International Finance

Corporation:

Its Mission and Challenges

World Bank Group 1

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

IFC Mission

“Promoting sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives.

• IFC is a member of the World Bank Group• IFC’s shareholders: 175 Countries

Other Countries

54.2%

United States

24.1%

Japan 6.0%

Germany 5.5%

France 5.1%

United Kingdom 5.1%

Introducing IFC

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 S&P)

• IFC bonds rated AAA

• The Corporation has made profit every years since its inception in 1956

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

Services Offered

• Financial products:

loans, equity, quasi-equity, guarantees and risk management facilities

• Resource mobilization

• Advisory services

• Current emphasis on “Financing Plus”

IFC’s Commitments FY03

FY03 Total Commitments: $5 billion (By Product)

IFC Loans (55%)

Syndications (14%)

Equity (22%)

Guarantees (8%)

Risk Management (1%)

IFC Priority Sectors

Priority sectors - sectors with high development impact:

• Financial markets• Infrastructure• Health and Education• Information technology• SMEs

IFC’s 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

IFC’s Investment Portfolio

Total IFC Portfolio: $16.8 billion

By Sector

OGM10% Infrastruc

ture15%

Manufacturing31%

Other

15%

Finance & Insurance 29%

Europe & Central

Asia 21%

By Region

East Asia 17%

Africa9%

South Asia 9%

Latin America

36%

Middle East 8%

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

Exhibit 1: Financing of the Private Sector by Development Institutions, 2000 (Commitments)

0500

10001500200025003000

$M

illi

on

s

IFC Share of International Development Institutions

Investment Volume -- Private Sector in Developing Countries

0

2000

4000

6000

8000

10000

12000

US

$Th

ou

san

ds

TotalDevelopmentInstitutionsIFC

IFC Share

-

5

10

15

20

25

30

35

40

45

Pe

rce

nt

“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

IFC’s Advantage vs. Other IFI’s

• 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

Why Clients Choose to Work with IFC?

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

Best 5 %

Long-term Partnership 91

Provision of Capital 91

Perceived Stamp of Approval 79

Reassurance to Other Parties 76

Environmental & Social Knowledge 75

Why Clients Choose to Work with IFC?

“Simple Geology, Complex

Politics”.

Why Clients Choose to Work with IFC?

Good News• Growing overall satisfaction rate:

IFC’s service is improving• Our expertise valued more and

more

Lessons• Problems with responsiveness

and flexibility• Gap yet between client’s

perception and our value-added positioning; need more marketing

• 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

Adding value to our clients through “Finance – Plus”

Finance – PlusEnvironmental and Social

Capabilities

• Top-of-the-line environmental and social standards

• Unmatched “case law” experience in applying standards

• And in helping clients meet policies

• Unmatched external credibility

Specialized Expertise• Local community

relations and economic development

• Resettlement• Corporate governance• HIV/AIDS• Dispute resolution• The business case

Sustainability Impact

• ‘Private sector development in poor countries is not just about making investments. Enlightened companies…have 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 Reviewhttp://www.ifc.org/ifcext/home.nsf/Content/SustainabilityReview03

Maximize financial return on capital

Achieve certain minimum environmental and social standards

2000

Old Paradigm

Maximize financial, environmental and social return on capital

200?

New Paradigm

Achieve certain minimum environmental and social standards

Entry level requirements

Aspirations

Sustainability

Preventing harm

What do we mean by the environmental and social return on capital?

The Transition: From Safeguards to Sustainability

Making Business Case for Sustainability

Examples:•Cembrit Bohemia•Kunda Cement

SustainabilityCembrit Bohemia, Czech

Republic

• Pending prohibition on use of asbestos materials in construction

• Company near shut-down • IFC invests US$14.7

million to switch to environmentally sound cellulose-based process

SustainabilityCembrit Bohemia, Czech

RepublicProject’s 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

SustainabilityKunda Cement,

Estonia

20

Public-Private Partnerships(PPP)

2 Examples:•Pamir Hydroelectric Plant in Tajikistan

•Chad- Cameroon Pipeline

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

Public-Private PartnershipsPamir Hydroelectric plant in

Tajikistan

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

Agha Khan Foundation for

Economic Development

Govt. of Tajikistan

$10mil., 40 years, at 0.75%

Pamir Energy

Co.

$10mil., 20 years, at 6.00%

IDA and Swiss Donor

Funding

$4.5mil., 10 years, at 10.00%

$8.2mil. equity at 10.00% expected rate of return

$3.5mil. equity at 10.00% expected rate of return

Rep

ub

lic of T

ajikista

n P

am

ir Priv

ate

Pow

er P

roje

ct

IFC

IDA

Chad-Cameroon Petroleum Chad-Cameroon Petroleum Development and Pipeline Development and Pipeline

ProjectProjectThe ProjectDeveloping Three Oil Fields in Landlocked Chadand Building a Pipeline System/Export Terminal to transport oil from Chad to offshore Cameroon

CHAD

N’Djamena

Doba

Oil Field

CAMEROON

KribiPipeline650 miles/1,050 kilometers

Marine Export Terminal

Yaoundé

• Development of three oil fields in Chad

• Construction of a pipeline from the oil fields to an offshore terminal in Cameroon

•Total project cost US$3.7 billion

•High profile among NGOsFirst Oil Expected by end 2004

The project is comprised of an oilfield development in Chad and a pipeline through Cameroon

CameroonExxon 40%Petronas 35%Chevron 25% Totco

Cotco

Chad

Con

sort

ium

Operator: Exxon affiliates

Funding involves public/private equity and participation of World Bank Group, ECAs and EIB

• $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

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

Chad-Cameroon Pipeline ProjectChad-Cameroon Pipeline ProjectEnvironmental/Social & Political Risk Environmental/Social & Political Risk

Mitigation Mitigation

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

My Life in IFC

• SectorsShrimp 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

• FunctionsBusiness development, structuring new projects, restructurings, debt/equity swaps, staff position for Vice President of new investments, portfolio management, training

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

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

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)

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

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@ifc.org • NB: “GTT Application – Fletcher School

extended deadline” in Subject field! • More info => OCS e-recruiting website

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 IFC’s web site www.ifc.org/careers

Summer Internship Programs

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

www.ifc.org

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