FOR IMMEDIATE REL:EASE
                                                                                WOIILD



    INTERNATIONAL BANK FOR
                              I



    RECONSTRUCTION                     r:JD DEVELOPMENT
    1818 H STREET,    N.W., WASHINGTON 25, D. C.     TELEPHONE:   EXECUTIVE 3-6360




        PRESS RELEASE NO. 504
                                                       SUBJECT:      $4. 2 million Pakistan
        September 25, 1957                                           loan approved.

               Th~ TJnrld Bank hA~ ~-r,r,,..nvedr-~~ loan of $4.2 million to help f'inance the
        development of' private industry in Pakistan.        The loan will be made to the
        Pakistan Industrial Credit and Investment Corporation Limited, a corporation
        being formed by private Pakistani, British, American and Japanese investors.
       The Bank will enter into a formal loan agreement when the Corporation is




•
        established a few months hence •

               The initial share capital of the Corporation will be 20 million rupees
        ($4.2 million). Arrangements have been made for the Pakista.niinvestors to
       subscr:i.be to 60'1/o of the shares, American and British investors to 15% each, and
       Japanese investors to 10%.       The Government of Pakistan wi.11 make a 3()-year
       interest-free advance of 30 mH.lion rupees to the Corporation; so that the
       capital resources initially available to the Corporation, from capital subscrip-
       tion,     the Government advance and the Bank loan, will be 70 million rupees
       ( $14. 7 ,million) •
               The principal objectives of the Corporation will be to assist in the
       expansion or modernization of small and medium-sizecl, :'industries           and.   to help

       create new ones. ;, To a.chi eve these objectives, the Corporation will make loans
       and equity investments, and underwrite and distribute securities.                It will also



•      help private industries to obtain managerial, technical and administrative

       services and advice.       As rapidly as is prudent, the Corpcration Will sell its
       loans and share holdings to other investors to recover its own capital for
       f\u'ther investment.
                ...

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                                It is expected that the initial Boa.rd of Directors of the Corporation will

                           comprise 14 Directors: 10 prominent Pakistani industrialists, 'businessmen and

                           bankers to represent the Pakistani shareholders, one director each to represent

                           the British, American and Japanese investors, and one Government Director.

                           The General Manager of the Corporation will be Esgo T. Kuiper of the Nether-

                           lands, who organized and was the first Managing Director of the Indonesian

                           Industrial Bank.   Headquarters of the Corporation will be in Karachi and

                           branches will be established in Lah.ore and Dacca.

                                One of the main impediments to the growth of private industry in Pakistan

                           has been the lack of risk capital.         When Pakistan achieved its independence in

                           1947, it had relatively little industry, and private capital was reluctant to
                           venture from the traditional fields of trade and cormnerce.             However, the

            •              past few years have brought increasing investment opportunities, ana. the role

                           of private capital in industrial development has progressively grown.              It

                           needs encouragement and assistance to d~velop further and to take full

                           advantage of the new opportunities.

                                Recognizing the need for a credit institution to help finance such indus-

                           tries, the Pakistan Government and leading Paldstani industrialists and

                           financiers requested assistance fro~<t,he--World Bank.           In April 1956, Mr. George
                                                                 /i                (-',,\
                           Woods, Chairman of' The First Boston Corporation, a.:__)Bank officials visited

                           Pakistan to explore the possibilities in the field of industrial development

                           and . . to study the ways in which an industrial. finance institution should be

                           established.   The main outlines of the corporation were draw up during that

                           visit, and a Steering Commit.tee of five prominent Pakistani industrialists and

                           financiers was formed to carry out the preparatory work necessary to the es.tab-

          •                lishment of' the new corporation.   At that time the World Bank indicated its




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    ...   ,,.         ,'
                                          - 3 -



•   willingness to consider a loan equivalent to the a.nx,unt
    the corporation·were set up in a satisfactory manner.
                                                                of   the equity capital. if


         In August 1957, representatives o:f' the Steering Committee, the Government
    of Pakistan and.of the British, American and Japanese investor groups met with
    World Bank o:f'ficiaJ.s in Washington and reached agreement on all points of substance
    and on drafts of all documents.
         The authorized' capital of the Corporation will be 15.0 million rupees ($31.5
    million), divided into two million ordinary shares (common stock) and 13 million
    unclassified shares, all with a par value of 10 rupees ($2.10) each.        Initially
    the Corporation will issue only the two million ordinary smres with an aggregate
    par value of 20 million rupees ($4.2 million) which will be offered for subscrip-
    tion at par.    The Pakistani Steering Committee is arranging for the sale of
    1,200,000 shares ( 12 million rupees) of capital in Pakistan: 800,000 f;hares
•   through private placement and 400,000 by public offering.        The British investors
    some of the Eastern Exchange Banks, a number of i:c.surance companies, four

    industrial concerns and the Commonwealth Development Fina.nee Company Limited --
    intend to subscribe 300,000 shares (3 million rupees) • .American investors --
    Bank of America., Henry J. Kaiser Company, International Basic Economy Corporation,
    Transoceanic Development Corporation Limited, and others -- intend to subscribe
    300,000 shares (3 million rupees).    The Japanese investing group, consisting of
                             0

    the 12 Japanese foreign exchange banks, intend to subscribe 200,000 shares
    ( 2 million rupees'} •
         The Govermnent •s 30-year interest-free advance ,6'!\ 30 million rupees 'Will be
                                                            ·~<\
    repayable in 15 equal installments, beginning. in the 16th year.       This advance
    will be, provided out of funds derived from the sale of commodities provided to
    Pakistan under United States Government aid.
         The proce.eds of the $4.2 million World Bank loan will be used to pay for
    imported materials, equipment and services required to carry, out industrial
    projects financed by the Corporation. The loan will be for a term of about
    15 years and interest will be determined at the time the loa.ri do_cuments are
    signed. 'The Government .of Pakistan will gua.rentee the loan.