33819 I FC DONOR-SU PPORTE D TECH N ICAL ASSISTANCE PROG RAMS 2004 Report to the Donor Community © DiskArtTM 1988 © DiskArtTM 1988 © DiskArtTM 1988 © DiskArtTM 1988 About IFC About IFC The mission ofof IFC (www.ifc.org) is to promote sustainable .ifc.org) promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in th developing world, mobilizes capital in the international financial markets, helps clients private investments the improve social and environmental sustainability environmental sustainability, and prov provides technical assistance and advice to governments and businesses. From its founding in 1956 through through FY04, IFC has committed more than $4 h $44 billion of its own funds and has arranged $23 billion in syndications and underwriting for 3,143 companies in 140 developing cou for companies countries. IFC's worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants iin for n loan syndica syndications. About the Cover the Cover This cover is the seventh in tthe the he series featu featuring flowers. We have used these images to symbolize our thanks to our development partners for their generous support. generous support. Previous yyears ears have feat featured cherry blossoms, dogwoods, tulips, edelweiss, roses, and white lilies. This year's cover features the lily of the vvalley. Copyright © 2004 INTERNATIONAL FINANCE CORPORATION 2121 Pennsylvania Avenue, NW Washington, DC 20433, USA www.ifc.org All rights reserved Manufactured in the United States of America Environmentally friendly printing on recycled paper using vegetable-based ink September 2004 The material in this publication is copyrighted. 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Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, USA Table of Contents 02 Message from IFC's ExecutiveVice President 04 Chapter 1:Technical Assistance as a Mainstream Service -- in Partnership with Donors 08 Donor Breakfast and Roundtable Meetings 10 Chapter 2: Donor Funded Operations and Technical Assistance and Advisory Services in the Regions 12 Sub-Saharan Africa 18 Asia and the Pacific 26 Europe and Central Asia 38 Latin America and the Caribbean 42 Middle East and North Africa 46 Global 48 Chapter 3: Donor Funded Operations ­ Global Programs 49 Technical Assistance Trust Funds Program 54 Foreign Investment Advisory Service 56 Sustainable Business Assistance Program 60 Capacity Building Facility 64 Annexes, Directory, and Glossary 66 Technical Assistance and Advisory Projects 86 IFC Donor-Supported Technical Assistance Programs: Purpose/Strategy and Locations 88 Cumulative Financial Commitments 90 Directory 92 Glossary Message from IFC's Executive Vice President It gives me great pleasure to present to you this comprehensive report, which describes all that we do in the area of technical assistance (TA) and advisory services with the funding that you have so generously provided. This year has marked a turning point in our growing network of partnerships · Using our focus on environmental and social sustainability as a key way to with donor nations. differentiate ourselves from others in this field · Addressing constraints to private sector investment in infrastructure, health, Not only were our donors more supportive and entrepreneurial in collaborating and education with IFC than ever before, increasing our overall technical assistance and · Continuing to focus on the development of domestic financial markets through advisory activities to a level of over $100 million. IFC responded in kind, by institution-building and the use of innovative financial products. expanding our capacity, formalizing a long-term plan to ensure greater stability in our own funding for these initiatives, and integrating donor-funded operations It is becoming increasingly clear that to meet the challenges of these strategic more tightly into our core business. priorities, the Corporation will need to scale up its provision of technical assistance and advisory services. Altogether, this creates some very exciting prospects for our shared mission of reducing poverty through vibrant private sector growth. IFC's strategy, structure, In frontier markets, IFC's TA will continue to focus on both private industry and staff are aligned to ensure that we deliver for donors both consistent, and governments, improving the framework for investment and increasing the tangible results and the flexibility to respond to new opportunities. capacity of businesses (mostly SMEs) to thrive and grow. This includes the work of all our Project Development Facilities and Private Enterprise Partnership We are constantly reminded in our work on private sector development that facilities so generously supported by you. This also includes closer collabora- our clients require a broad array of responses. Governments in both frontier tion with the World Bank private sector development groups and enhanced and middle income countries have increasingly recognized the importance of partnerships with IDA. supporting the growth of the private sector, creating a greater call for assistance from development institutions, and placing increasingly complex demands An increasing number of IFC's clients, other financial institutions, and investors upon them. recognize IFC's leadership in the sustainability area and the value that its envi- ronmental and social standards and expertise provide. As we reported to you last In response to these demands, the Corporation is working with five strategic year, in June 2003, 10 major international banks from seven countries adopted priorities: the Equator Principles, based on IFC's environmental and social safeguards and · Strengthening our focus on frontier markets with emphasis on the SME guidelines, as standards for their project finance activities. Since then, 16 more sector banks have joined, making the Equator Principles the new market standard, · Building long-term partnerships with emerging global players in developing applicable to over 80 percent of the project finance market. countries 2 22 IFC invests on a commercial basis, and this remains at the core of the One of the unique features of IFC's involvement in technical assistance and Corporation's approach. However, IFC has the ability to broaden this core advisory services is that we make a significant cash contribution to the various competency by providing other value-added services to its clients. In a context TA activities from our own net income, and then use this funding to leverage where clients have an increased range of choices among international financial additional resources from you, our donor partners. We believe that our financial institutions, including some positioned as low interest rate lenders, IFC's involvement strengthens the ongoing working relationship with you and helps comparative advantage is to provide these value added services along with to ensure better alignment of interests. IFC's annual contributions to these funding to its clients, rather than just provide capital. Our ability to do this on a activities have increased from $5 million five years ago to $34 million in FY04 consistent basis is highly dependent on partnering with donors, as for example and a projected $43 million for FY05. IFC's expertise and track record in this in our work in work have been recognized by the donor community, which now provides · corporate governance, where we help clients implement best practice more than $100 million per year to these IFC-managed activities. We seek to · linkages, which add value to clients by lowering costs through increased local build on this confidence you have shown in IFC, and work with you, our donor procurement of goods and services, enhancing community development partners, to fund a good part of IFC's highly developmental capacity building programs, and improving relations with various local stakeholders and advisory activities. · HIV/AIDS, where our IFC Against AIDS program has worked with IFC clients to help first identify the risks and then provide guidance to establishing As a way to strengthen our collaboration with you, IFC's Board has now approved appropriate programs for the workforce and/or neighboring communities. the creation of a new Funding Mechanism for Technical Assistance and Advisory Services, wholly funded from our own resources. From now on, in every year As the number of TA programs increases, there is a growing recognition in IFC that IFC's net income exceeds $150 million, a portion of the net income will be and among our donors that evaluation of outcome is important. To strengthen designated for Technical Assistance and Advisory Services. The mechanism will the measurement of IFC's technical assistance and advisory services, a uniform thus provide a better, more stable way for IFC to meet its own commitments over project completion measurement system, applicable to all such activities in the a longer term. It can also give the Corporation some added flexibility: IFC can Corporation, is being piloted. The system will address both the effectiveness of potentially make an upfront commitment for bigger programs and for project the advisory work from an output perspective and the expected development facilities, with the donors subsequently joining the funding exercise, depending impact, and it will also include a corresponding system of evaluation. This will on their own budget cycles. In addition, the mechanism will allow IFC to do allow the effectiveness of the TA and advisory activities to become an important important mission-related advisory work in regions where donor resources are element in the assessment of the overall results of the Corporation. scarce or unavailable and will allow us to cover gaps in external funding due to economic downturns and/or "donor fatigue." IFC's reorganization a couple of years ago strengthened the role of the Regional Departments in the strategy process, with corporate investment activities being We will continue to need the support provided by you, our donor partners, driven by regional strategies. In order to fully integrate and coordinate the added because there is so much to be done. Our intention in setting up the Funding value of our services with investments, since January of this year the Regional Mechanism is to provide a more sustainable, efficient, and transparent way Departments have taken on responsibility for all TA activities in their regions. for IFC to support the many technical assistance and advisory activities being They will put forward a separate TA strategy; this will be done for the first time requested by our clients. in the fall of 2004. We made this change to emphasize even more the long-term importance of TA. I thank you once again for your continued support and for another productive year of partnership; we look forward to continuing together in our joint mission Last year I reported to you a long-term challenge for IFC. To do what is of fighting poverty by fostering sustainable, private sector­led development. demanded of us in those areas where we have a comparative advantage, I said we would need a much more planned and stable source of TA funding. I am happy to report that we have now taken an important step in this direction. PETER WOICKE IFC EXECUTIVE VICE PRESIDENT SEPTEMBER 2004 223 1 CHAPTE R ON E: Technical Assistance as a Mainstream Service ­ in Partnership with Donors Donor Funded Operations accounted for about $90 million in expenditures in FY04. About one-third of IFC staff are engaged full time in DFO work. Many of them are based in the field. Technical Assistance (TA) at IFC has grown in the range of activities, sectors, and regions covered in the past decade, and is now an integral tool in delivering IFC's mission of private sector development in our client countries. In FY2000 five Donor Funded Operations (DFO) were managed by IFC, with Clients and beneficiaries of TA are also diversified. Many of the direct benefi- a total approved budget of $126 million. Today there are 24 DFOs with about ciaries are private companies that have shown strong commitment in improving $100 million currently committed from IFC and about $250 million from our various facets of their business, for example, in corporate governance, envi- donors. These committed funds will be utilized in the coming three to five years, ronmental management, or accounting. IFC also provides advisory services depending on the funding cycle of each DFO. through TA to government entities, financial institutions, SMEs, and business development service providers. The growth of TA programs at IFC demonstrates the strong demand for TA for private sector development (PSD) in our client countries as well as the interest of the donors in responding to such demands. Many donors have explicit PSD strategies and have relied on IFC's capacity and capability to deliver intended results through various TA programs. We are therefore making a conscious effort to leverage our TA efforts with our investments to deliver IFC's broader development mission. Some TA projects are directly linked to IFC investment projects and are adding significant develop- ment value to our investment. These investment projects often become models for other companies to follow. Other TA programs, such as SME facilities and projects, are not directly linked to IFC investment projects and address broader issues, such as improving investment climate in certain sectors, regions, and countries, while using the knowledge and experience IFC has acquired through its investment operations. 225 In FY04, TA programs focused on the following areas: Small and Medium Enterprises SMEs are critical to development, and IFC continues to stress the importance of developing viable SMEs in many of our client countries. During FY04, one new facility to promote SMEs was launched (Private Enterprise Partnership for the Middle East), and another was approved (Iraq Small Business Financing Facility) in the Middle East and North Africa, thus increasing the total number of SME facilities to 12. During FY04, regional directors took direct responsibility for all of these facilities, thus making them more integrated with IFC's regional strategies. The facilities are gradually shifting their focus toward wholesale assistance rather than providing assistance to individual SMEs on a retail level. Donors continued to show strong support for SME facilities, and about 75 percent of new commitments in FY04 from the donors went to these facilities. In collaboration with the SME facilities and industry departments, IFC's SME Department is increasingly developing linkage programs. Currently programs in 14 countries are linked to over $1 billion in IFC investments. Two prominent programs underway are related to the Chad-Cameroon pipeline and the Baku- Tbilisi-Ceyhan (BTC) pipeline projects. Both of these programs reflect IFC's strategy of working closely with clients and partners to provide developmental support to growing SMEs through linkages to major investment projects. The support is directed at expanding local supply and distribution chains to create more opportunities for smaller businesses and to assist in sustainable commu- nity development efforts. The program's clients benefit from the provision of targeted technical assistance, improved access to finance, and the creation of local business development service providers. The SME Department is now much more focused on capturing and dissemi- nating best practice in SME development and providing input to regional SME strategies. It also provides expertise to the facilities and other activities in the World Bank Group, such as the IDA/IFC Africa program. 6 22 Financial Markets Sustainability IFC continues its efforts to improve the quality, scope, and accessibility of For IFC, sustainability is an essential element of business success and a means financial services in our client countries by investing in and providing TA to to enhance development impact. IFC is now the global sustainability leader. The banks and non-bank institutions and related regulatory authorities. The TA Equator Principles are a voluntary set of guidelines based on the policies and tools include undertaking studies to identify new financial services such as guidelines of the World Bank and IFC for managing social and environmental leasing, housing finance, insurance, and contractual savings; creating enabling issues related to the financing of development projects. Adopted initially by environments to support the financial institutions, including the development 10 leading banks in June 2003, the concept now extends to 26 financial of securities markets and credit bureaus; and building strong, sustainable, and institutions around the world. These financial institutions will apply the Principles diversified financial institutions and markets. globally for project finance in all industry sectors, including mining, oil and gas, and forestry. IFC is currently engaged in 88 TA projects in Financial Markets Advisory Services (FMAS) in 60 countries, worth almost $38 million in aggregate. Over In July 2002, IFC created three new donor-funded facilities around the theme 75 percent of the FMAS TA portfolio involves strengthening micro- and SME of environmentally and socially sustainable business. Together, these facilities finance. Helping countries diversify into non-bank financial services accounts are called the Sustainable Business Assistance Program (SBAP) and comprise for 35 percent of the portfolio, primarily for firms to diversify into SME-related the Corporate Citizenship Facility, the Sustainable Financial Markets Facility, leasing. Over 70 percent of the FMAS portfolio is helping to strengthen individual and the Environmental Opportunities Facility. They help to expand the range institutions, largely where IFC has investments. of activities associated with IFC's investments, and accelerate wider market adoption of new technologies, services, and business models. (See details on Substantial efforts are made in institutional capacity building in such areas SBAP in Chapter 3.) as corporate governance, applying international standards in various areas including accounting, and conventional training in technical areas such as In addition, IFC manages a part of the Global Environment Facility, carries out credit analysis. updates of the Environmental, Health, and Safety Guidelines, and engages in energy efficiency initiatives, many of which are funded by the donors. One of IFC's strengths in delivering...results comes from our experience in investing in private sector projects in our client countries. 227 Donor Breakfast and Roundtable Meetings IFC ANNUAL DONOR BREAKFAST MEETING: Dubai, September 21, 2003 The IFC Donor Breakfast Meeting was held in Dubai, United Arab Emirates, in building in financial institutions began operations. IFC was able to leverage its conjunction with the World Bank Group­IMF Annual Meetings on September expertise in sustainability to facilitate adoption of the Equator Principles, an 21, 2003. IFC uses this annual opportunity to share with donors the broad initiative in which the world's leading banks have adopted IFC's environmental strategic directions of its donor-funded operations for the coming year and to and social standards as mandatory for their project finance lending around the review the performance of past and ongoing initiatives. world. IFC is proud to be the center of the Equator process and could not have done this without donors' support. The meeting was chaired by Mr. Peter Woicke, Executive Vice President of IFC and Managing Director of the World Bank. Mr. Woicke welcomed two new Donors expressed general satisfaction with IFC's TA activities and its strategic donors, South Africa and the Federal Government of Germany, and thanked directions, including its sustainability focus. They called for IFC to play a greater Finland's Ministry of Trade and Industry for setting up a new trust fund for China role in promoting private investment in the poorest countries, particularly and Russia. He thanked donors for the more than $65 million in new commit- in Africa. The donors welcomed the trend toward linkages and community ments for technical assistance they provided last year, targeted primarily toward development around large IFC projects, and they encouraged IFC to link its TA capacity building in the private sector, and for the support of SMEs. He pointed activities to its investment operations. They sought earlier and greater donor out that the bulk of IFC's technical assistance was in higher-risk "frontier" consultation in project design, and urged greater collaboration between IFC and countries, with more than 10 percent in countries with a high incidence of the regional development banks. poverty. These frontier countries remain underserved as investors become more discerning, and this has meant more demand for IFC's TA services. While there is optimism about the momentum of IFC's TA work, Mr. Woicke concluded, a lot more remains to be done. Iraq and Afghanistan will present a Mr. Woicke pointed out that IFC has responded through new approaches, special development challenge. Also, there is still room for progress in measuring strengthened partnerships, and enhanced capacity. For instance, a donor- development impact and ensuring that IFC disseminates its lessons of experi- funded facility for infrastructure projects in the Balkans, the BIDFacility, was ence with clients and others in the development community. IFC has allocated established during the year and is expected to make use of public-private about $34 million of its own funds for technical assistance and advisory work partnerships. In the SME sector, IFC's project development facilities now report for the current fiscal year-- the highest levels ever. Underlying all these efforts directly to regional directors to ensure that their operations are more closely is a deep appreciation for donors' support and collaboration, and a willingness integrated with IFC's core private sector development strategy. Also, work on two to continue experimenting with new models and pilots. new facilities in Indonesia and Latin America began operations in FY04. The financial markets TA program was reorganized and expanded to include housing finance and leasing. In the area of environmental and social sustainability, three new facilities for corporate citizenship, environmental innovation, and capacity IFC DONOR ROUNDTABLE: Paris, May 3-4, 2004 The theme for the Donor Roundtable held in Paris, France on May 3 and While welcoming the Africa Strategy and the IDA/IFC Africa Initiative, donors May 4, 2004, was Beyond Financing: Adding Value through Partnerships. felt that there should be greater collaboration with other multilateral institu- A broad cross-section of donor representatives attended, along with an IFC tions, such as the United Nations Development Programme and the Africa delegation led by Mrs. Farida Khambata, Vice President Portfolio and Risk Development Bank, with IFC playing a more proactive role in leading such Management, who chaired the Roundtable. The primary objective of the collaboration. In Asia where, in many countries, finance is not in short supply, Roundtable was to update donors on the status of IFC's technical assistance IFC should focus on countries with a more challenging political environment programs and of the Corporation's future strategic directions so as to enable both and help support regional integration efforts. With regard to the IFC's TA sides to make informed decisions about partnering. This year, the Roundtable activities in the area of sustainability, donors encouraged IFC to pay special was organized to present IFC's TA activities along regional lines, while also attention to monitoring and evaluation. On IFC's microfinance activities, summarizing cross-cutting themes such as sustainability, financial market donors recommended that IFC maintain an appropriate mix of TA and credit development, and SME development. A few donors shared their experiences lines, with up-front subsidies preferred to ongoing subsidies. Many donors about their own bilateral programs and their potential for strengthening partner- expressed a willingness to collaborate with IFC and the World Bank in the ships with IFC. A half-day was also allotted to discussing the important theme area of infrastructure. Donors welcomed the concept of a corporate project of TA evaluation within IFC. completion report for IFC's TA evaluation activities, but recognized the difficulty of measuring development impact and poverty reduction. They emphasized the Donors welcomed the proposed changes following the Donor Funded Operations importance of independent evaluations and suggested that good case studies Strategic Initiative (DFO-SI), which they saw as an indication of IFC's ability to be disseminated broadly. They also encouraged flexibility, ex-ante evaluations, adapt to a changing environment. However, they cautioned that IFC's TA activities and cross-cutting themes. should remain demand-driven, and that the proposed Funding Mechanism for Technical Assistance and Advisory Services should not be seen as an indirect way of phasing out nationality-tied donor funds. They also were concerned that IFC's expanding TA activities could distort markets by competing with local providers of finance who cannot offer TA services. On the restructuring of the SME Department, many donors applauded the devolution of responsibility to the regional departments. However, they warned of the necessity to ensure an optimal balance between regional and central knowledge in the SME sector. Some donors suggested a special session in next year's Roundtable dedicated to the lessons learned from IFCs experience with SMEs. They encouraged IFC to share its knowledge on SMEs with other organizations such as the International Labor Organization. 