World Bank Document · 2016. 7. 9. · 1/ Kohat Cement. 2/ Iron and steel, basic metals, heavy engineering, heavy electrical automa-tive assembly and manufacturing, tractor assembly,

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 446 0

PROJECT COMPLETION REPORT

PAKISTAN

THE NATIONAL DEVELOPMENT FINANCE CORPORATION PROJECT(CREDIT 546-PAK)

April 28, 1983

Industrial Development and Finance Division

South Asia Projects

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

US$1 Rs 9.90Rs 1 = US$0.10Rs I million = US$100,000Rs 1 billion = US$1.0 million

ACRONYMS

ADB - Asian Development BankADP - Annual Development PlanBIM - Board of Industrial ManagementECNEC - Economic Committee National Economic CouncilGOP - Government of PakistanICP - Investment Corporation of PakistanIDBP - Industrial Development Bank of PakistanIERR - Internal Economic Rate of ReturnIFRR - Internal Financial Rate of ReturnNCCC - National Credit Consultative CouncilNWFP - North West Frontier ProvincePICIC - Pakistan Industrial Credit and Investment

CorporationSBP - State Bank of Pakistan

FISCAL YEARS

GOP - July 1 - June 30NDFC - January 1 - December 31

PROJECT COMPLETION REPORT FOR OFFICIAL USE ONLY

PAKISTAN

NATIONAL DEVELOPMENT FINANCE CORPORATION PROJECT(CREDIT 546-PAK)

Table of Contents

Page No.

PREFACE .... ........... ........... * ..................... .. i

BASIC DATA SHEET .. ......... ii ..... *.

HIGHLIGHTS ............... iii

I. INTRODUCTION. 1

II. ENVIRONMENT .1

Environment .Performance of the Public Sector. 3

III. OBJECTIVES OF THE CREDIT. 4

IV. CREDIT UTILIZATION. 5

V. PERFORMANCE OF NDFC. 6

Institutional Aspects. 6Procedures and Standards. 7Research and Development. 7Operations. 8Consortium Financing .................................... 10Promotion of Local Capital Goods Industries . ............. 10Financial Position ............ 11........................ llNDFC's Performance vis-a-vis Credit Objectives .......... o. 11

VI. IDA's ROLE ................................................ 12

VII. CONCLUSIONS ................ o ............................. 13

ANNEXES

1. Credit Utilization ............... . 142. Classification of Subprojects financed under

Credit 546-PAK ............. 153. Lending Activities 1973-1980 .................... .. ...... 184. Consortium Financing 1974-1980 ..... ..................... 195. Balance Sheets 1976-1981 ....... ..... 206. Income Statements 1976-1981 ......... o.............. 227. Analysis Loan Portfolio in Arrears 1977-1981. ..... o.. 238. Collection Performance 1979-1981 ... ......-.. 259. Projected and Actual Results, 1979 ..* ................. 2610. Comments from the Government of Pakistan .... - ........ 2911. Comments from NDFC .... ... . o-*-v-. .... 30

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.


PAKISTAN


PREFACE

This report presents an evaluation of Bank Credit 546-PAKto the National Development Finance Corporation (NDFC) for US$30 million.The credit was approved in May 1975 and closed in March 1982, aftercancellation of US$500,000.

The PCR was prepared by the South Asia Regional Officeon the basis of a country visit in August 1982, a Project CompletionReport, dated August 15, 1982, prepared by NDFC, the Staff Appraisaland President's Reports, the credit documents and study of the projectfiles. The report presents a factual review of NDFC's use of the creditproceeds and of its institutional development over the last sevenyears. Comments received from the Borrower have been taken intoaccount in finalizing the report and are reproduced as Annexes 10and 11.

This project has not been audited by the OperationsEvaluation Department.

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BASIC DATA SHEET

PAKISTAN


KEY PROJECT DATAAmounts (in US$M)

As of 2/28/83Original Disbursed Cancelled Repaid Outstanding

Credit 546 30.0 29.49 .51 - 29.49

CUMULATIVE CREDIT DISBURSEMENT

FY76 FY77 FY78 FY79 FY80 FY81 FY 82

(i) Planned 8.5 22.5 28.8 30.0 30.0 30.0 30.0(ii) Actual 1.2 15.9 22.6 25.1 28.2 28.6 29.5

(iii) (ii) as % of (i) 14 71 78 84 94 95 98

PROJECT DATA

Original Actual orCredit Date Re-estimated

Board Approval 4/22/75 4/22/75Credit Agreement 5/15/75 5/15/75Effectiveness 7/17/75 7/17/75Credit Closing 9/30/79 3/31/82

MISSION DATA

Month, No. of No. of Date ofYear Weeks Persons Manweeks Report

Identification 6/74 1 1 1 n.a.Preparation 6/74 1 1 1 n.a.Appraisal 10/74 3 1 3 4/75

Supervision I 5/76 2 3 6 8/76Supervision II 4/77 2 2 4 7/77Supervision III 5/78 2 2 4 7/78Supervision IV 3/79 1 2 2 4/79Supervision V 1/80 2 2 4 4/80Completion 8/82 1 2 2 12/82

OTHER DATA

Borrower: Government of Pakistan

Executing Agency: National Development Finance Corporation

Fiscal Year of Borrower: June 30

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PAKISTAN


HIGHLIGHTS

Credit 546-PAK of US$30.0 million was the first and, to date,only credit to the National Development Finance Corporation (NDFC).The credit was granted to NDFC in 1975 for onlending to industrialprojects in the public manufacturing sector and was the first creditto a Government owned DFC in the South Asia Region. IDA's mainobjectives were to: (i) develop NDFC into a sound financial insti-tution; (ii) assist GOP through NDFC in shaping new investments inpublic industrial projects through rigorous project appraisal; and(iii) cortribute to GOP's industrial policy and efficiency of publicsector units through sector studies,

The project was completed after a delay of 24 months although84% of the credit had been disbursed on schedule. The delay isattributed mainly to procurement problems of one large subproject(Kohat Cement). IDA's objective of building NDFC into a sound finan-cial institution capable of mobilizing domestic resources has beenmet as NDFC has emerged as a mixed bank providing full range of bank-ing services. NDFC is highly regarded by its clients, financialcommunity and GOP. NDFC was less successful in meeting other projectobjectives due to resource constraints and the rapidly changing socio-political factors during the implementation period. In retrospect,these other objectives were relatively ambitious given the 'infant'status of NDFC at the time of appraisal and unforeseen changes inGOP policies. Given the difficult and uncertain environment in whichNDFC has been operating, NDFC's management has performed well andestablished NDFC as a viable development financial institution. Thefollowing points are of particular interest:

- the changes in GOP's industrial policy (paras. 4-5)which diffused the role of NDFC during the projectimplementation period;

- the mixed bank nature of NDFC which made it possibleto provide both working capital and term loans toits clients (paras. 22-23); and

- the promotion of the local capital goods industries(para. 28).


PAKISTAN

NATIONAL DEVELOPMENT FINANCE CORPORATION PROJECT

(CREDIT 546-PAK)

I. INTRODUCTION AND BACKGROUND

1. Credit 546-PAK for US$30.0 million was the first and to date the onlycredit to the National Development Finance Corporation (NDFC). The CreditAgreement was signed on May 15, 1975 and provided for an onlending rate fromthe Government (GOP) to NDFC of 8.5% p.a.; and a composite repayment periodof 15 years, including a grace period of three years. The credit wasexpected to be fully committed by September 30, 1977, and disbursed by Sep-tember 30, 1979. However, due to delay in the implementation of one largesubproject, 1/ completion was delayed until December 31, 1981. At closure,US$29.5 million has been disbursed leaving US$0.5 million to be cancelled.

