In accordance with article 20.3 of the Articles of Association, we are privileged to present the 1996 annual accounts of De Surinaamse Bank Nv.

The Company balance sheet at 31 December 1996, the company profit and loss account for 1996 and notes thereto have been audited, including the consolidated balance sheet at 31 December 1996, the consolidated profit and loss account for 1996 and notes. We recommend you adopt the annual accounts as presented by the management with the accompanying auditor's report of Ernst & Young Suriname Accountants.

Pre-tax profit amounted to Sf 1,124,872,00. After deduction of taxes amounting to Sf 576,042,000. Minority interests of Sf 44,000 and retained profit of Sf 1,000 for the previous year, the profit available for appropriation was Sf 548,787,000. On approval of the annual accounts and the proposed profit appropriation, a cash dividend of Sf. 142,831,000 or Sf 81.25 per share of Sf 25 face value will be paid out for the 1996 financial year. Part of this dividend has already been made available as interim dividend of Sf 31.25. A final dividend of Sf 50 per share will be paid. The total cash dividend percentage amounts to 325%. The remaining net profit of Sf 405,956,000 will be added to the reserve. In addition to the cash dividend the management proposes to pay a stock dividend of 10% from the share premium account. We agree with said proposals of the management and recommend you approve them.

In accordance with the schedule of retirement drawn up by the Board of Directors, pursuant to the provisions of article 13.7 of the Articles of Association, Messrs A.J. Brahim and L.C. Johanns are due to retire from our Board. As they have offered themselves for re-election, we propose to reappoint them.

We would like to express our gratitude to the management and the staff of the bank for their dedication and loyalty during the past year.

Paramaribo, 28 April 1997

Board of Directors

 A.R.J. Frijmersum, Chairman

A.J. Brahim

F.G.H. Deckers

L.C. Johanns

J.J. Oyevaar, delegate member

R. Shankar

The year 1996 was an eventful year in many respects. After being admitted to the Caricom as the 14th member state in 1995, internal borders were lifted from 1 January 1996. On that date Surinamese companies gained access to a market of 5.5 million people. In 1996 it became undeniably clear that Suriname's industry is considerably less competitive than that of more developed Caricom countries such as Trinidad & Tobago. As a consequence, Suriname is being flooded with products from other Caricom countries without being able to increase its exports to this market. Though recent statistics on this flow of goods are lacking, it is evident that the trade balance with these countries has deteriorated further (due to the importation of petroleum products from Trinidad the trade balance with the Caricom has shown a deficit for years). The principal causes of this deterioration are:

1. For many years trade and industry had no access to foreign currency at official exchange rates. Consequently, hardly any replacement investments were made in that period to modernise production plants. Businesses therefore have to operate as best as they can with obsolete machinery and equipment;
2. The sharp increase in tax rates under the Structural Adjustment Programme (SAP). The rates of direct taxation for both individuals and businesses are currently among the highest in the Caricom, even after the slight reduction effective from 1 January 1997;
3. Many raw materials are subjected to import duties in Suriname but are exempt from import duties in other Caricom countries. (very recently the government decided to put an end to this form of unequal treatment. We hope that this decision is implemented very shortly.)
4. Energy cost are much lower in Trinidad than in our country.

As noted in our annual report for 1995, the accession to the Caricam is a special challenge; unless the Suriname government is able to provide companies with the same macroeconomic environment as the other Caricom countries, Suriname's membership should be regarded as too ambitious.

In other respects, too, the industrial sector in general and the export sector in particular went through a difficult year. The tremendous appreciation of the Suriname guilder in 1995 is especially noteworthy in this context. Its negative impact on competitiveness really started to be felt in 1996.

In this light, we advocate a stable exchange rate policy aimed at avoiding both appreciation and depreciation of the Suriname guilder, such a policy was indeed pursued in 1996.

Politically, too, 1996 was a turbulent year. The general elections held on 23 May for the National Assembly (DNA) proceeded in orderly fashion. The coalition government united in the New Front for Democracy and Development (New Front) won 24 of the available 51 seats. As the New Front failed to attain the qualified majority for electing the President and the Vice President, it was forced to seek cooperation with the small parties. However, endless negotiations about the distribution of cabinet posts did not lead to a satisfactory outcome for all parties involved and the coalition fell apart. Nine coalition members split off to join the then largest opposition party (NDP), which had won 16 seats. Their example was followed by a number of district and area council members who had been elected for their party.

