EBRD Role in Central and Eastern Europe and CIS. Arthur Schankler EFCA Conference Brussels 24 February 2005

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1 EBRD Role in Central and Eastern Europe and CIS Arthur Schankler EFCA Conference Brussels 24 February 2005

2 What is the EBRD? '98 '99 '00 '01 '02 '03 '04 Cumulative commitments 25.3 billion International financial institution, promotes transition to market economies in 27 countries from central Europe to central Asia Owned by 60 countries and two intergovernmental institutions Capital base of 20 billion Unaudited December 2004

3 Shareholding of the EBRD USA 10.1% Japan 8.6% EBRD region 8.6% excl EU members Others 13.8% EU [25] countries 58.9%

4 A network of 32 offices in 27 countries

5 What are the EBRD s s objectives? To promote transition to market economies by investing mainly in the private sector To mobilise significant foreign direct investment To support privatisation, restructuring and better municipal services to improve people s lives To encourage environmentally sound and sustainable development

6 EBRD commitments by facility type Private loans 39.5% Other participating interest 8.6% State loans 24.0% Guarantees, etc 2.0% Financial intermediaries 17.0% Direct equity 8.9% Unaudited December 2004

7 Active in all countries of operations Cumulative commitments 25.3 billion Russia & Central Asia 30% SE Europe & Caucasus 31% Central Europe 39% Unaudited December 2004

8 Portfolio by sector Transport 14% Power & Energy 7% Financial Institutions 32% General Industry 13% MEI 6% Agribusiness Energy Property & Natural 8% Efficiency Telecoms 8% Tourism Resources 1% 4% 7% Unaudited December 2004

9 Project status billon EBRD Total cost 1,139 signed projects Disbursements Unaudited December 2004

10 Project portfolio billon Private sector State sector ,139 signed projects Disbursements 4 Unaudited December 2004

11 EBRD s role after EU accession: Industrial Sector Outlook for SMEs and local companies is uncertain Restructuring is not complete steel, shipyards, etc. Deregulation and liberalisation yet to come energy Labor costs rising and productivity varies substantially Politics interferes with remaining privatisation EBRD response: Equity and equity-type products Indirect support through SME credit lines Structured project finance Enterprise restructuring but with caution

12 EBRD s role after EU accession role: Financial Sector Financial intermediation low and product sophistication required Lack of liquidity in equity markets Bond markets dominated by public bonds Few bank privatisations left but important ones remain Private equity activity and outlook constrained Pension reforms underway but progress uneven EBRD response: Credit lines (distribution of donor funds) to banks and leasing cos. Stimulate capital markets activity by supporting new instruments Focus on non-banking financial sector Risk participations / securitisations

13 EBRD s role after EU accession: Infrastructure Huge transport investment needs ( 100bn for trans-european networks through 2015) Water and environment requirements of similar magnitude Grant absorption problematic High fiscal deficits at local and national level EBRD response: Co-financing of EU-funded projects Support to small municipalities (SMM line) and regional projects Sovereign loans with high transition impact Financing of new sectors (social housing, health care) Introduce new products (e.g. revenue bonds; leasing; equity) PPPs

14 EBRD s s countries of operation: CIS Second largest region in the EBRD Portfolio with cumulative investments of EUR 6.2 billion The region is expected to grow by 4.3% in 2003, highest GDP growth prospects of all EBRD regions Excellent investment prospect in natural resources, agribusiness, steel, retail and other sectors

15 Key EBRD Objectives in Russia Assist the attraction of major strategic investors into Russia Proactively contribute to the restructuring of the natural monopolies (i.e. Railways, UES, etc.) Develop projects supporting high-tech companies in areas of competitive advantage (i.e. Aerospace) Develop new products (local currency financing, warehouse bills, leasing) Expand the SME programmes and the RVFs, paying particular attention to developing supplier linkages to foreign investments Progress in regional approach through clustering projects and policy dialogue on a regional level Assist in developing and implementing the Corporate Governance Code and establishing a system for corporate governance rating

16 EBRD s s countries of operation: SEEC South Eastern Europe and the Caucasus Third largest region in EBRD portfolio with cumulative EBRD commitments of 5.8 billion Euro GDP growth is also strong, though from a lower level than CEB, estimated 2003 average: 4.3% Excellent investment prospects in the agribusiness, natural resources, construction materials, consumer goods and other sectors Peace and political stability are taking further root in the region

17 Prospects of the SEEC Region Romania, Bulgaria and to a lesser extent Ukraine are beginning to attract more FDI and have good GDP growth prospects On the other hand, western Balkan countries and Caucasus countries are small and poor and are not an FDI destination yet Infrastructure needs are enormous and represent a large share of EBRD s business

18 Opportunities for consultants Procurement Opportunities over 800 consultants working on the Bank s projects at any given time Project Evaluation Department consultants for evaluation of completed projects -- lessons learnt Nuclear Safety Department specialists in project preparation, procurement and project implementation

19 Donor funding - Technical Cooperation Nearly half of all signed EBRD investments have been supported by TC funding Over 3,600 projects funded Over 930 million of funds mobilised Unaudited September 2004

20 Technical Cooperation commitments Focus on investment projects: 70% of commitments for project implementation or preparation Sector studies 1% Advisory services 26% Training 3% Project preparation 24% Project implementation 46% Unaudited September 2004

21 Procurement Opportunities Where to find Information on opportunities check check national press contact client Projects approved (public and private sectors) Technical co-operation projects approved Project Pipeline Contract awards Procurement notices (public sector) general procurement notices specific tender notices

22 EBRD s Procurement Policies and Rules Detailed rules for public sector open tendering the norm Some flexibility for concessions operations Policies and objectives for private sector normal commercial practices Consultant services selective tendering (short list of 3 to 6) Shares the same principles as other IFI s but. Eligibility to participate is open to firms from all countries including non shareholder countries. (except those countries subject to UN Chapter VII sanctions) Only restriction is capability to fulfil the contract No domestic preference Aligned to principles of WTO Government Procurement Agreement

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24 Annual Meeting & Business Forum 2005 Good opportunity to: find out more about the EBRD and its countries of operations network with bankers, business people and government officials May 2005 in Belgrade Parallel forum of debate and discussion on the investment climate in the region