: To review the pharmaceuticals industry in Sichuan province and its role in the Sweden TATF Sector Study local economy. Promotion Strategy To discuss the environment for foreign direct investment with government officials FIAS from northeast China. IFC 2004 ANNUAL REPORT 95 Technical Assistance and Advisory Projects (continued) Project Project Description Donor Program Pulp and Paper To prepare a development plan for the nonwood pulp and paper industry. Finland TATF Industry Development Strategic Business Development To help a metal technology company prepare a business plan and consolidated Denmark/IFC TATF baseline financial statements. Fiji Banking: Management Program To provide mentoring for staff of Fiji Development Bank on processes and Australia TATF procedural changes. Investment Policy To assist with policy and legislative recommendations on foreign investment. FIAS Marshall Islands Investment Policy To help the government review and update its policy on foreign direct investment. FIAS Mongolia Leasing Development Project To develop the capacity of the government's leasing agency. Japan/IFC PEP/TATF Mining Sector: Scope Study To help strengthen small and medium enterprises working with the mining sector. Ireland TATF Papua New Guinea Investment Climate To review the environment for foreign direct investment and recommend FIAS improvements. Philippines Assessment of Stock Exchange To provide an independent assessment of the Philippine Stock Exchange. Italy TATF Banking: Institutional To help Banco de Oro improve its credit risk management, corporate governance, Canada/IFC TATF Strengthening Program and policies on money laundering. Electricity: Private To help the government achieve complete village electrification by 2006 and Norway/IFC TATF Sector Participation increase private sector participation in power generation. Fixed Income Exchange Board To help Philippine Dealing and Securities Holding, Inc., set up infrastructure for the Italy TATF local bond market. Microenterprise Bank Philippines To strengthen the bank's sustainability through recruitment and training of loan CBF officers, new management systems, and enhanced monitoring of loans. Mining: Consensus Building To raise stakeholders' awareness of the potential economic contribution of IFC TATF mining operations. Samoa Lending and Credit Appraisal To help strengthen credit procedures and train staff of the National Bank of Samoa Ltd. New Zealand TATF Solomon Islands Credit Union Revitalization To analyze credit unions and savings clubs and identify changes necessary to a Australia TATF sustainable revival of the credit union movement. Thailand Bond Market Development Project To help the Thai Bond Dealing Center further implement market surveillance and IFC TATF self-regulatory functions. Timor-Leste Investment Policy and Promotion Two projects: to review draft investment legislation, and to evaluate a proposal for FIAS an investment promotion agency. Vietnam Business Forum To finance activities of the Vietnam Business Forum that promote dialogue Canada TATF between the government and the business community. Consumer and Small To help Sacombank expand operations in retail and small business finance. Switzerland TATF Business Banking Credit Bureau Program To help develop credit reporting to extend credit to underserved segments of the Australia TATF population, especially small businesses. Housing Finance, To analyze the housing finance market and help the Central Bank of Vietnam Denmark TATF Privatization Assistance privatize the Housing Bank of Mekong Delta. Investment Policy: Law To support creation of a Unified Law on Foreign and Domestic Investment. FIAS 96 IFC 2004 ANNUAL REPORT Project Project Description Donor Program SOUTH ASIA COUNTRY Bangladesh Feasibility Study and Business Plan To help the developer of a low-cost device that purifies household drinking water. Netherlands/IFC EOF Bhutan Institutional Development To support the government's efforts to attract and manage foreign direct FIAS investment. India Food Production and To improve food safety and quality management. Sweden TATF Safety Management SME Sector: Global Business To determine the educational needs of the SME sector and develop relevant Netherlands TATF School Network business training. Special Economic Zones To facilitate public and private sector discussion on special economic zones. Switzerland TATF/FIAS Sri Lanka Competition Policy To analyze the relationship between productivity, competitiveness, economic growth, FIAS and poverty reduction, and review the state of competition. SME Programs To develop SME initiatives and consider establishing a project office in the country Netherlands TATF to carry out and manage these activities. IFC 2004 ANNUAL REPORT 97 Technical Assistance and Advisory Projects (continued) Project Project Description Donor Program EUROPE AND CENTRAL ASIA REGIONAL Central Asia Leasing Facility To assist leasing companies that are candidates for investment through the facility. CBF Commercialization of Energy To help implement energy-efficient projects through market evaluation and Finland TATF Efficiency Finance promotion of related service companies. Glass Container Manufacturing: To assess the glass container industry in Ukraine and Russia and promote its Switzerland TATF Strategic Assessment sustainable development. Hazard Analysis Critical Control To provide training in food safety management to agribusiness consultants and Greece TATF Point Training public health officials from Albania, Bosnia and Herzegovina, and Serbia and Montenegro. Housing Finance Analysis To document housing finance systems, capital markets, and related laws in Switzerland TATF Kazakhstan, the Kyrgyz Republic, Tajikistan, and Uzbekistan. Housing Finance Institutions: To assess housing finance systems, capital markets, and the legal framework in Spain/IFC TATF Feasibility Study the Balkan region. COUNTRY Albania Administrative Barriers: To help the government reduce administrative barriers to investment. FIAS Implementation Armenia Gold Jewelry Project: To advise the Yerevan Jewelry Company on global best practice and Israel TATF Feasibility Study competitiveness. Bosnia and Herzegovina Banking: Legal Advisory To help implement a merger of Union Banka and other state-owned banks. Austria/IFC TATF Herbal Development Initiative To help develop associations that can enhance the herbal sector's sustainability. Netherlands/Norway/IFC CCF Bulgaria Administrative Barriers To help review administrative procedures for doing business. FIAS Croatia Administrative Barriers To help the government implement the findings of a 2002 study. FIAS Czech Republic Supplier Support Program To complete the training of local SME specialists and help fund their training and IFC TATF coaching of domestic enterprises. Georgia Administrative Barriers Two projects: to help the government design its investment climate program, and FIAS to implement recommendations of a study on administrative barriers. Kazakhstan Oil and Gas Supplier Development To help develop suppliers around the Karachaganak oil and gas field project. CBF Quality Management To help local firms become eligible suppliers to international consortia operating Netherlands TATF in joint ventures with the government. Latvia Administrative Barriers To analyze the impact of reforms to remove administrative barriers to investment. FIAS Macedonia, FYR of Administrative Barriers To provide recommendations on the government's capacity for business FIAS environment reform. Moldova Investment Policy: Law To review the draft law on foreign investment and discuss recommendations with FIAS government officials. 