The President and Vice President of the Republic of Suriname need a two-thirds majority in the National Assembly to be elected. None of the parties or combinations of parties which had taken part in the elections enjoyed such a majority. As in 1991, therefore, these elections had to be carried out by the United People's Meeting, consisting of 869 national assembly, district council and area council members. The constitution stipulates that a straight majority is sufficient in this meeting.

The elections were held on 5 September 1996. The candidates of the new coalition, Messrs Jules Wijdenbosch and Pertaap Radhakisun, were elected and inaugurated as President and Vice President on 14 September. Evidently the election result had no bearing on bearing on this radical shift in the political balance of power.

The Venetiaan government must be given credit for implementing the drastic but much needed reforms, thus laying a healthy basis for the economy which the new government is now able to build upon. The International Monetary Fund took a favourable stance in its report of 9 December 1996 and reffered to an important turnaround in the country's economic and financial situation in term of:

• restoration of fiscal discipline
• unification and subsequent stabilization of the exchange rate
• recovery of both the internal and external balance as expressed in a substantial improvement of the monetary reserve, a sharp reduction in external debt and the return of flight capital.

This effort, in short, is certainly something to be proud of.

The Government policy statement for 1996-2001 which was read out on 1 October by the President of the Republic, outlined the policy for the coming period. It is extremely regrettable that the members of the existing government, including the President, have indicated on several occasions that the Structural Adjustment Programme (SAP), which was approved by the National Assembly on 23 September 1992, is not to be continued as the new government has decided to embark on a different course. The National Assembly should have conducted a broadly-based evaluation of the SAP. A businesslike and rational debate could have provided the arguments and laid the foundations for a new policy. A population who recognises the need for a new policy and understands its aims will be more inclined to give that policy their backing.

It is vitally important that the government does not renounce fundamental policy principles just for the sake of popularity. Otherwise the country may be faced again with a budget deficit that cannot be financed on the capital marked. It is therefore necessary to cut public expenditure and introduce a more balanced tax system, with personal and corporate income tax rates not being higher than those in the other Caricom countries.

It is clear from the above that Suriname does not really have an alternative and must strive to restructure public expenditures. In this context priority must be given to abolishing subsidies, privatising public companies and trimming the civil service.

As in previous years, we will take a critical look at some macroeconomic factors:

- foreign payments and exchange rates

- monetary developments

- balance of payments

- public finances

- national debt and

- development of the production sector.

The volume of outgoing foreign payments channeled through the banks increased further, particularly in the first half of 1996. This is due to the fact that the banks offer a range of different methods of payment, including Letters of Credit and collections. These instruments are only available through the banks. In 1996 it also became clear that the banks, in contrast with the parallel payment system, are able to handle payments to foreign countries much more efficiently and safely. Two incidents will serve to illustrate this. The first incident concerns an illegal foreign exchange office where the main proprietor vanished into thin air after receiving enormous sums of money by Suriname standards for transfers, which he subsequently failed to perform. Obviously the clients have very little prospect of recovering their money. The second incident concerns another illegal foreign exchange office (cambio) which regularly exported large sums of gold and foreign currency to effect transfers for Surinamese importers. It is currently still unclear wether this "bureau de change" deliberately abused, or became victim of, the extremely complicated currency regime. The matter is now before court.

In earlier annual reports we indicated that the currency regulations are completely out of line with present- day reality. The Foreign Exchange Act of 1947 is still in force and an attempt has been made to liberalise the currency policy through lower-status legal instruments. This has resulted in a system that is not only highly complicated, but also often inconsistent. Implementations of the currency regulations will therefore be an extremely difficult task.

The Suriname guilder had a fairly calm year in 1996. The stable development is not evident from table 1 but even more so from table 2, which shows the relative change in the rate of the Netherlands guilder on the parallel market.

 Table 1

Source: De Surinaamsche Bank N.V.

 Table 2

Source: International Monetary Fund, the Central bank of Suriname, The Suriname Bureau of Statistics and the Surinaamsche Bank N.V.

** Figures at 30 September 1996

This is due to the following causes:

1. The budget deficit on a cash basis remained limited, so that public finance had virtually no disturbing effect on the monetary balance. Though direct payment of the bauxite companies to the Suriname government declined from USD 25.6 million to USD 20 million as a result of lower income tax revenues, US dollar transfers through the Central Bank of Suriname (CBvS) increased from USD 45 million in 1995 to USD 49 million in 1996. The higher volume of transfers stemmed from increased investment activities and higher purchases of materials and services in the local market. The bauxite companies maintain current accounts with their parent companies. Dollars are transferred to Suriname for the payment of wages, taxes and local purchases.