229 2 CHAPTE R TWO: Donor Funded Operations and Technical Assistance and Advisory Services in the Regions 12 18 26 38 42 SUB-SAHARAN ASIA AND EUROPE AND LATIN AMERICA AND MIDDLE EAST AND AFRICA THE PACIFIC CENTRAL ASIA THE CARIBBEAN NORTH AFRICA Angola, Benin, Botswana, Bangladesh, Bhutan, Albania,Armenia,Azerbaijan, Antigua & Barbuda,Argentina, Afghanistan,Algeria, Bahrain, Burkina Faso, Burundi, Cambodia, China, Fiji, India, Belarus, Bosnia and Herze- The Bahamas, Barbados, Arab Republic of Egypt, Cameroon, CapeVerde, Indonesia, Kiribati, Republic govina, Bulgaria, Croatia, Belize, Bolivia, Brazil, Chile, Islamic Republic of Iran, Central African Republic, of Korea, Lao People's Czech Republic, Estonia, Colombia, Costa Rica, Iraq, Jordan, Kuwait, Lebanon, Chad, Comoros, Democratic Democratic Republic, Georgia, Hungary, Kazakhstan, Dominica, Dominican Libya, Morocco, Oman, Republic of Congo, Republic Malaysia, Maldives, Marshall Kyrgyz Republic, Latvia, Republic, Ecuador, Pakistan, Saudi Arabia, of Congo, Côte d'Ivoire, Islands, Federated States Lithuania, FYR Macedonia, El Salvador, Grenada, Syrian Arab Republic, Djibouti, Equatorial Guinea, of Micronesia, Mongolia, Moldova, Poland, Romania, Guatemala, Guyana, Haiti, Tunisia, United Arab Eritrea, Ethiopia, Gabon, Myanmar, Nepal, Palau, Papua Russian Federation, Serbia Honduras, Jamaica, Mexico, Emirates,West Bank and Gaza, The Gambia, Ghana, Guinea, New Guinea, Philippines, and Montenegro, Slovak Nicaragua, Panama, Paraguay, Republic of Yemen Guinea-Bissau, Kenya, Samoa, Solomon Islands, Republic, Slovenia,Tajikistan, Peru, St. Kitts and Nevis, Lesotho, Liberia, Madagascar, Sri Lanka,Thailand,Tonga, Turkey,Turkmenistan, St. Lucia,Trinidad and Malawi, Mali, Mauritania, Vanuatu,Vietnam Ukraine, Uzbekistan Tobago, Uruguay, República Mauritius, Mozambique, Bolivariana deVenezuela Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania,Togo, Uganda, Zambia, Zimbabwe 22 11 Sub-Saharan Africa Recognizing the need to address Africa's development challenge more compre- hensively, IFC launched a new strategy for Sub-Saharan Africa in FY04. The new approach responds to the needs of Africa's private sector with expanded and enhanced programs oriented to SMEs. It also addresses the challenge of developing larger projects by targeting more IFC support to the formative stages of project development, thus expanding IFC's role well beyond the provision of finance. This strategy recognizes the obstacles faced both by governments and by the private sector in their efforts to improve the overall investment climate, and it brings IFC's global knowledge and local experience to bear on removing investment constraints. IFC has consistently devoted significant resources to its operations in Africa, and will increase those resources under the new strategy. One of the major implications of the new strategy is the increased role for technical assistance, capacity building, and advisory services. Continued Other SME Initiatives donor support is essential for IFC to be able to expand new SME financing IFC also began implementing a joint Micro Small and Medium Enterprise intermediaries and to provide business development services through the Africa (MSME) initiative with IDA. The initial stages have involved designing a compre- Project Development Facility (APDF). Technical assistance is also key to laying hensive program for MSME support. Donor funding provided consultants to the groundwork for potential investments, particularly in infrastructure. assist in the design of several initiatives included in the program, including an assessment of the market for business development services in Madagascar IFC also plans to expand investments in the region. But, to do so requires and Kenya, a review of the regulatory framework for leasing in Madagascar, and additional resources to identify potential projects, prove their concept, and help expansion of the Support and Training for Entrepreneurs Program (Netherlands address the constraints in the investment climate that deter potential investors. and Switzerland) from Nigeria to Mali. IFC's investment commitments in Africa increased to $391 million in FY04, up from $152 million the previous year. While this increase is not attributable to the IFC opened the first of three pilot SME Solutions Centers (SSCs) in Madagascar. shift in strategy--as most projects have been in development for some time--the The SSCs combine technical assistance, market and business environment increased volume does illustrate the potential returns from an increased information and services, and a risk capital facility. IFC also invested in a new upstream effort in project development, a key element of the new strategy. microfinance bank in Angola. Establishment of the bank through trust funds helped defray some of the training costs and startup expenses (Norway). Given these initial infusions, the bank is expected to become commercially viable in a shorter time than otherwise. Upstream Project Development In the financial sector, IFC initiated a project to revitalize the corporate bond In FY04, IFC initiated a number of efforts to identify potential new projects, market in Nigeria, which has long been dormant because of inefficiencies and define sector strategies to guide IFC investments, and help define concession high costs (Canada). The study is being used to document the constraints, and arrangements for private infrastructure projects. Following a successful TA to engage the Stock Exchange and relevant regulatory authorities in a dialogue project that surveyed the information technology sector in West Africa, thereby on addressing them. The objective is to restart this potentially powerful tool for helping IFC develop an approach to supporting the sector (Sweden), IFC expanding options for longer-term funding for corporates and for diversifying replicated the approach in southern and eastern Africa (Finland). We used instruments for institutional investment and individual savings. On a parallel TA to assess the potential export market of a major forest products company track, IFC is identifying potential issuers of bonds to provide some immediate in which IFC is considering an investment; the study assessed the ability of response to the proposed reforms. Under the pilot World Bank Group program the company to tap markets for products derived from sustainably managed for municipal finance, IFC made its second such investment (and its first in forests, with external certification. We also examined the potential for expansion Africa) with a guarantee for a bond issue by the City of Johannesburg. With a view of glass manufacturing in East Africa (Sweden). In Mozambique, we began to exploring options beyond South Africa, IFC commissioned a study with a major initiative to develop the tourism sector (Netherlands), working with INCA, the principal institution for municipal infrastructure financing, to assess the government and local communities to define private investment opportuni- the potential for similar municipal finance opportunities in other African ties, to design regional tourism circuits in neighboring countries, and to put countries (Norway). in place mechanisms for concessioning projects to the private sector in a transparent fashion. REVISITING PAST TA PROJECT Air Tanzania In FY03, IFC completed the privatization of Air Tanzania Corpora- tion, the national airline of Tanzania, and its sale to South African Airways (SAA). SAA paid $20 million for 49 percent of the company, of which $10 million was cash to the government and $10 million was a capital injection into the airline. The transaction was carried out under a fully liberalized and competitive market structure, with no protection for the airline following privatization.This is a first for Africa. An essential component of IFC's advisory mandate was the role played by trust funds (Denmark and IFC TA Fund).This support made possible the mobilization of a team of transitional management consultants, who stabilized the airline before the transaction and turned around its flagging financial performance. The deal would not have been completed satisfactorily without this intervention (IFC TA Fund). 22 13 AFRICA PROJECT DEVELOPMENT FACILITY A critical accomplishment in FY04 with regard to enhancing IFC's SME opera- market for their honey. In May 2004 it was one of 10 global firms to win tions was the development of a new strategic vision for APDF, and the beginning the World Business Awards from the UNDP, the International Chamber of of its transformation to a new operating and funding model. Commerce, and the International Business Leaders Forum for its contribution toward attaining the Millennium Development Goals. During FY04,APDF continued to improve the quality of its service delivery and to concentrate on programs that expand the reach and improve the impact of its IFC's Operations Evaluation Group completed an evaluation of APDF in the operations.While maintaining its focus on capacity building and training of local fall of 2003 and presented a number of recommendations, which are under business associations and local consultants.APDF also expanded business linkages, implementation. Recommendations included changing APDF's organizational enabling it to reach more beneficiaries. These shifts were a result of a needs structure, its product lines, and its funding.The evaluation further recommended assessment undertaken in a number of countries in the region, and an evaluation increasing APDF's field presence, expanding its staff, and focusing its services by an independent external consultant of where APDF can bring the greatest and activities on fewer, broader interventions. These recommendations will be value. Quality improvements were achieved through greater usage of improved fully implemented over the next year within the new ADPF operating and diagnostics tools, disciplined use of our training standards and guidelines, improved funding model. training modules, better application of the business association diagnostics manual, and improved access to the operational data base by APDF staff.APDF continued Key aspects of APDF's new model include: to consolidate, standardize, and benchmark its services and its internal management systems and processes, and to adopt recognized best practices from other donor · Moving APDF more toward a projects/programs model of operation. funded operations. · Strengthening APDF's partnerships with its key donors. This is fundamental to APDF's success in broadening and expanding its services and achieving a Integration of APDF into the regional department has allowed for the coor- deeper and more lasting impact on the countries it serves. This will require dination and delivery of a more integrated package of financing and technical closer collaboration with donors in the selection, design, and implementation of assistance in a number of cases. In Mozambique, for example, IFC made a repeat programs they choose to support. investment in a flour mill, while APDF helped design and implement a linkage · Changing the way APDF is funded to include a major commitment by IFC program to work with local bakeries to improve their quality and efficiency. In to pay staff costs and some administrative support needed to attract and retain Kenya, APDF designed a technical assistance program for microenterprises that highly skilled core staff, and a major commitment by donors to fund specific constitute the retail and small distributor end of a soft-drink bottler's distribution programs and their administrative costs. chain.This TA complemented a previous IFC loan that funded investments by the · Strengthening and improving the skills mix of APDF staff. bottler in East Africa. · Where consistent with its mandate, aligning the operations of APDF more closely with the strategies and activities of IFC and the World Bank's Private Sector APDF and the Corporate Citizenship Facility (CCF) are providing technical Department. assistance to Honey Care Africa, a socially responsible small business that sells · Using FY05 as a transition year during which APDF will complete the activities beehives to rural subsistence farmers and buys their produce at fair market prices. envisioned in APDF 2000 and begin to implement specific, donor-funded Honey Care introduces Kenyan small-scale farmers to commercial beekeeping projects/programs. During FY05 APDF will also mobilize resources from donors production methods used elsewhere around the world and is building a premium in order to fund specific projects/programs for implementation beyond FY05. Expanding the sustainable development of Africa's natural resources is a strategic priority for IFC. The Corporation investigated the potential of bringing natural gas from Mozambique to South Africa for integration into the domestic and industrial markets for gas in South Africa (Switzerland). Part of that project involves a pipeline spur to Maputo for eventual domestic use within Mozambique. IFC began a study to identify the demand for gas in the Maputo area to assist in the implementation of the pipeline spur. This is an important aspect of the project, as it is expected to bring direct benefits to Mozambican companies and consumers, in addition to the benefits to the country from export earnings (Norway). There is a strong role for the private sector in providing infrastructure in Africa. IFC began exploring the potential for a private high bandwidth backbone linking cellular providers in Southern and Central Africa (Sweden). IFC is also working closely with the World Bank to establish new public-private partner- ships, particularly in the power sector. In Senegal, IFC worked with the Bank to structure a concession for a new private power plant. In order to be able to respond rapidly to the winning concessionaire, IFC used trust fund resources to begin the legal and technical work needed for project preparation (Switzerland and IFC TA Fund). In Madagascar, IFC initiated three advisory mandates to support private investment in the country's ports, airports, and power sectors. Donor funding helped IFC conduct the studies required to appraise the current public utilities in the ports and airports. In addition, this work was supported through DevCo, the new advisory facility provided by members of the Private Infrastructure Development Group of donors, led by the UK Department for International Development (DFID) (see box, page 47). IFC has consistently devoted significant resources to its operations in Africa, and will increase those resources under the new strategy. 22 15 REVISITING PAST TA PROJECT Gabon: Société d'Énergie et d'Eau du Gabon (SEEG) In July 1997, SEEG signed a 20-year concession contract with the government of Gabon for operating both water and electricity services throughout the country. This transaction was not only Gabon's first major privatization, but the first full water and electricity concession in Africa where the concessionaire accepted complete responsibility for financing and management. It also introduced coverage targets for expanding service to previously unconnected rural areas. Bidders had to bid on the average reduction in tariffs they would implement if awarded the concession. Compagnie Générale des Eaux of France (since renamed Vivendi), in a consortium with the Electricity Supply Board of Ireland, won with a proposed cut of 17.25 percent and an investment requirement of at least $200 million.The strategic sale was followed by Gabon's first initial public offering (IPO), a challenging task considering that the country has no stock market. Nevertheless, the IPO was a success and considerably broadened the ownership base of the privatized company. A 2002 report published by the World Bank and the Public-Private Infrastructure Advisory Facility found that "overall, SEEG's performance in the first 5 years of operations shows substantial improvement in terms of quality of service, both in technical terms and in commercial terms." 1 Furthermore, the report found that SEEG had met most of its coverage obligations, and customers "are more satisfied with the service than prior to privatization."2 In addition, the financial performance of the company has continued to improve. IFC's Advisory Services Department was the lead advisor to the government of Gabon on this transaction, and the Japanese trust fund provided funding for specialized consultants used on the mandate. 1 Emerging lessons in Private Provision of Infrastructure Services in Rural Areas:Water and Electricity Services in Gabon. Author: Sophie Trémolet and Joanna Neale. Source:World Bank and the Public-Private Infrastructure Advisory Facility (PPIAF),Washington, D.C., September 2002 2 Ibid. 16 22 IFC also expects to expand the number of new initiatives to develop new projects Future Directions in the key areas of private infrastructure, the financial sector, and competitive As a critical element of its strategy in Sub-Saharan Africa, IFC expects to expand export industries, including the sustainable development of Africa's extractive its advisory and capacity building services significantly . Donors contributed to industries. the restructuring of APDF and helped guide the thinking on how to improve the impact of APDF and expand its coverage while making it a more flexible FIAS has continued to help Sub-Saharan African governments liberalize their program, able to respond quickly to demand and be linked more closely to investment regimes and improve their attractiveness for FDI. Many countries other IFC operations. IFC will be seeking support for specific programs to be have already made basic investment law reforms, and FIAS advice has moved implemented by APDF, normally at the country or subregional level. toward the next generation of products, such as incentive structures--simpli- fying maze-like administrative systems and creating investment agencies that Similarly, a number of SME financing initiatives under consideration will require focus on promotion rather than regulation. some concessional funding, as in the microfinance example, to cover associated provision of technical assistance to investees, and in some cases to cover the FIAS conducted 15 advisory projects in Sub-Saharan Africa during the past costs of managing these facilities. In the latter cases, it has been our experience fiscal year. The range of product areas includes administrative and regulatory that often high start-up costs of new institutions, make it impossible to cover fully costs surveys (Cape Verde, Ghana, Guinea-Bissau, Burkina Faso, Uganda, and the management costs from investment earnings, and a limited upfront subsidy Zambia), taxation and incentives policy and implementation (Guinea-Bissau, from donor resources can allow the fund or institution to be professionally Senegal, Sao Tome and Principe - not yet an IFC shareholder), administrative managed, perform well, and ultimately graduate from the subsidy following a barriers studies (Kenya, Cape Verde, and Eritrea), reviews of investment laws start-up period or upon achieving scale. (Kenya and Sierra Leone), and diagnostics (Seychelles). FIAS also pursued work at the regional (supranational) level with programs addressing constraints and the reform agenda of the West African Economic and Monetary Union (WAEMU) and the East Africa Community (EAC). FIAS also prepared the launch of new analytical tools, such as competition policy, in Burkina Faso. Most of this work was supported by and coordinated with IBRD/IDA, IFC, MIGA, the IMF, and a range of multilateral and bilateral agencies. For instance, a large number of the FIAS recommendations on reform of administrative barriers in Cape Verde were incorporated by IDA into a new private sector development operation that is now financing the implementation of these reforms. 22 17 Asia and the Pacific East Asia & the Pacific East Asia and the Pacific (EAP) region investment activities in FY04 resulted Fund) that will help build the Mongolian leasing industry. The work includes in committed investments of $730 million, which continued to be targeted on advising the government on regulation, training leasing companies, banks, and high impact sectors, such as financial markets and infrastructure. Increasingly potential leasing clients on leasing operations, building opportunities for leasing these investments have been integrated with TA work that has been coordinated investments, and conducting a public awareness campaign. with EAP regional and IFC global TA programs and those of other donors and agencies. This integration of investment and TA has been a key element of IFC's In China, through the Bond Market Development TA, IFC is advising the approach, where individual private investment transactions tend to be reinforced Chinese government on how to create a more market-oriented bond market by by TA, and where TA can advance related policy dialogue and advisory work helping improve disclosure and build a credit rating culture (Canada and IFC with the government. TA Fund). IFC is also helping the National Council for Social Securities Funds evaluate its liquid assets, formulate internal policies and operating guidelines In China, IFC's equity investment of $52 million in Industrial Bank, a former based on industry best practices that are adapted to local market and policy state-owned bank, has become a model for a progressive privatization invest- conditions, and develop an information technology department (Ireland and ment project. IFC is also providing assistance through institution building to IFC TA Fund). strengthen its corporate governance and retail and SME finance practices (Ireland and IFC TA Fund). In Vietnam, along with IFC's investment in Sacom In the Philippines, IFC is advising the Philippines Stock Exchange on how to Bank, a TA program to strengthen consumer and small banking practices is improve its function in the capital markets and is helping the Philippines Dealing being implemented (Switzerland). In the Philippines, IFC has implemented an and Securities Holding Inc. introduce custody operations (Italy). institution building TA project for Banco de Oro that will help to strengthen its risk management, corporate governance, and anti­money laundering practices (Canada and IFC TA Fund). IFC has invested $20 million in the bank's convert- ible shares. A major constraint to the growth of jobs through the private sector continues to be the investment climate. Thus, in addition to investment- specific TA, IFC is implementing several enabling environment TA proj- ects to help inform policymakers and regulatory bodies on how to improve the investment environment by developing the necessary legal and regu- latory frameworks. In Mongolia, we are using the Moscow-based Private Enterprise Partnership's extensive leasing experience from the former Soviet Union to implement a Leasing Development Program (Japan and IFC TA IFC is also working in Vietnam to facilitate the extension of credit to previously underserved segments, in particular small businesses, through the develop- ment of private credit bureaus (Australia). IFC has also used TA to facilitate CAMBODIA the dialogue between the government, development agencies, and the private Private Sector Forum Secretariat: sector to better understand the constraints of the private sector; this activity took a form of the Vietnam Business Forum (Canada) and the Cambodia Private Facilitating Private Sector Dialogue Sector Forum (Australia) (see box). Funded by IFC and AusAid, the Government Private Sector Forum (PSF) is a mechanism for improving the business environment, IFC is also using TA resources to increase interregional trade by implementing building trust between the public and private sector, and fostering a study on local trade finance practices in the Philippines, Vietnam, Indonesia, private investment. Throughout the year, seven sector-based and China to design a future guarantee facility (Switzerland). This TA will include working groups meet regularly to review and comment on a a trade finance training program for local banks to enable those banks to variety of issues including proposed legislation and to identify learn international best practices. IFC is also working to develop the housing issues for discussion at the next PSF. Input is encouraged from the finance market in Vietnam with a TA project that consist of a basic housing broad spectrum of domestic and foreign investors in Cambodia and finance market study to help the Mekong Housing Bank understand its strategic from small and large businesses. To make this process inclusive of position in the market, and prepare it for the forthcoming equitization (Denmark). businesses operating in Cambodia, provincial input in the working Another area where IFC can improve the investment climate is through its group process is being actively encouraged, and in the future, agro- Corporate Advisory Services, which is working with the Philippines government business & agro-processing working group meetings will likely be to help it prepare for the process of privatizing rural electrification (Norway and held in the provinces.Achievements include high-level consultation on investment and tax law, the introduction of private sector moni- IFC TA Fund). tors within the Customs Department, improved labor standards, and negotiations on cost reductions for a major road concession. The private sector in East Asia is showing increased interest in sustainability, including environmental, corporate governance, corporate social responsibility, community development, and SME linkages. IFC has been making the business case for sustainability, and firms now realize the importance of these factors for sustainable operations or improved access to funding (from multilateral institu- tions, for initial public offerings, and in the international capital markets), and for access to markets (international buyers and global supply chains). Improving the environmental, financial, and social sustainability of local companies through the capacity building TA to assist them in adopting international standards is a core part of IFC's special role in the region. IFC is now implementing a capacity building TA for Fangxin Metal Technologies Co. Limited, a packaging company in China (Denmark and IFC TA Fund). This pre-investment TA will help Fangxin prepare a strategic business plan and upgrade its financial management systems, and will enable IFC to make our first investment in the packaging sector. IFC is also using TA to help strengthen © DiskArtTM 1988 the shipping sector in China, with Minsheng Shipping in Chongqing (Norway). TM 1988 The TA designed is to help Minsheng Shipping better understand its strategic 22 19 position in the shipping market and introduce a competitive strategy to become a leading shipping company in the region. PEDF: FIJI DEVELOPMENT BANK Sharing the benefits of economic growth promotes sustainability, and increas- ingly businesses are recognizing the business case for local community In mid-2003, the Fiji Development Bank requested PEDF's assis- development as a way to lessen the inequalities that weaken and potentially tance in reviewing the Bank's operations to improve its customer destabilize the business environment. In the Philippines, IFC helped build a service and operating efficiency. This project included a complete consensus among stakeholders to promote sustainable development of mineral review of the Bank's existing systems and the development of a resources (Japan). This project has improved awareness and appreciation totally new way of doing business­while at the same time ensur- among key stakeholders of the potential economic contribution of mining, and ing that its "development bank" charter was not lost in the process. has sought consensus on the actions needed to increase private investment PEDF completed that assignment in December 2003, and its find- for sustainable development of mineral resources. ings were then presented at a strategic planning workshop attended by government ministers, the FDB Board, senior executives, and PEDF. Among PEDF's recommendations: In Mongolia, a feasibility study is in preparation for a Mining SME Linkages · Improved risk management procedures, including Program (Ireland). This TA builds upon other IFC-developed linkages programs - the design and implementation of credit risk rating systems that promote sustainability along with IFC's investments as a way to share the - the establishment of an asset liability committee benefits of economic growth with the suppliers/distributors of IFC's clients. - the establishment of an asset management unit (debt collection) · Operation restructuring, including a "skills audit" to help deter- TA funding continues to be valuable in identifying opportunites for investment mine staff duties. activities. IFC has done ten sector review/investment identification TA projects · Training programs developed and implemented for the new in various sectors, such as polyester fiber (Sweden), non-wood pulp and paper corporate teams, covering both risk and sales and service. (Finland), in pharmaceuticals (Sweden), information technology (Ireland), flat glass (Sweden and IFC TA Fund), and the automotive sector (Sweden). PEDF completed this phase of the program in March 2004, leaving Such studies are essential, as they lead directly to potential FDI opportunites. the Bank with a plan that will enable it to better serve the banking For instance, in China, possible investment clients were identified through a needs of Fiji's SMEs. To implement this plan, a third phase, also study on the private higher education sector. Also as a result of this study, IFC funded by Australia, commenced in May 2004. By the end of June has implemented a capacity building TA for one of its potential clients, Yellow 2004, corporate portfolios had been designed and allocated to River University, to improve its financial reporting system (Sweden and IFC TA regional managers and operations for the newly formed teams: the Fund). Corporate Sales and Service Team, the Corporate Business and Risk Team, and the Credit Audit and Credit Support and Monitoring FIAS has implemented ten projects in the region. In China, FIAS held a Team. Furthermore, an independent director with internationally workshop with Chinese government officials from the northeastern part of China recognized banking expertise was nominated for membership of the and discussed enhancement of the foreign direct investment environment. FIAS board as part of an improved corporate governance program, and has conducted an independent review on the current status of foreign direct the benefits of improved banking practices have begun to appear. investment in Papua New Guinea and proposed action plans to improve the country's investment climate. © DiskArtTM 1988 TM 1988 20 22 The East Asia Region now manages four regional facilities: the Pacific Enterprise Through its Sydney Office, FIAS advisory products and services are available on Development Facility (PEDF); the Mekong Private Sector Development Facility a country-specific and subregional basis in East Asia and the Pacific. (MPDF); the China Project Development Facility (CPDF); and the Program for Eastern Indonesia SME Assistance (PENSA). Some activities in the past year include: · Successful test of an approach to identify and assess the nature and extent PEDF, the oldest of the regional SME facilities, increased its focus on improving of linkages arising from FDI into the local economies of Fiji and Samoa, at the SME access to capital and building the capacity of local business development request of the Pacific Islands Forum Secretariat. The results of the research services. For example, PEDF was asked by the Central Bank of Solomon Islands ­ the first of its kind in the Pacific ­ were presented at the 2003 Heads of to provide expert assistance for the Solomon Islands Credit Union League Investment Promotion Agencies Meeting. (SICUL). The TA is to implement strategic and operational plans for the credit · The Fiji Cabinet ­ and subsequently the House of Representatives ­ approved union movement and SICUL (Australia). PEDF has also supported the Fiji the Foreign Investment (Amendment) Bill 2004. The new Act, prepared Development Bank by providing assistance on capacity building (Australia) with FIAS assistance, will facilitate investment via a simple, transparent, (see box, page 20). non-discretionary process. FIAS also provided assistance to the Fiji Trade and Investment Bureau (FTIB) to develop an automatic registration system MPDF, launched in 1997, supports the growth of small and medium enterprises for foreign investors. Finally, in collaboration with MIGA, FIAS helped FTIB to in Vietnam, Cambodia, and Lao PDR. MPDF, now in its second five-year cycle, develop an investment promotion strategy. has three main programs: the Business Development Program, the Business · Participation in a Pacific regional initiative with MIGA, the Commonwealth Enabling Environment Program, and the Company Advisory Assistance Program. Secretariat, and the Forum Secretariat to develop and deliver a capacity- MPDF has pioneered the development of the Business Edge management building program for investment promotion agencies from all 14 Forum training and has helped create Bank Training Centers in Vietnam and Cambodia. Island Countries. The initiative used MIGA's Website architecture, IPAworks, The expansion of the Business Edge approach is being supported by other to enable the IPAs to develop and maintain an investment promotion regional SME Facilities and by donors (Australia and IFC TA Fund) (see box). Website. · Continuation of a program of assistance to the Board of Investment in the CPDF, now in its third year of operations, continues to work in close collaboration Philippines designed to create an investor aftercare program and, through with the Chinese government to improve business conditions in the interior this, to address the issues of the retention, expansion, and diversification of of China and is focusing on access to finance, capacity building, corporate foreign investors. governance, and an improved business enabling environment for SMEs. · Assistance to the Government of Cambodia with drafting guidelines for the new Investment Law, which was subsequently passed by the National Assembly. PENSA has now completed its first year of operation and has made substantial · Participation in a World Bank Private Sector Development Team in Timor- progress on many fronts, including access to finance, supply chain development, Leste, where an evaluation of a proposed Investment Promotion Agency was agribusiness (maize, poultry, cocoa, and seaweed), oil, gas, and mining linkages provided. FIAS recommendations are now being implemented through a Small programs, and business enabling environment programs. PENSA recently Enterprises Project. Subsequently, the Bank team asked FIAS for advice on released a publication "Voices of the Private Sector" presenting the "voices" of draft External Investment and Domestic Investment Laws. 19 business men and women from across Indonesia (see page 23). 