ANNUAL REPORT .1 * 9 * 8 * 9 13331 Public Disclosure Authorized Internai~onal Finaince Corporation (4 S8 W > A tQi !0, Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized AIMS AND OBJECTIVES The International Finance Corporation (IFC) is a multilateral development institution. An affiliate of the World Bank, IFC was established in 1956 to fur- ther economic growth in its developing member countries by promoting productive private invest- ment. Its equity capital is provided by its 133 mem- ber countries-both developed and developing- which collectively determine its policies and activi- ties. IFC's principal tasks are to provide and bring to- gether the financing, technical assistance, and man- agement needed to make good use of investment opportunities in the developing world. IFC provides long-term loans and risk capital without government guarantees to enterprises in the private sector. Its fi- nancial assistance is designed to fit the special re- quirements of its client companies and takes into account their ability to raise funds from other sources on reasonable terms. In all of its activities, IFC works to raise investor confidence and employs its status as an international institution to facilitate the process by which investors and governments ar- rive at mutually satisfactory agreements. IFC also seeks to encourage the flow of private capital, both domestically and internationally, to de- veloping countries through the establishment or ex- pansion of capital markets and financial institutions. It offers technical assistance to member governments in support of their efforts to create an environment that will encourage domestic and foreign investment. HIGHLIGHTS OF THE YEAR 1989 1988 New investmentsapproved 90 95 Totalinvestments (gross) $ 1.7 billion $ 1.3 billion Net investmentsfor IFC's account $ 1.3 billion $ 1.0 billion Total project costs $ 9.7 billion $ 5.0 billion Net commitmentsfior IFC's account $ 1.2 billion $ 1.1 billion Net disbursementslor IFC's account $ 870 million $ 762 million Net income $ 196.5 million $100.6 million Paid-in capital $ 948 million $ 850 million Accumulatedearninigs $ 635 million $ 438 million Borrowingsfor the year $ 845 million $ 747 million Totaldisbursed loan and equity porffolio for IFC's account $ 2.8 billion $ 2.3 billion page 15 The volume of net investment approvals and the disbursed portfolio rose to 17 record levels. Net income doabled for the third successive year, mainly because of 19 substantialcapital gains. 21 The first public issue of IFC's debt securities received triple-A ratings. The new Corporate Finance Services group will allow IFC to expand its 43 activities in corporate restructurings and privatizations. The Africa Enterprise Fund, which will finance small and medium-size 44 projects in Africa, began operations in March 1989. 46 The African M[anagementServices Company was launched in April 1989 to provide training and short-term management assistance to African enterprises. Acronyms AEF Africa Enterprise Fund AMSCo African Management Services Company APDF Africa Project Development Facility ASEAN Association of Southeast Asian Nations CPDF Caribbean Project Development Facility EC The European Community EMDB Emerging Markets Data Base FIAS Foreign Investment Advisory Service IBRD International Bank for Reconstruction and Development (The World Bank) IMF International Monetary Fund MIGA Multilateral Investment Guarantee Agency OECD Organisation for Economic Co-operation and Development, comprising Australia, Austria, Belgium, Canada, Denmark, Finland, France, Federal Republic of Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States OPEC Organization of Petroleum Exporting Countries UNDP United Nations Development Programme Abbreviations BOT build-operate-transfer bpd barrels per day FY fiscal year GDP gross domestic product GNP gross national product LIBOR London interbank offered rate mmcfd million cubic feet per day mtpd metric tons per day mtpy metric tons per year MW megawatt tpy tons per year Notes and Definitions 1. lFC's fiscal year runs from July I to June 30. Thus, fiscal year 1989 (FY89) began on July 1, 1988 and ended on June 30, 1989. 2. The World Bank Group includes the World Bank, IFC, and MIGA. 3. In this report, investment amounts are generally given in U.S. dollars, regardless of the original currency or currencies of the investment, based on the exchange rate in effect on June 30, 1989. 4. Figures given in this report in connection with investments may refer to the following: (a) Approvals Loans, guarantees, or equity investments approved during FY89. (b) Commitments Loans, guarantees, or equity investments for which agreements were signed by IFC during FY89. (c) Disbursements Loans and equity investments (including under- written offerings) actually disbursed during FY89. 