The Success of the " Self Assessment System" for direct tax collection, which was introduced in 1995, was confirmed in 1996. Under this system, companies and private individuals are required to settle their tax bills almost immediately according to the 'pay as you earn' formula. Thanks to this system, the CBvS once again did not need to finance budget deficits in 1996 and the government was able to make regular debt repayments to the CBvS.

2. Since mid-1994 the CBvS has been gradually building up its reserves which at the time were minimal. By making currency regularly available to the exchange banks, these were better able to meet importers' demand.

In the second half of 1996 and particularly in the fourth quarter the currency supply from the CBvS to the exchange banks diminished and importers increasingly turned to the parallel currency market. This development was due to the fall in foreign currency revenue whereas demand for currency from the import sector increased. The decline in foreign currency revenue was caused by stagnating exports following strikes in the bauxite sector, the export quota for rice to the European Union being used to the limit and increased rice imports from the US to the European Union. The grater demand for currency originated from the sorely needed modernisation of plants and equipment and the improvement in purchasing power which boosted demand for durable consumer goods.

Over the past year hyperinflation has severely dented the purchasing power of people on fixed incomes. Many peoples have seen their standard of living deteriorate. Recognising the need to address the problem, it was in this period that the concept of the 'social debt' was formulated. This concept is based on the assumption that the purchasing power of the people on fixed incomes must be restored to former levels. It will not be clear who is to foot the bill and the pace at which the plan is to be carried out until wage demands exceed the rate of inflation. If this is the case, the bill will very conveniently be passed on to the employers. We would like to stress the importance of avoiding a new price-wage spiral. To this end, captains of industry and trade union leaders must agree that a reinforcement of purchasing power is only acceptable if counterbalanced by a corresponding increase in productivity. Wage increases in excess of productivity improvements inevitably trigger inflation.

As in 1995 the primary aim of the monetary authorities in 1996 was to bolster both national and international confidence in the Suriname guilder. They are seeking to do this by strengthening the monetary reserves (see table 3) not only in absolute terms, but also as a percentage of the money supply (see table 4). Confidence was boosted further when the government started to repay its foreign debts after these had been restructured in consultation whit the creditor countries. We will return to this in the section on the national debt.

 Table 3

Source: Centrale Bank van Suriname

1 Provisional figures at 30 September 1996

* Provisional figures

Table 4

1 Provisional figures at 30 September 1996

* Provisional figures

It can be inferred from table 4 that the relationship between the monetary reserve and M1 and M2 came under pressure in the course of the reporting year. This can be partly explained by the decrease in the value of the monetary reserve components; on the other hand there was a considerable increase in the domestic money supply. Evidently the inflation outlook is still prompting investors, driven by a strong preference for liquidity, to opt for interest-bearing products with a comparatively short term to maturity. From mid-1996 the banks responded to this development by offering deposits with extremely short terms in addition to existing investment and savings products. In the years to end-September 1996, deposits held with banks with a term shorter than one year increased by more than fivefold (see table 4). The largest increase (Sf 10.6 billion) occurred in the third quarter. As a result, the banks had to raise medium-term funds at fairly high real interest rates, and a further fall in debit interest rates was out of the question.

It should be noted, however, that the rapid emergence of 'near bankers' has drained funds away from the banking sector. This is one of the reasons why general interest rates levels have not fallen further since March 1996. In view of the negative consequences for the country's economy, we would like to cast a brief glance at a phenomenon which is wrongly referred to as 'near banking' in Suriname. 'Near banking' generally refers to the lending operations undertaken by a company that does not have a banking licence, possibly but not necessarily to support its core business. The company either uses its own surplus funds or borrows funds to finance economic activities in de production or consumer sphere on terms broadly similar to those offered by the banks. The most striking difference with the phenomenon that has become manifest in Suriname in recent years and is wrongly referred to as 'near banking' is that in this case funds are borrowed at interest rates that could never be financed by any legal economic activity. In addition, in contrast with real 'near banking' activities, these funds are not ploughed back into the economy but are withdrawn from the money circulation. This means they are no longer available for providing finance in the production and/or consumer spheres, thereby dampening the impulse to initiate in vestments in e.g. the production sector. Real 'near banking' activities are transparent like normal banking operations and are aimed at ensuring the company's continuity. We would like to urge the government to take strong action against these 'near bankers'. This would definitely be to the country's benefit.