2. In 1972, as part of its package of social, economic and politicalreforms, GOP took over the management of 31 major manufacturing enterprisescovering 10 subsectors. 2/ These units had total assets of Rs 2.2 billionand accounted for about 8.0% of Pakistan's total industrial assets. 3/ ABoard of Industrial Management (BIM) was established, with the Minister ofProduction as Chairman, to control these units and to carry out futureinvestments in the public industrial sector. In January 1973, GOP estab-lished NDFC as a mixed bank to provide local and foreign currency assistance,both short and long-term, to the units taken over in 1972, and to theindustrial units already wholly or partly owned by GOP.

II. ENVIRONMENT

3. At the time the Credit was made, the political and economic situationin Pakistan was in flux. GOP was introducing a number of measures in thefield of industrial operation and investment, labor relations and agrariantenancy. The rupee was devalued from Rs 4.76 to Rs 9.9 to the US dollar and

1/ Kohat Cement.

2/ Iron and steel, basic metals, heavy engineering, heavy electrical automa-tive assembly and manufacturing, tractor assembly, chemicals, petrochemi-cals, public utilities and cement.

3/ IBRD Report No. 657a-PAK, April 21, 1975.

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the export bonus system with its multiple exchange rates was abolished. From1972 until 1977, GOP continued its program of nationalization by taking overthe vegetable ghee industry in 1973, commercial banking and shipping in 1974,and flour milling, rice husking and cotton ginning in 1976. In line withthis policy of expanding the role of the public sector, industrial investmentincreased rapidly from Rs 1.1 billion, or 42.6% of total industrial invest-ment in FY75 to Rs 6.1 billion, or 74.3% of total in FY78 (Table 1). Thiswas mainly due to large investments in basic industries, i.e., steel, cement,fertilizers and the expansion of the other nationalized industries.

Table 1: Industrial Investment(Rs million)

Sectoral Investment Public as % ofYear Private Public Total Total Investment

FY75 1,437 1,065 2,502 42.6FY76 1,819 3,182 5,001 63.6FY77 2,111 4,514 6,625 68.1FY78 2,120 6,144 8,264 74.3FY79 2,479 6,659 9,138 72.9FY80 3,409 5,593 10,002 65.9FY81/a 4,249 4,792 9,041 53.0FY82/b 4,456 4,061 8,517 47.7

/a Revised.7T Provisional.

Sources: State Bank of Pakistan.Economic Survey

4. Partly as a result of GOP's policy of nationalization and partly as aresult of the loss of market in East Pakistan, manufacturing productiondeclined in FY72 but increased rapidly in FY73 and FY74 as the industrialsector recovered from these disruptions. However, from FY75 to FY77 thesector stagnated with an annual average growth rate of only 0.81% p.a. InFY77, GOP announced a number of significant changes to its industrial policy.Investment in public sector enterprises was curtailed and a number ofindustries were opened to the private sector. To this end, GOP provided anumber of fiscal incentives to stimulate private investment. These includedreduction of the long-term lending rate from 14% to 11%, enhancement ofexport financing facility and the granting of numerous tax exemptions to thetextile industry and new industrial undertakings. Foreign exchange borrow-ings were encouraged under the non-repatriable foreign investment schenie.

5. The policy changes introduced produced positive results both on theeconomy and on the manufacturing sector. From the stagnation in FY75-FY77

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output increased with significant contributions to GDP. In FY78, the manu-facturing sector griw at a rate of 9.2% compared with 7.4% for the economy,with the growth momentum maintained thereafter except for the temporary setback in FY79 due to the second round of oil price increases. DuringFY80-FY82, the sector outperformed the economy and grew at an average annualrate of 9.3% compared with 6.4% for the economy (Table 2).

Table 2: Growth in Manufacturing During FY75-FY82

Percentage Change Per AnnumFY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82

GDP at factor cost 3.9 3.3 2.5 7.4 4.7 7.0 5.7 6.2Manufacturing 0.6 1.5 0.4 9.2 4.6 9.5 9.2 9.5

Source: IBRD Economic Report No. 3802-PAK, April 14, 1982.

Performance of the Public Sector

6. The performance of most sector corporations after nationalization waspoor due to: (i) the lack of operational autonomy; (ii) management changes;(iii) labor unrest; (iv) GOP's policies such as price control. In FY77, GOPappointed a Commission to study their problems and recommend ways to improvetheir efficiency. The Commission recommended a number of measures, includingthe appointment of boards of directors for each corporation to monitor theirperformance and enable them to function more independently. Accordingly, theEconomic Reforms (Amendment) Ordinance, 1978, was passed and the boards ofdirectors for a large number of companies were constituted. The majority ofthe members on the boards are Government nominees, although there are repre-sentatives of the private sector. Subsequently in 1978, GOP passed theTransfer of Managed Establishments Order No. 12 of 1978" to enable the returnof nationalized units to the former owners. 1/ In 1979, the control overpublic enterprises was transferred to the Ministry of Production and the BIMwas abolished to allow companies to operate more independently under theguidance of their boards of directors.

7. With these changes, the autonomy of public sector units was sig-nificantly increased and this has resulted in a general improvement in over-all efficiency (Table 3). In FY82, the public manufacturing corporations(PMCs) as a group earned a pretax profit of Rs 921 million on sales of Rs 18billion compares with Rs 0.7 billion and Rs 15.2 billion, respectively inFY81. However, the return is inadequate and clearly shows a need for further

1/ Two companies, i.e., Nowshera Engineering Co. Ltd. and Lahore Engineeringand Foundry Limited were transferred to their former owners and cases ofother units are under examination.

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improvement. In 1980, GOP/IDA undertook a detailed study on the problems ofpublic enterprises and identified a number of policy and procedural changes,including the need to introduce performance evaluation criterion. 1/ Thislast recommendation is being implemented as a condition of the StructuralAdjustment Loan, which was approved in 1982. An expert cell has been estab-lished in the Ministry of Production and a sample of firms has been selectedto operate the new performance evaluation system. GOP is also consideringimplementing other policy recommendations, including mergers and disinvest-ments of small units.

Table 3: Public Manufacturing Corporation (PMCs)(Rs million)

FY79 FY80 FY81 FY82

Production(Index 1978/79 = 100) 100 131.8 132.7 149.9

Net Sales 8,299 13,017 15,226 17,977Pretax Profit 20 587 746 921Taxes and Duties 2,019 3,351 3,512 3,772Manufacturing Costs 6,354 10,493 11,939 13,777

Source: Public Sector Industries, Annual Report FY82, ExpertAdvisory Cell, Ministry of Production, Government ofPakistan.

III. OBJECTIVES OF THE CREDIT

8. Until 1975, the Bank Group has been lending entirely to privateindustry through the Pakistan Industrial Credit and Investment Corporation(PICIC) and the Industrial Development Bank of Pakistan (IDBP). However, atthat time both institutions were facing severe operational and financialproblems due to the loss of a large portion of their assets in East Pakistanand the devaluation of the Rupee by 131%. PICIC concentrated its financingon large/medium-scale, private sector enterprises and IDBP was cateringmainly to small and medium-sized industries. NDFC, therefore, has an impor-tant role to play in providing financial assistance to the nationalizedindustries which were facing serous financial and operational problems.GOP's industrial policy in 1975 clearly preferred the dominant role of thepublic sector in industry especially in the non-textile subsectors. IDA felt

1/ "Efficiency of Public Manufacturing Enterprises" dated August 1981 byLeroy Jones.

