Beko

completed

Beko Elektronik A.S., established in 1966, is a domestic market leader and major OEM and private label manufacturer in consumer electronic products. Beko''s product range focuses on conventional televisions, but also includes flat screen TVs, set top boxes, PCs, monitors, DVDs, cash registers, and audio equipment. The US$95 million proposed project consists of (i) a phased capital investment program of US$30 million, aimed primarily at a 100% expansion of TV manufacturing capacity, in line with long-term OEM export contracts recently secured; (ii) increased working capital requirements of approximately US$50 million, and (iii) US$15 million in short-term debt restructuring in order to improve the overall debt profile of the company. Development Impacts:Sustainable Employment - Support of the company''s expansion efforts may serve to counteract the employment pressures observed during the deep economic contraction of 2001. As a result of the expansion, and in spite of the company''s continuing focus on improved productivity, total headcount is expected to increase from 1,828 to 2,817. The company further supports indirect labor employment through forward and backward linkages, related to outsourced components, transport, and sales. Beko outsources approximately 30% of its purchases from the domestic market including SMEs, while domestically supporting more than 4,500 dealers, and 350 service centers.Higher Export Earnings - Since the expanded capacity will be directed to exports, IFC will help to increase the country''s foreign currency earnings and thereby recover from the current economic turmoil. Electronics Industry - Both Beko''s long-term relationship with domestic suppliers and "learning by doing" experience supports the continued emergence of an electronic components industry, which, in turn, serves to strengthen the growth of an overall electronics industry in Turkey. In recent years, due to the solid growth of electronics manufacturers, the industry has increasingly invested not only in capacity, but also in R&D to improve the overall quality and design of new products. In line with the development of Turkey as a technology-related hub, the company''s plans to expand into the engineering contract business could be expected to have important spillover effects related to R&D, new product development initiatives, and production technologies across the wider manufacturing sector.IFC Role: Mobilization of long-term capital under the IFC B Loan program - Despite its export orientation and success to date, Beko has been largely unable to attract long-term funding at reasonable terms. The proposed B Loan aims to provide reasonably priced long-term financing, which is important not only for ensuring profitability in a highly competitive global industry, but also for strengthening the company''s position vis-a-vis its key customers who value long-term financial stability.