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PACKAGED DEALS



Washington, D.C., June 9, 2000—The following is a package of brief announcements about IFC transactions signed in the past month for investments that will support private sector enterprises in the developing world. Packaged deals is a monthly digest of new IFC investments that have not been announced in our regular press releases. More information is available by contacting the Media Relations team listed at the end.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.



INDIA: EXPANSION OF HI-TECH PROJECT


The IFC is investing up to US$40 million in Moser Baer India Limited (MBIL), the only Indian manufacturer and exporter of floppy disks and optical media, to expand the company's capacity to make compact disk recordables (CD-Rs) and digital versatile disks (DVDs). The $292 million project will enable the company to set up an export oriented facility with annual production of 760 million CD-Rs on which data and music can be easily recorded. The project will put India on the world map for the manufacture of high quality optical media, make it an important source for such high-tech products, and sustain the domestic growth and development of this critically important technology sector.
The demand for optical data storage media is growing rapidly with increasing multimedia applications and the need for higher data storage capacity and greater operational reliability. CD-Rs have become one of the most popular of the various optical data storage media products. The project will benefit from low labor and overhead costs in India and economies of scale resulting from a global-sized facility. Its competitive advantages are a large, existing marketing network, distribution channels and customers, and experience in disk technology. As in the case of floppy disks, MBIL is expected to become one of the lowest cost CD-R manufacturers in the world.
IFC's financing includes an equity investment of $15 million and a loan of $25 million for its own account. In 1997, IFC invested to help MBIL expand its floppy disk capacity seven-fold and in 1998-99 to set up its CD-R facilities. While the loan for the floppy disk project has been completely repaid, IFC's new investment will increase its total exposure in MBIL to about $67 million.


THAILAND: UPDATE ON RESTRUCTURING OF IFC PROJECT,

THAI PETROCHEMICAL INDUSTRY PUBLIC COMPANY LTD. (TPI)


After more than two years of negotiations on a restructuring of TPI's $3.4 billion debt had failed to yield tangible results, the creditors of TPI took action. On January 17, 2000, Bangkok Bank, Citibank, Bank of America, US Ex-Im Bank, and IFC, acting on behalf of the informal creditors steering committee, filed a petition with the Central Bankruptcy Court of Thailand to have Thai Petrochemical Industry (TPI) declared insolvent. The petitioners also nominated Effective Planner Ltd. as planner (to prepare a plan of reorganization and to run TPI on an interim basis), while TPI nominated its own candidate. The court, in a landmark decision for Thailand and its new bankruptcy law and court, ruled in favor of the creditors on March 15 finding TPI insolvent and ordering its reorganization.
Since there were two nominees for planner, the court set April 19 for voting by all creditors on the selection of the planner. The role of planner is critical since the law provides that a planner has full control of a debtor company during the period (90-150 days) the reorganization plan is being prepared. In this case, the choice of planner would also have a dramatic impact on the content of the plan presented to creditors. For the creditors' nominee to be selected, the law required a minimum of 66-2/3 percent by value of those voting. After extensive lobbying of creditors by both sides, the April 19 vote gave the creditor nominee a 75.9 percent majority.
Effective Planner took over operations of TPI on April 20 and expects to complete its plan by the end of July. The reorganization plan is expected to be substantially the same as that approved by a substantial majority of creditors in early 1999. Once the plan is submitted to the Official Receiver of the court, the receiver sets a date for voting on the plan by creditors. At the same time a plan administrator will also be chosen. The plan administrator will be responsible for operating the company in accordance with the approved reorganization plan during the period of restructuring which is expected to continue through 2003.


EASTERN AND SOUTHERN AFRICA: PRIVATE POWER WORKSHOP


A private power workshop sponsored by IFC in Nairobi, Kenya, May 10-11, 2000, concluded that—for the region to prosper—it was essential for countries in eastern and southern Africa to open their economies to private investment in power and to step up regional cooperation.
With treasuries already stretched thin by population growth and urbanization, public spending on infrastructure has been steadily diminishing. The ability of African countries to compete on a global basis and attract foreign direct investment is dependent on an efficient infrastructure system—good roads and bridges, safe airlines, sound waste management, phones that work, clean water, and reliable electricity. In the power sector, IFC has been actively supporting this by investing in private power projects in a number of countries and by providing advisory services to governments.
The workshop was conducted in a participatory format, providing opportunity for delegates to define the agenda. Issues discussed were: improved access to electricity in rural areas; legal and regulatory reforms; organization and competition in electricity markets; regional power trading and functioning of power pools; opening of power sectors to private ownership, control and privatization; and project finance structuring, including contractual and security arrangements. The discussions resulted in a better understanding of the enabling environments needed to attract increased private investment flows and on technical and financial assistance from IFC.
Besides representatives from the World Bank and IFC, participants included, ministerial-level delegations, utility heads and regulators, from Kenya, Mauritius, Mozambique, Namibia, South Africa, Tanzania, Uganda, Zambia, and Zimbabwe; representatives of the Commission for East Africa Cooperation; the African Development Bank; the National Rural Electric Cooperative Association of the US; and independent experts in private power project finance.


TRENDS IN PRIVATE INVESTMENT IN DEVELOPING COUNTRIES:
IFC DISCUSSION PAPER #41


Despite worse economic conditions, there was a small increase in private investment in 1998 that produced another record year for private capital formation in developing countries, according to a new paper by the Economics Department of IFC.
The latest edition of "Trends in Private Investment in Developing Countries", by Lawrence Bouton and Mariusz Sumlinski, containing public and private capital formation trends for 50 developing countries, shows that the ratio of average private investment to GDP in 1998 increased slightly to 14.3 percent from 14.1 percent in 1997. Public investment, on the other hand, fell more sharply as a ratio to GDP, from 7.5 percent in 1997 to 7.0 percent in the most recent year.
The paper offers statistics and analysis on trends in private and public capital formation from 1970 to 1998 and discusses the role of private investment in economic growth. It finds a strong positive association between levels of private investment and rates of GDP growth, based on results from recent empirical literature updated with recent data on private investment. While the theoretical literature makes no distinction between private and public components of investment, the paper finds that the correlation between private investment and growth is positive and strong, while statistically the correlation between public investment and growth was low and perhaps zero.
This and other IFC discussion papers are available on-line at www.ifc.org/economics/pubs/discuss.htm.
For further information, please contact IFC Corporate Relations at (202) 473-7711 or send an e-mail request to Vincent Yemoh at
vyemoh@ifc.org.
For more information on any of these transactions, please contact one of the following people:
Ludi Joseph, (202) 473-7700,
ljoseph@ifc.org AFRICA & ASIA
Jannette Esguerra, (202) 458-5204,
jesguerra@ifc.org MIDDLE EAST & LATIN AMERICA
Brigid Janssen, (202) 458-4698,
bjanssen@ifc.org EUROPE
Lana Moriarty, (202) 473-6005,
lmoriarty@ifc.org GENERAL PRESS INFO