98 IFC 2004 ANNUAL REPORT Project Project Description Donor Program Russian Federation Administrative Barriers Three projects to make recommendations for removing administrative barriers to FIAS investment in the Kaliningrad, Perm, and Tomsk oblasts. Bank Capacity Building To help UralTransBank introduce international practices in credit procedures and Switzerland TATF corporate governance. Banking Sector: To improve the internal governance of Russian banks and their credit assessment Switzerland PEP Corporate Governance of corporate clients. A Chance to Work To promote corporate social responsibility and help disadvantaged youth improve IFC TATF/PEP their lives. Commercial Bank: To help Sibacademank introduce international practices in credit procedures and Norway TATF Technical Assistance risk management. Higher Education: Strategic To assist four private higher education institutions in strategic planning. Israel/IFC TATF Business Plan Investors: Diagnostic To survey potential investors in three Russian regions. FIAS Leasing: Northwest Russia To develop leasing in northwest Russia and help Swedish companies establish Sweden PEP commercial links with Russian businesses. Local Community To build stakeholders' capacity to engage in discussions about development. Italy CCF Capacity Building Microfinance Institution: To assess feasibility of transforming a noncommercial financial institution into a Denmark TATF Feasibility Study specialized microfinance bank in the Samara region. Primary Mortgage To help meet the demand for mortgages, particularly in regions outside the capital. Switzerland PEP Market Development Retail Lending Development To help Bank Vozrozhdenie strengthen its practices in credit procedures and risk Canada/IFC TATF management and develop its retail lending. Social and Environmental To help Novatek, a private gas company, bring monitoring of its social and Denmark TATF Management environmental performance into line with international standards. Steel Sector: Market Assessment To consider financing the modernization of steel pipe producers. United Kingdom TATF Telecom Regulatory Body To review the regulatory environment for telecommunications and determine steps Sweden TATF for setting up an independent regulator. Volga and North-Western To assist two shipping companies in understanding environmental, health, and Netherlands TATF Shipping Companies safety problems at their ship repair and maintenance yards. Waste Gas Utilization: To test the viability of capturing gas wasted in the process of extracting oil and Germany PEP Feasibility Study recovering gas from low-pressure wells. Serbia and Montenegro Administrative Barriers To analyze and make recommendations for removing administrative barriers FIAS to investment. Business School: Feasibility Study To prepare a market survey and feasibility study for a new business school. Italy TATF Cogeneration of Heat To identify potential for cogeneration power within existing electric power Italy TATF and Electricity production plants, industrial sites, and district heating systems. Foreign Direct Investment: Strategy To assess the investment environment and advise on improvements to attract FIAS foreign direct investment. Pipeline Development Strategy To help plan development of the Constanza-Pancevo-Omisalj-Trieste pipeline. Italy TATF Poultry Company: Corporate To help a poultry breeding company restructure its operations to meet Italy TATF Reorganization Study international meat industry norms, maximize efficiency and productivity, and reduce production costs. Privatization Agency To assist the capital market center in the country's privatization agency. Italy TATF IFC 2004 ANNUAL REPORT 99 Technical Assistance and Advisory Projects (continued) Project Project Description Donor Program Restructuring Program: To help the country's privatization agency restructure state-owned companies Italy TATF Elektronska prior to privatization and to assess plans for establishing an industrial district, a multifunction logistic center, and a trade village. Water and Sanitation: Private To foster private sector participation in the water supply and sanitation sector. Italy/Sweden/IFC TATF Sector Participation Tajikistan Banking: Sustainability To help ensure the First MicroFinance Bank of Tajikistan's sustainability and Canada TATF commercial viability. Microfinance: Institutional To help an NGO transform itself into a commercially viable microfinance bank. Canada TATF Transformation SME Policy Phase II To improve regulatory procedures for SMEs and launch an information campaign Switzerland PEP for entrepreneurs. Turkey Competition Policy To conduct presentations on investment climate and competition policy to the FIAS country's competition board. Investment Advisory Council Two projects to help the government establish an investment advisory council, FIAS composed of international executives, that will support investment climate reforms based on international best practice. Ukraine Accounting and MIS Diagnosis To help Nova Liniya assess its finance and accounting functions and set up a new Italy TATF management information system. Banking Sector: Two projects to improve the internal corporate governance of banks and improve Switzerland PEP/TATF Corporate Governance their credit assessment of corporate clients. Leasing Development To create a suitable legislative environment for leasing and develop the capacity Netherlands PEP of the agency supervising the sector. Poultry Producer: Food Safety and To help Mironovsky Khleboprodukt, a poultry producer, manage its production Italy/Sweden TATF Quality Management System/ safety and quality and establish effective finance and accounting departments. Accounting and Finance SME Policy Development To monitor the regulatory environment for SMEs and promote a consolidated law Norway/IFC TATF on permits for business start-up and expansion. Uzbekistan Garment Manufacturing: To assess the production machinery, market conditions, and technological Switzerland TATF Market Survey requirements of an expanding garment manufacturer. Privatization: Business To help Uzbektelecom prepare a business plan in advance of privatization. Japan TATF Plan Development SME Policy Phase III To continue development of regulatory policy and increase entrepreneurs' access Switzerland PEP to information. 100 IFC 2004 ANNUAL REPORT Project Project Description Donor Program LATIN AMERICA AND THE CARIBBEAN REGIONAL Caribbean: Business To identify and assess constraints in the business environments of select FIAS Environments Caribbean countries. Credit Bureau Program To develop private credit bureaus that extend credit to underserved segments of Italy TATF the population. Life Insurance for Disabled Persons To assess the technical and financial viability of establishing a life insurance IFC TATF company for the disabled. Precious Woods To help a Brazilian-based forest products company develop new revenue streams IFC EOF from its timber and land holdings. Regional Housing Finance Facility To analyze housing finance markets and potential for mortgage lending in Costa Italy/IFC TATF Rica, El Salvador, and Panama. COUNTRY Bolivia Labor Market Study To review the country's labor market and determine the most important needs for Netherlands TATF higher education. Llama Fiber, Prodem Foundation To support the infrastructure needs of small producers of llama fiber and provide CBF training on quality issues. Microfinance: Prodem FFP To provide funding to a rural microfinance institution to improve financial services CBF for clients. Colombia Development Finance: To study the market for transforming development finance companies into modern Spain TATF Feasibility Study investment banks. Costa Rica Investment Taxation and Incentives To review the corporate income tax and incentive system to help the government FIAS structure a reform proposal. Ecuador Sustainable Supply Chains To develop supply chains in the banana industry that are environmentally IFC CCF sustainable and socially equitable. Wastewater Treatment To help Procesadora Nacional de Alimentos C.A. broaden its technical knowledge Germany TATF of secondary wastewater treatment and treated effluent management. El Salvador Business Development Support To support business school development to address the needs of local communities. Norway CCF for Retailers Coffee and Apparel: Corporate To assess corporate social responsibility initiatives in the coffee and apparel FIAS Social Responsibility industries and design policy tools to strengthen these initiatives. Faculty Development Program To implement training courses that address the needs of entrepreneurs. Italy TATF Global Home Township Program: To analyze the potential for the Global Home Township program. Sweden TATF Feasibility Study Grenada Investment Climate To help Grenada Industrial