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that it could play a key role in assisting GOP in addressing some of theseproblems by working with NDFC, as local intermediary to:

(i) provide more balanced financial packages for publicsector corporations.

(ii) shape new investments in public industrial projectsthrough the application of high project appraisalstandards and independent assessment;

(iii) develop a primary repository of information on publicsector units; and

(iv) contribute to GOP's industrial policy and efficiencyof public sector units through sector studies to identifyand offer solutions affecting policy/operations.

IV. CREDIT UTILIZATION

9. Although there was a general slump in the economy in FY77, a substan-tial portion of the credit (US$23 million) was committed by September 30,1977 the original closure date for submission of projects. At GOP's request,the terminal commitment date was extended to June 30, 1978 by which time thecredit was fully committed.

10. By the credit closing date of September 30, 1978, US$25 million hadbeen disbursed. The undisbursed balance of US$5 million related to the KohatCement and Mustehkam Cement subprojects which were not implemented onschedule due to delayed Government approvals, changes in civil designs, anddelayed execution of contracts. To accommodate these delays, the closingdate was extended first to November 30, 1980 and subsequently to December 31,1981. As of December 31, 1981, US$29.5 million has been disbursed and thebalance US$0.5 million in respect to the Kohat Cement Project was cancelled.Overall, the utilization of the credit was satisfactory.

Characteristics of Subprojects Financed

11. Twenty-two subprojects were financed under the Credit (Annex 1) ofwhich seven projects (32%) were above NDFC's free limit of US$1 million andranged between US$1.4 million and US$4.6 million, while the remaining (68%)ranged between US$57,000 and US$1 million. By size of subloan amount, 89% ofthe Credit went to projects requiring between US$0.8 million and US$3 mil-lion. The regional dispersion of the subloans shows concentration of financ-ing in Sind (43%) and Punjab (37%). This follows the historical pattern ofindustrial development in Pakistan which GOP has been endeavoring to rectify.However, efforts were made by NDFC to reach the less developed regions, i.e.,NWFP and Baluchistan, which together received 20% of the credit.

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12. Sectoral distribution of the Credit was concentrated in the energyand cement sectors which together utilized 56% of the Credit. Of the US$10.8million utilized by the energy sector, US$7 million went to two oil companies(POL/OGDC) which together generated net foreign exchange savings of aboutUS$70 million. The cement sector received US$5.7 million or 19.3% of thecredit through loans to two cement units for Balancing, Modernizing andRehabilitation (BMR), one new cement project (Kohat Cement) and an expansionproject to double the capacity of an existing project (Mustehkam Cement).

13. About 76% of the credit was utilized for BMR and expansion projects.The new subprojects which accounted for US$7 million or 24% of the credit,were Kohat Cement (US$4 million) and two chemical subprojects (NationalFibres and Ravi Rayon Limited) which received US$0.9 million each.

14. Annex 2 provides details on the status of subprojects financed underthe credit. As of December 31, 1981, 10 projects involving loans of US$16.6million were under construction or in pre-operating stages. Nine projectsinvolving loans of US$12.2 million were operating profitably and threeprojects with loans of US$0.8 million were facing technical or financialdifficulty. While the performance of subprojects financed by NDFC appears tobe satisfactory, a full assessment can only be made two to three years fromnow when the projects are completed and operational.

15. In terms of the economic benefits, the Credit resulted in a capitalmobilization ratio of 1:8.2 (US$243 million). The projects financed underthe credit generated a net foreign exchange savings/earnings of US$153 mil-lion p.a. The total direct employment generated by the 22 projects was about6,621 with a capital/job cost ratio of US$36,000. Based on NDFC's appraisalreports, the ex ante economic rate of return of the 10 major subprojects wasbetween 15-50% (Annex 2).

V. PERFORMAANCE OF NDFC

Institutional Aspects

16. Management and Organization. Since its creation in 1973, NDFC hashad reasonable continuity of top management. The first chairman (a commer-cial banker) guided NDFC's operations from 1973 until mid-1978, For twelvemonths NDFC was under the control of a caretaker chairman and in mid-1979,GOP appointed NDFC's present chairman, a former civil servant in the Ministryof Finance. No fixed term of appointment was set by GOP for any of theappointments, although NDFC's Act provides that an appointed chairman willserve for an initial period of three years. The continuity of appointment ofthe present chairman has allowed NDFC the management guidance needed duringthe periods when GOP was introducing its changing policies for the publicsector.

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17. Under its three chairmen, NDFC has evolved an organization structurewhich generally meets the needs of NDFC's operations. Functional groupingsfor appraisals, end-use and administration are sound, although NDFC's opera-tions could be improved by having the proper organization and proceduresnecessary to cope with the increasing volume of working capital operations.

18. Staffing and Training. Since 1973 NDFC has experienced a continuingloss of seasoned officers. This loss has had a considerable impact on thequality of NDFC's operations, particularly project appraisals and subsectoranalyses. Within its powers NDFC has attempted to minimize the level ofresignations which are due, in large part, to the uncompetitive salary struc-ture allowed by GOP for the specialized staff of the Development FinancingInstitutions (e.g., PICIC, IDBP, etc.). Also, NDFC has followed a soundprogram of graduate recruitment and training.

Procedures and Standards

19. Appraisals. While the general standard of NDFC's systems and proce-dures are satisfactory, there exists scope for improvement in NDFC's projectappraisals which could be more analytical, objective and balanced. In par-ticular, there is still a need to give: (i) a clearer definition of sub-project objectives; (ii) an indication of likely development impact; (iii)a more indepth and detailed sector and market analysis; and (iv) realisticassessments of cost and project implementation periods.

20. End Use. With the establishment of an End Use Division in 1979,NDFC's project supervision activities have shown a continuing rate ofimprovement. The scope and depth of end use operations is generally com-prehensive, although there is variation in the quality and a lack of focusupon the key problem areas for corrective action to control arrears. WhileNDFC's portfolio is predominantly public sector, with NDFC having the abilityto affect arrears against payments due to GOP, these weaknesses do not assumegreat importance. However, as NDFC expands its operations into the privatesector, there will be a need to concentrate upon them, in order to minimizearrears.

Research and Development

21. Up to 1980, NDFC had done little in the way of substantive projectdevelopment and research activities. Where subsector studies had been car-ried out the criteria used in the selection of the subsectors was not clearand there appeared to have been little relationship to NDFC's portfolioinvestments or proposed lending strategy. The studies which were carried outwere satisfactory in the area of review, but did not address such aspectsas the economic and social significance of sectoral operations, legislativeor policy constraints. More recently, NDFC's sector work has attempted toaddress these aspects, with satisfactory results.