22 21 MPDF'S "BUSINESS EDGE" APPLICATION CROSSES OVER TO CHINA The Business Development Program of MPDF has been especially well received in Vietnam, Cambodia, and Lao PDR. It develops management training resources, supports bank training centers in Vietnam and Cambodia, expands the services and advocacy skills of business associations, and helps service providers and producers to market their wares overseas. Under this program, MPDF has pioneered the development of the Business Edge management training program and published 16 new workbooks, bringing the total to 40, more than 85,000 copies of which have been sold in three countries.The weekly television series Leveraging on MPDF's experience, CPDF has introduced Business Business Edge was launched in Cambodia with good ratings, positive Edge in China in FY04.The current status is as follows: evaluations, and spontaneously formed weekly discussion groups. · Seven Marketing and five HR training courses currently available; eleven Personal Productivity and four Finance and Accounting topics will be available in FY05. · Over 50 local trainers trained and certified, who in turn have deliv- KEY COMPONENTS OF BUSINESS EDGE ered Marketing courses to 5,000 participants in 97 course sessions. · Open Course Training ­ 20-30 participants/course ­ 250-350 RMB per participant, 21 courses held to date. · Internal Company Training ­ 50-100 participants/course ­ 3,000- 5,000 RMB per course day, 46 courses held to date. · Leaders' Dialogue (LD) ­ 200 Senior Managers/Forum ­ two LDs held to date, as well as one cooperative forum with partner Basis. Second LD run on cost-recovery basis ­ approximately 100 tickets sold at 300-800 RMB/ticket. · Business Edge workbook series: 80,000 printed by a Shanghai publishing firm; sales figures not yet available. Through this program, six certified local training partners have been developed, of which four are active: Knowledge in Action; Unicorn- Chengdu Chamber of Commerce; Sichuan Basis; and Chengdu Better Training. © DiskArtTM 1988 TM 1988 22 22 VOICES OF THE PRIVATE SECTOR-- INFORMATION FOR CHANGE PENSA recently released "Voices of the Private Sector," a publication presenting the "voices" of 19 business men and women from across Indonesia in varied sectors and with diverse company structures.Their thoughts, experiences, and anecdotes tell the story of the day-to-day challenges faced by the Indonesian private sector. It also provides insights into how private sector investment has been affected by issues such as the decentralization process, fiscal uncertainties (tax levies and fees), worsening infrastructure, and growing labor and legal issues. "All issues are actually quite important, but most urgent to handle is labor regulation and tax system," said Jaya Sukamto, President Director of Berri Indonesia and one of the "voices" speaking on behalf of the private sector. He pointed out the differences of implementing labor regulations in Indonesia. The current regulation requires companies to provide unreasonable amounts of remuneration and makes it very difficult to lay off workers. This makes contract workers a better option for SMEs, but this is not necessarily better for the workers.As for tax systems, Sukamto said that most tax regulations are unclear and provide gray areas for interpretation. PENSA strongly believes that these messages can drive Indonesian leaders to priori- tize the issues raised by the private sector and promote a multistakeholder partnership between the private sector, labor unions, regulators, and others. We hope that this publication will help Indonesian public policy makers better understand the needs of the private sector. PENSA believes that this study can be a tool to help the new government encourage an improved investment climate as a means for creating jobs. The government can work together with the private sector in developing balanced reforms that can improve the country's weak business enabling environment and support sustainable growth, but primarily to accelerate job creation in Indonesia. As part of the effort to create impact and promote Indonesia's private sector,"Voices" has been used for reference in Metro TV during the "Candidate on Stage" program, distributed to panelists and attendees of the Commission for General Election's Presidential Candidates Dialogue, and sent to Indonesian leaders in government, businesses and nonprofit organizations. PENSA hopes that by reaching out to diverse leaders, "Voices" will be a valuable source of information for creating a change for the better. BANGLADESH: Helping the Garment Industry Compete The garment industry is a cornerstone of the Bangladeshi economy, accounting for 75 percent of total export earnings and employing more than 1.5 million workers, mostly women working in small and medium enterprises. The workers' income raises living standards, including the health care, housing, and education of their children. Attaining competitiveness in international markets is critical, with competition rising from China and other countries that have high labor productivity, and with the 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 $300 million in the coming year. South Asia chain analysis of subsectors such as ready-made garments, light engineering, South Asia, led by accelerating growth in India, emerged as one of the fastest and agribusiness to identify key issues and areas of intervention to facilitate growing regions in the world in FY04. The private sector remains at the forefront future growth and development of these subsectors. of this strong performance, as entrepreneurs throughout South Asia strive for international competitiveness and identify new opportunities in the region and One important objective of SEDF is addressing the constraints to finance for beyond. IFC supported this trend with a record level of new investments of smaller businesses. In Bangladesh, SEDF is working with eight partner financial $405.1 million, as well as $108.5 million in loan syndications. In addition to institutions to introduce a range of new products and tools that will increase investment in support of private sector development, IFC has provided technical the quality and quantity of their SME portfolio. Already, 3,000 new small and assistance to help companies improve competitiveness, foster environmental medium enterprises have access to finance, with five of the financial institutions performance, access longer-term funding, and reach new markets. 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 Small and medium enterprises are a key component of sustainable growth and a thousand bankers in core risk areas such as credit analysis, asset and liability development. IFC supports local entrepreneurs and their businesses through its management, treasury functions, internal controls, and anti­money laundering. regional SME program, the SouthAsia Enterprise Development Facility (SEDF). These are all issues identified by local bankers and authorities as crucial to Based in Dhaka, SEDF was launched in October 2002 to cover Bangladesh, the sustainability of the financial sector. In combination with the Netherlands Bhutan, Nepal, and northeast India. SEDF takes a multifaceted approach, Development Finance Company and IFC's Global Financial Markets group, working to improve the business-enabling environment, increase access to SEDF also organized workshops on corporate governance with local financial finance, and make business services for SMEs more widely available (see institutions. The resulting recommendations were accepted by the Central Bank boxes). As part of its sector-specific approach, SEDF has undertaken value and incorporated in recent government legislation. 24 22 In consultation with the Office of the Registrar of Joint Stock Companies and foreign direct investment. Next, IFC invested in Bhutan Hotels Limited, one of the Firms (RJSC) in Bangladesh, SEDF produced a registration kit aimed at reducing first foreign investors, which is building a chain of resorts. Now, SEDF is working the regulatory difficulties faced by entrepreneurs during business registration. with the resorts and the local business community to create linkages between The kit contains information on how to register, the various forms required for the resorts and local SMEs, to spread the benefits of foreign investment. different types of company registration, as well as postregistration statutory requirements. It is available through the RJSC, the SEDF Knowledge Center, In India, IFC has initiated a project to support an edible oils company, Ruchi and online, and has been published in daily newspapers. In addition, SEDF Soya, in managing interrelated aspects of food production safety and quality has provided copies to all the chambers of commerce, associations, and key beyond compliance with IFC policies and guideline requirements (Sweden). government ministries and departments for information-sharing purposes. Data The project, currently underway, aims to assist the company in identifying, received from the RJSC have shown that average total registration time fell from designing, and planning the steps required to ultimately achieve Hazard Analysis 18.5 days in December 2003 to 16.41 days in March 2004. and Critical Control Point (HACCP) certification, an internationally recognized food safety system, throughout its plants in India. This past year, IFC undertook a study on the feasibility of establishing a targeted SME program in Sri Lanka (Netherlands). The study consisted of a review A key role that IFC plays is to share global experience and facilitate international of the state of the SME sector in Sri Lanka, including an analysis of donor business relationships. In April 2004, IFC and FIAS, with the financial support involvement in SME development, as well as a skills gap analysis of selected of Switzerland's State Secretariat for Economic Affairs (seco), hosted a regional financial institutions involved in SME lending. In addition, IFC hosted a seminar workshop in New Delhi, India, on prospects for special economic zones. The in Colombo on best practices in SME financing (Netherlands). Based on this workshop provided a forum for dialogue by bringing together potential investors, work, IFC will launch an SME program for Sri Lanka and the Maldives in 2005, developers, business owners from around the world, and policymakers from focusing on business environment, access to finance, and specific subsectors the region to discuss the prerequisites for attracting private sponsorship and such as tourism, agribusiness, and construction. investment in economic zones in the region. Speakers from China, the United Arab Emirates, the Philippines, Mauritius, Kenya, Costa Rica, and the USA To promote the sustainable development of the tourism sector in Bhutan, key joined experts from IFC, FIAS, and the WTO in describing the experience of to the country's development, IFC has undertaken a range of activities. First, similar zones elsewhere in the world to offer lessons on best practice, illustrate FIAS worked with the government to create a legal and regulatory framework for common problems, and identify mistakes to avoid. LEVERAGING THE SME TOOLKIT­DHAKA KNOWLEDGE CENTER In April 2004, SEDF and the Dhaka Chamber of Commerce and Industry (DCCI) opened a Knowledge Center and introduced a Web-based South Asia SME Toolkit in Bangladesh.The Knowledge Center and SME Toolkit aim to support entrepreneurs in establishing and promoting successful and sustainable SMEs.The Knowledge Center provides internet access and a library of business resources for members and will assist the DCCI in expanding its existing training capabilities, particularly related to on-site support and training to SMEs.The SME Toolkit for Bangladesh, available in English and Bengali, is based on a design that has been successfully implemented in a range of countries in Asia, Africa, Europe, and parts of Latin America.The Toolkit will provide small business owners and managers in Bangladesh with an online source of information on several core business areas, including accounting and finance, business planning, human resources, legal and insurance issues, marketing and sales, operations, and technology. 22 25 Europe and Central Asia Central and Eastern Europe IFC's commitments in Central and Eastern Europe reached a record high in FY04, exceeding $825 million, with an additional $68 million syndicated from partner banks. The largest share of this funding, $486 million, went to Russia, reflecting the country's growth and stability and the Corporation's increasing work with local companies there. IFC also increased commitments to Ukraine to $57 million, with investments in agribusiness, the financial sector, and general manufacturing. IFC expects that its role in Ukraine will continue to grow in response to an improving investment climate. In the EU Accession countries, IFC is playing a more selective role, as evidenced by its latest investment in the Baltics aimed at deepening its mortgage market through the first cross-border securitizations in the region. IFC's strategy in Central and Eastern Europe is tailored to meet the unique Technical assistance activities are a significant portion of IFC's work in the challenges of the region. IFC's role in the countries that joined the European region, helping to enhance IFC's development impact. Many of these activities Union this year--the Czech Republic, Estonia, Hungary, Latvia, Lithuania, are central to building the private sector in emerging economies, beyond what Poland, Slovakia, and Slovenia--is changing, as private investment is becoming IFC can do through its commercially oriented investing. increasingly available in those countries. IFC continued to support the private sector in Armenia, Belarus, and Georgia through advisory work and investment, IFC supplements its credit lines to local banks for SME finance with tailored with a focus on strengthening small businesses. IFC is focusing on the countries, technical assistance to strengthen these banks' management, lending practices, sectors and projects where its developmental role is crucial and for which private and corporate governance. For example, IFC, alongside its $10 million credit financing remains limited, with an emphasis on socially and environmentally line, assisted UralTransBank in expanding its capacity to lend to SMEs in the sensitive sectors. Urals region of Russia (Switzerland). For the countries of the former Soviet Union, the full transformation to a market To develop non-banking financial services, that are accessible for SMEs such economy is likely to remain a major challenge in the next few decades. IFC can as leasing, IFC provides advice to governments on developing appropriate make a significant contribution toward accelerating this process. In this context, legislation, shares its expertise with local financial institutions, and provides IFC is responding to the recent positive signals from Russia and Ukraine with professional training to the broader business community on using new financial rigor and speed, focusing on developing efficient capital markets, supporting tools. IFC also invests in the sector, having lent to one of Ukraine's first leasing SMEs through investment and technical assistance, and increasing financing companies, First Lease, and having financed Delta Leasing Far East and leasing of locally sponsored businesses. operations of Société Générale Vostok in Russia. THE PRIVATE ENTERPRISE PARTNERSHIP The Private Enterprise Partnership is IFC's technical assistance program in the former Soviet Union. IFC established the Partner- ship in 2000 with a $4.6 million annual budget through FY06 as a continuation of the technical assistance programs IFC has been carrying out in the region since 1992. IFC's contribution covers the Partnership's fixed costs (program management, accounting, human resources, impact assessment, IT support and overheads).The Partnership's programming activities are funded by donors, who have contributed $48.5 million since 2000. The Partnership works with its donor and investment partners to Technical assistance plays a key role in IFC's work in the real sector as well. IFC attract private direct investment, promote the growth of SMEs, is increasingly focusing on working with local companies. In addition to IFC's and improve the business-enabling environment. To achieve these financing, the local partners need IFC's guidance on a wide range of issues objectives, the Partnership implements programs in four distinct, including operational and management improvements, corporate governance, complementary areas: environmental and social issues, development of supply and distribution links, · Building supply and distribution chains to link smaller companies and reaching new markets. As an example, IFC advised its investment partners, to major investors. poultry producers in Russia (Stravropolsky Broiler) and Ukraine (Mironovsky) on · Developing financial markets. · Improving corporate governance practices and regulations. developing finance and accounting departments and management information · Building business support services and improving the regulatory systems (Netherlands and Italy). environment for SMEs. An area of special focus in IFC's technical assistance work, especially in Belarus The Partnership in FY04 and Ukraine, is promoting SME policy reform and building the capacity of · 27 projects in 11 countries ­ Armenia, Azerbaijan, Belarus, local business associations to represent the interests of the SME sector and Georgia, Kazakhstan, Kyrgyz Republic, Mongolia, Russia, provide needed professional services. In addition, IFC gives advice to national Tajikistan, Ukraine, and Uzbekistan. governments on improving business legislation and on the overall investment · Nine capital city offices and 16 regional offices. climate. · Over 270 field-based staff, 90 percent of whom are local professionals. IFC is providing technical assistance through a number of programs. In the · Funded jointly by IFC and donor governments of Austria, Canada, former Soviet countries of Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Finland, Germany, Japan, the Netherlands, Norway, Sweden, Switzerland, Kyrgyz Republic, Russia, Tajikistan, Ukraine, and Uzbekistan--and most the United Kingdom, and the United States. recently Mongolia--the Corporation's technical assistance is consolidated under IFC's Private Enterprise Partnership (the Partnership) (see box). 22 27 Highlights of the Partnership's Program in FY04 To date, SugdAgroServ has provided finance to 60 farms, directly helping to In FY04 the Partnership expanded its programs to two new countries, Kazakh- reduce the poverty levels of some 12,000 people. The Partnership is now stan and Mongolia, and is currently implementing 27 projects in 11 countries. working with the company to increase its working capital and shareholder base, Nine of these projects were approved in FY04. In addition, the Partnership allowing it to expand operations and diversify across regions (Switzerland). completed eight projects during the year in review. Below are some of the Matching Local Companies with Business Partners highlights of the Partnership's achievements in the past year. This year, two of the Russian manufacturers of automotive components with Facilitating Direct Investment which the Partnership has been working have improved their quality to a level In the forestry sector, the Partnership works with European investors to match that has enabled them to sign long-term supply contracts worth over $1 million them with Russian partners. As a result, Metsaliitto Group, one of the largest per year with the Ford assembly plant outside of St. Petersburg. The Russian forest industrial companies in Europe, recently acquired equity in two Russian consultants whom the Partnership trained in this process are already working on companies. Pleased with the quality of its Russian partners, Metsaliitto quality improvement at more than 10 other Russian manufacturers (USTDA). announced plans to build a sawmill and is considering another one in the St. Petersburg region (Finland). In Russia's remote region of Magadan, the Partnership has been working on linkages between large mining projects with 46 small businesses, five of which, In the Russian leasing sector, the Partnership facilitated several deals worth $8.5 including a farm in a village of 600 people, have already increased their annual million between Finnish equipment producers and local leasing companies. sales by over $600,000 by improving their operations and becoming suppliers Fourteen more transactions worth about $20.5 million are currently under to the region's mining industry (Canada). discussion (Finland). A leading investor in the Russian information, communications and technology In Tajikistan, the Partnership helped establish and develop SugdAgroServ, a (ICT) sector, IFC launched the ICT Connector Project last year to foster the commercial services company wholly owned by 365 farmer-shareholders in development of the software export sector in Russia and build business ties the Khojand region. The open joint stock company offers short-term finance with Finnish companies. The Partnership works with Russian ICT companies and selected marketing and retail services to farm entities, and its activities to help them improve software development processes, strengthen project are already beginning to improve lending and farming practices in the region. management, improve certification procedures, and identify business partners and investors. The project has facilitated two commercial contracts between Finnish and Russian companies. More contracts are currently under discussion. In addition, the project through its partner, Finpro, arranged over 40 sessions to match Russian ICT companies with European partners and provided project management training to more than 150 participants from 59 Russian small and medium IT companies (Finland). The Partnership advises Ukrainian farmers on finding new markets, helps them access market information, and links them to processors, wholesalers, and supermarket chains. Nearly 9,500 participants attended 170 training sessions organized by the Partnership's Ukraine Agribusiness Development Project. The Partnership also advised 1,600 farmers on marketing strategies to increase profits at the farm level and gain a stronger position in the market (see box) (Canada and Sweden). 