Source: Centrale Bank van Suriname

** Provisional figures at 31 March 1996

* Provisional figures

To reduce interest rates further the government must pursue a consistent policy aimed at restraining inflation and keeping exchange stable. These are both essential components of consistent and transparent public administrations. Such a policy alone will win the confidence of investors, so that interest rates can also come down to a normal, internationally acceptable level. Table 5 clearly indicates that the banks, in contrast with the period 1993-1995, had exceeded the norm by about 2.5% at the end of March 1996. As the CBvS considered this not to be conducive to exchange rate stability, a sanction was introduced. In our opinion, however, the credit ceiling was overshot due to the funding problems several banks experienced rather than the increase in lending on the back of the favourable macroeconomic environment.

Table 6 shows the development of the major balance sheet items of the commercial banks.

Source: The Central Bank of Suriname

* Provisional figures

Table 7 contains the abridged balance of payments on a cash basis. The movement of a country's balance of payments is determined by the real sector. This dealt with in the section on the development of the production sector. For a good understanding of the actual goods flows it is important to have reliable balance-of-payments statistics on a transaction basis. These record cross-border goods flows, and provide an accurate picture of the liabilities and receivables resulting from such imports or exports. Unfortunately the balance of payments is no longer drawn up on a transaction basis.

Source: The Central Bank of Suriname

* Provisional figures at 30 June

** Provisional figures 1995

1 Comprises services, primary incomes and transfer of incomes

2 incl. Bank transactions, items still to be classified and differences in value

3 including revaluation of monetary gold

Table 8 summarises the budget for 1997. As the budget was prepared before the Wijdenbosch government took office, the policy views of the current government are not reflected in the figures.

We expect the government to inform the population soon through the National Assembly of the quantitative effect of its policy plans. As in 1995 the actual figures on a cash basis were not made available. Consequently, we cannot give an assessment of the actual macroeconomic consequences of the fiscal policies pursued. It is important to observe, however, that the current government has indicated in its introductory note to the draft budget that windfalls and setbacks in 1996 will result in a substantial budget deficit. If fiscal policy were to remain uncharged, the deficit could possibly run up to Sf 18 billion. In our opinion the annual report of the Suriname Court of Auditors is a good source of information on the government's management of the country's financial affairs. In its report for 1996 the institute stated that its findings essentially boiled down to 'no discipline, inadequate accounting, poor control and failure to observe the reporting requirements'.

Table 8

 Source: Ministery of Finance (Budget 1996)

*Adjusted budget

1 Original budget

It would go too far to include a detailed analysis of the report of the Suriname Court of Auditors in our annual report, but we do not want to emphasise the need for an effective and disciplined management of public finances. The Suriname Court of Auditors reported several cases were the State 'forgot' to collect receivables. This indicates that the administration is in high need of improvement in many areas. Another worry is that in 1996 permission was given in no less than 208 cases to diverge from public tendering regulations, which is more than double the figure of 79 for 1995. The Suriname Court of Auditors also condemned the accounting backlog of the CBvS; the last report dates from 1991. International organisations such as the International Monetary Fund and the International Development Bank have already appointed out on several occasions that it is unacceptable for the Central Bank, which is one of the most important financial institutions in our country, to have an accounting backlog. We hope that the government heeds the observations of the Suriname Court of Auditors and takes corrective action where necessary. This should help to improve the government's image.

Table 9 shows the national debt at 30 June 1996, as indicated in the 1997 budget.

 Source: Ministery of Finance (Budget 1997)

*Figures as at 30 June 1996

n.a.: not available

 

Since 1995, current domestic debt has exclusively consisted of 'acknowledged private debts'. At the year-end 1995 this item was related to debts in the cinema sector amounting to Sf 17.2 million. At the end of June 1996 acknowledged private debts had gone up to Sf 1,699.1 million and concerned old debts relating to the importation of raw materials and supplies. Fixed domestic debt (the consolidated current national debt) decreased due to repayments made.

The redemption of foreign debts received special attention from the monetary authorities in 1996. These debts can be broken down into public debts and private debts. All public debts, barring one, were restructured and repaid in 1996 according to the agreed schedules. A number of loans were even paid in full. The foreign national debt at 30 June 1996 decreased by USD 11.8 million or 6.7% compared with 1995 as a result of the repayments made on the consolidated debts. On 10 January 1996 a debt restructuring agreement amounting to USD 68,179,649.25 was signed between the Federal Republic of Brazil and the Republic of Suriname. At year-end 1996 there were no arrears in respect of this restructuring arrangement which expires in the year 2007. On the other hand, government loans at the end of June 1996 increased as a result of a NLG 7.5 million loan from the International Fund for Agricultural Development (IFAD). This loan which is due to expire in 2011, is designed to support the small farmers in Suriname. The redemption of private debts is making far slower progress due to the level of exchange losses and the government's limited financial scope to provide compensation for these losses. However, in 1996 the Venetiaan government introduced a partial exchange loss compensation scheme.

