Page 1 Vol. 14 - March 15, 2004 Recent Business Highlights CPDF corporate governance pilot firm convenes shareholder meeting 200 SME leaders join CPDF forum on enterprise change management 2000 managers already trained under BE Danish IFU selects CPDF as investment advisor for west China CPDF and MIGA hold successful workshop on investment promotion best practice Visitors To IFC-CPDF William L. Luttrell, Courtney S. Roberts, Zhou Ming, Liu Xuhong, Alfred Yeo, Mike Shi, Lily Tang, and Caddy Ju People Among Us Lei Wei, BDO with CPDF’s Capacity Building team and linkages expert News From The Region Sichuan government unveils 120 investment projects Local agribusiness firm lists on Shanghai Stock Exchange Sun Microsystems opens IForce Solutions Center in Chengdu Coming Up Soon Chengdu CGF and SECO to sign US$6m capital increase agreement on March 30 Important delegation to Shanghai Global Poverty Reduction Conference to visit CPDF in April Recent Business Highlights Capacity Building (CB) CPDF Corporate Governance (CG) pilot company convenes shareholder meeting… Guanglin, a pilot company in CPDF’s CG project, saw the culmination of 8 months effort in the convening of the 2003 Extraordinary Shareholders Meeting on Dec. 28. Five motions dealing with improving CG in Guanglin were approved, including the appointment of an independent director and the inclusion of his rights in the company’s articles of association. Publication of the meeting agenda and smooth completion of the meeting was accompanied by a rise in Guanglin’s share price, reflecting increased confidence among the company’s minority shareholders. CPDF’s CG team has also been assisting another pilot firm, the Chengdu Credit Guarantee Firm, in drafting its Joint Venture Agreement with Swiss State Secretariat for Economic Affairs (SECO) and corresponding Articles of Association, for the upcoming, CPDF-facilitated injection of US$6 million in capital, with SECO providing US $3 million and the municipal government of Chengdu matching the contribution. (See Upcoming Events) (news contributed by Qing Lu, BDO with the CB team) Local consultants and SMEs acquire specialized Linkages skills… The Linkages team, working with Accenture consultants, is developing a linkage methodology and tool set to assist SMEs in accessing businesses generated by large corporates (LCs). In that regard, training materials covering supply chain management, marketing and customer service were developed for both 35645 Page 2 local consultants and SMEs. As a result, the first training session was delivered to 11 consultants and 11 SME managers on Feb.17. Future topics currently under development include inventory and logistics management. The new linkage methodology will be applied to pilot SMEs serving LCs starting in April. Continued assistanc e to CPDF’s partner or “BPIP” consultants in serving SMEs… The CPDF BPIP team, together with Accenture, provided additional training to local consultants in core consulting skills. Materials used were substantially derived from the MPDF consulting program. Sinowin, the most successful BPIP partner firm, has been rewarded by its SME client-Xianqu, a furniture company with bonus fees and a follow-on contract. Xianqu is now launching its first nationwide promotional campaign on China’s premier TV channel, CCTV, as it capitalizes on its rapid expansion in Sichuan. Two other BPIP-trained local consultants have started their own consultancies and obtained initial consulting contracts with SMEs. 200 SME leaders participate in MTP forum on change management…. On March 10, CPDF, working with local training partner Basis Educational, held a “Revolutionary Management Forum” featuring noted management guru and CEO coach Dr. Ichak Adizes. 3 of CPDF’s most accomplished local trainers also gave high-level presentations on marketing management at the event, raising the profile of MTP’s Business Edge brand and courses. Over 200 SME owners and GMs attended, along with local media. In the current quarter, CPDF’s MTP has trained a total of 1,418 SME staff, and also trained and certified 15 new trainers. (news contributed by Qiu Min, BDO with the CB team) Enterprise Development and Investment Services (EDIS) IS adopts new model and name… CPDF’s IS Team has adopted a new business model and name – Enterprise Development and Investment Services (EDIS) - designed to enhance its ability to support local SMEs in their efforts to raise finance. The new model lays out two lines of business: (1). The development and implementation of Internal Enhancement Plans (IEPs) detailing improvements needed to acquire finance; and (2). Assisted Due Diligence (ADD), supporting local financial institutions in evaluating select SMEs applying for finance. (news contributed