International Finance Corporation: Its Mission and Challenges

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International Finance CorporationIts Mission
and Challenges
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World Bank Group
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Presentation Outline

• Our Mission
• Facts about IFC
• Challenges and Differentiation through Financing
  Plus
  
• Examples of Sustainable Development
• Examples of Public-Private Partnership
• Personal Experience
• Recruitment

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IFC Mission
Promoting sustainable private sector investment
in developing countries, helping to reduce
poverty and improve peoples lives.
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Introducing IFC

• IFC is a member of the World Bank Group
• IFCs shareholders 175 Countries

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Brief Facts

• First and single largest multilateral source of
  financing for private sector projects in
  developing world
  
• Term emerging markets coined by IFC
• Created Emerging Markets Data Base (sold to SP)
• IFC bonds rated AAA
• The Corporation has made profit every years since
  its inception in 1956

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Staff Profile

• Over 2,300 staff worldwide
• About 40 of IFC staff are stationed in over 80
  IFC field offices.
  
• Staff from 125 countries
• Specialized skills
• Investment Operations (Investment Officers
  Analysts)
  
• Financial Advisory
• Environmental Social
• Information Technology

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Services Offered

• Financial products
• loans, equity, quasi-equity, guarantees and risk
  management facilities
  
• Resource mobilization
• Advisory services
• Current emphasis on Financing Plus

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IFCs Commitments FY03
FY03 Total Commitments 5 billion (By Product)

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IFC Priority Sectors

• Priority sectors - sectors with high development
  impact
  
• Financial markets
• Infrastructure
• Health and Education
• Information technology
• SMEs

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IFCs Strategy - 2003

• Continuous emphasis, begun several sectors ago,
  on priority sectors and frontier markets
  
• In frontier markets, more focus on advisory work
  alongside investments
  
• More flexibility in financing products offered
• More innovative ways of financing infrastructure,
  including public-private partnerships

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IFCs Investment Portfolio
Total IFC Portfolio 16.8 billion

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Competition Challenges in Development Finance

• IFC remains the largest source of finance for
  private sector projects in developing markets
  
• Growing competition from Regional Development
  Banks, G7 bilateral financing and Export Credit
  Facilities

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IFC Share of International Development
Institutions
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• IFC is one of the few institutions that can
  catalyze innovative, pioneering investments that
  combine the leading edge of finance with
  environmental sustainability and high development
  impact
• P. Woicke

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IFCs Advantage vs. Other IFIs

• Global presence, size provide unique expertise
  in industries, financial products, best practice
  
• Extensive in-field presence country knowledge
• Specialized skills developed in environmental and
  social aspects of projects
  
• Premier SME skills located in all regions
• Link to World Bank provides unique risk
  mitigation potential
  
• Extensive advisory expertise, especially in
  privatization, financial markets

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Why Clients Choose to Work with IFC?

• Capital and Comfort are valued most
• What do our clients value? From 2003 client
  survey

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Why Clients Choose to Work with IFC?

• Simple Geology,
• Complex Politics.

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Why Clients Choose to Work with IFC?

• Good News
• Growing overall satisfaction rate IFCs service
  is improving
  
• Our expertise valued more and more
• Lessons
• Problems with responsiveness and flexibility
• Gap yet between clients perception and our
  value-added positioning need more marketing

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Adding value to our clients through Finance
Plus

• Pioneer opportunities in frontier countries and
  sectors
  
• Take risks that private sector would not take
  alone
  
• Provide advice when private sector is
  unwilling/unable to do so
  
• Promote Environmental and Social Sustainability

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Finance PlusEnvironmental and Social
Capabilities

• Specialized Expertise
• Local community relations and economic
  development
  
• Resettlement
• Corporate governance
• HIV/AIDS
• Dispute resolution
• The business case