The regular repayment of the restructured foreign debt has helped to promote the country's goodwill in the international financial world. This policy which was initiated by the then President of the CBvS, Mr Andre Telting , and received the political backing of the Minister of Finance H. Hildenberg, testifies to a healthy vision for the future. Mr. Hildenberg, did not return to the current government. On 28 November 1996 Mr. Telting resigned his post as President over the controversy with the government relating to a new government commissioner at the CBvS. The Wijdenbosch government is less committed to this debt repayment schedule and has evidently embraced other priorities. However we should be careful not to jeopardise our hard-won credibility in the international financial world by failing to honour debt restructuring arrangements.

The year 1996 was a difficult year for the industrial sector in Suriname. The moderate development of bauxite exports is attributable to the following factors:

1. The prices in the aluminium market (LME-London Metal Exchange) declined in 1996. While the LME price at year-end 1995 was still USD 0.76 per lbs, the year 1996 ended at a level of USD 0.69 per lbs. The alumina market hardly showed a rosier picture. The slack already evident in this market in 1995 continued in 1996, with selling prices for alumina falling even further on the 'spot market'. Prices of USD 130 per tonne were quoted against an average selling price of USD 170 per tonne in 1995.
2. In the fourth quarter of 1996, production was hit hard by a spate of trade union actions which started in June and led to the shutdown of the alumina factory in November. Without this strike the production figures would have been considerably better. In this case the export value would not have shown a slight fall. A positive development in 1996 was the renewed investment activity. Renovation investment was no less than USD 4 million on the 1995 level of USD 72 million. The bauxite companies had committed themselves to this capital expenditure under de Bauxite Agreement of January 1993 which provided the basis for improvement of their position. Thanks to this agreement the companies were able to consolidate their position in the international market despite the depressed sentiment in the alumina/aluminium markets over the past years. The vital importance of this agreement to maintaining international competitiveness can only be fully understood in the light of the current transportatiion problem. As the channel of the Suriname river is not deep enough for ocean-going vessels, transshipment has to take place in Timbladoro (Trinidad). The transshipment costs, varying between USD7 and USD 10 per ton, weaken the competitive of our bauxite companies.

Table 10.

Source: Bauxite Institute Suriname

 Industrial relations in Suriname are a serious cause for concern. It is our firm belief that the method of last resort, strike action, is used too quickly. It should be clear that everyone loses in a strike; the company suffers loss of production and sees its reputation as a reliable supplier damaged, while the employees lose income.

Employer-employee relationships can be strained for long periods of time and finally the government is confronted with loss of tax revenues from both parties in the conflict. It is therefore advisable to consider the introduction of a legally required cooling-off period.

There are three Canadian prospecting companies active in the gold sector in the Gross Rosebel and the Lawa regions. So far the prospecting activities have been progressing well in the sense that extractable gold reserves can regularly be adjusted upwards. It will however certainly be at least a year before the definite decision to set up a processing plant is taken, as the reserves found so far are still not large enough. Furthermore, a solutio has still to be found for the porknokkers problem. Porknokkers are individual gold prospectors, who make a claim on certain concession areas, in this case in the Gross Rosebel and the Lawa regions. Conflicts between the local porknokkers and the Canadian prospecting companies are common.

Unfortunately a solution satisfactory to all parties remains to be found. A much more serious issue is the often irresponsible use of mercury by porknokkers. It is of a paramount importance to alert them to the disastrous consequences for man and the environment. During the Suriname Mining Conference which was held on 25-26 January 1997 under the auspices of the Association for Economists the extreme significance of the gold sector for Suriname was highlighted. The calculations of one of the Suriname experts at this seminar suggest that these small-scale gold extraction activities yields 25,00-30,000 worth of gold per year with an estimated value of USD 250 to 300 million. To underline the importance of this sector for our economy, it should be mentioned that this sum is a multiple of what Suriname receives in any year in development aid. Unfortunately the revenues have been only of marginal benefit to the economy. This sector must be incorporated as quickly as possible into the formal economy. It is in any case a positive development that the government recently started to register all those working in this sector. The CBvS must continue its gold-purchasing activities and even extend them to the mining sites.