Development Corporation assess the country's FIAS investment climate. Guatemala Investment Climate To assess the country's investment climate for discussion with the new FIAS government. Mining: Community Development To establish community-run tree nurseries to supply mine reforestation needs. Norway CCF IFC 2004 ANNUAL REPORT 101 Technical Assistance and Advisory Projects (continued) Project Project Description Donor Program Guyana Investment Policy To review the country's investment code, comparing it with international FIAS good practice. Honduras Linkages To help the government strengthen the framework for labor training. FIAS Jamaica Investment Taxation To help the government evaluate options for a more appropriate and attractive FIAS and Incentives incentives and tax regime. Sustainable Conch Farming To help develop sustainable conch farming and economies of scale in marketing. Netherlands/IFC EOF Mexico Compressed Natural Gas Buses To support a pilot project using compressed natural gas for commuter buses in IFC EOF Mexico City. E-Government Study To improve the competitiveness of e-government technology companies. Spain TATF Water Recycling for Lime Plant To assess the technical and commercial viability of an innovative system to recover IFC EOF water vapor. Nicaragua Competition Policy To analyze constraints to competition in key industries and help design a related FIAS policy framework. Peru Administrative Barriers: Municipal To assess administrative procedures at the municipal level in Lima and help improve FIAS the local business environment. Student Loan Program To study the potential for establishing a pilot student financing facility with local Switzerland TATF Market Study banks and private universities. 102 IFC 2004 ANNUAL REPORT Project Project Description Donor Program MIDDLE EAST AND NORTH AFRICA COUNTRY Afghanistan Bank Capacity Building To help the First Microfinance Bank of Afghanistan build capacity by funding key Norway/IFC TATF management positions. Investment Policy: Law To review the country's investment law for a discussion of trade and investment. FIAS Egypt, Arab Republic of Banking: Sustainable To train bankers in sustainable business practices. SFMF Business Practice Iraq Capacity Building To sponsor capacity building programs for Iraqi businesswomen. FIAS Pakistan Administrative Barriers To prepare a private sector development strategy for the Northwest FIAS Frontier province. Health Sector: Feasibility Study To study the country's private health care industry and assess the market for Japan TATF general and specialized services. Nonbanking Financial Companies: To analyze the competitive positions of the country's leasing companies and Canada TATF Investment Analysis investment banks and to strengthen the country's financial infrastructure. Textile Manufacturer: To help optimize a wastewater treatment facility. Norway EOF Wastewater Treatment Syrian Arab Republic FDI Environment: To examine the legal, policy, and institutional framework for attracting foreign France TATF Diagnostic Review direct investment. Investment Policy: Law To review investment legislation to make it more conducive to attracting FIAS foreign direct investment. Tunisia Environmental and To assess the portfolio of the Tuninvest Fund and identify opportunities to improve Norway SFMF Social Assessment sustainable practices. IFC 2004 ANNUAL REPORT 103 Technical Assistance and Advisory Projects (continued) Project Project Description Donor Program GLOBAL Competitive Business To provide an introduction to sustainable banking and environmental risk Netherlands/Norway/IFC SFMF Advantage Workshops management; workshops in Africa, Europe and Central Asia, and Latin America. Drinking Water Purification To help expand a business that retails potable water through franchises and sells Netherlands EOF water purification equipment and services to communities. Global Credit Bureau Program To help develop private credit bureaus that will extend credit to underserved Norway TATF segments of the population, especially small businesses. Human Rights Compliance To develop an interactive computer program giving companies specific guidance on Denmark TATF Assessment Tool human rights. Livestock Welfare: Good Practices To support the development of livestock welfare principles for IFC investments. Netherlands/Norway/IFC CCF SME Banking: Impact Assessment To create best practice in impact assessment for small and medium Netherlands TATF enterprise banking. SME Capacity Building: To build the capacity of micro and small businesses. CBF Shorecap Exchange SME Management Training To transform a successful pilot management training program for SMEs into a Australia/IFC TATF core IFC business development product. SME Toolkit To leverage information and communication technologies to help SMEs in emerging IFC TATF markets learn and implement sustainable business management practices. World Hotel Links.com To facilitate the extension of an online guesthouse booking service to CBF markets worldwide. 104 IFC 2004 ANNUAL REPORT A P P E N D I X A Board of Governors Governors and Alternates (as of June 30, 2004) Member Governor Alternate A Afghanistan Ashraf Ghani Anwar Ul-Haq Ahady Albania Arben Malaj Fatos Ibrahimi Algeria Abdellatif Benachenhou Abdelhak Bedjaoui Angola Ana Dias Lourenco Job Graca Antigua and Barbuda Errol Cort Asot A. Michael Argentina Roberto Lavagna Alfonso de Prat-Gay Armenia Vahram Nercissiantz Karen Chshmarityan Australia Peter Costello Chris Gallus Austria Karl-Heinz Grasser Thomas Wieser Azerbaijan Elman S. Rustamov Farhad Aliyev B Bahamas, The James H. Smith Ruth R. Millar Bahrain Abdulla Hassan Saif Zakaria Ahmed Hejres Bangladesh M. Saifur Rahman Mirza Tasadduq Hussain Beg Barbados Owen S. Arthur Grantley W. Smith Belarus Andrei V. Kobyakov Anatoly I. Sverzh Belgium Didier Reynders Guy Quaden Belize Said W. Musa Hugh McSweaney Benin Bruno Amoussou Fatiou Akplogan Bhutan Lyonpo Wangdi Norbu (vacant) Bolivia Horst Grebe Lopez Javier Cuevas Argote Bosnia and Herzegovina Adnan Terzic Dragan Doko Botswana Baledzi Gaolathe Serwalo S.G. Tumelo Brazil Antonio Palocci Filho Henrique de Campos Meirelles Bulgaria Milen Veltchev Bojidar Lubenov Kabaktchiev Burkina Faso Jean Baptiste Compaore Lene Sobgo Burundi Athanase Gahungu Leon Nimbona C Cambodia Keat Chhon Ouk Rabun Cameroon Martin Okouda Daniel Njankouo Lamere Canada Ralph Goodale Paul Thibault Cape Verde Joao Pinto Serra Victor A.G. Fidalgo Central African Republic Daniel Nditifei-Boysembe Sonny Mpokomandji Chad Mahamat Ali Hassan Mahamat Bahradine Oumar Chile Nicolas Eyzaguirre Mario Marcel China Jin Renqing Li Yong Colombia Alberto Carrasquilla Santiago Montenegro Trujillo Comoros Younoussa Imani Moindjie Saadi Congo, Democratic Republic of Andre-Philippe Futa Jean-Claude Masangu Mulongo Congo, Republic of Rigobert Roger Andely Pierre Moussa Costa Rica Alberto Dent Zeledon Francisco de Paula Gutierrez Côte d'Ivoire Bohoun Bouabre Boniface Britto Croatia Ivan Suker Martina Dalic Cyprus Makis Keravnos Christos Patsalides Czech Republic Bohuslav Sobotka Oldrich Dedek IFC 2004 ANNUAL REPORT 105 Board of Governors (continued) Member Governor Alternate D Denmark Per Stig Moller Carsten Staur Djibouti Yacin Elmi Bouh Simon Mibrathu Dominica Swinburne Lestrade Ambrose M.J. Sylvester Dominican Republic Jose Lois Malkun Carlos Despradel E Ecuador Mauricio Yepez Najas Ramiro Galarza Egypt, Arab Republic of Medhat Hassanein Fayza Abulnaga El Salvador Eduardo Zablah-Touche Guillermo Lopez-Suarez Equatorial Guinea Antonio Nve Nseng Miguel Edjang Angue Eritrea Berhane Abrehe Martha Woldegiorghis Estonia Taavi Veskimagi Renaldo Mandmets Ethiopia Ahmed Sufian Mekonnen Manyazewal F Fiji Jone Yavala Kubuabola Tevita Banuve Finland Antti Kalliomaki Paula Lehtomaki France Nicolas Sarkozy Jean-Pierre Jouyet G Gabon Casimir Oye-Mba Christian Bongo Gambia, The Mousa G. Bala Gaye Karamo K. Bojang Georgia Zurab Nogaideli Irakli Rekhviashvili Germany Heidemarie Wieczorek-Zeul Caio K. Koch-Weser Ghana Yaw Osafo-Maafo Anthony Akoto Osei Greece George Alogoskoufis Plutarchos Sakellaris Grenada Anthony Boatswain Timothy Antoine Guatemala Maria Antonieta de Bonilla Lizardo Sosa Lopez Guinea Madikaba Camara Eugene Camara Guinea-Bissau Joao