IFC head outlines Philippines investment strategy

As the World Bank''s investment arm into the private sector, the International Finance Corporation recently earmarked a substantial $125 million for the Philippines. Country manager, Vipul C. Prakash, reveals the details of this investment.

Vipul C. Prakash, 40, is country manager for the International Finance Corporation (IFC) based in Manila, a position he has held since February 1997. During his tenure, IFC has made over 15 investments in the Philippines, including IFC's first investment in e-commerce, information technology, LPG distribution and healthcare. In the same period, IFC's Philippine portfolio has grown from about $500 million to $800 million and is now the IFC's ninth largest country exposure.

As country manager, Prakash also represents IFC on the boards of several companies engaged in venture capital, manufacturing and power generation, and is responsible for coordinating the World Bank Group's efforts in creating an enabling environment for Private Sector Development in the Philippines.

Prior to assuming his current position in the Philippines, Prakash was based in IFC's headquarters in Washington, D.C. for nine years. From 1992-1996, as senior investment officer in IFC's Telecommunications group, he was responsible for developing IFC's investment strategy in Asia and also for making IFC's first investments in wireless communications in India, Sri Lanka, El Salvador, Bolivia and Russia. From 1987-1992 as investment officer for Brazil and Bolivia, he was responsible for 12 investments in mining, petrochemicals, agribusiness, pulp & paper, textiles and infrastructure.

Prakash earned his B. Tech. degree from the Indian Institute of Technology in Delhi, India in 1982, his MBA from the University of Maryland, College Park, US in 1996 and graduated from the World Bank Group's Executive Development Program at Harvard Business School in 1998.

Q: How long ago was this $125 million investment planned for the Philippines? Is this because of Gloria Macapagal-Arroyo's installation as new President?

Vipul Prakash IFCA: The $125 million estimate of investments for the fiscal year July 1, 2000 to June 30, 2001 was an internal target based on projects in the pipeline. In response to the Asian crisis we have tried to increase our own investments in the country to create a demonstration effect. The investments are not directly related to the installation of a new president, but I think the renewed confidence should help to push them along.

Q: What programs are involved in this $125 million investment?

A: The proposed investments include infrastructure projects such as the Manila North Tollways Corporation (MNTC) and Ninoy Aquino International Airport 3 (NAIA T3). We are also looking to invest in other sectors such as healthcare (eye institute), financial sector (liquidity facility for a bank and reinsurance portal), SMEs (working capital facility) and information technology (cyberpark).

Q: How did IFC choose the investees?

A: IFC's criteria for choosing a project are consistent with our mandate to promote sustainable private sector investment in developing countries as a way to reduce poverty and improve people's lives. In our investments we are usually looking to do more than just provide financing. We are keen to play a catalytic role and look for investments that would have a significant development impact and demonstration effect. The investee companies are the ones I mentioned earlier.

Q: Regarding the micro-finance project, does IFC have a model being followed for the Philippines? Which countries use this model?

A: For the micro-finance project, IFC is working with IPC (Internationale Projekt Consult) of Germany, who have developed a successful micro-finance model in several countries starting with Peru, Bolivia and El Salvador in the 1980s and then in Eastern Europe in the 1990s. The micro-finance model that will be implemented in the Philippines is being applied in more than 15 countries including Kosovo, Haiti, Romania, Bulgaria, Moldova, Kazakhstan, Macedonia and Ghana.

Q: Any favored industry sectors? Why do you prioritize support for this sector?

A: An important lesson from the Asian crisis was perhaps that the most beneficial impact on a country can come from a well-developed financial sector, and therefore IFC is keen to promote the broadening and deepening of the financial sector in developing countries. Also, from the perspective of poverty alleviation, SMEs are very important since they constitute 80%-90% of companies in most countries but account for a disproportionately smaller portion of the GDP. Hence, IFC is keen to reach out to SMEs through appropriate intermediaries. More recently, IFC has been looking to do projects in the social sector - healthcare and education. IFC is also keen to reach out to the more underdeveloped regions within a country, for example, Mindanao in the Philippines.

Q: Do you think the Philippine administration's priorities are skewed in the wrong direction? Which direction should the economy be directed? Agriculture? Infrastructure?

A: The new government recognizes that its biggest challenges are to, spur confidence and growth and lower the budget deficit. The government seems to be moving in the right direction to address these challenges. The government should look to create a more favorable investment climate through improved infrastructure, stronger and well regulated capital markets, and greater transparency. In terms of a sector focus, the government should look to exploit the strength of the Philippines as a service economy.

Q: What is IFC's overall perspective of the Philippine economy going forward? Any growth rate forecast on the Philippines from IFC?

A: With the change in government, the mood of business in the Philippines seems to have improved significantly. The Peso has strengthened and the stock market has climbed out of its lows. We do not have any growth forecasts for the Philippines, but I understand that National Economic Development Authority has projected a growth rate of about 3.8% while some other multilaterals expect a growth rate closer to 3% for 2001. Clearly, the Philippines needs to grow at a higher rate in order to alleviate poverty.

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