tions and would not carry voting rights. One-half of the contributions of Belgium and Luxembourg would be considered as initial subscriptions with voting rights, and the balance would be deemed additional contributions. Under the proposal as submitted by the Executive Directors, the obligation to contribute new resources would not become binding on any member unless 12 of the prospective contributing members, whose contributions total at least $600 million, formally notify the Association on or before December 31, 1963,40 that they will contribute the amounts proposed for them. In a Special Report to the President and to the Congress, the Council strongly recommended legislation to permit the United States to join in the proposed increase. Legislative action was completed after the close of the period under review.42

The U.S. Executive Director of the International Development Association, or his Alternate, acting on the advice of the Council, supported the decisions taken with respect to the foregoing matters.

THE INTERNATIONAL FINANCE CORPORATION

II-73

OPERATIONS OF THE INTERNATIONAL FINANCE CORPORATION DURING THE PERIOD JANUARY 1-JUNE 30, 1963: Report of the National Advisory Council on International Monetary and Financial Problems, Submitted April 11, 1964 (Excerpt)

43

The International Finance Corporation, an affiliate of the International Bank, continued in the 6-month period under review to contribute to the economic development of its member countries through its own investments in private enterprises and through the encouragement of additional private investment, both domestic and foreign. Three of the four commitments during the period-in Morocco, Pakistan, and Spain-were intended to develop and strengthen industrial investment institutions in those countries. In two transactions-in Mexico and Morocco-the IFC engaged in joint financing with the IDB and with the IBRD, respectively. The Ivory Coast became a member of the Corporation and steps were initiated to increase the Subsequently extended in two steps by the Executive Directors to June 30, 1964. [Footnote in source text.]

40

41

42

See H. Doc. No. 156, 88th Cong., 1st sess. [Footnote in source text.] Legislation_authorizing U.S. participation in the proposed increase passed the Senate in January 1964 and the House of Representatives in May 1964, and was signed into law by the President on May 26, 1964 (Public Law 88-310). [Footnote in source text.]

"H. Doc. 297, 88th Cong., Apr. 14, 1964, pp. 14-16. Part IV of the NAC report.

authorized capital stock of the Corporation from $100 million to $110 million.

MEMBERSHIP, SUBSCRIPTIONS, AND INCREASE IN AUTHORIZED CAPITAL

During the period under review, the Ivory Coast became a member of the Corporation, with a subscription of $111,000. On June 30, 1963, the membership of the Corporation comprised 73 countries, with a total subscribed capital of $98.2 million. (See appendix table D-1.) "

Section 2 of article II of the Corporation's Articles of Agreement provides for an increase of a maximum of $10 million in the authorized capital stock of the Corporation to allow for the initial subscriptions of new members. The Board of Directors in April 1963 recommended an increase from $100 million to $110 million to the Board of Governors, and the U.S. Governor voted in favor of the proposal. Authority for U.S. assent to the increase is contained in section 5 of the International Finance Corporation Act (Public Law 350, 84th Cong.). No part of the increase would be subscribed by the United States.

46

IFC INVESTMENT COMMITMENTS

45

In the 6-month period under review, the Corporation authorized new investments in Mexico, Morocco, Pakistan, and Spain, totaling approximately $3 million. In each instance, IFC investments served to generate additional funds from both domestic and international investors, thereby contributing to the growth of capital markets in the less-developed member countries.

The Corporation in April agreed, in conjunction with the InterAmerican Development Bank (IDB), to assist in financing the construction by Quimica del Rey, S.A., of a $2.8 million sodium sulfate plant in Mexico. The IDB made a loan in the equivalent of $500,000 from its ordinary resources, the IFC agreed to invest $750,000, and a U.S. commercial bank invested $500,000 to finance a 10-mile railroad spur from the plant to the Mexican National Railroad line. The transaction also included participation in the IFC commitment to the extent of $602,000 or over 80 percent, by four institutions in the United States and Europe. The output of the plant is expected to supply a large part of Mexico's requirements of sodium sulfate used in the detergent and glass industries.