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Operations

22. Unlike most DFCs associated with the Bank Group, NDFC is a mixed bankwqhich provides working capital and term loans. NDFC is also permitted by itsAct to mobilize resources directly from the public by way of deposits andother financial instruments such as debentures. Table 4 provides a summaryof NDFC's operations since its inception in FY73. Characteristics ofprojects financed by NDFC are given in Annex 3. 1/

Table 4: Summary of Operations(Rs million)

Up to Cumulat:ive1976 % 1977 1978 1979 1980 1981 Total %

Loan Approvals

Foreign currency 535 36 111 106 72 134 395 1,389 20

Local currency 373 25 61 74 293 315 317 1,458 22term loans

Working Capital Loan 563 39 340 455 539 809 1,186 3,931 581,470 100 512 636 904 1,258 1,898 6,778 100

Loan Commitment 1,055 - 450 609 749 1,146 1,548 5,557Loan Disbursement 851 - 520 511 674 975 984 4,515

Source: NDFC

23. NDFC's operations were sluggish during the first three years of itsoperations (1974-76) due to the teething problems involved in establishing anew institution and the uncertain economic climate. NDFC concentrated onmaking term loans out of the IDA credit, its equity, and suppliers' creditsfrom the State Bank of Pakistan (SBP). NDFC at that time was headed by anexperienced commercial banker, who placed emphasis on mobilizing domesticresources by way of deposits and running NDFC as a commercial concern. Sincethe bulk of deposits were of less than one year in maturity, NDFC had toplace the funds accordingly for liquidity reasons. As of December 31, 1976about 39% of NDFC loans were for working capital.

24. NDFC's role was clearly defined until 1977 when GOP changed itsindustrial policies. As public industrial investment was restricted and therole of private sector enhanced, NDFC's role was diffused. The situation was

1/ For the entire operation of NDFC.

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further complicated by the fact NDFC did not have a chairman for one year andits long-term resources were restricted to the SBP's line of credits asresources from multilateral sources were not available. NDFC's main resour-ces were deposits from its public sector clients and the public (Table 5).

Table 5: Mobilization of Domestic Resources 1974-81(Rs million)

1974 1975 1976 1977 1978 1979 1980 1981Deposits

Less than one year 173 306 518 702 769 897 992 1,154One year and over 19 58 184 291 332 340 334 414

Total (A) 192 364 702 993 1,101 1,237 1,326 1,568

Annual increase (%) 90 93 41 11 12 7 18

Total liability (B) 202 408 935 1,434 1,639 1,913 2,220 2,735

Deposit as % total 95 89 75 69 67 65 60 57liabilities (A/B)

Source: NDFC annual reports.

25. Because of the scarcity of long-term resources and disincentives forterm transformation, 1/ NDFC had no choice but to make working capital loans.NDFC's present chairman, who took office in 1979 adopted a new strategy ofdiversifying and mobilizing additional resources. However, due to the delayin obtaining additional term resources, the composition of NDFC's businesschanged dramatically. By December 31, 1981 cumulative loans for workingcapital amounted to Rs 3.9 billion or 58% of the total compared with 39% in1976 (Table 4). 2/ The share of foreign currency loans also declined from36% as the end of 1976 to 20% by December 31, 1981 due mainly to the lack offoreign currency resources. This position is likely to change only graduallyas NDFC mobilizes additional long-term resources which it can profitablyonlend. 3/

1/ In 1978, GOP reduced the interest rate for term loans from 14% to 11%making it unprofitable to finance long-term loans with deposits.

2/ NDFC would have been able to carry out more terms transformation if theinterest rate on long-term had not been reduced to 11%.

3/ ADB's second loan of US$50 million became available to NDFC in early1982.

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26. In 1979, in line with changes in GOP industrial policy, NDFC's roleand Statement of policy were redefined to allow it to finance private sectorprojects which met the following criteria: (i) procuring at least 40% ofmachinery requirements, in terms of value, from public sector enterprises,or; (ii) procuring equipment for at least Rs 10 million in value from publicsector enterprises; or (iii) representing an industry originally earmarkedfor the subsequently opened to the private sector. Subsequently in 1982, GOPapproved further amendments enabling NDFC to finance private sector projectsin capital goods and energy as well as projects costing up to Rs 100 million.Thus, NDFC now can finance most projects in the private sector while continu- 4ing to be a banker for existing public sector enterprises.

Consortium Financing

27. Since FY71J NDFC has actively pursued the use of consortium financingto satisfy the capital requirements of its large public sector clients,arranging 32 operations totalling Rs 1.8 billion of which Rs 0.3 billion wasin foreign currency. NDFC's share averaged about 8%. NDFC's consortiumactivities tapered off during FY78/79 due to the decline in public sectorinvestment and NDFC's limited involvement with private sector. However,NDFC's new management is giving renewed emphasis to this activity and NDFC'sinvolvement in consortium financing and co-financing with commercial banks islikely to increase.

Promotion of Local Capital Goods Industries

28. To encourage procurement of locally manufactured goods, SBP operatesa refinance scheme, which allows a spread of 2% to participating financialinstitutions. Since 1973, NDFC has been the most active user of the SBP'ssuppliers credit scheme. Up to December 31, 1981 NDFC has received 11credits amounting to Rs 685 million (Table 6) with about 60% of the creditsfinancing sugar plants and 15% each to cement and power. NDFC's performancein promoting the local capital goods industries has been better than P'ICICand IDBP, which also have access to the facility.

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Table 6: Utilization of SBP's Suppliers Credit(Rs million)

Sector Amount %

Chemical & Fertilizer 15.8 23.0Steel & Engineering 6.9 1.0Cement 106.2 15.5Energy 98.6 14.4Sugar 406.2 59.3Textile 17.8 2.6Oil & Vegetable Ghee 8.9 1.3Miscellaneous 24.6 3.6

685.0 100.0

Source: NDFC.

Financial Position

29. Annexes 5 and 6 show NDFC's balance sheets and income statements forFY76-FY81. Throughout this period NDFC's financial position has remainedsound with consistent growth in profitability, portfolio investment and totalassets. During FY76-FY81, NDFC's return on equity averaged over 20% and itsdebt/equity ratio remained well below the agreed limit of 5:1. As of Decem-ber 31, 1981 NDFC's arrears amounted to Rs 92.7 million, or about 4% of itsloan portfolio. NDFC's collection ratio remained at a satisfactory levelof 92% (Annexes 7 and 8).

NDFC's Performance Vis-a-Vis Credit Objective

30. Overall, NDFC's operational and financial performance has been satis-factory and IDA's institutional building objectives generally 1/ have beenmet. NDFC has developed into a well managed and profitable developmentfinance institution, during a period in which other development banks inPakistan experienced a decline. However, the credit's other objectives(para 8) were only met partially due to the changes in GOP's policy concern-ing the public enterprises subsequent to the approval of the IDA credit andthe strategy adopted by NDFC management in coping with the rapidly changingenvironment. Since NDFC was established in 1973, the credit's objectives(with the benefits of hindsight) were rather ambitious. Initially, NDFC'sability to influence GOP policies was restricted by its size and lack ofrecognition. As these constraints were removed, subsequent GOP policy chan-ges made it less essential for NDFC to be involved directly in the investmentplanning stage of public sector investment.

1/ Organization and management, project appraisal and supervision, financialplanning, internal audit and other procedures.

-12-

31. Since NDFC's foreign currency resources were initially limited to twocredits totalling US$60 million from IDA and ADB, NDFC mobilized domesticresources by such means as deposits and debentures to expand its operations.It also effectively utilized the suppliers credits from SBP to promote localcapital goods industries. In addition, NDFC successfully adopted its lendingstrategy to respond to the new GOP policy of promoting private industries;under a recent ADB loan of US$50 million, NDFC will lend half to privateindustry. NDFC has also contributed to mobilizing resources for its clientsby way of consortium financing and syndications.