28 22 Increasing Access to Financing for Small and Medium Enterprises This year the Partnership completed its SME Toolkit Project in Ukraine, part In Ukraine, the Partnership worked with Ukrsotsbank and Hromada Credit of the IFC­World Bank global initiative to provide businesses with accessible Union to help them develop and expand their rural credit programs. As a resources on products and services they need throughout their business result, Hromada started lending to farmers for the first time and its agribusi- development cycle. The Project involved the development of an Internet portal, ness portfolio now amounts to $470,000. Ukrsotsbank's rural credit portfolio www.VlasnaSprava.info --a comprehensive resource for Ukrainian small and increased from $1.5 million to $18 million. IFC has also trained and advised medium enterprises seeking finance and business advice. The Web site offers farmers and banks on agribusiness risk management and helped both parties interactive tools for businesses to assess their financing needs and proposes understand each other's requirements. The project assisted nearly 400 farmers customized solutions, links to lenders with an option to apply for financing on in the Kherson region in southern Ukraine to obtain over $3.4 million in loans line, and provides business training materials and information on consulting from local banks (Canada and Sweden). companies. Within a year of its operation, VlasnaSprava became one of the top REPLICATING SUCCESS TO MAXIMIZE DONOR CONTRIBUTIONS One key advantage gained by IFC in integrating its technical assistance projects in the former Soviet countries under the management of the Private Enterprise Partnership is the flexibility to replicate successful programs across the region and sectors.This integration has reduced the cost of initiating similar programs, enabled the Partnership to launch new programs more quickly, and leveraged donor contributions more effectively and magnified their impact. For example, the Partnership drew on its leasing development program in Russia to launch similar initiatives in Central Asia in 2001, later in Azerbaijan and Georgia, and in Ukraine, and Mongolia in FY04. In less than three years, the Partnership has contributed to improving leasing legislation in Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan,Tajikistan, Ukraine, and Uzbekistan. The Partnership replicated its Ukraine Corporate Governance initiative in Russia and most recently in Georgia, training over 2,400 companies and transferring knowledge to 64 colleges and universities.The Partnership also transferred its corporate governance experience to other sectors.This year it is starting a corporate governance project for the banking sector in Russia and Ukraine. The Partnership worked with a dozen Russian dairy farms to enable them to become suppliers to a Dutch dairy, Campina. This work laid the foundation for similar projects with Ukrainian farmers supplying tomatoes and fruits to major food processors. In addition, the Partnership used this experience in improving local suppliers for IKEA in the furniture manufacturing sector and for Ford in the automotive sector. The Partnership carries out regular surveys of the business enabling environment for SMEs in Belarus, Georgia,Tajikistan, Ukraine, and Uzbekistan. To maximize the value of the reports, the Partnership's SME policy projects use survey findings as a basis for working directly with the government, NGOs, and other stakeholders to implement changes to the business environment. As an example, the Partnership's recent work with regulatory agencies in Uzbekistan has resulted in a reduction of annual business inspections from 6.2 to 1.9 per Uzbek firm. 22 29 WHAT'S FOR DESSERT? ­ `VATTENMELON' FROM UKRAINE! Sergei Rybalko, a farmer from a small village in the Kherson region in southern Ukraine, could never imagine that the watermelons he grew would sell in Swedish supermarkets. Last summer Sergei shipped his first 100 tons of watermelons to one of the largest fruit and vegetable importers in Sweden, and this year Sergei will triple the supply. The initial supply contract with Sweden for 100 tons of watermelons worth about $25,000 is one of the many benefits Sergei has reaped by forming a cooperative with other farmers in late 2001. Although Sergei was very successful at the time, he could see the benefits of cooperation with other small and medium-size farms: for example, the ability to negotiate wholesale prices on inputs, direct connection with the market rather than through middlemen, larger product lots attractive to big buyers, and greater bargaining power. To gain these advantages, Sergei persuaded five other small farmers to join him in forming a marketing cooperative, subsequently named "Pivdenny Soyuz" ("Southern Union"). IFC's Ukraine Agribusiness Project has played an important role in Sergei's success (Canada and Sweden). A key aspect of the project's activities is training farmers in contemporary agribusiness practices.The seed for "Pivdenny Soyuz" was sown when Sergei participated in a study tour in Poland organized by the project in 2001. During the tour Sergei was most inspired by observing first hand the work of agricultural cooperatives. Shortly after his return, Sergei requested IFC's project team to help address the legal, financial, and organizational issues involved in setting up the first marketing cooperative in Kherson Oblast. Sergei and five other farmers, the first members of the Pivdenny Soyuz cooperative, realized almost immediately the benefits of working together. They were able to purchase fertilizer at wholesale prices and reduce costs by 15 percent.With advice and support from IFC, the management of the cooperative conducted comprehensive analyses of the grain and vegetable markets and identifying the best distribution channels and prices for its products. Collectively, the six members of Pivdenny Soyuz represented a significant share of the local vegetable market and were able to influence vegetable produce pricing and find new buyers who had not been interested in working with individual farmers because of high transaction costs of doing so.The success of Pivdenny Soyuz in marketing its products has subsequently attracted 13 more farms as new members of the cooperative. In August 2002, IFC's Agribusiness Development Project organized a trip to Sweden for some 30 farmers from the Kherson region to promote business ties and showcase best practices in Swedish agribusiness. Drawing on the successful experience of working with Pivdenny Soyuz, in late October 2003, Saba Frukt & Gront, the biggest importer of fruit and vegetables on the Swedish market, initi- ated further discussions on its future partnership with the cooperative.The result of the negotiations is a new supply contract for onions, sweet peppers, eggplants, tomatoes, melons, and cabbage. business sites in Ukraine, attracting over 700,000 hits from 79,000 different In Belarus, the Partnership is working with seven business associations to build hosts and 2,500 registered users. In April 2004, VlasnaSprava ranked 21st their organizational capacity to ensure long-term sustainability and the ability to among Ukraine's most popular business and financial internet portals. Though represent the interests of the private sector effectively in a challenging business the project is complete, the Toolkit and its Website will continue to operate; environment. Since the Partnership started this work in 2002, the associations the Partnership supported the creation of a Ukrainian NGO, the Business have reported a 37 percent increase in annual budget receipts and a 44 percent Technologies Development Center, which inherited the VlasnaSprava.info portal increase in their membership (Sweden). (Norway and IFC TA Fund). Improving Regulatory Environment In Russia, the Partnership facilitated the creation of the Agri-Industrial Finance In December 2003, the Ukrainian Securities and Stock Market State Commis- Company, the only commercial leasing company in the country that lends to the sion adopted the Ukrainian Corporate Governance Principles, a voluntary code of primary agricultural sector. At the end of 2003, the company's lease portfolio conduct for Ukrainian companies. The Partnership's Ukraine Corporate Develop- was $7 million in outstanding and approved leases. In 2004, the company looks ment Project worked closely with the Securities Commission's Special Task Force to expand its operations in a number of agri-sectors including dairy, grain, and on corporate governance to draft the principles. In addition, the Partnership animal husbandry and plans to introduce a lease product specifically focused advised the Ukrainian Government on 12 pieces of legislation, including the draft on smaller-size lease transactions, serving the farming sector. The Partnership Joint Stock Company Law. Three pieces of legislation on issues of information continues to provide technical assistance to Russian farms, which are the disclosure, boards of directors, and general regulations related to corporate company's existing and potential clients, on increasing productivity and quality governance have been adopted so far (Canada and Switzerland). (Netherlands). The Partnership also contributed to the passage this year of leasing legislation in Building Local Capacity Azerbaijan and Kazakhstan. In previous years, IFC worked with the parliaments To improve corporate governance in local enterprises, the Partnership has and government agencies of Uzbekistan, Kyrgyzstan, and Tajikistan to create provided advice and training to over 2,400 companies in Russia, Ukraine, world-standard legislation for leasing. With the enactment of the amendments in and Georgia, from major corporations in the forestry, telecommunications, Kazakhstan, the entire Central Asia region will have compatible leasing legisla- and chemical sectors to small and mid-size manufacturers, food processors, tions, that will facilitate region-wide investments to benefit all four countries and construction companies. To ensure that future managers and lawyers (Switzerland and USA). understand the importance of good corporate governance and have the skills to practice it, the Partnership works with 64 universities and colleges in Russia and Ukraine to introduce or improve their corporate governance curricula and train professors. In addition, it conducts public education campaigns to reach the broader shareholder community (Canada, Netherlands and Switzerland). IFC provides advice to governments on developing This past year, IFC surveyed corporate governance practices in the Russian and appropriate legislation, shares its expertise with Ukrainian banking sectors. Follow-on technical assistance projects will guide the banks in strengthening their own practices and in evaluating the corporate local financial institutions, and provides profes- governance of clients when making financing decisions (Switzerland). sional training to the broader business community on using new financial tools. 22 31 Southern Europe and Central Asia Highlights During FY04, the region was affected by exciting changes: in many countries, the private sector share of GDP increased, new dynamic local businesses emerged, and interest from foreign investors grew. In FY04, IFC committed $812 million of its own funds and arranged around $295 million in syndications. In the general manufacturing sector, post-privatization restructuring and modernization of previously state-owned enterprises were an important part of the investment and advisory portfolio. In addition, IFC responded to a deep need for public intervention in developing of infrastructure projects in Southern Europe with the creation of the Balkans Infrastructure Development Facility, which will start operating in FY05 (see box). The investment strategy for financial markets expanded to include regional THE BALKANS INFRASTRUCTURE wholesale approaches with the development of housing finance and leasing, microfinance institutions, and equity funds. Investment teams continued to DEVELOPMENT FACILITY facilitate financial sector privatization and involvement of strategic foreign investors, and aggressively pursued the Corporation's cornerstone strategy for Continuing infrastructure deficiencies remain a key constraint to SMEs and microbusiness development. more rapid private sector development and increased private invest- ments in the Balkan region, which has faced many social, economic, and political challenges in the past decade. The current state of IFC's multidimensional approach to technical assistance (TA) in the region poor and unreliable infrastructure discourages private investors and played a key role in producing results for clients. Its portfolio included programs hinders economic growth. In turn, lower economic growth reduces to improve the business environment in client countries, promote institutional the availability of public funding to improve infrastructure, which strengthening, assist SME sector development, build the capacity and expertise remains in a state of disrepair. Greater private sector involvement in of local banks, develop wholesale access to finance, and facilitate the privatiza- infrastructure growth is necessary to break this cycle.To address this tion of key industries. need, IFC is establishing the Balkans Infrastructure Development Facility (BIDFacility) in cooperation with the USAID and Euro- The FY04 active TA portfolio was about $8 million with more than 30 projects, pean and Nordic donors. The BIDFacility will help public sector allocated as follows: 37 percent in financial markets, 22 percent in general entities in the South East Europe region to attract private sector manufacturing services, 21 percent in utilities, 13 percent in infrastructure, participation and investments in infrastructure, primarily in energy, 4 percent in social sectors, and 3 percent in other sectors. IFC's top client transport, and water and sanitation sectors.The countries covered by countries were Serbia and Montenegro and countries in Central Asia. In Serbia the facility are Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania, and Serbia and Montenegro. The and Montenegro, over the last two years, IFC has mobilized more than $4 million Facility will be launched in FY05. in dedicated technical assistance trust funds provided by Italy and Sweden. 32 22 Coordinated TA Efforts to Improve the Business Environment When the National Association of Business Women in Tajikistan (NABWT), an SOUTHEAST EUROPE ENTERPRISE NGO provider of micro credit, asked IFC to help it successfully transform into a DEVELOPMENT FACILITY commercial microfinance institution with statutory authorization to operate as a deposit-taking institution, IFC launched a two-phase advisory program to help. Created three years ago, SEED has three overarching mandates: to Phase 1 comprised a study tour to one of the industry's leading microlenders, improve SME competitiveness through training and consulting, to Acleda Bank, in Cambodia. The training program covered human resource develop the pool of local business service providers, and to improve development, marketing of new financial products, and credit, treasury, the overall business environment for small and medium enterprises accounting, payroll, and management information system operations. Phase 2 in its target countries. will consist of regulatory advice and provision of a long-term, on-site expert to help NABWT implement operational and management changes and assist with Existing ties have been strengthened to enable a fully inclusive governance issues. The planned conversion of NABWT to a viable microfinance investment and technical assistance strategy. A clearer set of deliv- lender represents the culmination of a comprehensive microfinance advisory erables to its host countries is now punctuated by an integrated initiative launched in partnership with IFC's Global Microfinance Unit and the approach to addressing the need to tie technical assistance more closely to IFC's investment work. Going forward, SEED's program Private Enterprise Partnership (the Partnership) in Russia in FY03. will be linked to four major strategic objectives: With the full cooperation of the National Bank of Tajikistan, the Partnership · Access to Finance ­ Making alternate financing available and Microfinance Legal and Regulatory Framework Project set out to identify barriers affordable to SMEs to microfinance and produce draft legislation to help overcome them. At the · Linkages ­ Integrating SMEs into the supply chains of large same time, IFC oversaw a sector feasibility study designed to identify potential companies, to the benefit of both candidates for conversion to regulated microlenders (Canada). NABWT was · Business Membership Organizations ­ Focusing on estab- selected to undergo further TA inputs in preparation for conversion, and the lishing sustainable structures that can advocate for business legal framework developed through the Framework Project was passed by interests, provide networking and market opportunities, and serve Parliament in the spring of 2004. as a portal for essential training and consulting services · EU Accession/Institutional Development ­ Meeting the During the Turkish financial crisis of 2001, micro, small and medium-size needs of EU Accession countries by working to develop govern- mental structures supportive of SMEs. enterprises were particularly hard hit, and investment flow to this sector remains small. When the Turkish government asked IFC for help to spur development of this important sector, IFC sponsored and organized a microfinance conference that brought together IFIs, leading microfinance practitioners, and regulatory experts to share experiences of microfinance delivery throughout the world. The conference educated potential stakeholders and focused attention on the economic potential of the Turkish micro-entrepreneur. IFC provided technical assistance to the Turkish Government on the drafting of progressive microfinance legislation, and helped authorities modify legislation so that it addressed important microfinance delivery models such as not-for-profit NGO microfinance institutions, non-bank microfinance institutions, and commercial banks that specialize in microfinance. 22 33 quantitative analyses of available statistical information, SEED helped to develop an SME Macro Study that provided an overview of SME economic activity in Albania for the period 1998--2001. The study established indicators for monitoring SME performance and the role played by these businesses in economic growth, in addition to their level of compliance with EU standards. It is being used as a tool for policy makers in designing strategies and incentives for SME development. The international oil and gas industry operating in Kazakhstan is a vital source of revenue for the country, but gaining access to it remains a challenge for many local businesses because they are not certified to operate at international standards of quality and efficiency. IFC designed a program to help local SME vendors achieve internationally recognized ISO 9000 quality certification so Institution Building through Training that they can bid for contracts from global suppliers (Netherlands). In order When the Baku Stock Exchange and State Committee for Securities asked to prepare for certification, the SMEs in this pilot program are receiving sector for help to increase its know-how and increase public awareness, IFC provided specific training in quality procedures, human resource management, policy a comprehensive institutional strengthening program to its employees development, business process flow chart creation, document and information (Netherlands). The program included operational support to management as program flow chart creation, and training in problem solving. well as professional development training in the form of simulation exercises for IPOs and their trading cycle; an intensive capital markets seminar for In Uzbekistan, IFC oversaw a national study of the SME sector to identify barriers private and public sector companies; in-depth training workshops in capital to business development at the company and country level (Switzerland). The markets and exchange management; a public seminar for over 60 potential program is drawing to completion now, after almost two years of implementa- listed companies, related government agencies, and members of the press; tion, and survey results will be used to improve regulatory, administrative, and and a complete revision of the IPO guidebook on trading regulations and economic policies affecting the SME sector. procedures. In its first project in the Serbian IT sector, IFC conducted a survey to collect Assisting SME Sector Development and evaluate industry data in order to project growth trends over the course In Bosnia, SEED supported the first Business Attitudes Survey, developed by of the next three years, identify the current institutional/regulatory barriers to the Employers Confederation of Republika Srpska. The survey identified major doing business, and identify promising business opportunities. Study results impediments to business growth in the country and determined an advocacy were very encouraging, and IFC hosted a seminar to present the conclusions to agenda for the business confederation. SEED supported this and other business invited members of the local Internet and IT community as well as prospective associations throughout the Southern Europe region as part of its long-term foreign and local investors (Italy). commitment to empower SMEs and help promote their collective interests. This year, the confederation successfully launched three legislative initiatives Azerbaijan's SME Linkage Program, which is linked to IFC's proposed invest- to remove barriers to doing business. ments in the Azeri, Chirag, and Deepwater Gunashli oilfield and the Baku- Tbilisi-Ceyhan pipeline projects, is part of our strategy of working closely Policymaking in Albania has been greatly hindered by the scarcity of reliable with clients and partners to support growing SMEs through linkages to major information and statistics on the SME sector, so the Albanian SME Agency investments. These kinds of projects have been particularly successful in the asked IFC for help in addressing the problem. Drawing on qualitative and extractive industries. The support aims to create more opportunities for small 34 22 businesses by expanding local supply and distribution chains, and to assist in sustainable community development efforts. Clients benefit from targeted TA, and the program results in improved access to finance and the creation of local business development service providers. SEED has been working with the Makstil A.D. Duferco Group, one of Macedonia's largest manufacturing firms with an extensive network of SME suppliers, to help enhance its scrap metal supply chain management. SEED task managers are overseeing a comprehensive program of assistance to benefit Makstil and the SMEs integrated in its value chain so that they can achieve greater social, economic, and environmental impact. The potential of launching an environmentally friendly scrap recycling project is being assessed with the involvement of IFC's environmental specialists. Because the program will provide local scrap metal collectors with tools to heighten their productivity and increase revenue, it is estimated that around some 2,000 to 4,000 people who depend on Makstil's scrap metal business for their livelihood will be positively affected IFC client Neftebank, a regional bank operating in the far western area of by this program. Kazakhstan, is an important financial intermediary to local SMEs that serve the oil and gas sector. In order to survive, Neftebank needed help to compete Building the Capacity of Local Banks with Training Support against strong local and foreign banks. IFC created a year-long "twinning and Strategic Pre-Privatization Assistance program" using in-house advisors from an international bank to implement Building strong financial intermediaries to the SME sector is a cornerstone of hands-on training modules for general management, strategic and human IFC's development approach, and in FY04, SEED oversaw capacity building resource planning, IT/MIS upgrading, credit review procedures, project manage- programs for IFC investees ProCredit Bank (a microfinance institution where ment, and customer service (Netherlands). loans above $50,000 to SMEs now make up 23 percent of the portfolio) and National Commercial Bank. In addition, SEED conducted a staff training In Serbia and Montenegro, IFC implemented an advisory program to upgrade program for Albania Savings Bank, the country's largest financial institution, and eventually privatize Vojvodjanksa Banka (Sweden). Consistent with its and even extended the training to some of its SME borrowers. strategy of strengthening financial intermediaries so that they can provide capital to private businesses and individual borrowers, the program will support the bank's expansion and modernization. TA advisors are focusing on the strengthening of credit operations, the upgrading of management information systems, and the establishment of state-of-the-art portfolio management. IFC's investment strategy for financial markets expanded to include regional wholesale approaches with the development of housing finance and leasing, microfinance institutions and equity funds. 22 35 Primary Housing Finance in Southern Europe Facilitating Privatizations of Key Industries Increased access to housing finance helps to reduce poverty because it provides IFC recently launched an innovative technical assistance program for Elek- marketable collateral for homeowners and leads to improved living conditions. tronska Industrija (EI), a Serbian manufacturer of consumer electronic prod- A key strategy in IFC's approach to housing sector growth is the establishment ucts and home appliances (Italy). The program is helping EI management of primary and secondary housing finance institutions. Funded by Switzerland, prepare for privatization by creating a restructuring plan for its 40 state-owned this program is documenting demand and identifying gaps in current housing business units, modernizing those that are able to compete on a commercial finance systems in Croatia, as well as in Bosnia and Herzegovina, Kosovo, FYR basis, and facilitating joint ventures with foreign partners and direct sales to Macedonia, and Serbia and Montenegro. IFC will then use the data to create foreign investors. The work will unfold in three phases over a period of 14 action plans for improving the affordability and availability of housing funds for months: diagnostic analysis to identify the long-term market and financial middle and lower income households and, where feasible, generate business prospects of the separate business units; preparation of an overall restructuring viability plans for primary mortgage finance companies in each study country. strategy and identification of strategic partners and buyers; and finalization of The study will also identify operational, legal, and regulatory obstacles and will joint venture arrangements and sale or auction preparations with the Serbian propose solutions for overcoming them. Privatization Agency. When Nafta Industrija Serbije, the state-owned oil and gas utilities conglomerate, asked for help to prepare for possible privatization, IFC stepped in with a TA program that addressed the need for reorganization of the conglomerate in addition to rationalization and modernization of the entire oil and gas industry (Italy). The program helped to advance the reform agenda of the Serbian government in the energy sector. The government has begun to take steps to implement the recommendations of the study. The Government of Uzbekistan needed assistance in developing a strategy to privatize one of its most attractive state-owned assets, Uzbektelecom (UT). IFC responded with an advisory program to create a business plan and financial model that includes a comprehensive pre-privatization strategy that UT can present to the International Financial Institutions and other potential investors (Japan). The plan addresses UT's long term operational viability and profitability and develops a realistic investment scenario with financing requirements. The project has important demonstration value to the government as a model for future privatizations of state-owned enterprises in other sectors. 36 22 Innovative Approaches to SME Development ­ Introducing Alternative Dispute Resolution Because commercial litigation can be an unavoidable consequence of growth FIAS has likewise been active in carrying out reviews of investment legislation, for new businesses, time-consuming and expensive court proceedings are an investment incentives, competition policy, and removal of administrative barriers increasing burden to SMEs in Albania, Bosnia, FYR Macedonia, and Serbia to investment with a capacity-building and self-assessment focus. FIAS has and Montenegro. In addition, the high cost of litigation ties up company assets prepared self-assessment tools for monitoring and evaluating resulting reforms, that might otherwise be directed to new business development and operational as well as setting up the initial stages of new administrative barrier studies. upgrades. To help SMEs cut through judicial red tape and unlock these assets, SEED is helping to introduce alternative dispute resolution (ADR) mechanisms FIAS has also worked in collaboration with the Partnership in Russia and SEED in the region. Through its ADR mediation pilot project, SEED helped to draft in Southeast Europe. FIAS concentrated on advice to the federal/national and ADR legislation, train participants, and raise awareness on the benefits of using regional levels of government, while the Partnership and SEED leveraged their ADR and mediation. In one Bosnian court alone, the ADR pilot project helped to relationships with local governments and business associations. Such collabora- resolve some 20 commercial disputes within one month, releasing approximately tion took place in Magadan, Russia, where the municipal government is now $1 million in assets (Canada). working on an Action Plan for reform. Improving the Enviornment for FDI FIAS has been particularly active in Turkey through a multiyear, programmatic FIAS has been especially active in Southeastern Europe, Russia, and the approach. This year, FIAS piloted its first Investment Advisory Council Project Caucasus region, particularly in the removal of administrative barriers to invest- at the request of the Government of Turkey. FIAS also hosted a seminar on ment. Work in these countries is now at the "implementation assistance" stage Trade and Investment Policy and Linkages in Central Asia and the Caucasus (i.e., working with counterparts to design concrete reforms to remove the most jointly with the OECD. severe barriers, and using "best practice" examples from around the world). Inspection procedure reforms are underway, drawing on the earlier successes of Latvia and Croatia, in order to reduce the burden on businesses. 