International Finance Corporation: Its Mission and Challenges

1. International Finance Corporation:Its Mission and Challenges 1 World Bank Group

2. 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

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

4. United States 24.1% Other Countries 54.2% Japan 6.0% Germany 5.5% France 5.1% United Kingdom 5.1% Introducing IFC • IFC is a member of the World Bank Group • IFC’s shareholders: 175 Countries

5. 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

6. 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

7. Services Offered • Financial products: loans, equity, quasi-equity, guarantees and risk management facilities • Resource mobilization • Advisory services • Current emphasis on “Financing Plus”

8. Syndications (14%) Risk Management (1%) Guarantees (8%) Equity (22%) IFC Loans (55%) IFC’s Commitments FY03 FY03 Total Commitments: $5 billion (By Product)

9. IFC Priority Sectors Priority sectors - sectors with high development impact: • Financial markets • Infrastructure • Health and Education • Information technology • SMEs

10. 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

11. By Region By Sector Middle East 8% Other 15% Latin America 36% Manufacturing31% Africa9% East Asia 17% OGM10% Europe & Central Asia 21% Finance & Insurance 29% South Asia 9% Infrastructure15% IFC’s Investment Portfolio Total IFC Portfolio: $16.8 billion

12. 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

13. IFC Share of International Development Institutions

14. “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

15. 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

16. Capital and Comfort are valued most “What do our clients value?” From 2003 client survey Why Clients Choose to Work with IFC?

17. Why Clients Choose to Work with IFC? “Simple Geology, Complex Politics”.

18. 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

19. 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

20. 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 Finance – PlusEnvironmental and Social Capabilities

21. 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 Review http://www.ifc.org/ifcext/home.nsf/Content/SustainabilityReview03

22. 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?

23. Making Business Case for Sustainability Examples: • Cembrit Bohemia • Kunda Cement

24. 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

25. SustainabilityCembrit Bohemia, Czech Republic Project’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

26. SustainabilityKunda Cement, Estonia

27. Public-Private Partnerships(PPP) 2 Examples: • Pamir Hydroelectric Plant in Tajikistan • Chad- Cameroon Pipeline

29. Public-Private PartnershipsPamir Hydroelectric plant in Tajikistan

30. 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

31. 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

32. $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

33. Chad-Cameroon Petroleum Development and Pipeline Project The Project Developing Three Oil Fields in Landlocked Chad and Building a Pipeline System/Export Terminal to transport oil from Chad to offshore Cameroon CHAD N’Djamena Doba Oil Field CAMEROON Pipeline 650 miles/1,050 kilometers • Yaoundé Kribi Marine Export Terminal

34. 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 US$3.7 billion • High profile among NGOs First Oil Expected by end 2004

35. Funding involves public/private equity and participation of World Bank Group, ECAs and EIB Chad Cameroon 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

36. Chad-Cameroon Pipeline ProjectEnvironmental/Social & 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

37. 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

38. 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

39. 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

40. 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

41. 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)

42. 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

43. 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

44. 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 IFC’s web site www.ifc.org/careers

45. 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

46. www.ifc.org • Conclusion • Want to know more about the International Finance Corporation?