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
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
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 firstname.lastname@example.org.
For more information on any of these transactions, please contact one of
the following people:
Ludi Joseph, (202) 473-7700, email@example.com
AFRICA & ASIA
Jannette Esguerra, (202) 458-5204, firstname.lastname@example.org
MIDDLE EAST & LATIN AMERICA
Brigid Janssen, (202) 458-4698, email@example.com
Lana Moriarty, (202) 473-6005, firstname.lastname@example.org
GENERAL PRESS INFO