Aladje Mamadu Fadia Francisco Correia, Jr. Guyana Bharrat Jagdeo Saisnarine Kowlessar H Haiti Henri Bazin Raymond Magloire Honduras Arturo Alvarado Maria Elena Mondragon de Villar Hungary Tibor Draskovics Elemer Tertak I Iceland Halldor Asgrimsson Geir Hilmar Haarde India P. Chidambaram D.C. Gupta Indonesia Boediono Hartadi A. Sarwono Iran, Islamic Republic of Safdar Hosseini Mohammad Khazaee Torshizi Iraq (vacant) (vacant) Ireland Charlie McCreevy Tom Considine Israel David Klein Yossi Bachar Italy Antonio Fazio Lorenzo Bini Smaghi J Jamaica Omar Lloyd Davies Wesley George Hughes Japan Sadakazu Tanigaki Toshihiko Fukui Jordan Bassem I. Awadallah Tayseer Al-Smadi K Kazakhstan Grigoriy Aleksandrovich Marchenko Kayrat Nematovich Kelimbetov Kenya David Mwiraria Joseph Mbui Magari 106 IFC 2004 ANNUAL REPORT Member Governor Alternate Kiribati Nabuti Mwemwenikarawa Tebwe Ietaake Korea, Republic of Hun-Jai Lee Seung Park Kuwait Mahmoud Al-Nouri Bader Meshari Al-Humaidhi Kyrgyz Republic Bolot E. Abildaev Kubat A. Kanimetov L Lao People's Democratic Republic Chansy Phosikham Phouphet Khamphounvong Latvia Oskars Spurdzins Juris Lujans Lebanon Fuad A.B. Siniora Marwan Hemadeh Lesotho M.C. Mphutlane Moliehi Matabane Liberia Christian D. Herbert Harry A. Greaves, Jr. Libya Mohamed Ali Elhuwej Ali Ramadan Shnebsh Lithuania Algirdas Butkevicius Arvydas Kregzde Luxembourg Luc Frieden Jean Guill M Macedonia, former Yugoslav Republic of Nikola Popovski Dimko Kokaroski Madagascar Zaza Manitranja Ramandimbiarison Davida Rajaon Malawi Goodall E. Gondwe David Faiti Malaysia Abdullah Ahmad Badawi Samsudin Hitam Maldives Fathulla Jameel Adam Maniku Mali Abou-Bakar Traore Marimantia Diarra Marshall Islands Brenson S. Wase Smith Michael Mauritania Abdallah Ould Cheikh-Sidia Mohamed Ould El Abed Mauritius Pravind Kumar Jugnauth Krishnanand Guptar Mexico Francisco Gil Diaz Alonso Pascual Garcia Tames Micronesia, Federated States of Nick L. Andon Lorin Robert Moldova Zinaida Grecianii Dumitru Ursu Mongolia Chultem Ulaan Ochirbat Chuluunbat Morocco Fathallah Oualalou Abderazzak El Mossadeq Mozambique Adriano Afonso Maleiane Manuel Chang Myanmar Hla Tun Myo Nwe N Namibia Immanuel Ngatjizeko Carl-Hermann G. Schlettwein Nepal Prakash Chandra Lohani Bhanu Prasad Acharya Netherlands Gerrit Zalm Agnes van Ardenne New Zealand Michael Cullen John Whitehead Nicaragua Luis Eduardo Montiel Mario Alonso Icabalceta Niger Ali M. Lamine Zene Adamou Namata Nigeria Ngozi N. Okonjo-Iweala Haruna Usman Sanusi Norway Hilde Frafjord Johnson Olav Kjorven O Oman Ahmed Bin Abdulnabi Macki Mohammed bin Nasser Al-Khasibi P Pakistan Shaukat Aziz Waqar Masood Khan Palau Casmir Remengesau Lawrence Alan Goddard Panama Norberto Delgado Duran Domingo Latorraca Papua New Guinea Bart Philemon Koiari Tarata Paraguay Dionisio Borda Jose Ernesto Buttner Limprich Peru Pedro Pablo Kuczynski Javier Silva Ruete Philippines Juanita D. Amatong Rafael B. Buenaventura Poland Leszek Balcerowicz Jerzy Pruski Portugal Manuela Ferreira Leite Francisco Esteves de Carvalho IFC 2004 ANNUAL REPORT 107 Board of Governors (continued) Member Governor Alternate R Romania Mihai Nicolae Tanasescu Emil Iota Ghizari Russian Federation Aleksei Kudrin German O. Gref Rwanda Donald Kaberuka Celestin Kabanda S St. Kitts and Nevis Denzil Douglas Wendell E. Lawrence St. Lucia Kenny D. Anthony Trevor Brathwaite Samoa Misa Telefoni Retzlaff Hinauri Petana Saudi Arabia Ibrahim A. Al-Assaf Hamad Al-Sayari Senegal Abdoulaye Diop Cheikh Hadjibou Soumare Serbia and Montenegro Igor Luksic Mladjan Dinkic Seychelles Jeremie Bonnelame Sylvestre Radegonde Sierra Leone Joseph Bandabla Dauda Samura Kamara Singapore Lim Hng Kiang Lim Siong Guan Slovak Republic Ivan Miklos Elena Kohutikova Slovenia Dusan Mramor Irena Sodin Solomon Islands Francis John Zama Shadrach Fanega Somalia (vacant) (vacant) South Africa Trevor Andrew Manuel Mandisi Bongani Mpahlwa Spain Pedro Solbes Mira David Vegara Figueras Sri Lanka Sarath Leelananda Bandara Amunugama P. B. Jayasundera Sudan El Zubair Ahmed El Hassan Abda Y. El Mahdi Swaziland Guduza Dlamini Musa D. Fakudze Sweden Gunnar Lund Carin Jamtin Switzerland Joseph Deiss Micheline Calmy-Rey Syrian Arab Republic Ghassan El-Rifai Mohammad Hamandosh T Tajikistan Safarali Najmudinov Abdulaziz Sharipov Tanzania Abdallah Omar Kigoda Gray S. Mgonja Thailand Somkid Jatusripitak Somchainuk Engtrakul Togo M'Ba Legzim Mewunesso Baliki Pini Tonga Siosiua T.T. `Utoikamanu Meleseini Lomu Trinidad and Tobago Conrad Enill Alison Lewis Tunisia Mohamed Nouri Jouini Abdelhamid Triki Turkey Ibrahim H. Canakci Aydin Karaoz Turkmenistan Shekersoltan Muhammedova (vacant) U Uganda Gerald M. Ssendaula C. M. Kassami Ukraine Mykola Azarov Mykola Derkatch United Arab Emirates Hamdan bin Rashid Al-Maktoum Mohammed Khalfan Bin Khirbash United Kingdom Hilary Benn Gordon Brown United States John W. Snow Alan P. Larson Uruguay Isaac Alfie Ariel Davrieux Uzbekistan Rustam S. Azimov (vacant) V Vanuatu Jimmy Nicklam Simeon Athy Venezuela, República Bolivariana de Jorge Giordani Tobias Nobrega Suarez Vietnam Le Duc Thuy Phung Khac Ke Y Yemen, Republic of Ahmed Mohammed Sofan Mohammed Al-Sabbry Z Zambia Ng'andu Peter Magande Situmbeko Musokotwane Zimbabwe Christopher T. Kuruneri Gideon Gono 108 IFC 2004 ANNUAL REPORT A P P E N D I X B Board of Directors Directors and Alternates and Their Voting Power (as of June 30, 2004) Total Percent Director Alternate Director Casting Votes of Votes of Total Appointed Carole Brookins Robert B. Holland, III United States 569,629 23.68 (vacant)a Toshio Oya Japan 141,424 5.88 Eckhard Deutscher Walter Hermann Germany 129,158 5.37 Pierre Duquesne Anthony Requin France 121,265 5.04 Tom Scholar (vacant)b United Kingdom 121,265 5.04 Elected Kurt Bayer Gino Alzetta Austria, Belarus, Belgium, Czech Republic, 125,221 5.21 (Austria) (Belgium) Hungary, Kazakhstan, Luxembourg, Slovak Republic, Slovenia, Turkey Chander Mohan Vasudev Akbar Ali Khan Bangladesh, Bhutan, India, Sri Lanka 99,234 4.13 (India) (Bangladesh) Biagio Bossone Nuno Mota Pinto Albania, Greece, Italy, Portugal 98,866 4.11 (Italy) (Portugal) Per Kurowski Maria Jesus Fernandez Costa Rica, El Salvador, Guatemala, 97,478 4.05 (Rep. Bol. de Venezuela) (Spain) Honduras, Mexico, Nicaragua, Spain, Venezuela (República Bolivariana de) Marcel Masse Gobind Ganga Antigua and Barbuda, The Bahamas, Barbados, 92,944 3.86 (Canada) (Guyana) Belize, Canada, Dominica, Grenada, Guyana, Ireland, Jamaica, St. Kitts and Nevis, St. Lucia Ad Melkert Tamara Solyanyk Armenia, Bosnia and Herzegovina, Bulgaria, 87,113 3.62 (Netherlands) (Ukraine) Croatia, Cyprus, Georgia, Israel, Macedonia (former Yugoslav Republic of), Moldova, Netherlands, Romania, Ukraine Thorsteinn Ingolfsson Inkeri Hirvensalo Denmark, Estonia, Finland, Iceland, 86,693 3.60 (Iceland) (Finland) Latvia, Lithuania, Norway, Sweden Alexey G. Kvasov Eugene Miagkov Russian Federation 81,592 3.39 (Russian Federation) (Russian Federation) Otaviano Canuto Gil S. Beltran Brazil, Colombia, Dominican Republic, Ecuador, 75,980 3.16 (Brazil) (Philippines) Haiti, Panama, Philippines, Trinidad and Tobago John Austin Terry O'Brien Australia, Cambodia, Kiribati, Korea (Republic of), 73,309 3.05 (New Zealand) (Australia) Marshall Islands, Micronesia (Federated States of), Mongolia, New Zealand, Palau, Papua New Guinea, Samoa, Solomon Islands, Vanuatu IFC 2004 ANNUAL REPORT 109 Board of Directors (continued) Total Percent Director Alternate Director Casting Votes of Votes of Total Elected (continued) Alieto Guadagni C. Veronica Querejazu Argentina, Bolivia, Chile, Paraguay, Peru, Uruguay 64,144 2.67 (Argentina) Vidovic (Bolivia) Pietro Veglio Jakub Karnowski Azerbaijan, Kyrgyz Republic, Poland, Serbia and 62,601 2.60 (Switzerland) (Poland) Montenegro, Switzerland, Tajikistan, Turkmenistan, Uzbekistan Rapee Asumpinpong Hadiyanto Fiji, Indonesia, Lao People's Democratic Republic, 59,912 2.49 (Thailand) (Indonesia) Malaysia, Myanmar, Nepal, Singapore, Thailand, Tonga, Vietnam Louis K. Kasekende J. Mills Jones Angola, Botswana, Burundi, Eritrea, Ethiopia, 58,873 2.45 (Uganda) (Liberia) The Gambia, Kenya, Lesotho, Liberia, Malawi, Mozambique, Namibia, Nigeria, Seychelles, Sierra Leone, South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe Tanwir Ali Agha Sid