32. At the time of appraisal, NDFC was expected to rely heavily on multi-lateral institutions for resources and to concentrate its efforts on termslending operations. The mixed bank nature of NDFC was considered but thesubsequent drastic changes in the environment were not foreseen. Therefore,IDA's projections of NDFC operations and the actual outcomes differed con-siderably (Annex 9). NDFC was more successful in mobilizing domestic resour-ces than envisaged by IDA and its pattern of lending evolved in a differentfashion. This difference was due also to the prevailing interest rate struc-ture which created disincentives for financing term loans. 1/ Given itsfinancial objective and cost structure, NDFC had to minimize its local cur-

rency term loans to maintain its financial viability. The shortfall inforeign currency lending was due to the fact that the capital requirementsof most large public sector projects were financed either by bilateral sour-ces or through direct foreign borrowings.

33. In terms of influencing GOP policy regarding public sectorenterprises. NDFC's role has increased as GOP now makes use of NDFC'sresources to carry out financial reviews of sector corporations. Its sectorwork also has become more focused and operationally oriented although mnoreimprovements are still necessary. The information depository function onpublic enterprises has been taken over by the Experts Cell in the Ministry ofProduction and there is no need for NDFC to duplicate this function.

VI. IDA'S ROLE

34. IDA played an important role in assisting NDFC's management in build-ing NDFC into a viable development finance institution capable of mobilizingdomestic resources and financing viable projects. IDA's involvement duringFY78/79 was useful in bringing about stability in NDFC's management at a timeof uncertain economic and political climate. IDA was also successful instrengthening NDFC's appraisal, supervision and economic analysis procedures.

1/ Interest rate for long-term loan is presently 11% compared with themarginal cost of funds for term deposit of about 14%. The rate for termloan was reduced from 14% to 11% in 1978 by GOP.

-13-

IDA's performance in getting NDFC to increase long-term loans was not assuccessful as expected, mainly due to the structural disincentive in termlending. IDA attempted without success to convince GOP to make modificationsin its interest rate structure especially for term lending. This divergencefrom the expected operational mix does not imply that NDFC has not played adevelopmental role in Pakistan's public industrial sector. Over a time, NDFChas built itself into a sound financial institution and now has a cadre ofstaff which is respected for its financial and technical capability by thepublic sector corporation, financial community and GOP. IDA's involvementhas definitely enhanced the role of NDFC, and both GOP and NDFC have indi-cated a desire for the Bank Group's further involvement with NDFC.

VII. CONCLUSIONS

35. Credit 546-PAK was granted to NDFC in 1975 for onlending toindustrial projects in the public sector and was the first Credit to apublicly owned DFC in the South Asia Region. The project was completed aftera delay of 15 months due mainly to procurement problems of one large sub-project. IDA's objective of assisting NDFC to develop into a sound financialinstitution capable of mobilizing domestic resources has been met as NDFC hasemerged as a mixed bank, which is highly regarded by its clients, the finan-cial community and GOP. IDA also expected NDFC to play a key developmentalrole in carrying out studies, collecting data on public sector enterprisesand formulating policies affecting the public manufacturing sector for GOP.However, NDFC was less successful in meeting these objectives due to resour-ces constraints and the rapidly changing socio-political factors during theimplementation period. With the benefits of hindsight, these objectives wererelatively ambitious given the "infant" status of NDFC at the time of thecredit and unforeseen domestic changes in GOP policies. NDFC's managementhas responded well to the changes in environment and has built NDFC into aviable financial institution.

- 14 - ANNEX 1

NATIONAL DEVELOPMENT FINANCE CORPORATION

Credit Utilization According toRegion/ Sector/Nature

(US$ in Million)

Region No. of Projects Amount Percentage

Punjab 7 10.8 36.6Sind 10 12.6 42.7NWFP 2 4.9 16.6Baluchistan 3 1.2 4.1

Total: 22 29.5 100.0

Sector

1. Energy 5 10.8 36.62. Cement 4 5.7 19.33. Agrobased 1 3.0 10.24. Transport 1 2.5 8.55. Chemicals 2 2.0 6.86. Mining 3 1.9 6.47. Engineering 3 0.8 2.78. Sugar 1 0.8 2.79. Miscellaneous 2 2.0 6.8

Total: 22 29.5 100.0

Nature

BMR 8 6.6 22.4NEW 7 7.0 23.7Expansion 7 15.9 53.9

Total: 22 29.5 100.0==~~~~~~=5 ==

Size

Upto 0.199 1 0.1US$0.2 - 0.399 4 1.1US$0.4 - 0.599 3 1.4US$0.6 - 0.799 1 0.7US$0.8 - 0.999 6 5.6US$1.0 - 2.0 1 1.5US$2.0 - 3.0 4 10.6More than US$3.0 2 8.5

Total: 22 29.5

-15-

ANNEX 2

Page 1 of 3


Classification of Subprojects

Financed Under Credit 546-PAK

A. Companies operating at a loss or in Amounttechnical and financial difficulties (US$ million)

Textile Winding Machinery Co. Ltd. 0.4Pakistan Engineering Co. Ltd. 0.2Pakistan Machine Tool Factory 0.2

Subtotal (3) 0.8

B. Companies Operating Profitably

Associated Cement Ltd. 0.6National Refinery Ltd. 2.2Karachi Gas Company Ltd. 0.9 1/Rice Export Corporation 3.0Pakistan Oil Fields Ltd. 2.9Pakistan Securicy Printing Corp. 1.5Awami Autos Ltd. 0.5Indus Gas Co. Ltd. 0.3Gharibwal Cement 0.3

Subtotal (9) 12.1

C. Comuanies under construction or in preoperating stage

National Fibres Ltd. 1.0Kohat Cement 4.0 2/Resource Development Corporation 0.1Ravi Rayon Ltd. - Baker Yeast Project 1.0Leiah Sugar 0.8Oil and Gas Dvelopment Corporation 4.5Pakistan International Airline Corp. 2.5Mustehkam Cement Ltd. 0.8PIMC - Rock Salt Mines 1.0PMDC - Makerwal Collories 0.9

Subtotal (10) 16.6

TOTAL (22) 29.5

1I/ Two subloans to the same project.2/ The remaining balance of USS0.5 million under the credit was

cancelled due to the delay in implementation of the Kohat CementProject.

Source: NDFC

NATIOL?AL D VrCPZ4iT FINAtKE CCIRKChTION

COST CV.R-RUNJS & DBA -S IN PRJST ;XMPLzTICGI

(S-C31CANS CVSR USS o.6 m) Cr. S46 -PA (Re. lz milion)

t:aie of if.. Company. Amount or Sector. Type of Location. Expected Actual Total Project Cost Total Project At appraisalSubloan. Projeot. Date of Date of at appraisal Cost Actual. IFRR IvRR

Comple- Comple- LCY FCY Total

(us$) tion. tion.

T1) ~~~~~~~~(2 ) (3) (4) (5) (6) (7) (3) (9 ) 10)a/ MV0a

1. (il an' Jas Develop- 4,523,713 Energy Expan- Punjab Znd of Yarch, 123 255 378 Est. 1,'09 15% >X0%c-ent Corporation. sion. 1979 1983.

2. Iational Fibres Ltd. 970,710 Chemi- New Sind July, June 30, 165 186 351 586 13%cal 1979. 1932.

3. Textile 1ir.ding ilach- 413,309 Engin- lIew Sind Dec., 1980. 7 17 24 23 12.9% 23%.ner: Co. Ltd. eering 1973.

4. i;chat Cenent Co. Ltd. 4,002,660 Cement liew N4'WP Dcc., Vec.182 262 201 463 Est. 615 8.8% 14.6%1983.