The rice sector, the country's second major source of foreign currency income, went through a difficult period, particularly during the second half of 1996. Unfortunately, we were unable to obtain the production figures for 1996.

Table 11:

Source: Surexco

Table 11 shows a slight increase in the quantity of exported rice at lower prices, resulting in a moderate fall in the export value compared with 1995.

International trade is undergoing fundamental change in terms of organisation and structure. The conditions under which Suriname exports rice are determined by international developments and Suriname has no option but to anticipate these. Our export conditions are influenced by the following factors:

1. Word paddy production
2. The international trade arrangements (GATT)

The FAO assumes that world paddy production is set to grow marginally by 1.8% per year until the year 2000. The most important determining factor of the country's rice exports will be the international trade agreements. The rules for the liberalisation of international trade agreed in Marrakech (Morocco) in 1994 basically provide that goods must be produced and exported free from subsidies and levies and that markets must be freely accessible toe everyone without barriers. Suriname rice exports are sold almost entirely to the European market, primarily via the LGO route. The rice is processed in Curacao and Bonaire and then transported as a EU product -i.e. free from import duties- to the European mainland. Furthermore the ACP status offers Suriname (and also Guyana) the opportunity to export under preferential terms to Europe at a price well above the world market price. The prices for Suriname rice are falling, however, as a consequence of the GATT arrangements under which the EU is starting to open its borders to other exporting countries and protectionist measures are being dismantled. In addition, Suriname will also lose the advantages of exporting via the LGO route. Though the general international prospects are not unfavourable, it is quite clear that under rhe specific conditions applicable to Suriname, the GATT agreement will bring some short-term disadvantages in the form of stiffer competition and falling prices. The situation calls for vigorous policy adjustments in this sector, primarily aimed at rationalising production to cut the cost price and improving the rice processing facilities.

This sector had a less flourishing year than in 1995 due to the conditions imposed on timber-felling and the duties on round timber. The measure makes it unprofitable to export unprocessed timber, which is a good thing in itself. In the reporting year the timber-processing companies did make replacement investments involving the importation of newer and more advanced timber-processing machinery. As regards the timber concessions requested by two entrepreneurs from South-East Asia, the government once again adopted a wait and see attitude, partly due to the sustained international pressure from environmental organisations and western powers.

Staatsolie is a public company that Suriname is proud of. Having begun as a pioneer in 1981, the company has gradually succeeded in stepping up its petroleum production to approximately 8,000 barrels per day at the end of 1996. As the company continued to expand, it increasingly began to feel the need to set up its own refinery. The construction of such an installation took years of thorough planning and preparation. The signing of the financing agreement and the construction contract for the refinery on 15-February 1995 marked the realisation of a long-cherished wish. In the third quarter of 1996 the engineering activities in Europe were completed, as was the construction process modules. These modules were shipped to Suriname and placed on the foundations of the refinery complex at Tout Lui Faut on 13 December, marking a milestone in the history of this sector. The refinery is planned to come on stream in the third quarter of 1997.

The start of the IFONS (Investment Fund Development Aid Netherlands-Suriname) in August 1996 with the Dutch State making a first contribution of NLG 25 million available, can be regarded as a step forward. The intention is to reserve 70% of this sum for the currency-generating sector (e.g. export sector) and 30% for the import-replacing sector. The National Development Bank acts as manager of the fund; a Supervisory Board acts as credit committee and is manned by representatives of the business community, the government and the donor, i.e. the State of the Netherlands. The financing is arranged as follows: at least 20% must be contributed by the entrepreneur, a minimum of 10% by the commercial bank who reports the credit to the IFONS, after which a maximum of 70% can be borrowed through the IFONS. Credit applications must be supported by a feasibility study. As this could form an obstacle for some companies, a Fund for Technical Support to the Private Sector has been created in order to support these businesses and/or to provide any (technical) management support that may be necessary. As the fund was set up within a development aid context, the level of interest has been limited to the favourable rate of 6 months Libor + 300 basis points (approximately 9,5%). The maximum term of the loans is 10 years. In view of the importance of the rapid expansion of the country's production sector, we hope that the IFONS will in practice prove to be effective and efficient.

Paramaribo, 28 April 1997

General Management

E.J. Müller

Development of the DSB Share

1 As at 31 December 1996

*Exchange call DSB

Face value per share: Sf 25

All ratios are expressed in percentages