Ahmed Dib Afghanistan, Algeria, Ghana, Iran (Islamic Republic of), 46,377 1.93 (Pakistan) (Algeria) Iraq, Morocco, Pakistan, Tunisia Mahdy Ismail Aljazzaf Mohamed Kamel Amr Bahrain, Egypt (Arab Republic of), Jordan, 34,079 1.42 (Kuwait) (Arab Republic of Egypt) Kuwait, Lebanon, Libya, Maldives, Oman, Syrian Arab Republic, United Arab Emirates, Yemen (Republic of) Yahya Abdulla M. Alyahya Abdulrahman M. Almofadhi Saudi Arabia 30,312 1.26 (Saudi Arabia) (Saudi Arabia) Zhu Guangyao Wu Jinkang China 24,750 1.03 (China) (China) Paulo F. Gomes Louis Philippe Ong Seng Benin, Burkina Faso, Cameroon, Cape Verde, 22,947 0.95 (Guinea-Bissau) (Mauritius) Central African Republic, Chad, Comoros, Congo (Democratic Republic of), Congo (Republic of), Côte d'Ivoire, Djibouti, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Madagascar, Mali, Mauritania, Mauritius, Niger, Rwanda, Senegal, Togo In addition to the directors and alternates shown in the foregoing list, the following Directors also served after June 30, 2003: Amaury Bier (Brazil), to Jan. 9, 2004; Yuzo Harada (Japan), to June 15, 2004; Neil F. Hyden (Australia), to Aug. 14, 2003; Finn Jonck (Denmark), to Oct. 7, 2003; Franco Passacantando (Italy), to Sept. 25, 2003. The following Alternate Directors also served after June 30, 2003: Eckhardt Biskup (Germany), to Aug. 31, 2003; Dong-Soo Chin (Korea, Republic of), to July 22, 2003; Helena Cordeiro (Portugal), to Sept. 11, 2003; Emmanuel Moulin (France), to July 22, 2003; Alfonso C. Revollo (Bolivia) and Rosemary B. Stevenson (United Kingdom), to May 14, 2004; Sharon Weber (Jamaica), to Nov. 14, 2003; Masanori Yoshida (Japan), to July 11, 2003. Note: Somalia (333 votes) did not participate in the 2002 Regular Election of Directors. a. To be succeeded by Yoshio Okubo (Japan) effective July 6, 2004. b. To be succeeded by Caroline Sergeant (United Kingdom) effective July 29, 2004. 110 IFC 2004 ANNUAL REPORT A P P E N D I X C IFC Organization and Management IFC Management 2004 President1 James D. Wolfensohn Executive Vice President2 Peter L. Woicke See page 63 for IFC organizational chart. Vice President and Corporate Secretary1 W. Paatii Ofosu-Amaah Compliance Advisor/Ombudsman3 Meg Taylor Country Manager, Philippines (Manila) Vipul Bhagat Vice President, Legal Carol F. Lee Country Manager, Thailand (Bangkok) Michael Higgins Vice President, Human Resources Dorothy H. Berry Country Manager, Vietnam, Deepak Khanna and Administration Laos, and Cambodia (Hanoi) Vice President, Operations Assaad J. Jabre Manager, Strategy and Coordination Amitava Banerjee Vice President, Portfolio Farida Khambata and Risk Management South Asia Vice President, World Bank/IFC Michael Klein Director Iyad Malas Private Sector Development Senior Manager, India (New Delhi) Vipul C. Prakash and IFC Chief Economist Head, Strategy and Coordination Neil Gregory Vice President, Finance Nina Shapiro Central and Eastern Europe Director (Moscow) Edward Nassim REGIONAL DEPARTMENTS Director, Private Enterprise Christian Grossmann Partnership (Moscow) Sub-Saharan Africa Director (Johannesburg) Richard Ranken Manager, Strategy and Coordination Kutlay Ebiri Associate Director, SME Programs Mwaghazi Mwachofi Southern Europe and Central Asia Khosrow Zamani and Technical Assistance Operations Director (Istanbul) Associate Director, Investment Thierry Tanoh Associate Director (Istanbul) Shahbaz Mavaddat Operations Manager (Istanbul) Sita Ramaswami SME Solutions Center, Ibrahima Diong Manager (Istanbul) Vincent Rague Manager (Johannesburg) Manager, East Africa (Nairobi) Jean Philippe Prosper Latin America and the Caribbean Country Manager, Cheikh Oumar Seydi Director (Rio de Janeiro) Atul Mehta Central Africa (Douala) Associate Director (São Paulo) Saran Kebet Koulibaly Country Manager, Ghana (Accra) (vacant) Country Manager and Regional Serge Devieux Country Manager, Madagascar (vacant) Representative, Andean Region (Bogotá) Country Manager, Nigeria (Lagos) Andrew Alli Country Manager, Mexico and Paolo Martelli Central America (Mexico City) Country Manager, Senegal (Dakar) (vacant) Senior Strategy Officer Eduardo Wallentin East Asia and the Pacific Director Javed Hamid Middle East and North Africa Director (Cairo) Sami Haddad Senior Manager, Business Timothy Krause Development (Hong Kong) Associate Director, General Abdelkader H. Allaoua Business Development Senior Manager, China Karin Finkelston and Mongolia (Beijing) Country Manager, Pakistan (Islamabad) Farid Dossani Manager, Business Azmat Taufique Manager, Business Development Vivek Pathak Development (Hong Kong) Head, Dubai Office (vacant) Country Manager, Indonesia (Jakarta) German Vegarra Head, Strategy and Coordination Peggy Henderson IFC 2004 ANNUAL REPORT 111 IFC Organization and Management (continued) INDUSTRY DEPARTMENTS Global Manufacturing and Services Director Dimitris Tsitsiragos Agribusiness Associate Director, Sustainability Michael Essex Director Jean-Paul Pinard and Global Portfolio Senior Manager, Training Robin Glantz Senior Manager, Portfolio and Macadou N'Daw and Development Credit Review Manager, Sector Group I Sujoy Bose Senior Manager, New Investments Oscar Chemerinski Manager, Sector Group II Stephanie Fremann Manager, Sector Group III Ritva Laukkanen Global Financial Markets Director Jyrki Koskelo Manager, Global Transaction Group Snezana Stoiljkovic Manager, Transaction Group Edward Strawderman Health and Education Associate Director, Field and Portfolio Mark Alloway Director Guy Ellena Regional Head, Central and Eastern Alireza Zavar Manager, Business Development Shilpa Patel Europe (Moscow) Manager, Credit Review and Portfolio Sybile Lazar Regional Head, South Asia and MENA Jan Van Bilsen (Dubai) Infrastructure Regional Head, Southern Europe and Martin Kimmig Director Francisco Tourreilles Central Asia (Istanbul) Senior Manager, Transport Services Ravinder Bugga Regional Head, Sub-Saharan Africa Dolika Banda Manager, New Investments Darius Lilaoonwala (Johannesburg) Manager, Portfolio and Credit Review Apinya Suebsaeng Manager, East Asia Loy Pires Manager, Portfolio and Credit Review Paul Baribeau Associate Director, Financial Engineering Shidan Derakhshani Manager, Infrastructure Amnon Mates Manager, Institution Building and Georgina Baker Manager, Utilities Usha Rao-Monari New Product Development Manager, Microfinance S. Aftab Ahmed Oil, Gas, Mining, and Chemicals4 Director Rashad-Rudolf Kaldany Manager, Nonbank Financial Institutions Marcos Brujis Senior Manager, Mining Kent E. Lupberger Head, Banking Joao Lucas Duchene Senior Manager, Oil and Gas Somit Varma Head, Global Financial Markets Strategy Denis Lionel Chaput Manager, Chemicals Lance Crist Associate Director, Operations Mamta Shah Manager, Portfolio and Credit Review Kalada Harry Head, Regional Coordinator for CAF Ayaan Adam and CSA Private Equity and Investment Funds Head, Regional Coordinator for CEA Hans-Jorg Paris Director Haydée Celaya and MENA Manager, Portfolio Operations David Wilton Head, Regional Coordinator for CEU Rosy Khanna and SECA Small and Medium Enterprise5 Director Laurence Carter Head, Regional Coordinator for CLA James Scriven Senior Manager, Facilities Max Aitken Head, Special Projects Jean-Marie Masse Manager, Donor Funded Operations Mariann Kurtz Weber Manager, Linkages Sujata Lamba Global Information and Communication Technologies4 Director Mohsen Khalil Trust Funds Manager, Portfolio and Credit Review Joseph Solan Director Uday Wagle Manager, New Investments Stephanie von Friedeburg Manager Mariko Higashi Manager, Internet Group Ravi Vish 112 IFC 2004 ANNUAL REPORT DEPARTMENTS Manager, Investment Accounting, Karen Jones Compliance and Custody Controller's and Budgeting Director Allen F. Shapiro Grassroots Business Organizations Senior Manager, Budgeting Richard J. Moss Director Harold Rosen Manager, Financial Reporting Paul B. Bravery and Accounting Policy Human Resources and Administration Vice President Dorothy H. Berry Manager, Internal Controls Nicholas Pardoe and Special Projects Associate Director, HR Development Esteban Altschul Senior Adviser, Loss Provisioning Guy A. de Clercq Manager, Compensation and Daniel Tytiun Special Projects Corporate Business Informatics Manager, Facilities and Administration Geoffrey A. Willing Chief Information