by William Beloe, BDO with the IS Team) Danish IFU selects CPDF as investment advisor for West China… IFU, the Industrialization Fund for Developing Countries, is a self-governing Danish fund promoting economic growth in developing countries. IFU, often in co-operation with Danish business entities, participates as a partner in joint ventures with local companies through committing equity capital and/or loans. CPDF has signed a mandate with IFU to act as its investment advisor in west China, particularly Page 3 Sichuan. CPDF will provide quality SME investment proposals to IFU, provide TA to and assist in monitoring IFU portfolio companies. (news contributed by Quan Chen, BDO with the IS team) Agribusiness and gas- separation SMEs receive EDIS assistance… The EDIS team completed and delivered an Internal Enhancement Plan (IEP) for Sichuan Sihai Group, which comprises of 7 companies, 5 of which focus on pork production in various rural areas in Sichuan. The IEP addressed a wide range of business issues, focusing on financial systems/planning and strategic management. CPDF may work with Sihai to address some of the more pressing issues. Building on previous work with Ally, a fast-growing SME focused on the design and implementation of gas-separation facilities, to ensure that key IEP recommendations were properly implemented, EDIS has presented the company's Investment Plan (IP) to a number of appropriate financial institutions, including banks and guarantee funds. EDIS team builds on IEP and IP assistance to local manufacturers… In March, CPDF delivered an IEP to Fuhua, a Leshan-based specialized manufacturer of bamboo pulp- based paper. Fuhua has a strong local impact, as its major input - bamboo pulp - is supplied locally. CPDF is considering a possible TA program to assist Fuhua improve its corporate governance practices, one of the key problems highlighted in the IEP. Also in March, the IS team delivered an Investment Plan to Jinjiang, a local polyurethane foam manufacturer. CPDF is also discussing possible financial support with IFC’s Environmental Opportunities Facility, as Jinjiang is replacing its Ozone Depleting Substance- based production technologies with more environmentally friendly technologies. (news contributed by Quan Chen, BDO with the IS team) Business Enabling Environment (BEE) CPDF and MIGA staff hold workshop on investme nt promotion… On February 24-26, CPDF, together with Multilateral Investment Guarantee Agency (MIGA) and Sichuan Provincial Investment Promotion Bureau (SIPB), held a successful workshop on principles of investment promotion. About 130 representatives from central government agencies, SIPB, other provincial agencies, and local investment promotion agencies attended the 3- day workshop. Representatives from 2 Chinese central government agencies and MIGA delivered respectively lectures on China’s foreign capital policy and investment promotion practices, as well as international best practices in investment promotion. The workshop also drew the attention of high-level officials, notably Mr. Xiaoxiang Huang, Deputy Governor of Sichuan Province. Following up on this workshop, MIGA will assist SIPB in assessing and benchmarking investment environment conditions in 5 sectors in 8 Sichuan cities. (news contributed by Yanfei Ye, BDO with the BEE team) SIPB and MIGA launch online investment information sharing initia tive… Facilitated by CPDF’s BEE team, SIPB’s Information & Service Center (SIPB-ISC) and MIGA signed an agreement for online promotional services on February 27, 2004. SIPB-ISC will provide information on investment opportunities in Sichuan to MIGA, which will disseminate it to potential foreign investors via 3 websites - www.fdixchange.com, www.privatizationlink.com, or www.ipanet.net. Working with MIGA is expected to help improve Sichuan’s image in the eyes of foreign investors. Areas of future co- Page 4 operation currently under consideration include the use of investment promotion software and the provision of IT investment promotion training courses. (news contributed by Yanfei Ye, BDO with the BEE team) Financial Sector (FS) CPDF’s technical assistance to Leshan City Commercial Bank (LCCB) gets underway… CPDF’s technical assistance to LCCB began this March with an initial diagnostic assessment of the bank’s credit and HR systems, including training needs. Findings from the assessment, conducted jointly by Ernst & Young specialists and CPDF’s FS team, will be used to tailor a TA program addressing LCCB’s specific development priorities. LCCB plans to take advantage of opportunities created by the increasing disengagement of the “big four” state banks from outlying cities and semi-urban areas to increase its client base of local private