Secretariat draft
21 June 1993
the years.
In addition, CDC can play a useful role in helping move
enterprises currently in the public sector into the private sector (more
so if legislation is changed as proposed above).
6.6 We therefore recommend that over the next Quinquennial period CDC
should aim to commit at least 80 per cent of its new lending to the private
sector. As a corollory, not more than 20 per cent of new lending should
be in the public sector; within this CDC should be primarily investing in
support of privatisation strategy.
Equity investment
6.7 Under current reporting conventions CDC's equity investments are
reported as official development assistance (oda). Equity capital is a
particular scarcity in the developing world. In 1986 CDC were encouraged
to increase the proportion of equity in its new investments. It has
suceeded in doing this and expects to continue to do so. CDC forecast in
the current funds flow projections is that the share of equity in new
investments will increase over the next few years to 18 per cent. The
trend to equity investment is likely to be reinforced by increasing
emphasis on the private sector discussed above.
6.8 The percentage of equity investments which it is sensible for CDC to
have in its portfolio depends on part on the assessment of risk and the
structure of CDC's balance sheet and revenue account (although in the long
run equities may be expected to provide a higher return than loans, the
returns in early years will be lower). CDC have proposed an internal
target that 25 percent of private sector investments should be in the form
of equity or quasi-equity. We recommend that the proportion of equity should continue to be the maximum which CDC management judge to be prudent.
Sectoral focus
6.9 In recent years CDC has not met the target of 40% of lending going
to the RNR sector, mainly because of market factors. The MMC recommended
that the Review should consider resetting the RNR target at a more
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