22 37 Latin America and the Caribbean In FY04, many countries in the region regained access to international capital markets, especially for short-term funding, on relatively favorable terms. Favorable developments such as low interest rates, high commodity prices, export growth, increased remittances, and improving domestic demand helped stimulate the region's recovery. However, the region continues to face challenges relating to poverty and inequality, reliance on external financing, globalization and competitiveness, and political instability in some countries. On the investment side, in FY04 IFC refocused on the market's demand for long-term finance, including refinancing. On the non-investment side, IFC continued to provide technical assistance and advisory services to strategi- cally complement its investment activity. In particular, technical assistance has been used to effectively intervene in several areas, such as in the SME sector (including SMEs in indigenous communities), financial markets, the manufacturing, telecommunications and social sectors, as well as in support for sustainability programs. The LAC SME Facility is expected to operate In line with its strategy of promoting private sector development through support to SMEs, in FY04, IFC established the Latin America and Caribbean Small under a five-year cycle with an estimated and Medium Enterprise Facility (LAC SME Facility). Approved by the Board budget of $20 million; the Facility has in June 2003, the LAC SME Facility initially covers Peru, Bolivia, Nicaragua, and Honduras and accomplished much during its first year of operations, secured funding of $10 million from IFC from building the team and opening offices to launching pilot initiatives and and about $0.34 million from the Dutch gauging early impact. The Facility's work in each of these countries focuses on four key areas: (i) strengthening SME competitiveness; (ii) simplifying business government as of June 30, 2004. Additional regulations; (iii) broadening access to finance; and (iv) fostering indigenous funding in the amount of $5 million was and socially responsible enterprises. The Facility embarked on a number of pilot programs, including administrative simplification in the Municipality of La secured from the government of Switzerland Paz, Bolivia; mapping the microfinance sector in Peru; assessing the strengths (seco) in August 2004. Other donors are and weaknesses of the wood sectors in Bolivia and Nicaragua; and laying the groundwork for developing the Facility's work program in the coming year. expected to contribute to the Facility. LAC SME FACILITY: Bolivia Pilot Examples Strengthening Competitiveness Program: Under this program, the Facility is building capacity in the wood sector.The project analyzed the sector's potential and identified its major players.As a result of the findings, the facility is pursuing a two-pronged approach to strengthening competitive- ness, based on financial access and operational improvement.The Facility is currently working with financial institutions to develop products and services tailored to the sector's needs. Simultaneously, it is designing specific training interventions, such as customer/market segmentation courses, to enhance participants' operational capabilities. Simplifying Business Regulations Program: In seeking to promote SME growth through simplification of administrative procedures, the Facility prioritizes programs focused at the local level (municipal or state governments), as local governments are generally the first point at which SMEs interact with governments, and are often where SMEs face the highest administrative burden. In La Paz, through close collaboration between the local government and the Facility team, the pilot was able to reduce the number of steps required to register a business by 67 percent, thus reducing the time required by almost 97 percent.As a result, the number of new businesses registered increased significantly in the months following implementation of the changes. Currently, the program is being extended throughout Bolivia, and exploratory studies are underway in other countries in the region. Broaden Access to Finance: The Facility identified two specific areas for helping increase access to finance: (1) upgrading the capacity of microfinance institutions (MFIs); and (2) developing financial leasing capabilities. In both areas, coordination with the World Bank Group and other institutions will be invaluable for addressing the issues related to the relevant regulatory environment.Work in this area aims to increase the volume and range of financial services for SMEs. In Bolivia, where IFC has invested in four MFIs, the Facility provided technical assistance to extend their outreach to SMEs.Technical assistance included technological upgrading, institutional strengthening, and innovative designs for the MFIs' automatic teller machines (ATMs), which were designed to read fingerprints and operate by voice commands in indigenous languages.These innovations have allowed the ATMs to be used by rural populations with low literacy rates. Fostering Indigenous and Social Enterprises: The Facility recently completed a pilot match-making program that linked indigenous producer associations in Bolivia with a major international buyer and retailer.After researching local research into producer organizations, the Facility arranged a tour for the buyer to meet with the producers and select products for their upcoming lines.The buyer identified several products for retail, catalog, and Internet sales, and the Facility will assist in providing the technical assistance necessary to develop successful relationships. 22 39 IFC continued its housing finance intervention in the region in FY04, including to Trinidad and Tobago, the Dominican Republic, and Nicaragua in the coming technical assistance to support increased access to housing finance in Central year and to other countries in the region in later years. In the Andean region, America and Peru (Italy and IFC TA Fund). In Honduras, Guatemala, and IFC continues to explore the feasibility of establishing a student loan financing Nicaragua, IFC undertook a market gap analysis that reviewed the status of facility with various private banks and universities in the region. To this end, IFC the housing finance market and identified specific areas to develop a long-term is currently undertaking a study in Peru, with Swiss government support, and investment program (Canada and IFC TA Fund). In Costa Rica, El Salvador, another study in Bolivia with the support of the Dutch government. and Panama, where there is an evolving primary mortgage market and some secondary mortgage market activity, IFC's technical assistance work focused on The region continued to benefit in FY04 from the Sustainable Business building a regional platform to support the development of the primary mortgage Assistance Program (see chapter 3 for details) under IFC's Sustainability market, which would subsequently evolve into a regional secondary mortgage Initiative--one of IFC's core strategic themes. For instance, IFC's investment market entity (Italy and IFC TA Fund). In Peru, the technical assistance helped in Calidra, a lime manufacturer in Mexico, was strengthened by technical support Fondo Mivivienda's efforts to develop a vibrant secondary mortgage assistance funded by the Environmental Opportunities Facility that aimed at market and supported specific pilot programs to set up specialized full-service testing a pilot system to enhance water recovery from a lime manufacturing mortgage finance companies dedicated to very low-income borrowers (Italy plant. Similarly, the Corporate Citizenship Facility helped Marlin, a Guatemalan and IFC TA Fund). These initiatives complement IFC's investments and the gold mine that IFC funded with a $45 million loan, to train the local indigenous conclusions reached at a roundtable conference held in the region during the communities to develop and manage forest nurseries for reforestation, as well year, as well as a broad range of work that IFC supports in the development of as help identify other markets these nurseries can supply. Metrocentro, a retail local capital markets in the region. firm in El Salvador that is financed by IFC, received technical assistance support from the Italian Government and the CCF to enhance the business skills of In other areas of the financial sector, IFC assisted the Colombian regulatory its micro and small business tenants (Italy and CCF). With funding from the authorities in determining the market needs of Colombian Development Finance Sustainable Financial Market Facility, IFC organized a training seminar for the Corporations and to explore the feasibility of transforming these corporations region's microfinance institutions on environmental and social issues in order to into modern investment banks (Spain). Recognizing the importance of private help raise their awareness and promote sustainable ventures in the region. credit bureaus to facilitate the extension of credit to previously underserved segments of the population, in particular small businesses, IFC initiated a study in Brazil, Bolivia, and Colombia (Italy). This initiative is to be expanded 40 22 In the area of public-private partnership, IFC initiated a study in the technology sector in Mexico with the aim of analyzing the rapidly growing e-government sector and investment outlook, and to identify additional areas IFC can support (Spain). The study is expected to be completed in 2004. The findings of the study will help IFC identify similar opportunities for intervention in other countries in the region. FIAS completed 10 advisory projects in Latin America and the Caribbean in FY04 with a strong focus on Central America. Advisory work covered a wide spectrum of subjects constraining private investment, ranging from corporate tax and incentives reform in Costa Rica and Jamaica to corporate social respon- sibility initiatives in El Salvador, labor skills training programs in Honduras, and competition policy in Nicaragua. FIAS provided an assessment of the respective country's investment climate to the newly elected governments in Guatemala and Grenada to help set reform priorities. In Peru, assistance to the Municipality of Lima on the removal of administrative barriers to investment is now in the implementation stage in collaboration with the newly established SME facility (LACP) and a World Bank competitiveness lending operation. In addition, FIAS cosponsored two regional conferences with IFC representation: one in Central America in collaboration with the World Bank on post-CAFTA challenges, and one jointly with the Corporación Andina de Fomento on administrative barriers to investment in the Andean countries. Many countries in the LAC region regained access to international capital markets, especially for short-term funding, on relatively favorable terms. Favorable developments such as low interest rates, high commodity prices, export growth, increased remittances, and improving domestic demand helped stimulate the region's recovery. 22 41 Middle East and North Africa In FY04, the Middle East and North Africa (MENA) region experienced tremen- Four TA projects were funded through the Trust Funds Program in the MENA dous challenges. It was a year of intense activity by IFC in terms of investment region in FY04: (1) capacity building work for the First Microfinance Bank of operations and technical assistance. New markets were opened, and the year Afghanistan (Norway and IFC TA Fund) to overcome some of the immediate marked first IFC commitments in decades in Afghanistan and Iran. IFC also constraints imposed by the Afghan economic environment; (2) a study on initiated a program in Iraq, including both investment and technical assistance. the heath care industry of Pakistan (Japan); (3) a study on the non-banking IFC has worked to bring the technical assistance work and the investment financial sector (Canada), and (4) a diagnostic review of the FDI environment program under a unified strategy for the MENA region. IFC's integration of the in Syria to get a basis for providing suggestions for effective economic reform SME Project Development Facilities into the regional departments fundamentally to the Syrian government (France). enhanced the coordination of TA and investment work and made the services offered to the private sector far more comprehensive. IFC currently has two facilities providing TA in the region. The first is the North Africa Enterprise Development (NAED) Facility, which provides technical The countries in the MENA region have specific needs for development, support to SMEs in Algeria, Egypt and Morocco (see box). In addition to regardless of the relative wealth or lack thereof in particular countries. In some support provided by IFC, this initiative has been supported by donor funds countries, IFC is not needed for standard financing, but there is a strong demand from Belgium, Italy, and Switzerland. NAED has been working with banks, for our technical know-how. In others, there is demand for both investment and business associations, and educational institutions to help them build their TA. The particular approach taken by IFC toward each country is determined capacity to work directly with SMEs. This wholesale approach has a much by the specific demand and specific country needs. broader reach than a retail approach using direct assistance to SMEs. IFC has worked with banks or microfinance institutions in all three countries to In FY04, IFC committed $236 million in 21 investments in the region. The focus support the development of their SME lending activities. In Algeria, NAED has of the investment program was on the financial sector (including micro and small carried out a study to assess the existing market and regulatory framework business, and housing); manufacturing (with emphasis on the building materials for microfinance and is approaching the government with recommendations, sector); and oil and gas. Rounding out the sectoral range were investments in including the creation of a best practice microfinance institution. In Morocco, infrastructure and information technology. IFC invested in Afghanistan, Algeria, NAED is working with a leading bank to implement a credit rating system Egypt, Iran, Pakistan, and Tunisia. An example of a groundbreaking IFC invest- for SME lending. In Egypt, NAED is helping a major bank develop its SME ment is the Egyptian Housing Finance Company, where IFC was instrumental finance activities in the country. The facility has provided training modules for in launching the first private sector housing finance institution in the country. various institutions in all three countries and has initiated linkage programs, IFC also invested in the first microfinance institution in Afghanistan, a critical supported the development of databases, and leveraged investment promo- area at this juncture. tion efforts. This broad range of activities has generated tremendous support from the host countries, and we look forward to continuation and expansion of these programs. THE NORTH AFRICA ENTERPRISE DEVELOPMENT (NAED) FACILITY The North Africa Enterprise Development (NAED) Facility is a regional program managed by IFC that provides capacity building and advisory services to support the growth and development of small and medium enterprises (SMEs) in Algeria, Egypt and Morocco.The program was launched in October 2002 and is co-funded by the IFC and bilateral donors, including Belgium, Italy and Switzerland. NAED's main activities include: 1. Improved SME access to finance · Establishing partnerships with selected banks to improve their capacity to lend effectively to the SME segment, with the objec- tive of increasing the flow of bank credit to SMEs by improving partner bank performance and introducing dedicated SME finance technology and credit rating techniques. · Supporting the introduction of new financial products relevant to SMEs as well as credit risk mitigation products (e.g., factoring, leasing, credit guarantee schemes, local currency facilities, and credit members (information, trade linkages, business services, IT services) bureaus). and reinforcing capacity (organization, increase in memberships, and · Developing SME finance training modules to be delivered through fee and revenue raising). partner banks or selected training institutions. · Developing the microfinance industry by providing capacity building 3. Supply chain management (linkages) to existing or new institutions, rating services, and training to · Improving business supply chain between large firms and related managers and loan officers. SMEs.This is done both upstream (competitive pricing, quality prod- ucts, and on-time delivery) and downstream (sales and marketing, 2. Access to business services effective merchandising, customer service). · Improving access to training, business services, and information. · Supporting selected training institutions and consulting firms to 4. Business enabling environment introduce new products and services targeted to SMEs on a commer- · Advising and assisting governments on SME-related policies and cial basis. regulatory reform. · Capacity building for selected business and trade associations and · Acting as a catalyst to stimulate the local business environment for chambers of commerce.The focus is on introducing new services for SMEs and disseminate economic and sector analysis. 22 43 The focus of the investment program was on the financial sector (including micro and small business, and housing); manufacturing (with emphasis on the building materials sector); and oil and gas. THE PRIVATE ENTERPRISE PARTNERSHIP FOR THE MIDDLE EAST The Private Enterprise Partnership for the Middle East (PEP-ME) facility is the second regional program managed by IFC. PEP-ME provides capacity building and advisory services to support the private sector development generally in Afghanistan, Iraq, the West Bank and Gaza, andYemen. The program was approved by the Board in December 2003 and is in the initial stages of implementation. PEP-ME's main activities include: 1. Business enabling environment · Raise public awareness of the main constraints to business development and investment. · Provide advice and assistance on private sector-related policies (e.g., barriers to entry, regulatory issues, access to markets, and procurement) · Support policy reform for private sector development in close collaboration with the World Bank. · Work on laws relating to financial markets, company laws, commercial codes, and foreign investment laws. 2. Strengthen financial markets · Help local financial institutions in the areas of corporate governance, risk management, and credit assessments. · Support the development of financial institutions such as leasing and mortgage finance companies, and help introduce new financial instruments to new and existing companies. · Improve SME access to finance. · Establish partnerships with selected banks to improve their lending capacity for SMEs. · Develop the microfinance industry and new institutions. · Support the introduction of new financial products relevant to SMEs. 3. Stimulate the growth of SMEs · Develop linkages between SMEs and larger companies. · Provide selected assistance to SMEs in developing project proposals, raising finance, and improving overall management. · Strengthen the capacity of selected business associations and consulting firms to improve their services to SMEs. 4. Assist in the restructuring and privatization of SOEs 44 22 The second TA facility in the region, the Private Enterprise Partnership for the have suffered from years of economic sanctions and wars. They need help Middle East (PEP-ME), has just been set up (see box). This facility is aimed at with building their capacity to make credit decisions and to manage a portfolio providing TA in four challenging countries, which are either in conflict situations of investments. IFC will work with them to build their institutional capacity and or are IDA-eligible: Afghanistan, Iraq, West Bank and Gaza, and Yemen. The will provide the funding to on-lend to the private sector. Donor funds have been four focus areas for PEP-ME are support for SMEs, backing for the financial provided for both components. The investment component consists of $75 sector, support for the business enabling environment, and privatization or million in financing from IFC ($50 million) and donors ($15 million from the restructuring of state-owned enterprises. The specific focus for each country UK DFID, and $10 million from the US Treasury). The donor funds have been will vary according to local circumstances and needs. earmarked for a first loss on the facility. The TA component will be completely financed by donors and eventually will total $30 million to pay for technical A good example of the type of TA that IFC can provide is the work of PEP-ME, partners to help build the capacity and skills of the banks in lending to SMEs. For which initiated an assignment to help the banking sector of Iraq. IFC conducted the TA, Japan has committed $10 million, Spain $5 million, and IFC has pledged a workshop to introduce state-of-the-art banking practices in Iraq, where an additional $1 million. The first participating financial institution has been access has been highly constrained by its recent legacy of successive wars and identified, and IFC support has initiated such activities as bringing the bank's international economic sanctions. The PEP-ME workshop is a first but crucial financial statements up to international standards and arranging training. step in IFC's strategy of upgrading the technical and managerial capacity of the Iraqi financial sector to reinvigorate private sector development and job creation. IFC plans to approach its Board of Directors and the donor community with a The workshop included a training program designed for senior managers of proposal to merge the two MENA facilities, covering all countries from Morocco private sector and public sector banks, including heads of risk management in the west to Pakistan in the east. If approved, the new facility would cover the units, retail banking, marketing and auditing offices. The five modules of the entire region, supporting private sector development generally. The SME sector workshop were presented in Arabic and addressed topics such as credit risk would be a strong pillar of the work. IFC believes that the flexibility provided by management, asset-liability management, strategic planning, foreign risk the merged facilities would allow for a greater impact for overall private sector management, and marketing. development in the region. PEP-ME has also prepared a country program for Afghanistan. The program FIAS assisted an American Bar Association team in drafting a new Investment will focus on building capacity in local companies in the construction and Act for Afghanistan. The draft Act submitted to the Cabinet embodies most agribusiness sector, two critical sectors for the country's economy. Furthermore, of the principles espoused by FIAS. Further, FIAS accepted an invitation to the program will address the issue of access to finance for local companies prepare a review of the Afghan Investment Act for inclusion in a paper that was through establishing a leasing industry as well as providing training to local presented by the World Bank at an Afghanistan Trade and Investment workshop commercial banks. Strengthening of management skills in local companies conducted by the donor community at the time of the World Bank Group­IMF is another critical area that will be addressed. The business enabling environ- Joint Annual Meetings in Dubai in 2003. ment will be strengthened through support to local business associations and the insurance industry. Finally, gender awareness will be incorporated in the In the Middle East, FIAS provided advisory assistance in close collaboration with program components. IFC and the World Bank operations in order to encourage foreign investment and make more substantive contributions to sustainable development and poverty In addition, IFC is currently working on setting up the Iraq Small Business reduction. During the year, FIAS projects in the region included a review of the Financing Facility (ISBFF), which will have both TA and investment components. investment law of Syria and an assessment of Malta's incentive provisions in The Facility is being established to address the need for financing for micro comparison with EU rules and international best practice. and small businesses in Iraq. The project will work directly with Iraqi private sector banks to help them provide financing to these businesses. These banks 22 45 Global Making a worldwide impact While the majority of IFC's individual TA activities are carried out in specific institutions, regulators, industries, consultants, academics, and commercial countries, a number of activities are global or regional in nature. The SME banks, use these environmental, health & safety guidelines. An update was Department coordinates and disseminates lessons learned from the regional required for various reasons, and IFC took a leadership role throughout the SME facilities to be applied globally. The Technical Assistance Trust Funds update process. Five donors (Canada, Denmark, Italy, Norway and Sweden) (TATF) program, Foreign Investment Advisory Service (FIAS), the three facilities have contributed $1.5 million through the TATF program to this vital update, of the Sustainable Business Assistance Program (SBAP), and the Capacity which will result in a new set of guidelines, to be made available online, with Building Facility (CBF) are global in their activities (see Chapter 3 for a more more explicit objectives of the guidelines and methods of application. detailed description of the global programs). In addition, some TA assignments are global in approach, and their results are often applied at the country or Another global assignment is the SME Management Training Implementation investment project level. (Business Edge) & Trainer Development/Certification Program. This assignment is to assist a consortium of IFC-managed project development facilities to One example of TATF funding of a global initiative is the update of the Pollution implement three key objectives of a broader strategy to transform a successful Prevention and Abatement Handbook. The World Bank Group plus a diverse pilot management-training program for small and medium-size enterprises for external community, including other public and private international financial worldwide use (Australia and IFC TA Fund). IFC's Global Credit Bureau program seeks to establish private credit bureaus to facilitate the extension of credit to previously underserved segments, in particular small businesses (Australia, Italy, New Zealand, Norway, and IFC TA Fund). The program operates in East Asia, Africa, and Latin America and the Caribbean. Lessons learned from the regional SME facilities are applied globally. TA assignments are global in approach, and their results are often applied at the country or investment project level. Another project in the financial markets sector was the assignment to strengthen The vision of the SME Toolkit (www.smetoolkit.org) is to leverage the latest financial institutions in Asia. The Asian crisis had revealed the critical impor- information and communication technologies to help small and medium tance of strong corporate governance and institutional capacity more generally enterprises in emerging markets learn and implement sustainable business for achieving sustainable financial systems that can support economic growth, management practices (Japan). The project has received resoundingly posi- avoid crises, and help reduce poverty. A program was set up to help strengthen tive feedback from SME end-users, business development service providers, the corporate governance and institutional capacity of selected financial institu- and more than 50 current and prospective private sector and NGO partners. tions in the East Asia region (Netherlands). Technology enhancements and expansion were implemented in FY04 through the IFC TA Fund. DevCo In June 2003, a Memorandum of Understanding was signed between IFC and the UK Government's Department for International Development (DFID) to establish DevCo, a multidonor facility to support IFC's privatization advisory work in infrastructure. DFID has agreed to contribute $10 million over three years (FY04-FY06), and the Netherlands Ministry of Foreign Affairs has agreed in principle to make a $1 million contribution to DevCo in FY05. In addition, IFC has also agreed to contribute $0.75 million to DevCo over three years (FY04-FY06).The facility has been established under the umbrella of a broader portfolio of work being developed in association with the Private Infrastructure Development Group (PIDG) a group of like-minded donors seeking to increase private sector investment in the infrastructure of developing countries. Other donors, both PIDG and non-PIDG, are also expected to contribute. DevCo supports the development and implementation of infrastructure transactions in the following sectors and countries: · Sectors - water, electricity, sanitation, telecommunications/ICT, and transport at both the municipal or national level in developing countries, as well as other services such as housing, solid waste handling, and other physical infrastructure services. · Countries - the lowest three categories of Part 1 of the DAC list of aid recipients: 1) Least Developed Countries, 2) Other Low Income Countries, and 3) Lower Middle Income Countries and Territories. In its first year, DevCo has helped IFC expand its level of activities in poorer countries through the provision of additional resources to support the specialized outside consultants (legal, technical, environmental, social, auditing) that governments could not fund for use in IFC-led mandates. In addition, the facility has provided funding for IFC's project development efforts in DevCo's target countries and sectors. Since June 2003, three IFC mandates have received DevCo funding: 1) Madagascar Airports; 2) Tamatave Port (Madagascar), and 3) Moatize Coal Mine (Mozambique). In addition, ten potential mandates have been identified using DevCo's project development resources. 22 47 3 CHAPTE R TH R E E: Donor Funded Operations ­ Global Programs Technical Assistance Trust Funds Program Outline IFC's TATF Program helped 79 countries In 1988, IFC initiated a global program to provide technical assistance (TA) in FY04; besides providing funding to funded by bilateral and multilateral donors. The Technical Assistance Trust Funds (TATF) program now has a total of 44 active funding agreements from many one-time TA projects, TATF provides 24 donor countries/regions, in addition to IFC as a donor. Besides providing IFC with the ability to pilot ideas and funding to many one-time TA projects, TATF provides IFC with the ability to pilot ideas and initiate activities. For example, the TATF program supported TA in initiate activities. Afghanistan and West Bank and Gaza in the past, and in FY04 IFC decided to launch the Private Enterprise Partnership for the Middle East, which will take up TA initiatives in systematic ways with support from the donors. New Donor A new Trust Fund agreement was signed this fiscal year with the Wallonia regional government of Belgium for an initial contribution of C1 million to be = used to promote the development of the private sector, benefiting primarily the Democratic Republic of Congo, the Republic of Congo, Rwanda, and Burundi, but also other Sub-Saharan African countries. Country Coverage and Low-Income and Risk Focus TA was carried out in 79 countries; of the TA assignments approved in FY04, 100 (97 percent) were in low- and lower-middle-income countries. Sixty-one (59 percent) of them were in countries with very high risk ratings. 