Officer Guy-Pierre de Poerck Manager, Leadership Development Helen Frick Senior Manager, Development Wajdi Bustani Human Resources Team Manager Eva Mennel and Informatics Human Resources Team Manager Anne Sahl Manager, Business Informatics Paul Standen Legal Department Corporate Governance 6 General Counsel Jennifer Sullivan Director Teresa Barger Chief Counsel, Finance Victoria C. Choy Chief Counsel David Harris Corporate Portfolio Management Chief Counsel Eduardo A. Director Marc Babin Hernandorena Head, Equity and Portfolio Management Sebastian Thiriez Chief Counsel David McLean Chief Counsel Christian Philip Corporate Relations Manager Joseph O'Keefe Chief Counsel George Springsteen Corporate Risk Management and Financial Policy Operational Strategy Group Associate Director Lakshmi Shyam-Sunder Senior Manager Toshiya Masuoka Credit Review Operations Evaluation Group7 Director Sakdiyiam Kupasrimonkol Director William E. Stevenson Chief Credit Officer Mun Fui Wong Resource Mobilization Chief Credit Officer Eduardo Abello Director Jonathan Hakim Chief Credit Officer Vincent Polizatto Manager, B-Loan Management Mary Elizabeth Ward Environment and Social Development Treasury Director Rachel Kyte Deputy Treasurer--Head of Funding John Borthwick Manager, Environmental Markets Group Louis Boorstin Deputy Treasurer--Head of Liquid Mark Spindel Senior Manager, Project Support Group William Bulmer Asset and Cash Management Manager, Insurance Services Group Merunisha Ahmid Deputy Treasurer--Head of Derivative Shanker Krishnan Manager, Market Development (vacant) Products and Asset Liability Management Deputy Treasurer--Head of Takehisa Eguchi Financial Operations Quantitative Analysis Director Avi Hofman Deputy Treasurer--Global Head of Lee Meddin Manager, Loan and Equity Soon-Wan Ooi Structured Finance Operations Support IFC 2004 ANNUAL REPORT 113 IFC Organization and Management (continued) PROJECT DEVELOPMENT FACILITIES OTHER Africa Project Development Facility (APDF) Director, Tokyo Office (Japan) Motoharu Fujikura General Manager (Johannesburg) (vacant) Special Representative Wolfgang Bertelsmeier in Europe (Paris) China Project Development Facility (CPDF) Special Representative Oltmann G. Siemens General Manager (Chengdu) Eric Siew in Europe (Frankfurt) Program for Eastern Indonesia SME Assistance (PENSA) Municipal Fund General Manager (Bali) Chris Richards Director Declan J. Duff LAC SME Facility Private Sector Advisory Services General Manager Anita Bhatia Director Bernard Sheahan Manager, Privatization Policy Denise Leonard Mekong Private Sector Development Facility (MPDF) and Transactions General Manager (Hanoi) Adam Sack Manager, Privatization Policy David Donaldson and Transactions North Africa Enterprise Development (NAED) General Manager, Private Enterprise Jesper Kjaer Private Sector Development Partnership--Middle East and NAED Director, Investment Climate Neil Roger Program Manager (Cairo) Antoine Courcelle- Department and General Labrousse Manager, FIAS Program Manager (Algiers) Houria Sammari Manager, Foreign Investment Thomas Davenport Program Manager (Rabat) Joumana Cobein Advisory Service Manager, Monitoring and Simeon Djankov Pacific Enterprise Development Facility (PEDF) Analysis Group General Manager (Sydney) Denise Aldous Lead Economist (Sydney) Russell Muir SouthAsia Enterprise Development Facility (SEDF) Lead Economist (vacant) General Manager (Dhaka) Anil Sinha Special Operations Group Southeast Europe Enterprise Development (SEED) Director Maria Da Graça Domingues General Manager (Sarajevo) Alex Paine 1. These officers hold the same position in IBRD. 2. Also serves as Managing Director for the World Bank, with responsibility for Private Sector Development across the Bank Group. 3. Reports directly to James D. Wolfensohn. 4. Reports to IBRD Vice President, Infrastructure, as well as IFC Vice President, Operations, and IFC Vice President, Portfolio and Risk Management on portfolio matters. 5. Reports to IFC Vice President, Operations as well as to World Bank/IFC Vice President, Private Sector Development and IFC Chief Economist. 6. Reports to IFC Vice President, Portfolio and Risk Management as well as to World Bank/IFC Vice President, Private Sector Development and IFC Chief Economist. 7. Reports directly to Director General, Operations Evaluation, IBRD and to IFC Executive Vice President. 114 IFC 2004 ANNUAL REPORT A P P E N D I X D IFC Field Representatives and Contacts Country City Name Title Albania Tirana Elira Sakiqi Country Officer Albania (SEED) Tirana Anila Bashllari Program Coordinator Algeria (NAED) Algiers Houria Sammari Program Manager Argentina Buenos Aires Yolande Duhem Country Manager Armenia Yerevan Nerses Karamanukyan Sr. Projects Officer Australia (FIAS) Sydney Andrew Proctor Regional Manager Australia (PEDF) Sydney Denise Aldous General Manager Azerbaijan Baku Aliya Nuriyeva Program Coordinator Bangladesh Dhaka Hafeezuddin Ahmad Resident Representative Bangladesh (SEDF) Dhaka Anil Sinha General Manager Belarus Minsk Ivan Ivanov Project Manager Bolivia La Paz Paolo Martelli Country Manager Bosnia and Herzegovina Sarajevo Sita Ramaswami Country Manager (based in Istanbul) Bosnia and Herzegovina (SEED) Sarajevo Alex Paine General Manager Brazil Rio de Janeiro Atul Mehta Director Brazil São Paulo Saran-Kebet-Koulibaly Associate Director Bulgaria Sofia Sujata Lamba Country Manager (based in Istanbul) Cameroon Douala Oumar Seydi Country Officer Cameroon (APDF) Douala David Ashiagbor Business Development Officer Chile Santiago Yolande Duhem Country Manager China Hong Kong Tim Krause Senior Regional Manager China Beijing Karin Finkelston Country Manager China (CPDF) Chengdu Eric Siew General Manager Colombia Bogota Serge Devieux Resident Representative Côte d'Ivoire Abidjan (vacant) Croatia Zagreb Roberto Albisetti Country Manager (based in Belgrade) Czech Republic Prague Charles van der Mandele Head of Special Operations Dominican Republic Santo Domingo Salem Rohana Regional Representative Egypt, Arab Republic of Cairo Sami Haddad Director Egypt, Arab Republic of (NAED) Cairo Jesper Kjaer General Manager France Paris Wolfgang Bertelsmeier Special Representative for Europe Georgia Tbilisi (vacant) Germany Frankfurt Oltmann Siemens Special Representative for Europe Ghana Accra Kirsten Fenster Country Officer Ghana (APDF) Accra Modou Badara Njie Regional Manager India Mumbai (vacant) India New Delhi Iyad Malas Director Indonesia Jakarta German Vegarra Country Manager Indonesia (PENSA) Bali Christopher Richards General Manager Japan Tokyo Motoharu Fujikura Director IFC 2004 ANNUAL REPORT 115 IFC Field Representatives and Contacts (continued) Country City Name Title Kazakhstan Almaty Gorton De Mond Country Manager Kazakhstan Almaty Valerian Khagay Country Manager Kenya Nairobi Jean Philippe Prosper Regional Manager Kyrgyz Republic Bishkek Gulnura Djuzenova Country Officer Macedonia, Former Yugoslav Skopje Sita Ramaswami Country Manager (based in Istanbul) Republic of Madagascar (APDF) Antananarivo Henri E. Rabarijohn Regional Manager Mexico and Central America Mexico D.F. Paolo Martelli Country Manager Moldova Chisinau Roberto Albisetti Country Manager (based in Belgrade) Morocco (NAED) Rabat Joumana Cobein Program Manager Mozambique (APDF) Maputo Issufo Caba Business Development Officer Nigeria Lagos Andrew Alli Country Manager Pakistan Islamabad Farid Dossani Country Manager Pakistan Karachi Zunee Muhtashim Investment Officer Paraguay Asunción Yolande Duhem Country Manager Peru Lima Per Kjellerhaugh Resident Representative Peru (LAC SME Facility) Lima Anita Bhatia General Manager Philippines Manila Vipul Bhagat Country Manager Poland Warsaw Mary Lystad Senior Investment Officer Romania Bucharest Ana Maria Mihaescu Chief of Mission Russian Federation Moscow Edward Nassim Director Russian Federation (PEP) Moscow Christian Grossmann Director Senegal Dakar Mariéme D. Travaly Country Officer Serbia and Montenegro Belgrade Roberto Albisetti Chief of Mission South Africa Cape Town Henning Amelung Sr. Investment Officer South Africa Johannesburg Richard Ranken Director South Africa (APDF) Johannesburg (vacant) Sri Lanka Colombo Sanjiva Senanayake Resident Representative Tajikistan Dushanbe Olim Khomidov Investment Officer Thailand