5. Figures cited in this report may refer to either net or gross investments: (a) Net investment Amount lent or invested for IFC's own account, exclusive of funds provided by others. (b) Gross investment Total investment, including both IFC's loan or equity participation and funds provided by other investors and lenders. 6. In some tables, totals may differ from the sum of individual figures because of rounding. TABLE OF CONTENTS Intemational Letter to the Board of Governors 2 Finance The Five-YearProgram and Fiscal Year 1989 Reviewed 3 Program Objectives and Outcome Compared 3 Corporation Main Activities of the Five-YearProgram 4 Fiscal Year 1989 in Review 6 Looking Ahead 9 Annual Report Investment Climate 11 1989 Report on Operations 15 Investment Review 15 The Portfolio 17 Financial Review 19 Regional Reports 23 Africa 23 Asia 26 Europe and the Middle East 30 Latin America and the Caribbean 33 Capital Markets 37 Other Operations 40 Syndications 40 Fee-Based and Other Advisory Services 43 Africa Enterprise Fund 44 Africa Project Development Facility 45 African Management Services Company 46 Caribbean Project Development Facility 47 Foreign Investment Advisory Service 48 Technical Assistance and Technology Transfer 48 Personnel Management and Administration 50 Financial Statements 51 Appendices 61 June 30, 1989 TO THE BOARD OF GOVERNORS, The Board of Directors of the International Finance Corporation has had this Annual Report prepared for the fiscal year ending June 30, 1989 in accordance with the By-Laws of the Corpora- tion. Mr. Barber B. Conable, President of the Corporation and Chainnan of the Board of Directors, has submitted this Report, together with the accompanying audited financial statements, to the Board of Govemors. The Directors are pleased to report that in fiscal year 1989 IFC continued to expand its invest- ment and advisory activities in its developing member countries while further strengthening its financial position. The Corporation reached a major milestone when its first public issue of debt securities was awarded AAA and Aaa ratings by the two leading rating agencies in the United States. The Board expresses its appreciation to the staff of IFC for their contribution to the success of the Corporation during the year. Board of Directors Directors Alternates Fawzi Hamad Al-Sultan Mohamed W. Hosny Paul Arlman Cvitan Dujmovic Mourad Benachenhou Salem Mohamed Omeish Gerhard Boehmer Michael von Harpe Frank Cassell J.A.L. Faint E. Patrick Coady Mark T. Cox, IV Jacques de Groote Bahar Sahin Mario Draghi Rodrigo M. Guimaraes J.S.A. Funna Jabez A. Langley Jonas H. Haralz Veikko Kantola Chang-Yuel Lim Robert G. Carling Andre Milongo Jean-Pierre Le Bouder Raymundo Morales Felix Alberto Camarasa Jorge Pinto Francisco Vanninil Helene Ploix Stephane Pallez Frank Potter Clarence Ellis Mohd. Ramli Wajib Le Van Chau C.R.Krishnaswamy Rao Sahib M. Mustafizur Rahman Masaki Shiratori Yukio Yoshimura Jobarah E. Suraisry Abdulaziz Al-Sehail Eduardo Wiesner Pedro Sampaio Malan Zhang Junyi Jin Liqun 1. To be succeeded by Edgar Ayales effective July 1, 1989. 2 THE FIVE-YEAR PROGRAM AND FISCAL YEAR 1989 44 REVIEWED 1.. ISCAL year 1989 marks the completionof - lFC's present Five-Year Program. Despite difficult economic conditions in the devel- oping world, particularly during FY85-86, most of the Program's objectives were achieved and some were surpassed. IFC's growth over the period, supported by the doubling of its authorized capital from $650 million to $1,300 million in December 1985, has made the Corporation a significantly larger and stronger institution, able to offer its devel- oping member countries a greater volume and vari- ety of services. IFC is working with the Government of Gabon and project PROGRAMOBJECTIVES AND sponsors to minimize disruption to the natural environment in OUTCOMECOMPARED connoction with the development of the Rabi-Kounga oil field. This review left investment plans little changed, but The FY85-89 Program called for the Corporation reonzdtesoe-ha-xetdicesso to undertake more than 400 investments, at a total precognizedthe slower-than-expected increases of cost for the account of IFC of $4,400 million. This project approvals in Africa and the energy explora- meant average meantavergeannualaual growthgowthrate rates overoverthe the five-ive-tion sector; a reduction in those two areas was coun- year period of over 20 percent in the volume of in- terbalanced by increases in Latin American and vestments approved and 7.5 percent in the number Caribbean projects, capital markets