22 49 TA in Poorer and Riskier Countries Trends TA continues to focus more in the low-income countries and those with higher The number of approved TA projects has been steady in the last few years. The country-risk ratings, particularly compared to IFC's investment activities. These record value of approvals is due largely to a few fairly large, stand-alone projects. TA projects often enable IFC to undertake in investments in these countries at a Donor contributions to TATF have declined in the past few years, partly reflecting later date. donors' increased contributions to other IFC TA programs. IFC TA IFC INVESTMENT FISCAL YEAR 2000 2001 2002 2003 2004 COUNTRY INCOME ACTIVITY ACTIVITY TA projects approved 160 128 137 132 135 Low 28 (27%) 61 (31%) Value of approvals (US$ m) 20.2 15.6 14.9 17.6 23.3 Lower-Middle 72 (70%) 112 (57%) Average TA project value (US$ m) 0.126 0.122 0.109 0.133 0.173 Upper-Middle 3 (3%) 24 (12%) Number of large approvals * 26 23 17 26 17 High ­ ­ Annual contributions (US$ m) 14 14 22.9 11.3 9.7 IFC TA IFC INVESTMENT Annual disbursements (US$ m) 13.00 11.8 12.2 11.9 14.1 COUNTRY RISK RATING ACTIVITY ACTIVITY Number of active trust funds 35 37 40 46 44 <30 - Not Rated 39 (38%) 51 (26%) 30-45 22 (21%) 61 (31%) * Large approvals are defined as those in excess of US$200,000 >45-60 22 (21%) 18 (9%) >60 20 (19%) 67 (34%) 50 22 Largest Recipient Countries of TA in FY04 China, Serbia and Montenegro, and Russia continued to be among the top four recipients of TATF-funded projects. Tajikistan became the third largest recipient because of one large TA for a microfinance bank. Ukraine, Vietnam, and Afghani- stan remained on the list of top ten recipients for TATF funding for the second year in a row. RECIPIENT COUNTRY APPROVAL AMT (USD EQUIV.) NO. OF PROJECTS China 3,967,700 19 Serbia and Montenegro 2,411,300 11 Tajikistan 2,043,573 2 Russian Federation 1,378,688 12 Philippines 870,000 7 Mongolia 769,000 3 Ukraine 564,500 6 Vietnam 405,000 3 Afghanistan 400,000 2 El Salvador 390,000 2 A = Sub-Saharan Africa 15% A = Sub-Saharan Africa 12% B = Asia & the Pacific 32% B = Asia & the Pacific 31% C = Europe & Central Asia 33% C = Europe & Central Asia 37% D = Latin America & the Caribbean 8% D = Latin America & the Caribbean 7% E = Middle East & North Africa 4% E = Middle East & North Africa 3% F = Global 9% F = Global 10% 22 51 TA Activity by Region Asia and the Pacific and Europe and Central Asia continued to be the top regions in terms of volume. These regions combined received more than 65 percent of TATF funding, both in volume and in number of approvals. In absolute terms, the volume and the numbers of approvals for Sub-Saharan Africa increased. Since the Africa Project Development Facility is active in Sub-Saharan Africa, the level of TA activity in the region is often affected by how actively IFC is pursuing non- SME-related TA. The situation is similar to that in the Middle East and North Africa, where the North Africa Enterprise Development Facility is active. The launch of the Private Enterprise Partnership for the Middle East will stimulate TA activity in the region. TA ACTIVITY BY DONOR COUNTRY AND REGION ($'000S) SUB-SAHARAN ASIA & EUROPE & LATIN AMERICA & MIDDLE EAST & DONOR AFRICA THE PACIFIC CENTRAL ASIA THE CARIBBEAN NORTH AFRICA GLOBAL TOTAL Australia - 341 - - - 150 491 Austria - - 100 - - - 100 Canada 180 225 2,382 - 33 250 3,070 Denmark - 345 190 - - 305 840 Finland 300 1,100 90 - - - 1,490 France - - - - 83 - 83 Germany - - - 62 - - 62 Greece - - 81 - - - 81 IFC TA Fund 250 1,407 640 240 150 300 2,987 Ireland 100 399 - - - - 499 Israel - - 111 - - - 111 Italy 135 220 2,476 885 - 250 3,966 Japan - 820 320 - 130 42 1,312 Netherlands 309 506 131 53 - 39 1,038 New Zealand - 40 - - - - 40 Norway 630 444 122 - 250 400 1,846 Spain - - 477 210 - - 687 Sweden 538 1,000 417 140 - 500 2,595 Switzerland 350 411 1,097 80 - - 1,938 United Kingdom - - 100 - - - 100 TOTAL ($ thousands) 2,792 7,258 8,734 1,670 646 2,236 23,336 Percent 12% 31% 37% 7% 3% 10% 100% Number of Approvals 20 43 44 11 5 12 135 Percent 15% 32% 33% 8% 4% 9% 100% 52 22 Types and Sectors of TA Assignments The TATF program supported TA assignments that correspond to IFC's strategies, including SMEs, financial markets, and infrastructure. NUMBER OF ASSIGNMENTS, BY TA TYPE TYPE OF TA * NUMBER OF ASSIGNMENTS IFC Project-Related 54 SME Support 34 Sector Reviews/Project Identification 34 Enabling Environment 34 Training and Capacity Strengthening 41 Privatization/Corporate Advisory 12 Post Privatization 5 Others 5 * These categories are not mutually exclusive. NUMBER OF ASSIGNMENTS AND APPROVAL AMOUNTS, BY SECTOR SECTOR NAME NUMBER AMOUNT (US$) Financial Services 58 11,573,373 Manufacturing & Industry 22 3,649,924 Food & Agribusiness 6 511,000 Infrastructure 24 4,158,460 Health Care & Education 10 890,000 Multisector TA 15 2,553,300 TOTAL 135 23,336,057 22 53 Foreign Investment Advisory Service Introduction The Foreign Investment Advisory Service (FIAS) helps developing country In FY04, FIAS completed a record 60 projects: 15 projects in Sub-Saharan governments design initiatives to attract and retain foreign direct investment Africa, with Botswana and Seychelles as first-time clients; 17 projects in Europe (FDI) and maximize its impact on poverty reduction. Since its founding in 1985, and Central Asia; 16 projects in East Asia and the Pacific, five of them in the FIAS has advised more than 130 countries in almost 600 projects. Pacific; 10 projects in Latin America and the Caribbean, with Grenada as a first-time client; and two projects in the Middle East and North Africa, with Malta As part of the World Bank Group's Investment Climate Department of the Private and Syria as first-time clients. Thirty-five of these projects were conducted in Sector Development Vice-Presidency, FIAS is a joint service of the IFC and the frontier countries. World Bank. FIAS is supported by the expertise and resources of the entire Bank Group, which includes the Multilateral Investment Guarantee Agency (MIGA) Over the past fiscal year, FIAS received positive reviews from two independent and the International Centre for Settlement of Investment Disputes (ICSID), in evaluations: IFC's Operations Evaluation Group's evaluation of IFC's investment designing coordinated assistance packages for client countries. climate activities, and PDP Australia Pty. Ltd.'s evaluation of FIAS' Asia Pacific Regional Office. FIAS also received extremely positive feedback from clients in FIAS develops long-term strategies that are customized to fit each client the independently administered IFC Client Survey. country's needs and objectives. Its specialists identify practices that impede productive FDI, design financially and politically practical plans of action, and support their clients through all phases of transition and implementation. FIAS has increasingly collaborated with other multinational institutions, as well as with the IFC project development facilities (PDFs), to ensure that our clients are provided appropriate technical assistance in the implementation process. Progress is constantly monitored and evaluated for effectiveness. FIAS creates successful government partnerships that derive from: · worldwide best practice expertise · comprehensive regional and subject-related research · extensive communication with government officials · expedient responses to critical issues · committed governments and FIAS staff. Services Investment Promotion FIAS offers a comprehensive range of services tailored to governments' needs Investment promotion is a mechanism to influence investor perception and to help them attract and retain FDI and to maximize its development impact. affect the amount and kind of investments that a country receives. FIAS helps FIAS has further developed its latest service products in the areas of competition countries create promotion institutions to identify competitive advantages, policy and corporate social responsibility, and continues to offer assistance in manage investment policy, and target specific opportunities. Promotional its long-established products. These include: activities include planning public image campaigns, marketing investment opportunities, and helping potential and existing investors to set up and operate Investment Climate Diagnostics in the country. FIAS performs diagnostic studies to identify a country's main policy impediments to productive foreign direct investment. Issues typically identified include: Sector-Focused Solutions · prohibitions on foreign investment in many sectors or locations For industries with high growth potential, FIAS helps governments design poli- · restrictions on the share of foreign ownership in the equity of domestic cies and programs that foster investment, productivity, competition, corporate companies social responsibility, and positive spillovers and linkages between foreign-owned · difficult administrative approval processes and domestic companies. FIAS' programs create efficient public-private · restrictions on repatriation of dividends and capital partnerships that involve conducting market research on potential buyers and · taxes their needs, selecting and benchmarking committed suppliers, training, and · the character and function of legal systems monitoring progress. Industries covered include agro processing (including · inability to gain access to land forestry), apparel, electronics, retail, and tourism. · problems employing technical and managerial staff. Competition Policy FDI Policies for Attracting Investors FIAS assesses a country's constraints to competitive market structures and helps The rules of the game are critical to attracting worthwhile investments. FIAS to design a legal and institutional framework to reduce barriers to entry and reviews a country's policy, legal, and regulatory environment and recommends exit, improve competitive advantage in key strategic sectors, and deter collusive and helps to implement changes in areas such as project screening, capital behaviors and the abuse of market power. Countries must develop an adequate restrictions and repatriation, access to land, contract enforcement and collat- competition policy framework to create, and capitalize on existing, advantages eral, tax administration, and investment protection under national laws and in the global marketplace in order to reduce investor risks and enhance the international conventions. developmental impact of the investments. Administrative Barriers Corporate Social Responsibility FIAS helps countries remove bureaucratic barriers that slow, and often deter, Many countries specialize in industry sectors (e.g. apparel, footwear, electronics, the establishment and subsequent operation of businesses. FIAS assists oil, gas, and mining) where consumers and investors increasingly consider poor governments in identifying and eliminating counterproductive activities such labor, environmental, human rights and gender standards as key risk issues. as inconsistent implementation of laws and regulations, procedural delays, and FIAS works with governments to design approaches that maximize synergies overlapping and/or conflicting government roles. between public sector inspectorates and supply chain monitoring and inspection procedures regarding Corporate Social Responsibility issues. 22 55 Sustainable Business Assistance Program IFC's mission is to promote sustainable private sector investment in developing SBAP comprises three donor-funded facilities focused on helping reduce countries and economies in transition. To help achieve this, IFC finances or poverty and improve governance through environmentally and socially sustain- advises on projects that are financially and commercially viable, economically able private sector development. Together, the three facilities enable IFC to beneficial, environmentally sound, and socially responsible. Through this promote corporate social responsibility in IFC client companies (Corporate approach IFC can contribute to sustainability and be an active force for change Citizenship Facility); enhance the environmental and social impact of financial in developing countries. Increasingly, IFC sees its role in providing guidance and intermediaries (Sustainable Financial Markets Facility); and finance innovative leadership to help shape sustainable outcomes from private sector activities as projects that promote local environmental benefits (Environmental Opportuni- being key to achieving its mission. ties Facility). All three are multiyear, donor-funded operations located in and managed by IFC's Environment and Social Development Department. Together, IFC continues to provide significant environmental and social value-added to its they represent a key instrument used by IFC to ensure that the commercial, clients. Its contribution ranges from improvements in the efficiency of energy environmental, and social benefits of sustainable corporate behavior and and material use to the establishment of SME linkage programs. IFC clients innovation are passed on to the private sector in emerging market economies. increasingly recognize the significant opportunities or risks they face in relation Together, all three SBAP facilities offer IFC a comprehensive means of making to environmental and social performance of their products or operations. The selective, strategic interventions in key parts of the market where sustainable demand for assistance in these areas has risen steadily in recent years. There business practices offer potentially significant benefits. is a need to offer dedicated services in these areas to its clients, and in July 2002, IFC established the Sustainable Business Assistance Program (SBAP) to address this demand. ENVIRONMENTAL BUSINESS FINANCE PROGRAM Small and medium enterprises (SMEs) that help create a large share of new jobs in Of the $20 million in financing for the EBFP, $10 million is being used to support emerging economies are the primary employer of indigenous people and women the TA Program and $10 million is being allocated to the financing facility.The and make a significant contribution to a country's GDP.Yet the SME sector is EBFP management team hopes to attract an additional $10 million in funding the least served by the financial services industry. This is particularly evident from other donors, and to leverage these funds to a total program size of $100 for environmental SMEs, because they are often engaged in activities that are million, including funds from local and international financial institutions and the considered to be outside the mainstream.To address these challenges, IFC and the SMEs themselves. Global Environment Facility (GEF) are working together to find innovative ways to support activities that benefit the global environment. The EBFP will support activities that mitigate climate change, conserve biodiver- sity, prevent land degradation and eliminate persistent organic pollutants. Specific The Environmental Business Finance Program (EBFP) is an IFC initiative with examples include: $20 million in funding from the GEF which aims to create a sustainable market of viable SMEs that benefit the global environment.These goals are achieved by Renewable Energy supporting the three pillars of SME development: access to financing, increased · Solar home systems capacity, and development of an enabling environment for such activities. EBFP · Micro-hydro/run-of-the-river provides technical assistance grants to SMEs through financial intermediaries. · Wind pumps By supporting the economic development of SMEs that benefit the environ- ment, the EBFP directly contributes to the Millennium Development Goals of Energy Efficiency ensuring environmental sustainability and developing a global partnership for · Energy savings companies development. · Eco-homes · Efficient appliances Through the EBFP, financial intermediaries (FIs) will better understand and control the risks associated with environmental SME finance.The EBFP also aims Biodiversity to demonstrate that providing financing to the environmental SME market on · Eco-tourism commercial terms can be profitable. Once profitability has been demonstrated, it · Certified fishing is expected that market forces will further drive the development of a sustainable · Non-timber forest products environmental SME market without EBFP support. · Sustainable forestry · Sustainable agriculture · Reforestation EBFP expects to reach between 500 and 1,000 environmental SMEs in 30 to 40 countries: full-scale country programs targeting several GEF-eligible sectors, small country programs targeting specific sectors, and stand-alone projects focused on one or two high-impact activities or geographical areas. Please visit www.ifc.org/ebfp for further information. 22 57 CORPORATE CITIZENSHIP FACILITY (CCF): Helps IFC clients respond to SUSTAINABLE FINANCIAL MARKETS FACILITY (SFMF): IFC's investments rapidly changing expectations about environmental and social performance in the financial sector now represent about 35 percent of its portfolio and 40 (variously defined as corporate citizenship or corporate social responsibility) percent of annual approvals. Financial intermediary projects present a unique in their businesses. These expectations now affect most sectors and scales of opportunity for a broader development impact, and ensuring the sustainability business activity in emerging markets and are having direct and immediate of financial markets is therefore of increasing importance. The SFMF works effects on business competitiveness, markets and market access, and brand with the financial sector in developing countries to enhance the environmental equity. CCF support is available to clients who wish to go beyond compliance and social impact of IFC's intermediaries, help the financial sector use sustain- with IFC requirements because they see business opportunities. CCF aims ability as a tool to build better and more competitive businesses, and increase to provide catalytic technical assistance, and in all cases cost-sharing with environmentally and socially responsible investment in developing countries. sponsors is required. CCF support focuses on labor practices (including human rights aspects), communities and other stakeholders (including transparency Highlights of SFMF's activities in FY04 include: and credibility issues), and environmental stewardship (particularly around · Center for Sustainability Investing in Africa: SFMF provided a grant to the natural resources management). African Institute of Corporate Citizenship in South Africa to establish a new Center for Sustainability Investing through which it will deliver training and Examples of CCF projects approved in FY04 include: technical assistance to the banking sector. The Center is expected to be · Community Development around a Kenyan Soda Mine: CCF is working with self-sustaining by the end of the grant period. a Kenyan soda mine and local communities to formalize a development plan · New Competitive Business Advantage (CBA) Program: SFMF's popular CBA that identifies community needs, sets targets, and communicates outcomes training program for emerging market financial institutions, traditionally for IFC to help manage community expectations. clients, will now be offered to non-IFC clients and made more market oriented. · Stakeholder Consultation in Russia: CCF is helping an IFC sponsor, Komi It will be regionally targeted and delivered jointly with regional partners by Aluminium, to build the capacity of local communities to engage in discussions local trainers with a view to developing local capacity to run the program with related to the design, implementation, and development of a major aluminum minimal IFC input. project that will impact 100,000 inhabitants. · Private Equity Funds Program: SFMF developed and piloted a new training · Sustainable Oil Palm in Indonesia: CCF is assisting an IFC sponsor in diver- course in Beijing, China specifically geared to private equity funds. The course sifying rural livelihoods in Kalimantan to reduce risk from price fluctuations in combines environmental, social, and corporate governance content. The oil palm through (1) a microfinance facility for supporting fertilizer application course will be rolled out several times a year in key capital cities. and developing alternative agriculture; (2) support for alternative commercial agricultural activities; and (3) supply chain development. IFC's mission is to promote sustainable private sector investment in developing countries and economies in transition. 58 22 ENVIRONMENTAL OPPORTUNITIES FACILITY (EOF): Provides catalytic project development funding and flexible investment financing for innovative projects that address primarily local environmental issues. Target sectors include environmental infrastructure services (e.g., clean water supply), pollution abatement services, and improvements in the sustainable use of resources. The facility aims to overcome the barriers to investments in these sectors and move projects toward commercial viability. In this way, EOF will give IFC the ability to "push the market" toward adopting new business models and technologies that address the most immediate environmental problems of those living in developing countries, especially the poor. EOF provides project preparation grants and investment funding to projects that offer innovative private sector solutions to local environmental issues such as clean water supply or air pollution. Eligible projects can either produce goods or services with significant environmental benefits or increase the sustainability of resource use through eco-efficiency improvements. EOF's FY04 highlights include the following projects: · TurboTech, India (Equity): TurboTech Precision Engineering Private Limited designs turbo machinery employing local Indian talent and has launched a range of innovative turbines in India for combined heat and power applications. Its flagship energy conservation (steam) turbine can replace a pressure reduc- tion valve in a saturated steam system and generate electricity inexpensively. EOF's investment will strengthen TurboTech's manufacturing capabilities, extend its national marketing and service reach, and partially finance the beta-testing of a new low-cost gas turbine. The small size and low price of the turbines will help introduce cogeneration to thousands of Indian industries. · Ecomex (Grant): Ecomex sells compressed natural gas (CNG) and CNG-fueled microbuses in Mexico City, which is conducting trials to identify suitable vehicles for its transportation corridors. EOF would support the trial operation of two CNG buses to be supplied by two Chinese manufacturers. The introduc- tion of CNG buses would reduce emissions of pollutants and greenhouse gases from conventional diesel and alternative fuel buses. · Ignite Innovations Incorporated (Equity): A small US start-up firm emerging from a Stanford Business School course in socially responsible investing aims to supply the poorest markets across the world with goods providing strong environmental and social benefits. EOF's investment will help fund, through a joint venture with a prominent Indian entrepreneur, the manufacture and market launch of Ignite's first product: an innovative, low-cost solar LED light that will reduce indoor air pollution for users of fuel-burning lanterns. 22 59 Capacity Building Facility IFC's Capacity Building Facility (CBF) supports projects that create opportunity CBF's Main Areas of Focus and break down barriers for small and medium enterprises (SMEs), while LINKAGES. Since its formation less than two years ago, the Linkages Unit of also enhancing investment opportunities for the Corporation. Established in the SME Department has increased the impact of selected IFC investments 2000 with the creation of the Small and Medium Enterprise Department, CBF by giving SMEs and local communities the opportunity to participate in these was envisioned as a way to enhance the effectiveness of IFC's SME work. IFC projects. Linkage projects achieve this by improving local technical and business contributes $7.1 million annually to CBF to pursue SME development through skills, facilitating access to finance, strengthening local supply and distribution grants for innovative pilots and partnerships with best practice organizations. networks, and supporting community development projects. Today, less than four years since its inception, CBF has approved 117 projects Since inception, IFC's linkage programs have been implemented in 14 countries with $23.3 million in grant funding, including 18 new approvals in FY04. In and are linked to over $1 billion in IFC investments. Today, about a dozen addition, CBF has 13 projects totaling $2.1 million that were approved but not projects are being actively implemented and some 30 new projects are under yet committed for FY04. These projects have: development. CBF has contributed $4.7 million to linkage programs, which · supported numerous IFC investment opportunities with critical SME compo- leveraged contributions of over $10 million from private sponsors and other nents sources. · broadened the service offerings of the project development facilities (PDFs) · strengthened relationships with world-class partners · facilitated creation of new initiatives like the Strengthening Grassroots Business Organizations Initiative (SGBI) CBF supports projects and intermediaries through focused TA that increases SMEs' access to capital, forms links to large firms and markets, provides better access to business services and information, and improves the business environment. An emphasis on innovation and best practice coupled with an openness to learning from external partners continues to characterize CBF. SMALL BUSINESS FINANCE. CBF's work with banks focuses on reducing risk and transaction costs in SME lending, such as credit scoring. CBF provided seed money to develop bank training programs in Africa and is currently reviewing a REVISITING PAST TA PROJECT proposal to strengthen and standardize the bank training materials developed by Mozal: IFC's Linkages Program the Mekong Private Sector Development Facility's (MPDF) Bank Training Center. FY04 also marks CBF's first leasing initiative, as it is supporting the Central Asia Leasing Facility and the development of a leasing manual. In Mozambique, the Mozal aluminum smelter, which generated 55 percent of the nation's exports in 2001, opened the door for increased opportunities for SMEs and positively impacted the local MICROFINANCE. CBF has funded $5.72 million in microfinance projects. community. Capacity building initiatives help MFIs attain full commercial sustainability through the improvement of internal systems, establishment of risk management IFC invested approximately $133 million in Mozal, and in parallel, systems, and development of new products to meet customer needs. CBF provided a grant for the SME Empowerment Linkages Program (SMEELP), which provided contract opportunities for BUSINESS SERVICES. Small business owners need more than cash to help local small businesses.The program identified high-potential SMEs their businesses survive and thrive. In response, CBF funds consultant capacity and provided training and mentoring so that they could win and building, training, mentoring, and entrepreneurship services. Increasingly, CBF successfully deliver on contracts.As a result, 15 local SMEs won 27 is focusing on supporting service providers whose primary clients are SMEs contracts valued at over $5 million, all of which were successfully and who develop products and services that they can sell in a sustainable delivered. Based on its success, SMEELP was replicated at another manner. smelter construction project in South Africa. Mozlink, the Mozal Linkages Program, is the continuation of the NGO COMMERCIALIZATION. Best-practice NGOs and social enterprises that SMEELP supplier program and was supported by a second and work with disadvantaged communities have made a huge difference in the lives third CBF grant totaling $880,000.The program includes technical of their beneficiaries. Marketing, strategic planning, and product design training assistance to two local financial institutions, Novobanco and Gapi, to these NGOs enables them to become high-quality suppliers of international so they can develop and offer financing products needed by the commercial buyers, thereby reducing their dependence on donors. linked SMEs.A local consultant capacity building program was also introduced to train local consultants in the technical areas that SMEs BUSINESS ASSOCIATIONS. Empowering local business membership orga- need in order to deliver on Mozal contracts. nizations supports the reform process and reduces government red tape. CBF has facilitated the development of a network of PDFs, World Bank, and The project has also leveraged the Mozal Community Development IFC staff, together with best practice partners including the Confederation of Trust (MCDT), a Mozal-funded trust, with a $305,000 grant from Danish Industries and Canadian Manufacturers & Exporters, to learn from one CBF. This financial support has enabled MCDT to expand its training to new entrepreneurs and farmers, to build a new secondary another. school serving 700 pupils (potential Mozal employees), and to build a new laboratory for a local health clinic. 