Bangkok Michael Higgins Country Manager Trinidad and Tobago Port of Spain Kirk Ifill Regional Representative Turkey Istanbul Khosrow Zamani Regional Director Turkey Istanbul Sujata Lamba Country Manager Turkmenistan Ashgabat Gorton De Mond Regional Coordinator (based in Almaty) Ukraine Kiev Elena Voloshina Program Officer Uruguay Montevideo Yolande Duhem Country Manager Uzbekistan Tashkent Elbek Rikhsiyev Country Officer Vietnam Hanoi Deepak Khanna Country Manager Vietnam (MPDF) Hanoi Adam Sack General Manager West Bank and Gaza Jerusalem (vacant) 116 IFC 2004 ANNUAL REPORT A P P E N D I X E IFC Addresses Headquarters Bosnia and Herzegovina, Sarajevo Côte d'Ivoire, Abidjan 2121 Pennsylvania Avenue, N.W. H. Kresevljakovica 19 Immeuble Banque Mondiale Washington, DC 20433, U.S.A. 71000 Sarajevo Concody Telephone: (202) 473-3800 Bosnia and Herzegovina Angle des rues Jaques Aka et Booker Washington Fax: (202) 974-4384 Telephone: (387-33) 440-293 01 BP 1850, Abidjan Fax: (387-33) 440-108 Côte d'Ivoire Albania, Tirana Telephone: (225) 2244 3244 Rruga Deshmoret e 4 Shkurtit Brazil, Rio de Janeiro Fax: (225) 2244-4483 Vila. 34 Rua Redentor, 14-Ipanema Tirana, Albania Rio de Janeiro--22421-030, Brazil Czech Republic, Prague Telephone: (+355-4) 230-016/7 Telephone: (55-21) 2525-5850 Na Rybnicku 5 Fax: (+355-4) 240-590 Fax: (55-21) 2525-5879 12000 Prague, Czech Republic Telephone: (420-2) 9636-8400 Argentina, Buenos Aires Brazil, São Paulo Fax: (420-2) 9636-8410 Bouchard 680, piso 11° Av. Roque Petroni Junior, 999 Torre Fortabat 8th Floor, Rooms 81/82 Dominican Republic, Santo Domingo 1106 Buenos Aires, Argentina 04707-910 São Paulo SP, Brazil Calle Virgilio Diaz Ordoñez #36 Telephone: (54-11) 4114-7200 Telephone: (55-11) 5185-6888 esq, Gustavo Mejía Ricart Fax: (54-11) 4312-7184 Fax: (55-11) 5181-8252 Edificio Mezzo Tempo, Suite 401 Santo Domingo, Dominican Republic Armenia, Yerevan Bulgaria, Sofia Telephone: (809) 566-6815 Republic Square 36 Dragan Tzankov Blvd. Fax: (809) 566-7746 9 V. Sargsyan Str. World Trade Center/INTERPRED Yerevan 375010, Armenia 5th Floor Egypt, Cairo Telephone: (374-1) 545-241/242/243 1057 Sofia, Bulgaria World Trade Center Bldg. Fax: (374-1) 545-245 Telephone: (359-2) 918-14225/14230 1191 Corniche El Nil, Boulac Fax: (359-2) 9712-045 Cairo, Egypt Australia, Sydney (FIAS) Telephone: (20-2) 579-9900/6565/5353 Level 18, CML Building Cameroon, Douala Fax: (20-2) 579-2211 GPO Box 1612 96 Rue Flatters 14 Martin Place Suite 305 France, Paris Sydney, NSW 2000, Australia B.P. 4616 66, avenue d'Iéna Telephone: (61-2) 9223-7773 Douala, Cameroon 75116 Paris, France Fax: (61-2) 9223-2533 Telephone: (237) 428 033/429 451 Telephone: (33-1) 4069-3060 Fax: (237) 428 014 Fax: (33-1) 4720-7771 Azerbaijan, Baku 91-95 Mirza Mansur Str., Icheri Sheher China, Beijing Georgia, Tbilisi Baku 370 004, Azerbaijan Room 1501, Tower 2 5a, 1st Drive, Chavchavadze Ave Telephone: (994-12) 921-941/ 922-807 China World Trade Center Tbilisi, Georgia 0179 Fax: (994-12) 921-479/ 926-873 Beijing 100004, PR China Telephone: (995-32) 913 096, 912 689, 912 659, Telephone: (86-10) 6505 8686 912 436, 912 356 Bangladesh, Dhaka Fax: (86-10) 6505 9808 Fax: (995-32) 913 478, 913 480 United House 10 Gulshan Avenue, 4th Floor China, Hong Kong Germany, Frankfurt Gulshan 1 Suite 7903, Two International Finance Center Bockenheimer Landstrasse 109 Dhaka 1212, Bangladesh 8 Finance Street 60325 Frankfurt am Main, Germany Telephone: (880-2) 9899334 Central Telephone: (49-69) 7434-8230 Fax: (880-2) 9899255 Hong Kong Fax: (49-69) 7434-8239 Telephone: (852) 2509 8100 Belarus, Minsk Fax: (852) 2509 9363 Ghana, Accra 6ª, 3rd floor Partizansky Prospekt No. 150A, Roman Road Minsk 220033, Belarus Colombia, Bogotá Roman Ridge Telephone: (375-172) 197-811; Corporación Financiera Internacional P.O. Box CT 2638 Cantonments 281-779, 281-838 Cra. 7 No. 71-21 Torre A, Oficina 1401 Accra, Ghana Fax: (375-172) 227-440 Edificio Fiduagraria Telephone: (233) 244 312 053 Bogotá, Colombia Bolivia, La Paz Telephone: (571) 319-2330 India, Mumbai Calle Fernando Guachalla No. 342 Fax: (571) 319-2359 Godrej Bhavan, 3rd Floor Edificio Victor, Piso 9 Murzban Road La Paz, Bolivia Fort, Mumbai 400 001, India Telephone: (591-2) 244-3133 Telephone: (91-22) 5665-2000 Fax: (591-2) 212-5065 Fax: (91-22) 5665-2001 IFC 2004 ANNUAL REPORT 117 IFC Addresses (continued) India, New Delhi Pakistan, Karachi Sri Lanka, Colombo No. 1, Panchsheel Marg, Chanakyapuri 1st Floor, Bahria Complex-II c/o The World Bank, DFCC Bldg., 2nd Floor New Delhi 110 021, India M. T. Khan Road 73/5 Galle Road Telephone: (91-11) 2611-1306 Karachi, Pakistan Colombo 3, Sri Lanka Fax: (91-11) 2611-1281 Telephone: (92-21) 561-0098/0065 Telephone: (94-11) 2448-070 ext. 325/(94-11) 5561-325 Fax: (92-21) 561-0153 Fax: (94-11) 2471-536 Indonesia, Jakarta Jakarta Stock Exchange Bldg. Peru, Lima Tajikistan, Dushanbe Tower 2, 13th Floor Av. Alvarez Calderon 185, WB, IFC (RM): Jl. Jenderal Sudirman Kav. 52-53 Piso 7 San Isidro 91-10, Shevchenko str., 734025 Jakarta 12190, Indonesia Lima, Peru Dushanbe, Tajikistan Telephone: (62-21) 5299-3001 Telephone: (511) 615-0660 Telephone: (992-372) 210-756/ 211-518 Fax: (62-21) 5299-3002 Fax: (511) 421-7241 Fax: (992-372) 214-871 Japan, Tokyo Philippines, Manila Thailand, Bangkok 10th Floor, Fukoku Seimei Building 11th Floor, Tower One 17th Floor, Diethelm Tower A 2-2-2, Uchisaiwai-cho, Chiyoda-ku Ayala Triangle, Ayala Avenue 93/1 Wireless Road Tokyo 100-0011, Japan Makati 1226, Manila, Philippines Bangkok 10330, Thailand Telephone: (81-3) 3597-6657 Telephone: (63-2) 848-7333/38 Telephone: (66-2) 650-9253/8 Fax: (81-3) 3597-6698 Fax: (63-2) 848-7339 Fax: (66-2) 650-9259 Kazakhstan, Almaty Poland, Warsaw Trinidad and Tobago, Port of Spain 41, Kazybek Bi Street, blg. A, 4th Floor Warsaw Financial Center SW Penthouse, SAGICOR Building Almaty 480100, Emilii Plater 53, 9th Floor 16 Queen's Park West, 3rd floor Republic of Kazakhstan 00-113 Warsaw, Poland Port of Spain, Trinidad and Tobago Telephone: (7-3272) 980-580 Telephone: (48-22) 520-6100 Telephone: (868) 628-5074 Fax: (7-3272) 980-581/4 Fax: (48-22) 520-6101 Fax: (868) 622-1003 Kenya, Nairobi Romania, Bucharest Turkey, Istanbul Hill Park Building, Upper Hill Road 83, Dacia Boulevard, Sector 2 Is Kuleleri, Kule 2--Kat 3 P.O. Box 30577-00100 Bucharest, Romania 34330 4.--Levent Nairobi, Kenya Telephone: (40-21) 211-2866/201-0365/201-0366 Istanbul, Turkey Telephone: (254-20) 260-300/400 Fax: (40-21) 201-0364/211-3141 Telephone: (90-212) 282-4001 Fax: (254-20) 260-383 Fax: (90-212) 282-4002 Russian Federation, Moscow Kyrgyz Republic, Bishkek 36, bld. 1, 3d floor, Ukraine, Kiev 214 Moskovskaya Street Bolshaya Molchanovka 4 Bogomoltsa Ulitsa, 5th Floor 720 010 Bishkek, Kyrgyz Republic 103069 Moscow, Russia Kiev 01024, Ukraine Telephone: (996-312) 610-650 Telephone: (7-095) 411 7555 Telephone: (380-44) 253-0539 Fax: (996-312) 610-356/481 Fax: (7-095) 411 7556 Fax: (380-44) 490-5830 Mexico, Mexico City Senegal, Dakar United Kingdom, London Prado Sur 240, Suite 402 3 Place de l'Indépendence 4 Millbank Lomas de Chapultepec SIDH Building--7th floor London SW1P 3JA, U.K. Del. Miguel Hidalgo B.P. 3296 Telephone: (44-20) 7222-7711 Mexico D.F., 11000, Mexico Dakar, Senegal Fax: (44-20) 7976-8323 Telephone: (52-55) 5520-6191 Telephone: (22-1) 849-5049 Fax: (52-55) 5520-5659 Fax: (22-1) 849-5044 Uzbekistan, Tashkent 107B Amir Temur St. Tashkent 700084 Nigeria, Lagos Serbia and Montenegro, Belgrade Business Center Floor: 15C Maersk House, 1st Floor Knjeginje Zorke 96 World Bank Country Office, Uzbekistan Plot 121 Louis Solomon Close 11000 Belgrade, Serbia and Montenegro Telephone: (998 71) 138 2528 Off Ahmadu Bello Way Telephone: (381-11) 3023-760 Fax: (998 71) 138 5927 Victoria Island, Lagos, Nigeria Fax: (381-11) 3023-733 Telephone: (234-1) 262-6455/6464 Vietnam, Hanoi Fax: (234-1) 262-6465/6 South Africa, Johannesburg 7th Floor, 63 Ly Thai To, Hoan Kiem 14 Fricker Road Hanoi, Vietnam Pakistan, Islamabad Illovo Boulevard Telephone: (84-4) 934-2282 20 A, Shahrah-e-Jamhuriat Ramna 5 Illovo 2196 Fax: (84-4) 934-2289 (G5/1) Islamabad, Pakistan PO Box 411552, Craighall 2024 Telephone: (92-51) 227-9631/32/33 Johannesburg, South Africa West Bank and Gaza Fax: (92-51) 282-4335 Telephone: (27-11) 371 3000 P.O. Box 