Monday, 7 January 2013

Exclusive interview with the Chief Investment Officer of the International Finance Corporation (World Bank) Mr. Anil Chandramani

Read an exclusive interview with the Chief Investment Officer of the International Finance Corporation (World Bank) Mr. Anil Chandramani, who provides a brief preview of his forthcoming presentation at the 3rd Russia & CIS Executive Summit, taking place in Dubai end of February. He also gives brief overview of the main challenges Russia & CIS region is going to face in the near future in terms of attracting investments, political factors influencing the industry, shifting of markets and other interesting topics.
                                                                               Mr. Anil Chandramani,
Chief Investment Officer, IFC – short biography here

              - Please describe your company briefly?
IFC helps companies strengthen their risk management capabilities so they can grow and compete globally.

What are the main issues you are planning to address in your presentation at the 2013 Russia & CIS Executive Summit in Dubai?
I would like to discuss why companies today can hardly afford to ignore emerging markets if they want to retain their leadership position in the industry and remain profitable.  I would like to discuss some of the key risks that companies face when they consider expanding their business outside their home country in various emerging markets, and also how IFC can help them manage/ mitigate those risks so they become more comfortable in those other countries, maybe almost as comfortable as in their own home markets.  The good news is that even today, even in difficult economic and political conditions, many companies are investing and growing. We think most companies can do that, if they understand the challenges and are committed to fixing the issues.
- Could you please give us some brief information on the financial/investment challenges that Oil & Gas companies might be facing in 2013 when expanding to new markets or when planning large new projects?
Financial/ investment challenges include volatile exchange rates,  low interest rates which make it unprofitable for banks to lend specially to those perceived as more risky borrowers,  Basle III guidelines which are expected to force banks to reduce lending further, crowding out of private capital by government borrowings in EU zone,  reluctance of financial institutions to lend long term because of risks of interest rates going up,  growing nationalism and protectionism in some parts of the world. On the equity side, the challenges might be different – how to raise equity capital in small doses.  But of course, even today we are seeing many investments in many countries in the region, just for example in Turkey, Uzbekistan, Russia, Ukraine, among others.  The idea is to build on strengths and mitigate the weaknesses. Not investing, not modernizing, not exploiting opportunities is not really a viable option because it can weaken your company and make it increasingly more vulnerable to risks.
- Could you share with us your perspective on the economic and political factors that might challenge the companies from the industry in 2013-2014? How about other factors that might influence the industry?
Economic and political factors that affect the industry, include among others, the following: slow economic growth in the EU Region and its impact on the economies of Russia & CIS countries;   stressed financial institutions that are pulling back credit, specially from emerging markets;  political instability in the Middle east and North Africa region and its impact on feedstock costs and supply;  debt burden in the US and its potential impact on interest rates and currency exchange rates worldwide;   shale gas in the US and maybe China in 5 years – and how they will affect the competitive position of companies around the world, including Russia & CIS;  an aging European population and how it impacts oil & gas companies;  continuing expansion in China and its impact on cost of raw materials and supply of products, etc.
-  What would be your first advice on attracting new sources of capital for the downstream industry?
It is important to understand that the issue is not so much shortage of financing but rather projects or investment plans that are well structured to mitigate risk and thus attract capital.  For that the most important thing is to have the right people - if you have the right people they can take care of everything, whether it is finance or operations or marketing or procurement.  Similarly to attract new sources of capital, you need people who understand both what the investing company is trying to do and also what financial institutions and other sources of funding want to see. If you can understand both those aspects, a company will then be able to structure its project so it becomes a fully bankable project. Bankability is all about risk mitigation: a good project that attracts capital is one which identifies the risks well and then lays out strategies to mitigate those risks.
-  Do you expect a major shifting of markets in the mid-term perspective and if so what in your opinion would be the main factor to cause this? How does the investment climate in Russia & CIS compare to other emerging markets in the industry?
Barring major unforeseen events, shifts are definitely going to happen but incrementally and continuously rather than overnight. They will be driven by politics, economics and resources.  These have all been mentioned above briefly.  Change is inevitable – the key is for companies to be prepared to meet emerging challenges so that they can maintain their competitiveness even in a changing environment. In every industry there are companies that are faring better than others. The key therefore is can you do the right things and avoid or mitigate the problems. 
             - The petrochemical sector traditionally faces more difficulties when it comes to attracting investments    than refining and of course upstream. How can IFC assist petrochemical companies in this respect?

IFC can help in several ways by helping companies understand risks and options for mitigating those risks.  IFC can provide both equity and debt, IFC can provide long term local and foreign currency financing,  IFC can help mitigate political risks; IFC can bring other partners in, IFC is counter-cyclical and hence not subject to the vagaries of the market place. IFC understands emerging markets like few others do, by virtue of the fact that IFC is a part of the World Bank Group. In the current fiscal year, IFC will invest more than US$1 billion of its own money and mobilize about $2 billion of other people’s financing that together will finance projects up to maybe US$15 billion.  So IFC is very active even in today’s market and we are keen to engage with good proactive clients.

-  What do you expect from you participation at the Russia & CIS Executive Summit?
To meet companies and to share IFC’s perspective on risk mitigation and financing; to meet people from different companies.
-  Please answer a question of your choice.
Another trend is that of companies from emerging markets, particularly from Asia (but also from the Middle East) acquiring companies in Europe and America.  This trend can both be a source of support (for example, Chinese companies come with lots of money) but can also be a challenge, bringing another somewhat new breed of competitors.  Again, the goal is to be one of the successful companies that can benefit from this trend and IFC can help companies that are proactive and ready to move.


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