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Recent Activity: International Bank for Reconstruction and Development, International Finance Corporation, International Development Association

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
June 1969
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Aid Coordination

Groups of countries interested in development assistance to Colombia and Ceylon met under the chairmanship of the World Bank during the quarter ended March 31.

The fourth meeting of the Consultative Group on Colombia was held in January. The Group discussed a Bank report on the country’s current economic situation and prospects, and projects scheduled for external financing during 1969 and in the period to 1973. The Group agreed that Colombia’s recent economic performance and development prospects justified continued assistance from members of the Group. The members recognized that the volume of project lending envisioned for 1969 was realizable and that there was a convincing case for continuing program loan assistance on a declining scale through 1973.

The fifth meeting of the Group of countries interested in assisting Ceylon was held in March. The Group reaffirmed its endorsement of Ceylon’s long-term development strategy of encouraging growth in the two most promising sectors of the economy—domestic agriculture and manufacturing—and welcomed the major policy decisions taken toward this end in 1968. It noted with satisfaction that Ceylon’s development efforts, combined with financial assistance from abroad, have begun to bear fruit in accelerating economic growth, which in 1968 had reached the highest level in the postwar period. The Group voiced its concern over the decline of export earnings for the third consecutive year and agreed that more attention needed to be given to the problems of Ceylon’s export industries, particularly the tea industry, which accounts for two thirds of these earnings.

IDA Credits Signed During the Third Quarter of Fiscal 1969
COUNTRYPURPOSEAMOUNT

($ millions)
DahomeyAgriculture4.60
GuyanaEducation2.90
IndiaIndustrial Imports125.00
PakistanTelecommunications16.00
PakistanTechnical Assistance2.00
Papua and New GuineaAgriculture1.50
SenegalAgriculture6.00
SomaliaPort Engineering0.55
TanzaniaRoads8.00
TurkeyAgriculture12.00
Upper VoltaTelecommunications0.80
Credits signed during the third quarter of fiscal 1969179.35
Credits signed during the first six months of fiscal 196943.52
Total loans during the nine months of fiscal 1969222.87

Fresh commitments by the Group in 1968 amounted to $68 million and disbursements to $50 million. These were the highest annual levels reached since the Group came into existence in 1965. On the basis of indications given by member countries, disbursements in 1969 (including aid from earlier commitments) are expected to be substantially larger than in 1968. Several members, including the Asian Development Bank, the World Bank, and IDA also expect to be able to make substantial commitments for projects in several fields, including irrigation, power, and industry. Several delegations expressed the view that the terms on which assistance is provided should pay due regard to the potential debt servicing problems facing Ceylon.

Transport Studies in Turkey

The Government of Turkey, the United Nations Development Programme, and the World Bank signed an agreement in March providing for a transport coordination study and the preparation of a long-term program for improvements in the administration and operation of the Turkish State Railways and of a ten-year railway investment program.

The United Nations Development Programme has allocated $869,900 for the project. The Turkish Government is contributing in funds and in services the equivalent of $234,000. The World Bank is Executing Agency and has retained the Italian consulting firm, Italconsult S.P.A. of Rome to carry out the studies. The consultants began their field work on March 10 and the project is scheduled for completion in three years.

From a physical point of view, transport facilities in Turkey are generally adequate for present needs. There has been considerable progress in road construction and improvement, ports have ample capacity, and for the most part the railways can move all the traffic offered. However, the Government has had to subsidize heavily the operations of the various transport facilities, which has meant a substantial diversion of funds from other public investments which would accelerate economic growth. The annual deficits of the State Railways are particularly large.

The transport coordination study will include an assessment of Turkey’s present and future transport needs and the formulation of transport policies appropriate to these needs, and the establishment and initial operation of a permanent transport coordinating agency in the Ministry of Transport and Communications. The consultants will review the management, organization, administration, and staffing of the railways and make recommendations for their improvement; formulate a ten-year railway investment program; and make recommendations relating to the coordination of the railway with other modes of transport.

World Bank Borrowings

In January the World Bank placed an issue of DM 125 million ($31.25 million) with the Westdeutsche Landesbank Girozentrale in cooperation with other German banks. Interest will be at a rate of 6½ per cent per annum and repayment will be in eight annual installments starting in January 1977.

This was the second of the three tranches of the private placement of a sum totaling DM 400 million ($100 million). The agreement for the first tranche of DM 150 million was signed in December 1968. The third tranche, amounting to DM 125 million ($31.25 million) was announced in March. Interest on the third tranche will be at a rate of 6 per cent per annum and repayment will be in eight annual installments starting in April 1977.

