The World Bank's International Finance Corp. affiliate made a record amount of loans for development projects last year to companies investing in Third World countries.
The bank, which released its annual report today, characterized last year as "the most depressing since the 1930s." It said that the disturbing worldwide investment climate has caused many developing countries to start encouraging foreign and domestic private investment after years of shunning the intrusion of outside firms. The foreign investment might help to close the gap between the assistance developing countries need and what they can get from commercial lenders, the bank said.
However, the bank cautioned that developing countries could use private investment only if the recovery in industrialized countries continues and if protectionist pressures are eased.
"The challenge ahead is not only to solve short-term problems which have recently received the most attention such as the liquidity situation of some developing countries," an IFC spokesman said. "But it also means not losing sight of fundamental development issues which now, more than ever, include the problem of finding ways to channel additional funds into the private sector, particularly in the poorer developing countries."
In the past, the agency has focused on development of manufacturing operations and now will broaden its scope to include mining and agribusiness projects, the IFC said.
Last year the bank's total investment approved by its board of directors was $845 million, 38 percent higher than the previous year. A high proportion of loans were syndicated to commercial banks and other financial institutions, the IFC said.