Tigar Project The project supports the growth and strategic development of Tigar, a leading tire and rubber goods producer in Yugoslavia and the Balkans.   With the return of Yugoslavia to the international community, Tigar is planning to undertake a comprehensive corporate restructuring and investment program (the project) and has approached IFC for financial support.  The project involves; (i) debottlenecking and expanding its tire production capacity, which currently operates at 100% capacity, and moving into production of premium high speed tires; (ii) restructuring of non-core assets and businesses, and (iii) balance sheet restructuring to better match assets and liabilities.  Given that the project had been postponed due to circumstances outside its control, Tigar now wants to move quickly and IFC''s proposed project is structured to be responsive to this need.         The proposed project has a strong development impact.  Through this investment, IFC would be supporting the continuation of the transfer of technology to Yugoslavia.  The company is expected to be internationally competitive and export most of its production, resulting in over EUR30 million equivalent of foreign exchange revenues per year.  Moreover, this restructuring project will help employees of Tigar, especially among the tire producing units, secure their jobs in an environment where tens of thousands of employees are being laid off in various sectors in Yugoslavia.     After a decade of war, international isolation and poor economic management, there is low degree of financial intermediation in FRY and the mobilization of resources for new investment is negligible.  The banking system has a very low level of capitalization and extremely low intermediation capacity.  The financial difficulties of the major state owned banks preclude them from servicing the growing demands of the private sector.  Private banks are mostly small, thinly capitalized, and only offer short-term (1-3 month) working capital.  Private companies have little or no access to external finance.  As a result, interest rates are prohibitively high and local financial institutions do not have the financial depth required for the long-term, outward looking strategic development of major corporations in the country.  Loan maturities exceeding even a one-year range are not currently available in the  market.  In the context of an uncertain economic environment and competitive pressures in the global tire sector, IFC''s proposed long term financing of the project will provide critical support for the sustained and competitive evolution of a vital corporate sector enterprise in FRY.  Without IFCs investment, the company would be forced to rely on short term, extremely limited and very expensive financing.  While Michelin has had and will continue to have direct corporate exposure to Yugoslavia, its appetite for such exposure will in fact be enhanced by IFC''s participation in the venture.  IFC is working with the sponsors to structure a bankable investment program and ensure fair burden sharing amongst the parties.  IFC is also planning to provide technical assistance to Tigar with a view to eventually restructuring its non tire businesses  to preserve jobs and develop value-added business opportunities.Tigar is keen to have an environmental audit of operations and assistance to correct any deficiencies. IFC will also provide funding needed for environmental enhancement.    The proposed project will have a strong demonstration impact by supporting the investment of a leading tire manufacturer (Michelin) in FRY.  IFC financing is likely to encourage additional foreign direct financing and investment in Yugoslavia,  at a time when foreign investors are wary of Yugoslavias perceived macro-economic and political risks.  In the event that syndication is possible, it would be an enhancement of local companies'' credit worthiness in Yugoslavia.   In line with IFC''s view of developing Yugoslavia''s industry base, the project  supports research and development (in cooperation with Yugoslav technical institutions), new product development initiatives, and manufacturing technologies, which promote global competitiveness on the technology front.  In addition, by supporting a leading outward looking, regional company, IFC fosters the transfer of first-class production methods, strong environmental, health, and management systems in a country that has urgent needs to renovate its industrial base.