5. iRice kxport Corp. 2,969,999 Agrob- Expan- Sind January, Under- 97 30 12? 25.8% 28%Lt'd ased sion. 1978. way.

6. V:arachi Gas Co. Ltd. 951,565 Energy Expan- Sind 1978 15.5 14 29.5 27 15% >50%sion.

7. Pakistan C.lfields 2,929,090 Energy Expan- Punjab ond of 61 69 130 28.3% >50%I.ti. sion. 1978.

8. i.4..W ol .finery Ltd. 2,155,391 energy Lxpan- Sind January, 1978 406 225 631 65? 12.6% 12X8' on. 1977.

9. Pakistan Security 1,464,,20 misc. Expan- Sind April, 1976 5 15 20 15 18.G% 34%Frinting Ccrporation. sion. 1977-

10f. viqvi Hsyon Ltd. 954,422 Chemi- New Punjab July, Jan.'82 17 9.5 26.5 59 12.5% -ivecal 1977.

11. Pakistan Internatiln 2,499,911 Trans- LBH Sind 1977 1981 11 55 66 298niri.nes CorF.ration. port.

*10

(1) ~~~ ~~(2) (3) t4) (5) (6) (7) (8) (9) (10) a/ (t1)&/

12. Fakistan Mineral 979,136 Mining BM.R Punjab July, Under- 11 ii.6 22.6 - 20%Devulopment Corp. 1973 wayA/c Rocr. Salt Mine

13. 1-akerewal Colleries 723,917 Mining BIRIf' Baluchi- January, llnder- 24.2 20.4 44.6 - 30% Ž50%Ltd. stan. 1979. way

14. Lieah aupar Mlls. 816,223 £uZar BMR Punjab. January, ?Xarch, 8.5 7.5 161978, 1980.

15. Xustaehham Cennt Ltd. 812,448 Cement Expan- INWFP Iu4 ly, June'8 1 171 175 346 511.5 13% 15%;

sion. 1979.

F

/ The Actual, post appraisal IFRR, IEAR have rot been calculated as moat of the projects are underway andthose that h:ave been cormpleted have been in operation for a year or so. Further the cospleted projectsexcept TWIIC are doing well, and as such have not been visited,by NDFC, However, NDFC intends to write PCRe forall projects onco they have completed about three years of operation3 so &.s to have a realistic basisfcr calculation of IF.RR, IERR.

1k~~~~~~~~~~~~~~~~~1

U


Lending Activities1973 - 1980

(Rs. in million)

CUmulative Net.To 31 Dec.1977 1978 1979 1980 TotalNo. Amount. No. Amount No. Amount No. Amount No. Amount

By Geographical Distribution

Sind 164 1230.58 27 270.35 47 437.40 42 551.34 280 2439.67Pun4ab 100 608.46 28 319.10 33 449.65 57 593.69 218 1970.90NWFP 20 85.92 1 41.40 1 2.00 5 39.71 27 169.03Baluchistan 6 57.71 1 5.00 2 10.00 7 39.75 16 111.46Azad Kashmir - - - - 1 5.00 - - 1 5.00

Total: 290 1982.67 57 635.85 84 904.05 ItT 1223.49 T42 4796.06

Bv Industrial Classification

Energy a/ 43 468.43 3 57.50 10 174.87 18 277.59 74 978.39Steel and Engineering b/ 103 390.46 12 72.25 16 138.35 26 244.00 157 845.06Agro-based c/ 49 429.62 14 133.64 26 242.25 29 262.70 118 1068.21 XChemicals J/ 25 224.60 11 148.50 7 47.06 12 125.50 55 545.66Automobiles eY 31 263.92 7 115.60 5 60.41 5 137.50 48 577.43Transport and Communication 3 26.36 1 3.73 2 12.69 2 41.30 8 84.08Textiles 8 55.37 3 25.00 3 55.90 6 47.20 20 183.47Construction 12 13.94 2. 15.33 2 31.00 1 00.40 17 60.67Cement 9 48.42 3 55.21 9 111.90 4 27.00 25 242.53Others 7 61.55 1 9.09 4 29.62 8 60.30 20 160.56

Total: 290 T982.61 _7 635.85 904.05 TmT 1223.49 5E 4746 06

a/ Oil and gas development, refining, distribution and marketing.b/ Dies, heavy machine Cools, motors, pumps, curbines.C/ Rice Mills, Sugar mills, vegetable ghee plants.d' Caustic soda, ceramics, drugs, aynthetic fibres.eY Assembly and marketing of cars and commercial vehicles.

Note: The "No." refers to the number of loans and not to the number of projects.

- 19 -

ANNEX 4


Consortium Financing (1974-1980)

(Rs in million)

Number of NDFC asYear operations L.C. F.E. Total NDFC X of total

1974 1 30 - 30 10 33

1975 4 167 - 167 33 20

1976 16 905 30 935 65 7

1977 11 159 491 1/ 650 31 5

1978 5 109 - 109 - -

1979 2 13 - 13 - -

1980 5 196 - 196 3 2

Total 44 1579 521 2100 142 67

Source: NDFC

1/ Iucludes a syndicated loan of Rs 120 million for the Pakistan InternationalAirlines in Euromarket.

- - 20-

ANNEX 5Page 1

NATIONAL DEVELOPMENT FINANCE CORPORATIONComparative Audited Balance Sheets 1976 - 1981

(Rs in Million)

AuditAs of December 31 1976 1977 1978 1979 1980 rnT

Assets

Current assetsLiLquid assets /a 343 373 394 464 305 252Accrued interest on investments 27 17 16 12 10 12Accrued interest & charges on loans - 20 26 39 66 95Deposits, repayments and deferredcost 2 1 1 2 4 5

372 411 437 517 385 364

Investments (at cost)Equities 1 1 2 2 53 57Government bonds & loans treasurydeposits 167 276 298 214 215 512

168 277 300 216 268 569

Loan portfolioPrincipal 534 891 1,114 1,461 1,904 2,202Interest in arrears - 21 16 11 26 29Provision for doubtful loan (-) (-) (13) (11) (16) (21)

534 912 1,117 1,461 1,914 2D210

Fixed assets 2 2 1 2 3 4Total assets 1,076 1,602 1,855 2,196 2,570 3.147

Lia.bilities & network

Current liabilities /bAccrued interest and expenses 34 61 80 93 111 120Sundry creditors 6 5 3 8 8 9P'rovision for dividend 6 10 6 6 13 13Others 1 14 7 7 6 10

47 90 96 - 14 138 152

/a Liquid assets comprise cash on hand and short-term investments./b Excluding current maturity of deposits and borrowings.

- 21 -

ANNEX 5Page 2

AuditAs of December 31 1976 1977 1978 1979 1980 1981

Time deposits /c

Less than 12 months maturity 518 704 770 897 992 1,134More than 12 months maturity 184 285 332 340 334 434

702 989 1,102 1,237 1,326 1,568

Borrowings /d

Foreign currency 97 207 250 268 347 381Local currency 88 148 191 294 409 634

185 355 441 562 756 1,015

Network

Paid-in capital 100 100 126 132 132 132Statutory reserve 32 51 75 111 126 169Contingent reserve 10 17 15 40 92 111

142 168 216 283 350 412

Total liabilities and network 1,076 1,602 1,855 2,196 2,570 3,147

Guarantees 36 37 81 81 81 100

/c Including current maturity.7T Includes a new debenture issue of Rs 100 million.