In March the Bank announced the successful placement of a $192.65 million issue of U.S. dollar bonds in markets outside the United States. The Bank had authorized an issue of $175 million with provision for an increased amount should the offering be oversubscribed. The bonds were purchased by central banks and other governmental institutions for 57 different countries and by international organizations. The new World Bank bonds known as “Two-Year Bonds of 1969, due March 15, 1971,” bear interest at 6% per cent, payable semiannually, with the first payment due September 15, 1969. The issue was sold at par. The new issue was dated March 15, 1969, on which date a $100 million Two-Year Bond issue, also placed outside the United States in March 1967, matured.

World Bank Loans Signed During the Third Quarter of Fiscal 1969
COUNTRYPURPOSEAMOUNT

($ millions)
FinlandIndustry—Development Finance Company22.00
GabonRoads6.00
GuyanaEducation2.90
IrelandElectric Power14.50
Malagasy RepublicLivestock2.80
MalaysiaElectric Power11.50
NigeriaIndustry—Development Finance Company6.00
PakistanIndustry—Development Finance Company40.00
SenegalAgriculture3.50
TanzaniaRoads7.00
TunisiaWater Supply15.00
TurkeyAgriculture—Irrigation12.00
TurkeyIndustry—Development Finance Company25.00
Loans signed during the third quarter of fiscal 1969168.20
Loans signed during the first six months of fiscal 1969588.40
Total loans during the nine months of fiscal 1969756.60

IFC Commitments

IFC commitments during the third quarter (January 1-March 31) of fiscal 1969 were in pulp and paper, steel products, fertilizer production, tourism, industrial financing institutions, and textiles.

IFC invested in the $17 million modernization and expansion program of Karnaphuli Paper Mills Limited, located near Chittagong, in East Pakistan, and in Papel e Celulose Catarinense, S.A., a new $33 million mill to be built in Lajes, Santa Catarina, in southern Brazil.

A promotional investment made by IFC in Compañía Pino Celulosa de Centro America, S.A. (Copino) will finance the first stage of a projected pulp, paper, and timber operation. This investment was made under IFC’s new policy of giving limited financial support and technical assistance to embryo organizations established to lay the groundwork for full-scale development investments, in instances where it is felt that the completed project would be a sound private enterprise suitable for IFC financing.

Continuing to pursue the objective of increasing the availability of fertilizers in the developing countries, IFC provided the largest portion of foreign exchange funds required to finance a fertilizer project in Goa, southwest India, which will produce urea and compound fertilizers at a cost in excess of $70 million. A new company, Zuari Agro Chemicals Limited, will build and operate the plant and market its output.

Tourism Investment

IFC’s commitment to a first-class tourist and convention hotel to be built in San Salvador, El Salvador, reflects the growing importance of tourism projects as a means of expanding the economies of less developed countries. The new hotel will have 224 rooms and will increase first-class accommodations in the city by 60 per cent.

IFC investments in the steel industry were in Dalmine Siderca, S.A., Argentina’s largest private steel producer and the only producer in the country of seamless steel pipe. The IFC commitment will help the Argentine company increase its ingot production and raise new working capital.

IFC Investment Commitments Announced During the Third Quarter of Fiscal 1969
COUNTRYTYPE OF PROJECTAMOUNT $
ArgentinaSteel products
Dalmine Siderca S.A.3,000,000
BrazilPulp and paper
Papel e Celulose Catarinense, S.A.1,059,000
ColombiaTextiles
Compañía Colombiana de Tejidos, S.A. (ninth commitment)23,581
EcuadorIndustrial financing institution
Ecuatoriana de Desarrollo, S.A.
(Cofiec)251,371
El SalvadorHotel
Hoteles, S.A.933,400
HondurasPulp and paper (Promotional investment)
Compañía Pino Celulosa de
Centro America, S.A.37,500
IndiaFertilizer production
Zuari Agro Chemicals Ltd.15,940,000
IranSteel strip and pipe
Ahwaz Rolling and Pipe Mills Company3,871,287
PakistanPulp and paper
Karnaphuli Paper Mills, Ltd.6,230,001
TurkeyIndustrial financing institution
Turkiye Sinai Kalkinma Bankasi417,222
Total investments announced during the three months of fiscal 1969 ended March 31, 196931,763,362

In Iran, IFC helped to finance Ahwaz Rolling and Pipe Mills Company, the country’s first facility for making hot-rolled steel strip. The new plant will be able to produce 140,000 tons of steel strip and 40,000 tons of pipe a year.

IFC continued its support to private development finance companies by making an equity investment in Turkiye Sinai Kal-kinma Bankasi, A.S., making IFC the second largest stockholder in Turkey’s leading private development bank. IFC J also became one of the largest shareholders in Ecuatoriana de Desarrollo S.A. Compania Financiera (Cofiec) by purchasing 55,000 shares in the Ecuadoran private development bank.

An additional commitment, IFC’s ninth, was made during the period under review in the Colombian cotton textile manufacturer, Compania Colombiana de Tejidos. IFC first invested in this company in 1962.

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