The IFC chief described economic reforms as
From SHAMIM AHMED
Feb-11 - 17, 2002
After a long interval, the International Finance
Corporation has once again become active in Pakistan. The Chief
Executive of IFC, Mr. Peter Woicke who paid his first visit to Pakistan
last week, besides signing agreements pledging financial assistance of
over 46 million US dollars for 3 different projects showed keen interest
in the programme of developing small and medium enterprises launched by
the government of Pakistan. Mission is to promote sustainable private
sector investment in developing countries, helping to reduce poverty and
improving 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. Since its founding in 1956 through the close of the last
fiscal year in June 30, 2001, IFC committed more than 31 billion dollars
of its own funds and arranged 20 billion dollars in syndicate for 2,636
companies in 140 developing countries. IFC's committed portfolio at the
end of FY01 was 14.3 billion dollars.
The IFC delegation led by its Chief Executive had
detailed discussion with government officials and leading businessmen in
Karachi, and Islamabad. Besides meeting Minister of Finance and Commerce
the delegation also called on the President Pervez Musharraf and landed
the economic reforms carried out by the present government. The IFC
chief described economic reforms as impressive. The country needed these
reforms to remove irritant hampering investment. "The investment
climate can only improve in this way," he said. Mr. Peter promised
that IFC will certainly consider to help Pakistan in its privatization
programme as suggested by the President. The IFC delegation discussed a
number of issues with the president including Private Sector's growing
confidence and attracting foreign investment.
Talking to journalists Mr. Peter said that the IFC
had been very active in Pakistan in late 80s and early 90s in many
sectors including financial, power and cement. "In mid-90s IFC had
some worries due to some frustration and disappointments on the
investment made in Pakistan. The situation has now changed and IFC will
now onward play a more active role in Pakistan. We will continue to
invest in oil and gas sector and focus on domestic financial market
privatization programme and investment in IT project can also attract
IFC," he added.
IFC chief stressed upon Pakistan to continue
executing economic reforms agenda. "Foreign investors are examining
the situation very consciously and if Pakistan maintained stability it
could promote foreign investment, he said adding that the prevailing
tension between India & Pakistan and threats of war must be removed
to enable potential investors to finally make up their minds.
"There are some concerns in the ranks of foreign investors due to
Islamic banking system but we will find ways and means to proceed in the
Following are the 3 projects for which IFC delegation
pledged investment during its 4 days stay in Islamabad.
1) The IFC will provide $30 million to Lasmo Oil
Pakistan Ltd., (LOPL) a subsidiary of Lasmo Plc., which was acquired by
Italy's ENI SPA in 2001 to develop Pakistan's Bhit natural gas field.
The project involves the development, at an estimated cost of $283
million, of the Bhit gas field located in Kirthar Block, 150 kilometres
As project operator, LOPL will have a 40 per cent
stake in the Kirthar Block field with another 40 per cent shares held by
Kirthar Pakistan. B.V., a subsidiary of Premier and Shell, and the
remaining 20 per cent shares will be held by the Oil & Gas
Development Corporation Ltd., a government owned company.
The processed gas will be sold to Sui Southern Gas
Company, one of Pakistan's state-owned gas transmission and distribution
companies. IFC's $30 million loan will go towards financing LOPL's share
of development costs.
2) The IFC completed the debt restructuring for
Pakistan's leading cement manufacturer, D.G. Khan Cement Company Limited
(DGKCCL). As part of the restructuring, IFC issued a local currency
guarantee amounting to US$14.5 million to allow the company to borrow
locally in order to refinance part of its foreign currency debt. This is
the first restructuring of its type done by IFC in Pakistan and this
guarantee structure is now being replicated in other transactions.
The facility enables DGKCCL to partially hedge its
IFC "A" loan and to reschedule its foreign currency debt.
Under the facility's terms, the Pakistani Rupee equivalent of $14.5
million can be drawn up to July 15, 2004. The final maturity of the
facility is January 15, 2009. The financial institutions taking part in
the local currency syndication are Standard Chartered Grindlays Bank,
Deutsche Bank A.G., Credit Agricole Indosuez, Standard Chartered Bank,
and ABN AMRO N.V., with the latter institution acting as the agent bank,
led arranger, and documentation agent. DGKCCL is part of the Nishat
Group of Companies, the largest business house in Pakistan and the
single largest exporter of Pakistani textiles. Other comany in the group
include Nishat Mills Ltd. The Nishat Group and Group Chairman, Mian
Mohammad Mansha, played a critical role in supporting the company.
An equity investment of $1.6 million (about Rs. 100
million was committed for a 20 per cent stake in Pakistan first private
sector licensed Microfinance institution, first Microfinance Bank
Limited (FMFBL). According to IFC, the microfinance sector in Pakistan
is underdeveloped and dominated by public sector entities. IFC's
investment alongside reputable domestic and international investors is
designed to demonstrate that micro-finance institutions can be
The principal sponsors of the project are the Aga
Khan Fund for Economic Development (AKFED) and the Aga Khan Rural
Support Programme (AKRSP), a non-profit company established by the Aga
Khan Foundation in 1982, AKRSP is operating successfully in six northern
Pakistan districts of Gilgit and Baltistan as well as in Chitral in the
North West Frontier Province.
FMFBL has established its head office in Islamabad
where it also plans to open its first branch and additional branches
throughout the country, including in major cities such as Rawalpindi,
Karachi, and Peshawar. Over the course of the first two years, FMFBL
will absorb the clientele of AKRSO's microfinance programme.