Source: NDFC


Comparative Audited Income Statements 1976-81(Rs. in million)

AuditedAs of December 31 1976 1977 '2978 1979 '1980 18

Income

Interest on loans 37 76 103 134 187 221Other loan charges 6 9 6 6 9 15

43 85 109 140 236 623Investment income & interest

on bank deposits 36 52 72 59 49 47Profit on sale of investments 2 - 3 13 10 6Dividend income - - 3

Total Income 81 137 184 :T: 255 292

Expenses

Interest 50 93 127 131 157 187Commitment fees and other charges 2 1 2 2 2 2Salaries 2. .3 .4 4 7 9.Other administrative expenses 4 3 4 4 3 7

Total Expenses R 100 137 141 169 205

Net Profit 23 37 47 71 86 87

Appropriation of net profit

Statutory reserve 12 19 24 36 15 43Provision for doubtful loans - - 13 (2) 15 6Contingency reserve 5 8 (2) 25 41 25Provi-z.ion for dividen(d

Cash dividend 6 10 6 6 13 13Bonus share issue - - 6 6 - -

23 3~7 47 71 '85 87Financial ratios (%) =

Interest spread 5.3 5.2 4.6 4.5 3.8Administrative expenses/average

loan/portfolio 1.5 0.8 0.8 0.6 0.6Net profit/total income 28.4 27.0 25.5 33.5 32.9Net profit/average equity 17.3 23.9 24.5 28.4 26.4

Source: NDFC

23 -

ANNEX 7Page I


Ageing Analysis Loan Portfolio in Arrears1977 - 1981

(Rs in Million)

Principal OutstandingWorking Capital

Loans Term Loans /c Total

As of31 December 1977 391.5 499.9 891.431 December 1978 545.7 568.1 1,113.831 December 1979 715.9 745.0 1,460.931 December 1980 910.0 995.0 1,905.031 December 1981 945.0 1,257.0 2,202.0

Ageing of Arrears

Arrears /aAs of 31 December 1977 Principal Interest Total Percent

0 - 3 months 3.2 10.2 13.4 41.73 - 6 months 5.1 4.3 9.4 29.36 -12 months 2.7 3.5 6.2 19.312 -24 months - 3.1 3.1 9.724 - over ___ ___

11.0 21.1 32.1 100.0

As of 31 December 19780 - 3 months 4.5 7.4 11.9 44.43 - 6 months 3.9 4.1 8.0 29.56 -12 months 1.5 2.2 3.7 13.812 -24 months 1.4 1.9 3.3 12.324 - over

113 13.6 26.9 100.0

As of 31 December 19790 - 3 months 2,8 2.7 5.5 19.83 - 6 months 1.5 2.4 3.9 14.06 -12 months 8eO 2.9 10.9 39.212 -24 months 3.5 2.2 5.7 20.524 - over 0.7 1.1 1.8 6.5

16.5 11.3 27.8 100.0

- 24 -

ANNEX 7Page 2

N;eing of Arrears

Arrears /aAE; of 31 December 1980 Principal Interest Total Percent

0 - 3 months 5.6 3.5 9.1 13.23 - 6 months 10.6 12.8 23.4 33.96 -12 months 15.2 4.5 19.7 28.512 -24 months 8.1 1.3 9.4 13.624 - over 4.0 3.5 7.5 10.8

43.5 25.6 69.1 100.0

As of 31 December 19810 - 3 months 5.7 23.4 29.1 32.013 - 6 months 6.5 6.9 13.4 14.746 -12 months 8.3 7.2 15.5 17.0512 -24 months 4.0 5.2 9.2 10.1224 - over 14.0 9.7 23.7 26.08

38.5 52.4 90.9 100.00

Percentage ComparisonsAs of 31 December 1977 1978 1979 1980 1981Principal Arears/total principaloutstanding 1.2 1.0 1.1 2.3 1.7

Principal and interest arrears/total principal outstanding plusinterest in Arrears 3.5 2.4 1.9 3.6 4.1

/a By average of cash overdues installment.T7 Including penalty interest & other charges.Ic Term-loans including foreign currency loans, regular local currency__ term-loans and suppliers credit loans.

-25 -

ANNEX 8


Collection Performance on Loan Portfolio /a1978-1981

Year ending 31 December 1978 1979 1980 1981--------Rs million--------

1. Arrears 1 JanuaryPrincipal 11.0 11.3 16.5 43.5Interest /b 21.1 15.6 11.3 25.6

32.1 26.9 27.8 69.1

2. Current dues during the yearPrincipal 287.6 445.2 574.0 852.3Interest /b 97.6 120.8 157.2 223.3

385.2 566.0 731.2 1,075.6

3. Total due for collectionPrincipal 298.6 456.5 590.5 895.8Interest 118.7 136.4 168.5 248.9

417.3 592.9 759.0 1,144.7

4. Cash collectionPrincipal 287.3 440.0 547.0 861.0Interest 103.1 125.1 142.9 191.0

390.4 565.1 689.9 1,052.0

5. Arrears 31 DecemberPrincipal 11.3 16.5 43.5 34.8Interest 15.6 11.3 25.6 57.9

26.9 27.8 69.1 92.7

Percentage comparisonsCash collection/total due for collection

Principal 96 96 93 96Interest 87 92 85 77Principal and Interest 94 95 91 92

/a Net of rescheduling and rolled-over working capital loans.lb Includes penal interest.

-26- ANNEX 9

Page 1 of 3NATIONAL DEVELOPMENT FINANCE CORPORATION

Projected and Actual Results, 1979 /a(Rs in million)

Projected Actual Variance(z)

Resources

Domestic currencyborrowings-suppliers credit 129 293 144

Foreign currency borrowings 1,276 268 (79)Deposits 580 1,237 132Equity - Paid-in 120 120 0

- Retained earnings 134 164 22

Uses

Suppliers credit 61 272 345Working capital loans 96 700 629Local currency term loans 89 284 119Foreign currency term loans 1,304 256 (80)

/a Last year of the projection period.

NATIONAI. DEVEI0Pyno T FINMAE_R COIOATION

Balan Sht:t PrabuirtelActii.l Rgualts for. 1974 - 1979

(Ka In million)

1974 1975 1976 1977 1978 1979

ASSETS Actual Projected Actual Projected Actual Projectad Actual Projected Actual Prajectad Actual Ptoject*4

4 abort-term deposit 0.S 3.4 21.3 2.3 8.7 3.2 26.8 5.4 22.3 1.3 31.2 3.3

Tiaw Jap.asits (b.ank deposit) 68.2 40.0 96.8 40.0 334.1 30.0 346.2 30.0 371.8 35.0 432.5 40.0Short-term invuastgata (treasury

bills) 120.3 117.0 153.7 75.0 166.5 33.0 275.0 50.0 298.1 60.0 215.5 74.0Accrt .ed Interest receivables

and others 5.0 5.7 13.6 12.9 34.3 21.7 58.5 133. 17.8 47.3 14.7 61.9

194.1 16a.1 285.4 130.2 543.6 87.9 707.3 118.9 710.0 143.6 692.9 183.2

IMS t.!) lWESMYE\TS

V\1.)rt cr..'i - 10.0 - 11.5 - 13.2 15.2 - 17.5 - 20.1l.K,rking ca 1 Atal loan - 45.6 - 54.8 167.6 63.1 352.9 72.5 531.7 83.4 700.2 95.9Suppliara crdiit - 3.6 - 9.4 60.7 17.0 129.6 27.1 170.1 41.0 271.5 60.6Loc;1. currency term loan 119.0 63.7 243.8 228.2 183.2 395.9 196.9 564.2 211.1 727.8 283.7 885.5Flr.lign currency torm loza - 34.9 - 159.8 97.8 379.1 212.0 661.0 242.3 971.7 255.7 1304.8