• Top-of-the-line environmental and social
  standards
  
• Unmatched case law experience in applying
  standards
  
• And in helping clients meet policies
• Unmatched external credibility

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Sustainability Impact

• Private sector development in poor countries is
  not just about making investments. Enlightened
  companieshave recognized that long term
  profitability is best secured when these
  investments are made in an environmentally
  friendly way, when affected people participate in
  the process and when local communities receive a
  real benefit from the investments
• Peter Woicke, IFC 2003 Sustainability Review
• http//www.ifc.org/ifcext/home.nsf/Content/Sustain
  abilityReview03

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The Transition From Safeguards to Sustainability
Old Paradigm
New Paradigm
Maximize financial, environmental and social
return on capital
Maximize financial return on capital
Sustainability
Aspirations
Entry level requirements
Preventing harm
Achieve certain minimum environmental and social
standards
Achieve certain minimum environmental and social
standards
2000
200?
What do we mean by the environmental and social
return on capital?
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Making Business Case for Sustainability

• Examples
• Cembrit Bohemia
• Kunda Cement

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SustainabilityCembrit Bohemia, Czech Republic

• Pending prohibition on use of asbestos materials
  in construction
  
• Company near shut-down
• IFC invests US14.7 million to switch to
  environmentally sound cellulose-based process

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SustainabilityCembrit Bohemia, Czech Republic

• Projects impact
• Improved human health, environmental quality
• Jobs saved
• Access to non-asbestos markets like EU
• Exports exceed 50
• Upstream benefits and linkages with local
  suppliers of pigments and spare parts
  
• Some lingering worker health issues

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SustainabilityKunda Cement, Estonia
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Public-Private Partnerships(PPP)

• 2 Examples
• Pamir Hydroelectric Plant in Tajikistan
• Chad- Cameroon Pipeline

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Public-Private PartnershipsPamir Hydroelectric
plant in Tajikistan
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Public-Private PartnershipsPamir Hydroelectric
plant in Tajikistan

• Expansion of hydro plant from 14 MW to 28 MW and
  transmission distribution upgrade
  
• Project cost 26 m
• 25 year concession
• Sponsor is AKFED
• Current tariff is about 0.25 cents/kWh
• Project needs a tariff of about 4 cents/kWh to
  provide adequate return

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Public-Private PartnershipsPamir Hydroelectric
plant in Tajikistan

• Provide a subsidy to public sector to make an
  enterprise commercially viable for private
  sector
  
• Align incentives by making subsidy tied to
  private sector performance
  

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10mil., 40 years, at 0.75
Govt. of Tajikistan
IDA
10mil., 20 years, at 6.00
IDA and Swiss Donor Funding
IFC
4.5mil., 10 years, at 10.00
Republic of Tajikistan Pamir Private Power Project
3.5mil. equity at 10.00 expected rate of return
Agha Khan Foundation for Economic Development
Pamir Energy Co.
8.2mil. equity at 10.00 expected rate of return
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Chad-Cameroon Petroleum Development and Pipeline
Project
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The project is comprised of an oilfield
development in Chad and a pipeline through
Cameroon

• Development of three oil fields in Chad
• Construction of a pipeline from the oil fields to
  an offshore terminal in Cameroon
  
• Total project cost US3.7 billion
• High profile among NGOs

First Oil Expected by end 2004
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Funding involves public/private equity and
participation of World Bank Group, ECAs and EIB
Cameroon
Chad
Exxon 40 Petronas 35 Chevron 25
Operator Exxon affiliates
Consortium
Totco
Cotco

• 1.5 bn oilfields owned and funded by the
  Consortium
  
• 2.2 bn pipeline funded by debt and equity in
  Totco/Cotco
  
• 200-300mm from IFC (100mm A Loan, 100-200mm B
  Loan)
  
• 400-500 mm ECAs (USExim, Coface)
• 118 mm Governments equity, by IBRD/EIB (76
  mm/42 mm)
  