22 61 Portfolio Analysis CBF focuses on projects in financial markets (38 percent of total funding), Funding levels also reflect an emphasis on Sub-Saharan Africa (43 percent of capacity building (29 percent), and linkages (20 percent). These support IFC's funding) and low income countries (83 percent of projects are in IDA-eligible financial markets investments, PDFs, or innovative projects such as the SGBI countries), where the challenges facing SMEs remain significant and where or the Hotel e-marketplace. SMEs dominate the private sector. Thirty-nine percent of CBF funds support IFC investments and enhance their Some 35 percent of CBF projects link IFC to best practice partners that are impact on SMEs, primarily through financial markets and linkages. CBF funds expanding their work into new regions, typically in the area of finance. Another are often provided in parallel to IFC investments; however, many projects 18 percent are large linkage projects where IFC has developed a comprehensive prepare the groundwork for a potential investment. partnership with the project sponsor, who typically contributes significantly to the project. Twenty-one percent of CBF projects support IFC's PDFs. CBF now requires that projects sponsored by a PDF be replicated throughout the rest of the PDF network. For example, CBF funded the development of a consultant development tool at CPDF that is now being considered for replication as a tool throughout the PDF network. A = Global 18% A = SME Linkages 20% A = FM Investments 36% B = Sub-Saharan Africa 43% B = Access to Capital 38% B = ICT Investments 3% C = East Asia & the Pacific 13% C = Capacity Building 29% C = Linkage Investments 18% D = Latin America & the Caribbean 11% D = IT 6% D = PDF Product & Services 21% E = South Asia 3% E = Business Environment 7% E = World Bank 5% F = Central & Eastern Europe 2% F = Other 17% G = Southern Europe & Central Asia 10% 62 22 Global Lessons As CBF begins to exit its initial projects, accomplishments to date reveal a record of success. Some of the key lessons are: · International providers of services should be focused on transferring skills and products to lower-cost local service providers rather than on providing services directly. This not only saves valuable resources but contributes to the transfer of skills to developing countries. · Standardizing project materials, methodologies, terms of reference, and reports for similar activities reduces costs and allows for better comparisons among projects. This "packaging" facilitates replication and scaling-up of high-quality products. · Linking TA and investments allows IFC's technical assistance work to tap into IFC's extensive sectoral expertise. · Business service providers are more likely to utilize best practices when technical expertise is provided together with funding. · Developing sustainable funding sources (such as corporate sponsors) and focusing on higher value-added services contribute to the sustainability of business service providers. · Results from projects undertaken to date also suggest that business associa- tion projects should be closely related to general investment climate initiatives and the work of the World Bank. IFC's Capacity Building Facility (CBF) supports projects that create opportunity and break down barriers for small and medium enterprises (SMEs), while also enhancing investment opportunities for the Corporation. 22 63 Annexes, Directory, and Glossary 66 86 88 90 92 Technical Assistance IFC Donor-Supported Cumulative Directory Glossary and Advisory Projects Technical Assistance Financial Programs: Purpose/ Commitments Strategy and Locations 65 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 TATF Technical Assistance Trust Funds program Note: Projects implemented through the regional Facilities are not included in the Annex. Donors are not separately identified for multidonor facilities. Technical Assistance and Advisory Projects 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 and CBF U.S. bank training institutions. Business Development Services To support and develop the business development service programs to help increase Netherlands TATF the productivity of small firms in Kenya and Madagascar. Center for Sustainability Investing in Africa To promote environmentally and socially sustainable lending and investment in the Norway SFMF private financial sector. Entrepreneurship Program: To conduct an impact analysis and organize training for advisors, local trainers, and Netherlands TATF Capacity Building coaches in the support and training entrepreneurship program. Glass Packaging and Tableware: Sector To prepare an in-depth analysis and diagnostic study of the glass industry and prepare Sweden TATF Study a strategy for modernization. HIV/AIDS Workplace Training To assist the pilot phase of the HIV/AIDS workplace training initiative and to train local Netherlands TATF trainers to deliver the training. Horus Investments in Microfinance To offer training to staff of microfinance institutions in Benin, Chad, and Togo and CBF select university graduates. Investment Climate, Regional Integration To assess the investment climate and prospects for regional integration of eight West FIAS African Economic and Monetary Union countries. Investment Opportunities in IT To analyze the information technology market and the investment outlook in eastern Finland TATF and Internet Sectors and southern Africa. 66 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Telecommunications Network: To assess the viability of a long-distance telecommunications network. Sweden TATF Feasibility Study Angola Banking: Postconflict Support To help the Enterprise Bank of Angola build capacity to operate in a postconflict Norway TATF environment. Botswana Administrative Barriers to Investments To review the commercial legal framework, administrative and registration costs, and FIAS 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 Commodities To help an agricultural commodities merchandiser develop sustainable timber certifica- Norway CCF tion protocols for harvesters. Guinea-Bissau Tax System Review To review and recommend improvements of the tax and incentive systems. FIAS Kenya Administrative Barriers to Investments To study administrative barriers to investment. FIAS 67 PROJECT PROJECT DESCRIPTION DONOR PROGRAM 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 Development To assess needs and provide capacity building or community development around Norway CCF the Magadi soda mine site. Lesotho Administrative Barriers to Investments To help design a computerized company registry and reform the licensing system for FIAS private enterprises. Madagascar Leasing Services Support To review the potential to expand financial leasing operations and draft new laws and Italy TATF to conduct leasing benefits awareness seminars. SME Support Center To establish an SME Solutions Center and develop an information package and French CBF 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 establish CBF microbusinesses. Mauritius Water and Sanitation: Transaction Advisory To advise on private sector participation in water and sanitation services. IFC TA Fund TATF Mandate Mozambique Capital Markets Development Study To help enable individuals and institutions to acquire the government's stake in the Switzerland TATF Southern Africa Regional Gas Project. 68 PROJECT PROJECT DESCRIPTION DONOR PROGRAM 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 and complete a new tourism policy and strategy, and to identify invest- Netherlands TATF ment projects and associated tourism circuits, fostering the establishment of SME support programs. Nigeria Administrative Barriers to Investments and To assist in the reform of business registration as part of a micro, small, and medium FIAS Promotion Strategy enterprise program. Bond Markets Development Program To advise the country's securities commission and stock exchange on developing the Canada TATF local bond market. IFC TA Fund 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 TATF IFC TA Fund Seychelles Investment Climate To review the environment for domestic and foreign direct investment. FIAS Sierra Leone Postconflict Investment Climate To review the country's investment climate and make recommendations for a post- FIAS conflict environment. South Africa Forest Products: Export Market Assessment To assess the export market for a forest products company and prepare a strategy for Canada TATF the country's forest products sector. Forest Products: Revenue Streams To help a forest products company develop new revenue streams from its timber and Norway EOF land holdings. 69 PROJECT PROJECT DESCRIPTION DONOR PROGRAM 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 run an executive development course on competitiveness and corporate social Netherlands CCF responsibility. Tanzania Agriculture Promotion To improve opportunities for local growers to supply a sugar company and help replicate CBF the model within Africa. Competition Policy To analyze the relationship between productivity, competitiveness, economic growth, FIAS and poverty reduction. Irrigation Foot Pumps To provide the technical capacity to develop a distribution chain. Netherlands EOF Norway Uganda Administrative Barriers to Investments To review the administrative barriers to investment, with a focus on key export-oriented FIAS sectors. Uganda Village Phone To establish village phone microenterprises in rural areas. CBF Zambia Administrative Barriers to Investments 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. East Asia and the Pacific Regional Bank South Pacific To expand services and financing to small businesses through improved systems and CBF data scoring. 70 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Encouraging Cross Border To identify weaknesses in current practices and provide specific training to bring the Switzerland TATF South-South Trade practices to international standards, and to enhance trade finance practices among banks in Southeast Asia and promote regional growth through south-south trade. General Manufacturing and Services To assess the viability of links between manufacturers and local small and medium Japan TATF Projects: Needs Assessment and businesses. Diagnostic Studies Investment Opportunities Survey To analyze the business process outsourcing (BPO) market and its regional invest- Ireland TATF ment outlook. The TA will also provide information to assist governments of the target countries in developing policies to the BPO sector. Linkages To examine the impact of investment policies on links between foreign investors and FIAS domestic businesses, especially small and microenterprises. Pacific Islands Investment Policy Two projects: to assess screening practices and approvals mechanisms used by Pacific FIAS countries and their impact on foreign investment, and to review the progress made by these countries on investment policies that comply with APEC principles. 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 and CBF a restaurant operation. Private Sector Forum To improve government-private sector dialogue and monitor progress on issues raised Australia Regional by the private sector to improve the investment climate and stimulate private sector Program development in the country. China Automotive Industry: Sector Study To assess the automotive market, including major players and potential investments. Sweden TATF IFC TA Fund Banking: Corporate Governance To strengthen the corporate governance of Lotus Bank to support its growth in retail Ireland TATF and SME finance. IFC TA Fund Bond Market Development Program To help develop a credit rating culture to support the development of the local Canada TATF nongovernmental bond market. IFC TA Fund 71 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Business Planning and Capacity Building To help Minsheng Shipping Company plan an expansion of its business and improve Norway TATF its financial management standards. Evaluations and IT Systems Development To help the National Council for Social Security Funds evaluate its liquid assets and Ireland TATF formulate policies for investment and information technology. IFC TA Fund Financial Audit Assistance To help two private universities carry out an audit based on international accounting Sweden TATF standards and to institute proper accounting standards to meet these standards. IFC TA Fund Glass Industry Transformation To develop a strategy for the country's float glass sector. Sweden TATF IFC TA Fund Leasing Company To help the New Century Finance Leasing Company strengthen capacity and compli- Netherlands TATF ance with international standards and best practices. IT Sector: Strategic Overview To help develop the IT sector and highlight the types of projects that could result in Sweden TATF and Market Analysis positive economic and developmental impacts while at the same time being commer- cially viable. Mining Supplier Development Program To facilitate local suppliers for the mining operations of Sino Gold and develop other CBF sectors for economic growth after mine closure. Paper Mill Wastewater Treatment Tech- To develop commercial pilots of a technology to treat the wastewater from straw pulp IFC EOF nology plants, a major source of pollution. Pharmaceutical Industry: Sector Study To review the pharmaceuticals industry in Sichuan province and its role in the local Sweden TATF economy. Promotion Strategy To discuss the environment for foreign direct investment with government officials FIAS from northeast China. Pulp and Paper Industry Development To prepare a development and financing plan for the nonwood pulp and paper Finland TATF industry. Strategic Business Development To help a metal technology company prepare a business plan and institute processes Denmark TATF to facilitate the preparation of consolidated baseline financial statements in accordance IFC TA Fund to International Financial Reporting Standards. Fiji Banking: Management Program To provide mentoring for the 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 72 PROJECT PROJECT DESCRIPTION DONOR PROGRAM 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, building opportunities Japan PEP / TATF for local and foreign leasing investments, and educating private enterprises, financial IFC TA Fund institutions, and regulatory bodies in leasing. 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 improve- FIAS ments. Philippines Assessment of Stock Exchange To provide an independent assessment of the Philippine Stock Exchange and provide Italy TATF general recommendations on how to improve its performance. Banking: Institutional Strengthening To help Banco de Oro improve its credit risk management, corporate governance, and Canada TATF Program policies on money laundering. IFC TA Fund Electricity: Private Sector Participation To help the government achieve complete village electrification by 2006 and increase Norway TATF private sector participation in power generation in non-grid areas. IFC TA Fund 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 officers, CBF new management systems, and enhanced monitoring of loans. Mining: Consensus Building To raise stakeholders' awareness of the potential economic contribution of mining IFC TA Fund TATF operations. 73 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Samoa Lending and Credit Appraisal Enhancement To help draft new credit procedures for the National Bank of Samoa Ltd and to assist New Zealand TATF with the training of its staff. Solomon Islands Credit Union Revitalization To analyze credit unions and savings clubs and identify changes necessary for a Australia TATF sustainable revival of the credit union movement. Thailand Bond Market Development Project To help the Thai Bond Dealing Center implement market surveillance and self- IFC TA Fund TATF regulatory functions. Timor-Leste Investment Policy and Promotion Two projects: to review draft investment legislation, and to evaluate a proposal for an FIAS investment promotion agency. Vietnam Business Forum To finance activities of the Vietnam Business Forum that promote dialogue between Canada Regional the government and the business community to improve its investment climate and Program private sector development within the country. Consumer and Small Business Banking To help Sacom Bank expand operations in retail and small business finance. Switzerland TATF Credit Bureau Program To help develop credit reporting to extend credit to underserved segments of the Australia TATF population, in particular small businesses. Housing Finance, Privatization Assistance To analyze the housing finance market and help the Central Bank of Vietnam privatize Denmark TATF the Housing Bank of Mekong Delta. Investment Policy: Law To support creation of a Unified Law on Foreign and Domestic Investment. FIAS South Asia Bangladesh Feasibility Study and Business Plan To assist the developer of a low-cost device for purifying household drinking water. Netherlands EOF IFC 74 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Bhutan Institutional Development To support the government's efforts to attract and manage foreign direct investment. FIAS India Food Production and Safety Management To improve food safety and quality management and implement a Hazard Analysis Sweden TATF and Critical Control Point food safety management system. SME Sector: Global Business School To determine the educational needs of the SME sector and develop relevant business Netherlands TATF Network 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 to Netherlands TATF carry out and manage these activities. Europe and Central Asia Regional Central Asia Leasing Facility To assist leasing companies that are candidates for investment through the facility. CBF Commercialization of To help implement energy-efficient projects through market evaluation and promotion Finland TATF Energy Efficiency Finance of related service companies. Glass Container Manufacturing: To assess the glass container industry in Ukraine and Russia and promote its sustain- Switzerland TATF Strategic Assessment able development. Hazard Analysis Critical Control Point To provide training in food safety management to agribusiness consultants and public Greece TATF Training 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 Kazakh- Switzerland TATF stan, Kyrgyzstan, Tajikistan, and Uzbekistan and aid in the development of a long-term business strategic plan. 75 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Housing Finance Institutions: To assess housing finance systems, capital markets, and the legal framework in the Spain TATF Feasibility Study Balkan region and assist in the development of a long-term business strategic plan. IFC TA Fund Albania Administrative Barriers to Investments To help the government reduce administrative barriers to investment. FIAS Armenia Gold Jewelry Project: Feasibility Study To advise the Yerevan Jewelry Company on global best practice and competitiveness Israel TATF in the international market. Bosnia and Herzegovina Banking: Legal Advisory To help implement a merger of Union Banka and other state-owned banks. Austria TATF IFC TA Fund Herbal Development Initiative To help develop associations that can enhance the herbal sector's sustainability. Netherlands CCF Norway IFC Bulgaria Administrative Barriers to Investments To help review administrative procedures for doing business. FIAS Croatia Administrative Barriers to Investments 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 TA Fund TATF coaching of domestic enterprises. Georgia Administrative Barriers to Investments Two projects: to help the government design its investment climate program, and to FIAS implement recommendations of a study on administrative barriers. 76 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Kazakhstan Oil and Gas Supplier Development To help develop suppliers around the Karachaganak oil and gas field project. CBF Quality Management, Certification and To help local SMEs become eligible suppliers to international consortia operating in Netherlands TATF Business Services to Local SMEs joint ventures with the government. Latvia Administrative Barriers to Investments To analyze the impact of reforms to remove administrative barriers to investment. FIAS Macedonia, FYR of Administrative Barriers to Investments To provide recommendations on the government's capacity for business environment FIAS reform. Moldova Investment Policy: Law To review the draft law on foreign investment and discuss recommendations with FIAS government officials. Russian Federation A Chance to Work To promote corporate social responsibility and to provide Russia's disadvantaged youth IFC TA Fund PEP / TATF with opportunities to improve their lives. Administrative Barriers to Investments 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: Corporate Governance To improve the internal governance of Russian banks and their credit assessment of Switzerland PEP corporate clients. Commercial Bank: Technical Assistance To help Sibacademank introduce international practices in credit procedures and risk Norway TATF management. Environmental, Health and Safety Study To assist Volga and North Western Shipping Companies understand environmental, Netherlands TATF health, and safety problems at their ship repair and maintenance yards and recom- mend suitable options. 77 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Higher Education: Strategic Business Plan To assist four private higher education institutions in strategic planning and capital Israel TATF investment plans. IFC TA Fund 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 Capacity Building To build stakeholders' capacity to engage in discussions about development. Italy CCF Microfinance Institution: Feasibility Study To assess the feasibility of transforming a noncommercial financial institution to a Denmark TATF specialized microfinance bank in the Samara region. Primary Mortgage Market Development To help meet the demand for mortgages, particularly in regions outside the capital. Switzerland PEP IFC Retail Lending Development To help Bank Vozrozhdenie strengthen its practices in credit procedures and risk Canada TATF management and develop its retail lending. IFC TA Fund Social and Environmental Management To help Novatek, a private gas company, bring monitoring of its social and environ- Denmark TATF mental performance into line with international standards and to develop a coherent, effective, and documented approach to its existing programs for local indigenous groups. Steel Sector: Market Assessment To analyze the demand characteristics for various types of the steel pipe market and United TATF to help IFC consider financing the modernization of steel pipe producers, which would Kingdom foster the development of Russian steel pipe sector. Telecom Regulatory Body To review the regulatory environment for telecommunications and determine steps for Sweden TATF setting up and funding an independent regulator. Waste Gas Utilization: Feasibility Study To test the viability of capturing gas wasted in the process of extracting oil and Germany PEP recovering gas from low-pressure wells. Serbia and Montenegro Administrative Barriers to Investments To analyze and make recommendations for removing administrative barriers to FIAS investment. Business School: Feasibility Study To prepare a market survey and feasibility study for a new business school. Italy TATF 78 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Cogeneration of Heat and Electricity To identify potential for cogeneration power within existing electric power production Italy TATF plants, industrial sites, and district heating systems. Foreign Direct Investment: Strategy To assess the investment environment and advise on improvements to attract foreign FIAS direct investment. Pipeline: Development Strategy To help develop the country's energy sector and launch the development of the Italy TATF Constanza-Pancevo-Omisalj-Trieste pipeline. Poultry Company: Corporate To help a poultry breeding company restructure its operations to meet international Italy TATF Reorganization Study 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 in dealing with Italy TATF the States Share Fund sale program. The TA will also help identify and correct potential weaknesses in delivering this program Restructuring Program: To help the country's privatization agency restructure state-owned companies prior to Italy TATF Elektronska Industrija privatization and to assess plans for establishing an industrial district, a multifunction logistic center, and a trade village. Water and Sanitation: Private Sector To foster private sector participation in the water supply and sanitation sector. Italy TATF Participation Sweden IFC TA Fund Tajikistan Banking: Sustainability To help ensure the First MicroFinance Bank of Tajikistan's long-run sustainability Canada TATF and commercial viability in order to provide microfinance services to the previously underserved target population. Microfinance: Institutional Transformation To help an NGO transform itself into a commercially viable microfinance bank and Canada TATF to create a legal structure appropriate to a commercial entity, and build institutional capacity. SME Policy Phase II To improve regulatory procedures for SMEs and launch an information campaign for Switzerland PEP entrepreneurs. Turkey Competition Policy To conduct presentations on investment climate and competition policy to the country's FIAS 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. 79 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Ukraine Accounting and MIS Diagnosis To help Nova Liniya assess its finance and accounting functions and to set up a new Italy TATF management information system. Banking Sector: Corporate Governance To improve the internal corporate governance of banks and improve their credit Switzerland PEP assessment of corporate clients. Banking Sector Corporate Governance To assess how banks follow corporate governance best practices. Switzerland PEP / TATF Project Leasing Development To create a suitable legislative environment for leasing and develop the capacity of the Netherlands PEP agency supervising the sector. Poultry Producer: Food Safety and Quality To help Mironovsky Khleboprodukt, a poultry producer, manage its production safety Italy TATF Management System and Accounting and and quality, and to help expand and modernize its finance and accounting depart- Sweden Finance ments. SME Policy Development To monitor the regulatory environment for SMEs and promote a consolidated law on Norway TATF permits for business start-up and expansion. IFC TA Fund Uzbekistan Garment Manufacturing: Market Survey To assess the production machinery, market conditions, and technological require- Switzerland TATF ments of an expanding garment manufacturer. Privatization: Business Plan Development To help Uzbektelecom prepare a business plan to prepare for privatization. Japan TATF SME Policy Phase III To continue development of regulatory policy and increase entrepreneurs' access to Switzerland PEP information. Latin America and the Caribbean Regional Business Environments To identify and assess constraints in the business environments of certain Caribbean FIAS countries. Credit Bureau Program To help develop private credit bureaus that will extend credit to underserved segments Italy TATF of the population, in particular small businesses. 