SMEs. (news contributed by Wenfang Chen, BDO with the FS team) Visitors To IFC-CPDF ƒ William A. Luttrell , MIGA Senior Investment Promotion Officer and an expert on site selection, and Courtney S. Roberts , an Internet investment promotion expert and MIGA consultant, visited CPDF from Feb. 21-28 to share their expertise at a week-long investment promotion workshop. ƒ Speaking at the same workshop, Ms. Liu Xuhong , Deputy Director-General of the Foreign Capital Utilization Dept., National Development and Reform Commission, and Ms. Zhou Ming , Deputy Director-General of the Investment Promotion Agency, Ministry of Commerce, also visited CPDF on Feb. 24-25. ƒ A team of Ernst & Young specialists visited CPDF in late February to assist in the initial diagnostic evaluation of Leshan City Commercial Bank. The team included Alfred Yeo , Partner, Ernst & Young Beijing, Mike Shi , Senior Manager, and consultants Lily Tang and Caddy Ju . People Among Us Currently working on CPDF’s Linkages project, Lei Wei joined us in September of 2003, after receiving his MBA from New York University. Before that, he worked for China Merchants Bank in Shenzhen as Senior Project Manager for three years, and also in Agricultural Bank of China, Chengdu Branch for six years as Manager. In addition to his MBA, Lei Wei also holds an MS in economics from Illinois State University and a BA in International Finance from Nankai University. Lei Wei is a math whiz and our resident card shark - visitors to CPDF are advised to exercise caution before entering a poker or bridge contest. He is also an avid NBA fan, and suggests you keep an eye on the San Antonio Spurs this year. News From The Region Page 5 Government - Provinci al government to unveil new investment projects during April forum… On April 22 and 23, the Sichuan Provincial Government will be presenting 120 investment projects requiring US$2.5 billion in investment to local and foreign investors. The projects cover a range of fields, including city management, high and new technologies, resource development, reorganization of SOEs and private enterprises, services and trade. Government - Improved domestic and international rail links planned for Sichuan… The Chengdu and Shenzhen governments are applying to create “five-fixed” freight trains between the two cities, linking Sichuan to the Pearl River Delta’s export corridor. Five-fixed trains have fixed freight prices, loading and unloading times, route, train numbers, and departure/arrival time. In related news, the central government announced plans to build an additional 16,000 km of railway in the southwestern and northwestern border regions by 2020, in order to improve freight links with neighboring countries. Business - Agribusiness powerhouse lists on the Shanghai market… Tongwei Group, a Sichuan-based producer of fish and animal feeds, was listed on the Shanghai A-share market on February 16. Liu Hanyuan, founder of Tongwei and #16 on the Forbes ranking of the wealthiest mainland Chinese, built the company from a small fish farm into the largest fish food producer in the nation. The listing reduced the Liu family’s stake in Tongwei from 97.92% to 63.74%. Business - Foreign multinationals continue to expand into C hengdu… Sun Microsystems and the Chengdu government opened the Chengdu Iforce Solution Center, a testing and proof-of- concept prototype center for Sun’s retail and enterprise partners; Konica Minolta disclosed plans to set up a software R & D center in Chengdu; Amway is to establish a raw materials purchasing center in Sichuan; and Richardson Electronics will open a branch office in Chengdu. Coming Up Soon ƒ On March 30, the Chengdu Credit Guarantee Fund and SECO will hold a signing ceremony for their joint venture agreement providing a US $6 million capital increase to CGF. CPDF played a key role in setting up and facilitating this deal. Mr. Claude Barras, Head of Investment Promotion Unit, will lead the SECO delegation. ƒ CPDF will host a week-long training session for BDOs from 4 facilities from March 15-19. Staff from MPDF, PENSA, SEDF and CPDF will participate in the training sessions, along with a number of headquarters and regional department staff. ƒ The same week – March 15-19 - a COSO Assessment by a Finance Control Team from HQ will review CPDF finance controls and operations. ƒ On April 12, a important delegation of donor and other government representatives to the Global Poverty Reduction Conference in Shanghai will visit Sichuan and see first-hand IFC and CPDF’s work in the province. The delegation will hold a roundtable with CPDF clients and also conduct site visits, before reporting the contribution of the private sector to poverty reduction at the summit in Shanghai this May. Page 6