In conjunction with the Government of Morocco, private Moroccan investors, and financial institutions in Europe and the United States, the IFC authorized an investment in the equivalent of $1.5 million in the Banque Nationale pour le Developpement Economique (BNDE) to enable that institution to expand its activities in financing the industrial growth of Morocco. This investment is part of a combined operation with the International Bank, and it is the first time that these two institutions have engaged in joint financing..

"Not reprinted here; but see table B-1 annexed to doc. II-69, ante.

45 The increase became effective in September 1963. [Footnote in source text.] 48 Aug. 11, 1955; 69 Stat. 669.

Together with Pakistani and foreign interests, the IFC authorized an investment in the equivalent of $449,400 in the Pakistan Industrial Credit and Investment Corporation, Limited (PICIC), the country's most important source of long and intermediate-term industrial financing as well as one of the principal sources of foreign exchange loans to private industry.

In order to assist in expanding the investment market in Spain, the IFC authorized an investment of approximately $300,000 to aid, together with Banco Espanol de Credito, a leading Spanish commercial bank, and other foreign financial institutions, in the establishment of a new industrial development bank in Spain, Banco de Desarrollo Economico Espanol, S.A. (BANDESCO). It is expected that the new bank will add significantly to the supply of medium and long-term capital for economic development in Spain.

In fiscal 1963, the Corporation authorized 11 commitments totaling $18 million to assist in financing private enterprise in 10 member countries. Included were 2 standby commitments totaling $5.1 million. Of the 11 commitments, 7 involved investments in industrial companies, and 4 were concerned with the expansion of private industry through the medium of industrial finance companies.

47

Through June 30, 1963, the Corporation authorized a net total of $80 million for the purpose of expanding a wide range of industrial enterprises in 24 member countries. (See table 10.) 4 Disbursements increased to $61 million, or over 75 percent of net commitments. Approximately 64 percent of total net commitments was invested in 10 countries in Latin America.

Loans and equity sold from effective commitments amounted to $15.8 million, an increase of $2 million during the 6-month period under review, and standby and underwriting commitments totaling $2.8 million were acquired by others.

The U.S. Director of the International Finance Corporation, or his Alternate, acting on the advice of the Council, supported the decisions taken with respect to the foregoing matters.

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OPERATIONS OF THE INTERNATIONAL FINANCE CORPORATION DURING THE PERIOD JULY 1-DECEMBER 31, 1963: Report of the National Advisory Council on International Monetary and Financial Problems, Submitted June 23, 1964 (Excerpt) 48

SEVENTH ANNUAL MEETING

The Board of Governors of the International Finance Corporation. held its Seventh Annual Meeting in conjunction with the Annual "Note reprinted here; but see table 9 in doc. II-74, infra.

48 H. Doc. 200, 88th Cong., pp. 15-18. Part IV of the NAC report.

Meetings of the Boards of Governors of the International Monetary Fund, the International Bank and the International Development Association. In reviewing the range of operations carried on during the past fiscal year, the President of the Corporation, George D. Woods, noted that the Corporation obtained wider private participation in its investments than in any previous year. In addition to its loans to private industrial enterprises, the Corporation used its new powers of equity investment to acquire the share capital of industrial companies and to enter into standby agreements in connection with the issue of shares and debentures. A significant development during the year has been the increasing activity of the Bank group, under the leadership of the IFC, in the establishment and support of local private industrial finance companies in Asia, Africa, and Latin America. In this field, the ability of the IFC to acquire capital stock has made possible combined operations by the IFC and the International Bank or the International Development Association.

The Board of Governors reviewed the financial statements and audit report for the fiscal year ended June 30, 1963, and the administrative budget for the fiscal year ending June 30, 1964, and approved the terms and conditions of membership for Jamaica, Kenya, Korea, and Nepal.