• 1,285-1,485 mm equity from Consortium
  affiliates
  
• Project bonds under consideration but not
  required to complete financing
  
• Loan evaluation based on certified proved
  reserves of 595mm bbls

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Chad-Cameroon Pipeline ProjectEnvironmental/Socia
l Political Risk Mitigation

• In Chad
• Revenue management program, incl. IDA grant
• Government signed direct legal agreements with
  lenders to address gaps in legislation
  
• SME Initiative to support private sector
  development
  
• In Cameroon
• Diversion of pipeline route by 300 km to avoid
  sensitive areas (extra 50 million)
  
• Government had to set up 2 new national parks
  (forests)
  
• However, Trust that was initially set up by
  sponsors to manage forest, will be run by
  Government
  
• IDA Grant for Governments of Chad and Cameroon
  for capacity building to manage environment
  monitor petroleum sector

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My Life in IFC

• Beginning
• How I joined
• First Assignment
• Hotel in Mexico
• Oil and Gas Department
• Shell in Nigeria
• Small company in Guatemala
• Pangue-Hydroelectric Dam
• Steel in Eastern Europe

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My Life in IFC

• Sectors
• Shrimp farming, denim, tennis shoes, cotton and
  wool textiles, ports,water treatment plants,
  retail (Ikea), sawmills in jungles of Peru,
  hotels, cement, pulp and paper, gypsum board and
  glass
• Functions
• Business development, structuring new projects,
  restructurings, debt/equity swaps, staff position
  for Vice President of new investments, portfolio
  management, training

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Recruitment at IFC - GTT Program

• Minimum Requirements
• MBA or equivalent
• Work experience in finance, consulting and/or
  industry
  
• GTT Program
• Main IO entry into IFC for MBAs/MAs
• 2-year rotational program, then permanent
  assignment
  
• 2 4 assignments in various departments of IFC,
  including a regional department
  
• Credit Review course 7 week intensive program
• Mentoring Buddy programs

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Responsibilities of GTT member

• Appraise new investment projects
• Make financial projections
• Negotiate terms with clients
• Supervise project implementation and
  performance
  
• Advise clients on corporate restructuring,
• privatization and capital markets developments
• Assist in business development

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IFC Departmental Structure

• Industry Departments
• Agribusiness
• Infrastructure
• Global Manufacturing
• Information Communication Technologies
• Oil, Gas, Mining Petrochemicals
• Global Financial Markets
• Health Education
• Regional Departments
• Private Sector Advisory (PSA)
• Small Medium Enterprises (SME)

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GTT Recruitment Process and Timeline

• 15 - 20 GTT candidates sought
• School presentations at 35 Business Schools in
• 17 countries September October
• First round of interviews November
• Applicants informed after interviews at all
  Schools are completed November December
  
• Panels of 5 senior staff conduct second round
• interviews in Washington DC, Hong Kong
  
  Paris December
  
• Final decision communicated December

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GTT Program Application Process

• Formal application deadline was September 30,
  2003
  
• However, deadline for interested Fletcher
  students was extended through October 30, 2003.
  
• Send Application to mbarecruit_at_ifc.org
• NB GTT Application Fletcher School extended
  deadline in Subject field!
  
• More info OCS e-recruiting website

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Summer Internship Programs

• Candidates must be enrolled in a graduate level
  program
  
• Strong computing skills
• Fluency in English
• To apply, please send your resume between
  December 1 and January 15 to the address
  indicated on IFCs web site www.ifc.org/careers

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Other Career Opportunities

• AT IFC
• IT Program strong candidates with double major
  in IT/Business, for role of liaisons between IT
  and Business Departments
  
• AT THE WORLD BANK
• Junior Professional Associates Program
• 2 year, non-renewable program for recent
  graduates under 29 years old with interest in
  international work
  
• Must hold bachelor's or master's degree, or be a
  Ph.D. candidate
  
• Young Professionals Program (closed for 2004)
• For more information www.worldbank.org/careers

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• Conclusion
• Want to know more about the International Finance
  Corporation?

• www.ifc.org