54842 Fax: (27-11) 325 0582 Jerusalem, Israel Telephone: (972-2) 236-6517/6500 Fax: (972-2) 236-6521 118 IFC 2004 ANNUAL REPORT A P P E N D I X E S F & G Participants in Loan Syndications ABN AMRO Bank NV Gulf International Bank BSC Alpha Bank AE HSBC Group Anglo Irish Bank Corporation plc HSH Nordbank AG The Arab Investment Company SAA ING Group Banca Intesa SpA International Finance Participation Trust Banca Monte dei Paschi di Siena SPA Investkredit Bank AG Banco Atlantico SA KBC Bank NV Banco Bilbao Vizcaya Argentaria, S.A. The Korea Development Bank Banco Espirito Santo SA Landesbank Rheinland-Pfalz Girozentrale Bank of America NA Mizuho Corporate Bank, Ltd. Bank of Bahrain and Kuwait BSC Natexis Banques Populaires Bayerische Hypo- und Vereinsbank AG National Bank of Dubai PJSC Bayerische Landesbank National Bank of Kuwait SAK BNP Paribas Nederlandse Financierings--Maatschappij voor BRE Bank SA Ontwikkelingslanden NV (FMO) BRED Banque Populaire Norddeutsche Landesbank Girozentrale Bumiputra-Commerce Bank Berhad Nordea AB (pub) Caixa Geral de Depositos S.A. Overseas-Chinese Banking Corporation Limited Calyon* Raiffeisen Zentralbank Oesterreich AG (RZB Austria) Citigroup Inc. Raiffeisenlandesbank Oberosterreich rGmbH Cooperatieve Centrale Raiffeisen-Boerenleenbank BA Raiffeisenverband Salzburg reg Gen mbH (Rabobank Nederland) The Royal Bank of Scotland Group plc DBS Bank Limited San Paolo IMI SpA DekaBank Deutsche Girozentrale Société Générale Deutsche Bank AG Standard Chartered Bank Dexia SA State Bank of India Erste Bank der Oesterreichischen Sparkassen AG UniCredito Italiano SPA ForeningsSparbanken AB (publ) (Swedbank) Union National Bank Fortis Bank NV/SA WestLB AG Equator Principles: Adopting Institutions The following financial institutions had adopted the Equator Principles as of June 30, 2004. For more information on the principles, see p. 17. ABN AMRO Bank NV Dexia SA Mizuho Corporate Bank, Ltd. Banco Bilbao Vizcaya Argentaria, S.A. Dresdner Bank Rabobank Group Bank of America NA Eksport Kredit Fonden Royal Bank of Canada Barclays HSBC Group Royal Bank of Scotland Calyon* HVB Group Standard Chartered Bank CIBC ING Group Unibanco Citigroup Inc. KBC Bank NV WestLB AG Credit Suisse Group MCC Westpac Banking Corporation *Credit Agricole Indosuez and Credit Lyonnais merged to form Calyon on April 30, 2004. IFC 2004 ANNUAL REPORT 119 A P P E N D I X H Acronyms, Notes, and Definitions ACRONYMS APDF Africa Project Development Facility IMF International Monetary Fund ASEAN Association of Southeast Asian Nations IT information technology CAO Compliance Advisor/Ombudsman MENA Middle East and North Africa CBF Capacity Building Facility MIGA Multilateral Investment Guarantee Agency CCF Corporate Citizenship Facility MPDF Mekong Private Sector Development Facility EBRD European Bank for Reconstruction and Development NGO nongovernmental organization EOF Environmental Opportunities Facility OECD Organisation for Economic Co-operation and Development EU European Union OEG Operations Evaluation Group FDI foreign direct investment PEP Private Enterprise Partnership FIAS Foreign Investment Advisory Service PEP-ME Private Enterprise Partnership for the Middle East FMAS Financial Markets Advisory Services SEDF SouthAsia Enterprise Development Facility FY fiscal year SEED Southeast Europe Enterprise Development GDP gross domestic product SFMF Sustainable Financial Markets Facility GEF Global Environment Facility SME small and medium enterprise IBRD International Bank for Reconstruction and Development SRI socially responsible investment ICSID International Centre for Settlement of Investment Disputes TATF Technical Assistance Trust Funds IDA International Development Association USAID U.S. Agency for International Development IFC International Finance Corporation WTO World Trade Organization NOTES AND DEFINITIONS A-loan and B-loan. A single loan agreement between the borrower and IFC normally stipulates the full amount of financing to be provided by IFC and the participating institutions. The IFC loan may be in two portions: (1) the A-loan is IFC's own portion, funded with IFC's own resources and subject to its agreed loan terms; (2) the B-loan is funded by participants on terms that may differ from those of IFC. Commitments include (1) signed loan and equity (including quasi-equity) investment agreements; (2) signed guarantee agreements; and (3) risk management facilities that are considered ready for execution as evidenced by a signed International Swaps and Derivatives Association agreement or a signed risk management agreement with a client. Disbursements are loans and investments paid out. The fiscal year at IFC runs from July 1 to June 30. Thus, FY04 began on July 1, 2003, and ended on June 30, 2004. Investment amounts are given in U.S. dollars, regardless of the currencies of the investment. Investment amounts in non-U.S.-dollar currencies are revalued on the ending day of the month in which they are approved. On-lending is the process of lending funds from the IFC's own sources through intermediaries, such as local banks. Participants and IFC fully share the commercial credit risks of projects, but because IFC is the lender of record, participants receive the same tax and country risk benefits that IFC derives from its special status as a multilateral financial institution. Quasi-equity instruments incorporate both loan and equity features, which are designed to provide varying degrees of risk/return trade-offs that lie between those of straight loan and equity investments. Rounding of numbers may cause totals to differ from the sum of individual figures in some tables. The World Bank includes both IBRD and IDA. The World Bank Group includes IBRD, IDA, IFC, MIGA, and ICSID. 120 IFC 2004 ANNUAL REPORT Project Manager and Editor Paul McClure Corporate Relations Contributors Joseph O'Keefe, Manager Dana Lane, Chief of Publications Ariadne Garscadden, Information Assistant Declan Heery, Consultant Gemma Lueje, Program Assistant Andre McClean, Intern Web site: Stephan Beauchesne, Anna Bottiglieri, Vincent Yemoh Primary IFC Staff Contributors Translation Philippe Ahoua Irina Likhacheva Arabic: Al-Ahram Center for Faheen Allibhoy Michele Lubrano Translation & Publishing, Cairo Teresa Andaya Nadia Maaze Chinese: China Financial & Economic Anthony Aylward Junko Oikawa Publishing, Beijing Paul Bravery Kaikham Onedamdy French & Spanish: World Bank Nicholas Burke Lory Camba Opem Translation Division, Washington, DC Omar Chaudry Skander Oueslati Julia Chiperfield Sérgio Pimenta Russian: Alex Publishing, Moscow Michael Dompas Andrea Quinones David Donaldson Fereshteh Raissian Design Sabine Durier Randall Riopelle Financial Communications Inc., Kutlay Ebiri Brian Samuel Bethesda, MD James Emery Hillmare Schulze Sara Gann Ellen Schwab Printing Anastasia Gekis William V. Todd S&S Graphics, Laurel, MD Stella Gonzales Erika Veizaga Alison Harwood Mary Beth Ward Photography Peggy Henderson David Wofford Greg Girard Brigid Holleran Wai-Keen Wong Michael Gunawan Emily Horgan Rob Wright Breton Littlehales Lisa Kaestner Linda Young Carlos Madrid Sam Keller Kenji Yuhaku Staff of IFC, World Bank, and MIGA Jung Lim Kim Damla Zeybel Gjergj Konda INTERNATIONAL FINANCE CORPORATION WORLD BANK GROUP 2004 ANNUAL REPORT VOLUME 1 At IFC our mandate is to further sustainable economic development through the private sector. We pursue this goal through innovative solutions to the challenges of development, as we invest in companies and financial institutions in emerging markets and as we help build business skills. We consider positive development impact an integral part of good business, and we focus much of our effort on the countries with the greatest need for investment. We recognize that economic growth is sustainable only if it is environmentally and socially sound and helps improve the quality of life for those living in developing countries. THE IFC ANNUAL REPORT ON THE WEB, www.ifc.org/ar2004, is a companion to this printed edition. It provides easy navigation and downloading of data related to IFC investment projects. 2121 Pennsylvania Avenue, NW Washington, DC 20433 USA Telephone 202-473-3800 SHIRES Fax 202-974-4384 KIMBERLY www.ifc.org ISBN 0-8213-5944-4 PRINTED WITH SOY-BASED INKS