80 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Life Insurance for Disabled Persons To assess the technical and financial viability of establishing a life insurance company IFC TA Fund TATF for the disabled. Precious Woods To help a Brazilian-based forest products company develop new revenue streams from IFC EOF its timber and land holdings. Regional Housing Finance Facility To analyze housing finance markets and potential for mortgage lending in Costa Rica, Italy TATF El Salvador, and Panama. IFC TA Fund 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 for CBF clients. Colombia Development Finance: Feasibility Study To study the market needs and develop a viable blueprint to transform development Spain TATF finance companies into modern 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 sustainable IFC CCF and socially equitable. Wastewater Treatment To help Procesadora Nacional de Alimentos C.A. broaden its technical knowledge of Germany TATF secondary wastewater treatment and treated effluent management options. El Salvador Business Development Support for Retailers To support business school development to address the needs of local communi- Norway CCF ties. 81 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Coffee and Apparel: Corporate Social To assess corporate social responsibility initiatives in the coffee and apparel industries FIAS Responsibility and design policy tools to strengthen these initiatives. Faculty Development Program To implement training courses that address the needs of entrepreneurs and introduce Italy TATF a curriculum for university-level students and adults to encourage and prepare them to be entrepreneurs. Global Home Township Program: Feasibility To analyze the potential for the Global Home Township (GHT) program. The GHT is Sweden TATF Study an integrative and community approach to providing increased access to housing and social services. Grenada Investment Climate To help Grenada Industrial Development Corporation assess the country's investment FIAS climate. Guatemala Investment Climate To assess the country's investment climate for discussion with the new government. FIAS Mining: Community Development To establish community-run tree nurseries to supply mine reforestation needs. Norway CCF Guyana Investment Policy To review the country's investment code, comparing it with international good FIAS practice. Honduras Linkages To help the government strengthen the framework for labor training. FIAS Jamaica Investment Taxation and Incentives To help the government evaluate options for a more appropriate and attractive incen- FIAS tives and tax package. Sustainable Conch Farming To help develop sustainable conch farming and economies of scale in marketing. Netherlands EOF IFC 82 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Mexico Compressed Natural Gas Buses To support a pilot project using compressed natural gas for commuter buses in Mexico IFC EOF 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 policy FIAS 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 Market Study To study the potential of establishing a pilot student financing facility with local banks Switzerland TATF and top private universities. Middle East and North Africa Afghanistan Bank Capacity Building To help the First Microfinance Bank of Afghanistan build capacity by funding key Norway TATF management positions to develop best practice in its operations and to introduce solid IFC TA Fund management and operating policies and procedures in accordance with Afghan law. Investment Policy: Law To review the country's investment law for a discussion of trade and investment. FIAS Egypt, Arab Republic of Banking: Sustainable Business Practice To train bankers in sustainable business practices. SFMF 83 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Iraq Capacity Building To sponsor capacity building programs for Iraqi businesswomen. FIAS Pakistan Administrative Barriers to Investments To prepare a private sector development strategy for the Northwest Frontier prov- FIAS ince. Health Sector: Feasibility Study To study the country's private health care industry and to assess the market for general Japan TATF and specialized services, including hospital-based and ambulatory care, imaging diagnostic and laboratory services. Nonbanking Financial Companies: Invest- To analyze the competitive positions of the country's leasing companies and investment Canada TATF ment Analysis banks and to strengthen the financial infrastructure. Textile Manufacturer: Wastewater Treatment To help optimize a wastewater treatment facility. Norway EOF Syrian Arab Republic FDI Environment: Diagnostic Review To examine the legal, policy, and institutional framework for attracting foreign direct France TATF investment. Investment Policy: Law To review investment legislation to make it more conducive to attracting foreign direct FIAS investment. Tunisia Environmental and Social Assessment To assess the portfolio of the Tuninvest Fund and identify opportunities to improve Norway SFMF sustainable practices. Global Competitive Business Advantage Workshops To provide an introduction to sustainable banking and environmental risk management; Netherlands SFMF workshops in Africa, Europe and Central Asia, and Latin America. Norway IFC Drinking Water Purification To help expand a business that retails potable water through franchises and sells water Netherlands EOF purification equipment and services to communities. 84 PROJECT PROJECT DESCRIPTION DONOR PROGRAM Environmental, Health and Safety To help update Part II of the Pollution Prevention and Abatement Handbook and the Canada TATF Guidelines Update IFC Environmental Guidelines. Denmark Italy, Norway Sweden Global Credit Bureau Program To help develop private credit bureaus that will extend credit to underserved segments Norway TATF of the population, in particular small businesses. Human Rights Compliance To develop an interactive computer program giving companies specific guidance on Denmark TATF Assessment Tool how to comply with human rights. Livestock Welfare: Good Practices To support the development of livestock welfare principles for IFC investments. Netherlands CCF Norway IFC SME Banking: Impact Assessment To create best practice in impact assessment for SME banking. Netherlands TATF SME Capacity Building: Shorecap Exchange To build the capacity of microfinance institutions and small business banks. CBF SME Management Training To transform a successful pilot management training program (Business Edge) for Australia TATF SMEs into a core IFC business development product suitable for implementation in IFC TA Fund multiple countries and regions. SME Toolkit To leverage information and communication technologies to help SMEs in emerging IFC TA Fund TATF markets learn and implement sustainable business management practices. World Hotel Links.com To facilitate the extension of an online guesthouse booking service to markets CBF worldwide. 85 IFC Donor-Supported Technical Assistance Programs: Purpose/Strategy INCEPTION ACTIVITY /DFO PURPOSE/STRATEGY DATE FIAS To provide advisory services on improving the FDI environment in emerging markets. 1985 APDF To respond to the need for project preparation and assistance for African entrepreneurs. 1986 TATF To develop TA projects to help strengthen the business environment in all IFC client countries, focusing on TAs to promote private sector growth. 1988 Through the ATMS Project, to assist SMEs with substantial African ownership in becoming more sustainable and competitive in national and international AMSCO 1989 markets PEDF To assist and accelerate the development of productive, self-sustaining SMEs in Pacific Island countries. 1990 MPDF To foster growth in the number and size of domestic private firms in the Mekong region. 1996 In operation since 1997. The Partnership PEP To provide focused technical assistance, with the goal of helping build successful private businesses in the former Soviet Union. was formally created in May 2000 CPDF To support the development of private SMEs in the interior of China, with an initial focus on Sichuan province. 2000 SEED To help support the development of the private sector in Albania, Bosnia, FYR Macedonia, Kosovo, Serbia and Montenegro. 2000 To demonstrate the business case for progressive approaches to corporate citizenship and to leverage the potential of IFC investments to catalyze improved CCF 2002 environmental and social performance. EOF To provide catalytic project development funding and flexible investment financing for innovative projects that address primarily local environmental issues. 2002 To enhance the environmental and social impact of financial intermediaries operating in developing markets and to have a strategic impact on the sustainability SFMF 2002 agenda of the broader financial community. To support the development of markets and institutions that are key to SME growth in (initially) Algeria, Egypt, and Morocco. To develop SME finance instruments NAED 2002 and expertise, improve the business and regulatory environment, and provide support for intermediary organizations. SEDF To increase the number and growth rates of SMEs in Bangladesh, Bhutan, and Nepal. 2002 CBF To fund partnerships and programs that support the four core pillars of the WBG SME strategy. 2002 To support the increased flow of capital to SMEs via strengthening SME banks, creating new SME financial products, and identifying and preparing projects for follow- PENSA 2003 on IFC investment. To support linkage programs related to IFC investments and to work with IBRD on improvements in the business enabling environment. To promote private sector development through SMEs in selected countries in Latin America with the aim of fostering job creation and reducing poverty in the host LACP 2003 countries. The target countries for this program are Peru, Bolivia, Honduras, and Nicaragua. To set in place sustainable contractual agreements in which infrastructure services are privately provided, with an emphasis on the provision of services to those DevCo 2003 that currently do not enjoy access. To enable participating financial institutions to upgrade management skills, loan underwriting procedures and management information systems, and supervision ISBFF 2003 and other systems to meet the needs of the micro and small business finance market in Iraq. PEP- ME To provide technical assistance to support private sector development in, initially, Afghanistan, Iraq, West Bank and Gaza, and Yemen. 2004 PLANNED BIDFacility To help the public sector in Southeast Europe increase private participation and investment in infrastructure that contributes to economic development. 2005 SGBI To strengthen and expand support for Grassroots Business Organizations by the World Bank Group and others. 2005 SLDF To expand the South Asia SME Development Program from Bangladesh (SEDF) to Sri Lanka and the Maldives. 2005 To finance small and medium enterprises on a commercial basis and provide technical assistance to investee companies and outside service providers in SIMOZ 2005 Mozambique. 86 IFC Donor-Supported Technical Assistance Programs: Locations GLOBAL EUROPE & CENTRAL ASIA CBF BIDFacility (planned) DevCo PEP MPDF FIAS MIDDLE EAST & NORTH AFRICA PENSA SBAP (includes CCF, EOF, PEDF and SFMF) PEP-ME SGBI (planned) TATF SLDF (planned) ASIA & THE PACIFIC LACP LATIN AMERICA & THE CARIBBEAN SIMOZ (planned) SUB-SAHARAN AFRICA 87 IFC Donor-Supported Technical Assistance Programs Cumulative Financial Commitments in $ millions equivalent up to June 30, 2004 CUMULATIVE FINANCIAL SME REGIONAL2 SUPPORT BY PROGRAM DONOR TATF FIAS SBAP CBF DevCo 1 SGBI 1 INITIATIVES FACILITIES TOTAL IFC Donor Community African Development Bank - - - - - - - 12.06 12.06 ADB - - - - - - - 1.50 1.50 EBRD - - - - - - - 1.22 1.22 European Community 3.50 - - - - - - 12.83 16.33 Inter-American Devt Bank - - - - - - - 3.40 3.40 UNDP 1.14 8.43 - - - - - 15.69 25.26 Australia 4.74 2.91 - - - - - 13.18 20.83 Austria 1.05 - 1.20 - - - - 3.28 5.53 Belgium 1.20 0.17 - - - - - 3.11 4.48 Canada 9.49 1.65 - - - - - 40.60 51.74 Denmark 5.64 - - - - - 14.58 20.22 Finland 5.71 0.47 - - - - - 10.95 17.13 A = Sub-Saharan Africa 19% France 1.88 0.79 - - - - - 7.16 9.83 B = Asian & the Pacific 15% Germany 3.62 - - - - - - 6.73 10.35 C = Europe & Central Asia 19% Greece 1.85 - - - - - - 0.25 2.10 D = Latin America & the Caribbean 1% India # - - - - - - - - - E = Middle East & North Africa 7% Ireland 2.48 0.56 - - - - - 1.52 4.56 F = Global 35% Israel 0.90 - - - - - - - 0.90 G = Closed Facilities 4% Italy 17.22 0.57 1.50 - - - - 4.54 23.83 Japan 32.76 3.56 - - - - - 24.42 60.74 Luxembourg 1.52 1.02 - - - - - - 2.54 CUMULATIVE FINANCIAL Mexico - - - - - - - 0.50 0.50 SUPPORT BY DONOR Netherlands 23.69 2.74 8.00 - - - 5.20 42.06 81.69 New Zealand 1.49 0.96 - - - - - 2.37 4.82 Norway 7.79 0.79 0.95 - - - 0.90 22.58 33.01 Poland - - - - - - - 0.50 0.50 Portugal - 0.25 - - - - - 4.84 5.09 Slovenia - - - - - - - 0.20 0.20 South Africa 0.20 - - - - - - - 0.20 Spain 2.85 0.30 - - - - - 5.00 8.15 Sweden 14.06 2.42 - - - - 0.56 19.94 36.98 Switzerland 13.77 3.68 1.50 - - - - 49.84 68.79 United Kingdom 7.25 2.54 - - 10.00 - - 69.65 89.44 United States 7.25 3.74 - - - - - 74.67 85.66 ICDS - - - - - - - 2.65 2.65 Caribbean Devt Bank - - - - - - - 0.10 0.10 Others 0.65 - - - - - - 2.81 3.46 A = Canada 6% 173.70 37.55 13.15 - 10.00 - 6.66 474.73 715.79 B = Italy 3% C = Japan 7% World Bank Group* D = Netherlands 9% IBRD - 11.19 - - - 0.43 - 5.85 17.47 E = Norway 4% IFC 14.36 23.30 10.00 28.31 0.75 0.99 0.70 116.15 194.56 F = Sweden 4% MIGA - 2.91 - - - - - - 2.91 G = Switzerland 7% 14.36 37.40 10.00 28.31 0.75 1.42 0.70 122.00 214.94 H = UNDP 3% I = United Kingdom 10% GRAND TOTAL 188.06 74.95 23.15 28.31 10.75 1.42 7.36 596.73 930.73 J = United States 9% K = Others 38% CBF refers to the SME Capacity Building Facility to fund pilots and partnerships, and programs that support the WBG SME strategy. DevCo Advisory supports privatization transactions in infrastructure in least developed and low income countries. FIAS is a joint service supported by IFC and the World Bank. SBAP (formerly know as SEF) comprises CCF, EOF, and SFMF. SME Initiatives comprise various initiatives. SGBI is a joint initiative supported by IFC and the World Bank. TATF includes one-time funding for specific projects (excluding EC/IFC equity line of ECU 5 million). Note 1 - New donor-funded programs include DevCo and SGBI. # Indicates contribution-in-kind from EximBank, India. 88 Note 2 - see next page for further details. * Includes contribution-in-kind from IBRD, IFC and MIGA. . Regional Facilities: IFC Donor-Supported Technical Assistance Programs Cumulative Financial Commitments in $ millions equivalent up to June 30, 2004 Sub-Saharan Africa SUB-SAHARAN AFRICA Asia & the Pacific ASIA & THE PACIFIC EUROPE & CENTRAL ASIA LAC Europe & Central Asia MENA CLOSED DONOR APDF AMSCO CPDF MPDF PEDF PENSA 1 SEDF OTHER 2 PEP SEED LACP NAED PEP-ME ISBFF PDFs 3 TOTAL IFC Donor Community African Development Bank 8.06 4.00 - - - - - - - - - - - - - 12.06 ADB - - - 0.75 - - 0.75 - - - - - - - - 1.50 EBRD - - - - - - - - - - - - - - 1.22 1.22 European Community - - - - - - 11.93 - - - - - - - 0.90 12.83 Inter-American Devt Bank - - - - - - - - - - - - - - 3.40 3.40 UNDP 10.00 4.69 - - - - - - - - - - - - 1.00 15.69 - - - - - - - Australia - - 1.48 3.30 5.01 2.77 - 0.62 - - - - - - - 13.18 Austria - - - - - - - - 1.01 2.27 - - - - - 3.28 Belgium 2.20 0.31 - - - - - - - - - 0.60 - - - 3.11 Canada 2.50 - - 4.75 0.77 3.72 5.96 0.23 16.14 1.36 - - - - 5.17 40.60 Denmark 8.56 5.64 - - - - - - - - - - - - 0.38 14.58 Finland 2.20 2.62 - 3.26 - - - - 2.87 - - - - - - 10.95 France 5.50 1.66 - - - - - - - - - - - - - 7.16 Germany 3.11 1.02 - - - - - - - - - - - - 2.60 6.73 Greece - - - - - - - - 0.25 - - - - - 0.25 India # - - - - - - - - - - - - - - - - Ireland - 1.50 - - - - - - - - - - - - 0.02 1.52 Israel - - - - - - - - - - - - - - - - Italy 1.00 1.00 - - - - - - - - - 1.76 - - 0.78 4.54 Japan 4.00 - - 2.03 6.64 0.50 - - - - - - - 10.00 1.25 24.42 Luxembourg - - - - - - - - - - - - - - - - Mexico - - - - - - - - - - - - - - 0.50 0.50 Netherlands 9.26 7.09 1.07 0.57 - 1.87 2.03 - 12.85 5.00 0.34 - - - 1.98 42.06 New Zealand - - - 0.58 1.79 - - - - - - - - - - 2.37 Norway 6.07 0.85 - 5.09 - - 7.25 - 0.02 3.20 - - - - 0.10 22.58 Poland - - - - - - - - - - - - - - 0.50 0.50 Portugal 1.90 2.94 - - - - - - - - - - - - - 4.84 Slovenia - - - - - - - - - 0.20 - - - - - 0.20 South Africa - - - - - - - - - - - - - - - - Spain - - - - - - - - - - - - - 5.00 - 5.00 Sweden 5.37 3.66 - 4.53 - - - - 3.14 2.21 - - - - 1.03 19.94 Switzerland 7.30 3.27 2.33 6.87 - 3.73 - - 18.58 4.00 - 3.46 - - 0.30 49.84 United Kingdom 3.77 3.26 3.36 4.97 - - 6.02 - 36.67 0.90 - - - 15.00 0.70 69.65 United States 11.50 2.70 - - - - - - 39.67 - - - - 10.00 5.80 74.67 - - - - - - - ICDS - 2.65 - - - - - - - - - - - - - 2.65 Caribbean Devt Bank - - - - - - - - - - - - - - 0.10 0.10 Others - 0.62 - - 0.88 - - - - - - - - - 1.31 2.81 92.30 49.48 8.24 36.70 15.09 12.59 33.94 0.85 130.95 19.39 0.34 5.82 - 40.00 29.04 474.73 - - - - - - - World Bank Group* IBRD - 5.85 - - - - - - - - - - - 5.85 IFC 23.10 8.07 5.00 9.00 4.41 5.00 5.00 - 17.77 6.00 10.00 5.00 10.00 - 7.80 116.15 MIGA - - - - - - - - - - - - - - - 23.10 13.92 5.00 9.00 4.41 5.00 5.00 - 17.77 6.00 10.00 5.00 10.00 - 7.80 122.00 GRAND TOTAL 115.40 63.40 13.24 45.70 19.50 17.59 38.94 0.85 148.72 25.39 10.34 10.82 10.00 40.00 36.84 596.73 Note 1 - PENSA formerly known as IEDF. Note 2 - Other refers to two special one-time funding projects carried out in East Asia. Note 3 - Closed PDFs comprise BAS, established in 1981 & closed during FY97; PBAS, established in 1991 & closed during June 1996; and ESSA, established in 1994 & closed in January 2002. # Indicates contribution-in-kind from EximBank, India. 89 * Includes contribution-in-kind from IBRD, IFC and MIGA. Program for Eastern Indonesia Private Enterprise Partnership SME Assistance Mr. Christian Grossmann Mr. Chris Richards Director General Manager Central and Eastern Europe Department Program for Eastern Indonesia Private Enterprise Partnership SME Assistance International Finance Corporation International Finance Corporation 36, Building 1, Bolshaya Molchanovka Directory Bali Jeff House Street, 3rd Floor Jalan Puputan Raya 488 121069 Moscow Renon Bali, Indonesia Russian Federation Tel: 62-361-265-350 Tel.: 7095-411-7555 Fax: 62-361-265-352 Fax: 7095-411-7556 SouthAsia Enterprise Southeast Europe Enterprise INTERNATIONAL FINANCE Development Facility Development Facility CORPORATION ASIA & THE PACIFIC Mr. Anil Sinha Mr. Alexander Paine General Manager General Manager Mr. Udayan Waglé China Project Development Facility SouthAsia Enterprise Development Facility Southeast Europe Enterprise Director Mr. Eric J. Siew International Finance Corporation Development Facility Trust Funds Department General Manager United House International Finance Corporation International Finance Corporation China Project Development Facility 10 Gulshan Avenue Hamdije Kresevljakovica 19/4 2121 Pennsylvania Ave., N.W. International Finance Corporation Dhaka 1212, Bangladesh 71000 Sarajevo MSN F6K-606 Suite 2716, 27th Floor Tel: 880-2-986-1714-6 Bosnia and Herzegovina Washington, DC 20433, USA CCB Sichuan Building Fax: 880-2-989-4744 Tel: 387-33-251-555 Tel: 1-202-473-0535 No. 88 Tidu Street Fax: 387-33-217-762 Fax: 1-202-974-4344 Chengdu, Sichuan Province P.R. China 610016 EUROPE & CENTRAL ASIA Tel: 86-28-8676-6622 LATIN AMERICA & THE CARIBBEAN REGIONAL SME PROJECT Fax: 86-28-8676-7362 Balkans Infrastructure DEVELOPMENT FACILITIES Development Facility Latin America and Mekong Private Sector Mr. Neeraj Jain Caribbean SME Facility SUB-SAHARAN AFRICA Development Facility Principal Investment and Strategy Officer Ms. Anita Bhatia Mr. Adam Sack Southern Europe and General Manager African Management Services Company General Manager Central Asia Department Latin America and Caribbean SME Facility Ms. Eva Bakonyi, CEO of AMSCO Mekong Private Sector Development Facility International Finance Corporation International Finance Corporation Principal Business Development Officer International Finance Corporation 2121 Pennsylvania Ave., N.W. Edificio Victor, Piso 9 Hyde Park Lane 3rd Floor, 21-23 Nguyen Thi Minh Khai St MSN F11P-1105 Calle Fernando Guachalla No. 342 Marlborough Gate, Ground Floor District 1, Ho Chi Minh City Washington, DC 20433, USA -Sopocachi Hyde Park Vietnam Tel: 1-202-473-6778 La Paz, Bolivia Johannesburg, South Africa Tel: 84-8-823-5266 Fax: 1-202-974-4849 Tel: 591-2-244-3753 Tel: 27-11-341-9030 Fax: 84-8-823-5271 Fax: 591-2-212-9880 Fax: 27-11-325-0319 Pacific Enterprise Development Facility Africa Project Development Facility Ms. Denise Jean Aldous Mr. Mwaghazi Mwachofi General Manager Associate Director Pacific Enterprise Development Facility Sub-Saharan Africa Department The World Bank Group International Finance Corporation Level 18, 14 Martin Place 14 Fricker Road CML Building Illovo, 2196 Sydney, NSW 2000 Johannesburg, South Africa Tel: 61-2-9235-6502 Tel: 27-11-731-3000 - Main Line Fax: 61-2-9223-2533 Fax: 27-11-268-0074 90 Environmental Business SUSTAINABLE BUSINESS MIDDLE EAST & NORTH AFRICA GLOBAL PROGRAMS Finance Program ASSISTANCE PROGRAM Ms. Lisa Da Silva North Africa Enterprise Technical Assistance Trust Funds Program Program Leader, EBFP Development Facility Corporate Citizenship Facility Ms. Mariko Higashi Environment and Social Mr. Jesper Kjaer Mr. Nick Flanders Manager Development Department General Manager Program Leader, CCF Trust Funds Department International Finance Corporation North Africa Enterprise Environment and Social International Finance Corporation 2121 Pennsylvania Ave., N.W. Development Facility Development Department 2121 Pennsylvania Ave., N.W. MSN F3P-301 International Finance Corporation International Finance Corporation MSN F6K-606 Washington, DC 20433, USA World Trade Center Bldg., 19th Floor 2121 Pennsylvania Ave., N.W. Washington, DC 20433, USA Tel: 1-202-473-5691 1191 Corniche El Nile Street, Boulac MSN F 9P-904 Tel: 1-202-473-5615 Fax: 1-202-614-0511 Cairo, Egypt Washington, DC 20433, USA Fax: 1-202-974-4344 Tel: 20-2-579-5912; 20-2-579-5812; Tel: 1-202- 473-3479 Global Environment Facility 20-2-579-6468 Fax: 1-202-974-4348 Foreign Investment Advisory Service Mr. Alan Miller Fax: 20-2-579-6447 Mr. Frank Sader GEF Coordinator Environmental Opportunities Facility Trust Fund Coordinator, FIAS Program Environment and Social Private Enterprise Partnership Ms. Corinne Figueredo Investment Climate Department Development Department for the Middle East Program Leader, EOF The World Bank Group International Finance Corporation Mr. Jesper Kjaer Environment and Social 1818 H St., N.W. 2121 Pennsylvania Ave., NW General Manager Development Department MSN F4K-250 MSN F3K-300 International Finance Corporation International Finance Corporation Washington, DC 20433, USA Washington, DC 20433, USA World Trade Center Bldg., 19th Floor 2121 Pennsylvania Avenue NW Tel: 1-202-473-3921 Tel: 1-202-473-8324 1191 Corniche El Nile Street, Boulac MSN F 3K-309 Fax: 1-202-522-3262/522-3183 Fax: 1-202-974-4800 Cairo, Egypt Washington DC 20433, USA Tel: 20-2-579-5912; 579-5812, 579-6468 Tel: 1-202-473-2899 Capacity Building Facility Infrastructure Development Fax: 20-2-579-6447 Fax: 1-202-974-4389 Ms. Irina Niederberger Collaboration Partnership Facility CBF Coordinator Mr. David Donaldson Iraq Small Business Financing Facility Sustainable Financial SME Department Program Manager Mr. Khaleel Ahmed Markets Facility International Finance Corporation Advisory Services Department Program Coordinator Mr. Clive Mason 2121 Pennsylvania Ave., N.W. International Finance Corporation Global Financial Markets Department Program Leader, SFMF MSN F3P-305 2121 Pennsylvania Ave., N.W. International Finance Corporation International Finance Corporation Washington, DC 20433, USA MSN F7K-711 2121 Pennsylvania Ave., N.W. 2121 Pennsylvania Ave., N.W. Tel: 1-202-473-2370 Washington, DC 20433, USA MSN F9K-907 MSN F3P-301 Fax: 1-202-522-3472 Tel: 1-202-473-3979 Washington, DC 20433, USA Washington, DC 20433, USA Fax: 1-202-522-0920 Tel: 1-202-473-6790 Tel: 1-202-458-4070 Fax: 1-202-974-4843 Fax: 1-202-974-4348 Strengthening Grassroots Business Organizations Initiative Mr. Harold Rosen Director International Finance Corporation 2121 Pennsylvania Ave., N.W. MSN F4P-403 Washington, DC 20433, USA Tel: 1-202-473-8841 Fax: 1-202-522-1429 91 Glossary ADB Asian Development Bank FSU former Soviet Union PENSA Program for Eastern Indonesia SME Assistance AfDB African Development Bank FTIB Fiji Trade and Investment Bureau PEP Private Enterprise Partnership AMSCO African Management Services Company FY fiscal year PEP-ME Private Enterprise Partnership for the Middle East APDF Africa Project Development Facility FYR former Yugoslav Republic PIDG Private Infrastructure Development Group AusAID Australian Agency for International Development GEF Global Environment Facility PSD Private Sector Development BAS Business Advisory Service for the Caribbean IADB Inter-American Development Bank PSF Private Sector Forum and Central America IAS International Accounting Standards RJSC Registrar of Joint Stock Companies and Firms BIDFacility Balkans Infrastructure Development Facility IBRD International Bank for Reconstruction SBAP Sustainable Business Assistance Program CBA Competitive Business Advantage and Development SECA Southern Europe and Central Asia CBF Capacity Building Facility ICDS Industry Council for Development Service seco State Secretariat for Economic Affairs CCF Corporate Citizenship Facility ICSID International Centre for Settlement of of Switzerland CDB Caribbean Development Bank Investment Disputes SEED Southeast Europe Enterprise Development facility CEE Central and Eastern Europe ICT information and communications technology SEDF SouthAsia Enterprise Development Facility CIDA Canadian International Development Agency IDA International Development Association SEF Social and Environmental Facility CPDF China Project Development Facility IEDF Indonesia Enterprise Development Facility SFMF Sustainable Financial Markets Facility DAC Development Assistance Committee IFC International Finance Corporation SGBI Strengthening Grassroots Business DevCo Infrastructure Development Collaboration IFI international financial institution Organizations Initiative Partnership facility IMF International Monetary Fund Sida Swedish International Development DFID Department for International Development (UK) IPA Investment Promotion Agency Cooperation Agency DFO Donor Funded Operations ISBFF Iraq Small Business Financing Facility SIMOZ Mozambique SME Initiative DTI Department of Trade and Industry (UK) LAC Latin America and the Caribbean SLDF Sri Lanka Maldives SME Development Facility EAP East Asia and the Pacific MDBs multilateral development banks SME small and medium enterprise EBFP Environmental Business Finance Program MENA Middle East and North Africa SPPF South Pacific Project Facility EBRD European Bank for Reconstruction MFB Micro Finance Bank TA Technical Assistance and Development MFI Micro Finance Institution TATF Technical Assistance Trust Funds program EC European Commission MIGA Multilateral Investment Guarantee Agency TF Trust Fund EOF Environmental Opportunities Facility MIS management information systems UNDP United Nations Development Programme ESSA Enterprise Support Service for Africa MPDF Mekong Private Sector Development Facility UNEP United Nations Environment Programme EU European Union MSME Micro Small and Medium Enterprises USAID United States Agency for International EXIM Export-Import Bank of India NAED North Africa Enterprise Development facility Development FDI foreign direct investment NGO nongovernmental organization USTDA United States Trade and Development Agency FI financial intermediaries NORAD Norwegian Agency for Development Cooperation WAEMU West African Economic and Monetary Union FIAS Foreign Investment Advisory Service OECD Organization for Economic Cooperation $ US$ FM financial markets and Development = C Euro FMAS Financial Markets Advisory Services PBAS Polish Business Advisory Service FMTAAS Funding Mechanism for Technical Assistance PDF project development facility and Advisory Services PEDF Pacific Enterprise Development Facility 92 Contributors and Production Team (IFC Trust Funds Department) Veronica Banez, Monica Chong, Leslie Christensen, Lloyd Corwin, Maria Cussianovich,Yves de Rosee, Margaret Ghobadi, Mariko Higashi, Mary Ellen Iskenderian, Reina Kawaguchi, Aminata Mbodj, Rene Ngo,Tran Nguyen, Michael O'Neill, Bayo Oyewole, Sophana So, Francis Tamakloe, Luz Tatlonghari, Amber Turner, Anton van Ruiten, Uday Wagle,Wai-Keen Wong, Fred Wright SPECIAL THANKS TO PRIMARY CONTRIBUTORS Sub Saharan Africa ­ James Emery East Asia & the Pacific ­ Denise Aldous, Ann Bishop, Caroline Edwards, Mario Fischel, Peter Philipson, Chris Richards,Adam Sack, Eric Siew, Jianping Song, Makiko Toyoda South Asia ­ Anastasia Gekis Eastern Europe ­ Irina Likhachova, Heather Matson Southern Europe & Central Asia ­ Anne Lagomarcino, Alex Paine, Vincent Rague Latin America & the Caribbean ­ Anita Bhatia, Kenroy Dowers, Paul Melton, Junko Oikawa, Eduardo Wallentin Middle East & North Africa ­ Peggy Henderson, Jesper Kjaer Foreign Investment Advisory Service ­ Teresa Andaya, Frank Sader Sustainable Business Assistance Program ­ Marichris Javier, Alex Leite Environmental Business Finance Program ­ Natalie Magradze Capacity Building Facility ­ David Lawrence, Irina Niederberger, Shaela Rahman, Wendy Teleki OTHER CONTRIBUTORS Simon Akala, Danilo Anzures, Arist Caruana, Timothy Collins, David Cumming, Kenan Erkan, Nan Fang, Simon Fowler, Ari Garscadden, Alison Harwood, Declan Heery, Brigid Holleran, Dana Lane, John Leber, Dina Lirag, Paul McClure, Anthon Meyer, Md. Akhtar Uddin Molla, Joe O'Keefe, Lory Camba Opem, Boy Andoko Purnadie, Kristie Roberts, Gamil Sadek, Rose Tan, Tuyet Nhung Tran, Igor Tutnjevic, Rob Wright PHOTO CREDITS Mark Fallander, Monte Feghali, John Fiege, Margaret Ghobadi, Peggy Henderson, Michele Iannacci, Anvar Ilyasov, Danny Juddin, Reina Kawaguchi, Valeriy Kharitonov, Richard Lord, Scott McConnell, Paul Melton, Tamar Razmadze, Brad Roberts, Ravi Ruparel, Vadim Solovyov, Courtesy of Air Tanzania, Ghada Teima, Niels Vestergarrd, Anton van Ruiten, Michael Wild, Wai-Keen Wong, Fred Wright, Linda Young DESIGN: Design Army, Washington D.C. PRINTING: ColorCraft of Virginia, Inc. INTERNATIONAL FINANCE CORPORATION INTERNA 2121 Pennsylvania Ave., N.W. Pennsylvania Washington, DC 20433 ashington, DC 20 USA Tel: 1-202-473-0535 Tel: 1-20 Fax: 1-202-974-4344 Fax: 1-20 www.ifc.org .ifc.o www.ifc.org/tatf .ifc.o