MEMBERSHIP, SUBSCRIPTIONS, AND INCREASE IN AUTHORIZED CAPITAL

In the 6-month period under review, two additional countries became members of the Corporation-the Malagasy Republic and Uganda— with subscriptions of $111,000 and $184,000, respectively. On December 31, 1963, the Corporation had 75 members with subscriptions totalling $98.5 million (see appendix table B-1).*

49

The increase in the authorized capital stock of the IFC from $100 million to $110 million, recommended to the Board of Governors by the Board of Directors in April 1963, became effective in September 1963. This increase, designed to accommodate initial subscriptions of new members, was provided for in section 2 of Article II of the Corporation's Articles of Agreement. The U.S. Governor voted in favor of the proposal under the authority of section 5 of the International Finance Corporation Act (Public Law 350, 84th Cong.).50 The United States would not subscribe to any part of the increase.

IFC INVESTMENT, STANDBY, AND UNDERWRITING COMMITMENTS In the last half of 1963, the IFC authorized new commitments in Finland, India, Malaysia, Nigeria, Turkey, and Venezuela in the equivalent of approximately $11.4 million, including standby arrangements amounting to $2.3 million. IFC assistance during this period to industrial financing companies in Finland, Malaysia, Nigeria, Turkey, and Venezuela reflects the growing recognition of the need and importance of institutions of this type in furthering economic development. Such assistance by the IFC totaled $16 million on December 31, 1963.

40 Annexed to doc. II-69, ante. 50 Aug. 11, 1955; 69 Stat. 669.

Two commitments, one in the equivalent of $1.3 million (including a standby of $490,000) in shares of the Malayan Industrial Development Finance Limited, and one in the equivalent of about $320,000 (including a standby of $160,000) in shares of the Industrialization Fund of Finland, were parts of combined operations in which the International Bank made loan funds available to these industrial finance companies and the IFC and foreign and local private investors participated in the share capital.

The IFC commitment in the equivalent of about $917,000 in shares of the Industrial Development Bank (IDB) of Turkey, supplemented a $5 million credit to IDB in November 1962 by the International Development Association.

To assist in the establishment and growth of productive private enterprise in Nigeria, the IFC approved a standby commitment in the equivalent of approximately $1.4 million in the Nigerian Industrial Development Bank (NIDB). With initial capital resources in the equivalent of approximately $12 million, the operations of the new institution will be concentrated in the industrial and mining sectors. American and foreign financial institutions have invested an additional $1.4 million in the shares of the Development Bank.

The IFC in conjunction with over 80 Venezuelan and foreign investors also assisted in the establishment of C. A. Venezolana de Desarrollo (Sociedad Financiera), a new private development finance company in Venezuela. The IFC subscription commitment amounted to the equivalent of $1.3 million. The new institution is designed to assist in financing the growth of Venezuelan private industry and the development of a capital market.

In three commitments in India, the IFC made available a total of $6 million in loan and share capital to the Mahindra Ugine Steel Company, Limited, for the construction and operation of an alloy steel plant ($3.4 million); to the Fort Gloster Industries Limited (FGI) of India to assist in financing an expansion of the company's electric cable manufacturing facilities ($1.2 million); and to the Lakshmi Machine Works, Limited, for the manufacture of textile machinery ($1.4 million).

Since 1956, when the IFC began operations, through December 31, 1963, cumulative net commitments in 27 member countries totaled the equivalent of $89 million," including $5.1 million in standby and underwriting transactions, and $68 million was disbursed (see table 9). These funds have been distributed among a number of industrial sectors-the largest volume of investments was made in steel manufacturing plants ($23 million), chemicals and fertilizer ($12 million), construction materials ($12 million) and pulp and paper mills ($10 million). Of total commitments, over $19 million has been sold or agreed to be sold.

81

*

Gross commitments totaled $102 million, of which $7.8 million was canceled or expired, and $5.3 million of the standby and underwriting commitments was acquired by others. [Footnote in source text.]