Invcatrt.-nts (eq.ity and octba'c 0.8 7.5 2.0 10.8 1.4 15.6 1.4 22.9 2.0 33.9 7.9 50.4L-s provisloni for lossus - (0.8) - (2.3) - (8.7) - (13.4) (13.6) (18.4) (11.3) (35.5)

FixeJ J'S.: (nAt) 0.7 0.4 1.5 0.8 2.0 0.7 1.8 0.7 1.2 0.5 .4 0.4

TJf.I. AzSLTS 314.6 331.4 532.7 603.2 1076.3 963.8 1601.9 1469.1 1054.8 2001.0 2196.0 2565.4

I.lAI .iI .1 !::S AN!)t t'r.4c!K ,

Divti.knJ payable - - 3.0 8.0 6.0 10.0 10.0 10.0 6.0 15 0 6.0 15.0 -4

Accru.4 Intvram.t payable and others 8.5 6.0 17.7 12.9 41.1 19.9 76.2 29.7 90.4 4i.3 108.1 53.9

DEUITS

L. sa thLn o une 1ear 172.8 60.0 306.1 72.0 518.2 86.4 701.9 103.7 769.4 124.4 897.2 149.3

0i -car to lews tiaia thraei years 19.0 150.0 57.6 184.0 184.4 226.4 290.7 279.5 332.2 346.4 339.7 431.0

D-)YESTlt CV RA1CV liORROtIK;GS

Birrowisl4a (COPJ/SIP) 1.7 - 24.0 - 87.7 15-0 147.6 105.0 191.2 106.0 293.3 120.0C~,.. vCrnLnt - - 7.0 - 70.0 8 6 0.0 - 90.0 - 100.0k. J I t .. (Sal) - 3.6 . a0.9 _ 30.2 _ 42.2 - 58.5 - 80.7tl wl .'Lwi,:ej - - 11.0 - 15.0 - (15.0 - 85.0

l:urr.swv lo-riwinzga - - - 11.9 97.3 331.7 207.3 624.1 24t.9 ll39.2 268.3 1276.8

PAIl1 01' CAPITAL. 100.0 100.0 100.0 100.0 100.0 120.0 100.0 120.0 120.0 120.0 120.0 120.0

OVSKMVES S r;APPROPRIATED SURPLUS 12.6_ 11.8 24.3 20.5 41.6; 33.2; - 59.9 -95.7 9 5.2 16|.4 133.7

T3?AL LIABILITIES .WD NETh'IOR 314.6 331.4 532.7 603.2 1076.3 st63.8 1601.1 1469.i 1854.8 2001.0 2196.0 2565.4^0....... ..... ....... _. ..... ...... ........ _..... A.... --. b)... * ..... ........ ..... t

Source: iiDFC ! 1|

NATIONAL DEVELOntL PIhAXCI CORIWOIATN

AMAI/PROJCThED JMCOtg STATEET n P1 IS74 - 197

(IN IIIii illion)

1974 Isis 1976 1077 197S 197

Actual ?rngact.d 1ct#j.1 yrat.ccat Actual Frolected Acu.3 *A&ct44 Acual Ycolget*c Actual rt.oictr4

Incerost *araed 20.6 21.3 38.9 4.4 ?3.0 U1.3 127.5 126. 0 174.1 178.3 192.9 213.2lnc.aO tto;s curiti Q.l 0.3 0.2 0.t O.S 2.1 1.3 0.3 1.9 32 2.4 13.0 4.2Co=I4r,tta & Sacban. 2.0 2.5 .7 5,0 5. 7 .6.0 3.2 6.0 9.7 4.S 11.1

total Incto 22.7 24.0 413 1 4.3 10.8 19.4 136.8 9 36 113.1 190.4 212.4 24U.7

lrarsr., pOld 9.6 10.6 23.7 33 51. 8 7.2 93.9 S0.3 128.9 130.1 132.7 171.3St.fir sp.snul 0.7 0.a 1.3 1.2 2.1 1.S 2.1 2.0 3.9 2.6 4.2 1.4 1

IIJDA Fip.nso 0.2 0.2 0.4 0.4 0.8 0.5 0.s 0.6 0.9 0. 1.1 1.0t

0'arg d (CO,,alsslZ) 0 6 O 6 1.2 0.9 2 7 1 27 i's 3.0 t.9 2.6 2-S

T.'c..1 cipcs 11,1 12.4 26.4 361 :174 . C 13 100.3 9469 1347 111.4 141.8 178.2

iP-Yltt:] Fro(it 31.6 ti.l 14.7 18.2 23.3 29.2 36.6 41.3 47.1 S5.4 71.4 70.1

,, I!

ANNEX 10

D.O.No.SECY(IND)-190/83

Goventamf.nt of Pakhjn- 29 - MINISTRY OF INDUSTRIES

Islamabad, the February 10 83.......... 49SECRETARY

Subject: Project Completion Report on Pakistan -The National Development Finance Corpora-tion (NDFC) (Credit 546-PAK)

Dear Mr. Kapur,

Please refer to your letter of December 16,

1982, on the subject noted above.

2. The Project Completion Report on NDFC

relates to a period when the public sector was

undergoing serious teething troubles. It deals

adequately with all the problems of that period.

NDFC has gathered considerable experience which

should stand it in good stead to become a highly

useful organization. It augurs well under its

present Chairman.

3. The Report is very realistic in the

treatment of various subjects and is very

satisfactory.

With regards,

Yours sincerely,

A-VBAL SAEED -

Mr. Shiv S. Kapur,Director,Operations Evaluation Dcpartment,The World Bank,1818 H Street, N.W.,Washington D.C. 20433,U.S.A.

ANNEX 11- 30- Page 1 of 2

PNSC Building,Moulvi Tamizuddin Khan Road,

K A R AC H 1-2 .

Chairman

Februarv 20, 1983

Mr. Shiv S. KapurDirectorOperations Evaluation DepartmentThe World Bank1818 H StreetN. W. Washington DC 20433USA

RE: PROJECT COMPLETION REPORT ON PAKISTANTHE NATIONAL DEVELOPMENT FINANCECORPORATION (NDFC) (CREDIT 546-PAK).

Dear Mr. Kapur,

We thank you for your letter of December 16,1983 alongwi-th a copy of the Project CompletionReport concerning NDFC Credit 546-Pak.

.e have corrected and updated statisticalinformation wherever it was required and latestfigures have since become available. A copy ofthe report with the revised figures is enclosed.

Continuous improvement of performanceremains one of NDFC managements prime objectives.In this context your comments regarding NPDFCprocedures and standards have been noted.

NDFC is run as a commercial concern asprovided for in its Charter as mentioned inpara 23 of the report.

For upgrading research and developmentwe requested for help Mr. Wiehen during his lastvisit to us. He had agreed to recommend a fewexperts for hiring by us for assistance in theidentification and formulation of projects.

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Meanwhile we have hired the services of aChief Economist who is expected to join usin April 1983. We have also strengthened our

Z Market Research Department.

Yours sincerely

Zafar Iqbal

Documents

World Bank Document · 2016. 7. 9. · 1/ Kohat Cement. 2/ Iron and steel, basic metals, heavy engineering, heavy electrical automa-tive assembly and manufacturing, tractor assembly,