EBRD Stability Pact for South Eastern Europe

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					               Private Sector
                Development
                     &
              EBRD Activities
              in South-Eastern
                   Europe

   Claudio Viezzoli
Director Western Balkans
 Stability Pact Working table II
 Skopje, November 18-19, 2004
SEE: Opportunity and Potential


   Growth exceeding CEB, driven by private
    sector expansion
   Improving investment climate: FDI at record
    levels in 2003 and stable in 2004
   Increasing access to finance for both
    businesses and households
   Expanding intra- and inter-regional trade
 SEE: Catching up in transition
EU candidates leading the way (EBRD TR 2004)
Change in transition scores *
0.12

0.10

0.08

0.06

0.04

0.02

0.00
                                                                                           Slovak Rep.
                            Czech Rep.




                                                                       Russia




                                                                                                                                Albania




                                                                                                                                                                                         Romania
                                                                                                                                                                           Kyrgyz Rep.
                 Bosnia &
       Armenia




                                         Estonia




                                                                                                                      Ukraine
                                                                                Serbia &




                                                                                                         Tajikistan




                                                                                                                                                                 Croatia
                                                   Georgia




                                                                                                                                                      Bulgaria
                                                             Moldova




                                                                                                                                          Macedonia
                                                                                 Mont.
                  Herz.




                                                                                                                                            FYR
  * No change was reported in the ten countries that are not listed
       Growing economies

           7

           6

           5                                      4.7   4.4
                                          4.5
Per cent




           4               3.8

           3   2.4
                     2.4
           2

           1

           0
                     CEB                          SEE
                            2001   2002    2003
  Capital flows and FDI peaked in 2003
16       US$ billion
14
12
10
 8
  6
  4
  2
  0
 -2      1996           1997          1998           1999    2000      2001       2002   2003

      FDI                                                   Portfolio Investment
      Other Investment including bank loans                 Total capital flows, net


Sources: EBRD, IMF, World Economic Outlook, UNCTAD
SEE: Challenges and Risks

   Overall transition lags behind CEB
   Financial intermediation is limited
   Limited “greenfield” investment so far
   Non-tariff barriers to trade remain significant
   Large current account deficits
                                       Average transition score, 2003

               H




                                 0.0
                                       0.5
                                             1.0
                                                   1.5
                                                         2.0
                                                               2.5
                                                                     3.0
                                                                           3.5
                                                                                 4.0
          Cz ung
              ec ar
                  h y
                     Re
                Es p.
                     to
                        ni
                             a
          Sl Pol
             ov an
                 ak d
                      Re
                            p
                   La .
                        tv




CEB
              Li
                 th ia
                    ua
               Sl nia
                  ov
                      en
                Cr ia
                     oa
               Bu tia
                    lg
      FY R ari
        R        om a
           M an
              ac
                  ed ia
                       o
                Al nia
                    ba
       Bo M nia
         sn old
       Se ia & ova
         rb
            ia Her
                & z.




SEE
                    M
                       o
               Ar nt.
                   m
                      e
               G nia
                  eo
                       rg
                           i
         Ky Ru a
             rg ss
               y           ia
          Ka z R
              za ep
                   kh .
                       s
                Uk tan
           Az rai
               er ne
                   ba
              Ta ija
                  ji n
           Uz kist
               be an
CIS



                    kis
                         t
        Tu Be an
                                                                                       Reforms in SEE lag behind CEB




           rk lar
              m us
                  en
                      ist
                           an
 SEE: high current account deficits
Often financed by remittances and aid
 Current account in per cent of GDP
 0
 -2
 -4
 -6
 -8
-10
-12
-14
-16
-18
      Albania   Bosnia and    Bulgaria   Croatia     FYR       Romania   Serbia and
                Herzegovina                        Macedonia             Montenegro
                                 2003              2004
Stability Pact:
Private Sector Initiatives
   Ten initiatives launched in March 2000
    with EUR 356m pledged
   Main priorities:
    (1) Trade facilitation
    (2) SME financing
    (3) SME support and development
   Implementation is on-going
   As of 31 Oct. 2004: donors committed EUR 140m
    matched by EUR 450m from IFIs
Trade Facilitation: Objectives

   Develop trade, both inter- and intra-regional
   Institutional development: help local banks in
    structuring trade transactions
   Create tracks records with foreign banks
   Avoid cash collateral requirements, i.e. cheaper
    financing terms for exporters or importers
   How? EBRD Guarantee covers payment risks
    by the Issuing Bank (under trade instrument) to
    the Confirming Bank
    Trade Facilitation: Results
     22 banks in SEE participate
      Total coverage limit EUR 92m
      As of 31 Oct 2004: cumulative total of
       over 1,500 transactions for EUR 219m
      Current annual turnover (2004):
       350 transactions for EUR 43m
      50% of transactions < EUR 100k
      Share of intra-regional deals increasing
    Possible through EUR 10m donor risk-sharing pool
SME Finance: Microfinance Institutions
   Microfinance Institutions: All countries in SEE (exc.
    Croatia). 8 banks,106 branches/outlets
     Cumul. 31 Oct. 04: 120,000 loans - USD 750m
     Average loan amount USD 6,700
     Portfolio: 51,000 SMEs - USD 328m
       Well-performing (arrears over 30 days 0.53%)
     Demonstration, know-how, competition and
       improvements of regulatory regimes
   Total Technical Assistance: USD 25.4m (EBRD 17.4m)
    (TC donors: US, EU, IFC, KfW, FMO, Luxembourg, Germany, Norway, DOEN, FAO)
    IFI Investments: USD 85m (of which EBRD USD 55m)
    (Other investors: IFC, KfW/DEG, FMO, IMI, Commerzbank, Western NIS)
    SME Financing: SME lines
   EBRD/EU SME Facility for Accession Countries in
    Bulgaria & Romania:
     13 banks/leasing co. in Bulgaria & Romania
     EUR 164.2m committed by EBRD matched by over
    EUR 38.4m from the EU (as of 30 June     2004)
     8,550 loans for EUR 238m
     Replicate in Western Balkans
   Overall EBRD support to banking sector in SEE :
     As of 30 June 04: cumulative of
        148 commitments of EUR 1.4bn in credit lines and
    equity participations
     Relationships with 64 banks in the region
    SME support initiatives: TAM & BAS
   Business Advisory Service (BiH, Bulg, Cro, Mac,
    Mont, Slov)
     Support through local consultants
     As of 31 Oct. 2004, 700 SME advisory projects
    (of which 75 in progress)
     Donor support: EUR 9.0m (EU, CEI, UK, AT,DE)
         More needed to expand (Serb, Rom)
   TurnAround Management Programme (all countries)
     Specialised industrial advisors
     As of 31 Oct. 2004, 240 SME management
        support projects (of which 68 on-going)
     Donor support: EUR 13 m – more needed
    EBRD: Strong presence in South-
    Eastern Europe
   285 projects
    Cumulative commitments as of end Sept. 2004
    EUR 6.4 billion, of which 63% are private sector
   Annual commitments flows in 2002-2003
    EUR 1.1 to 1.2 bn per year
    multiplied by 3.5 compared to 1999
   Mobilisation of commercial co-financing is
    becoming significant: EUR 934 million Jan.-Sep.
    2004
   Pipeline remains strong: EUR 1.4 billion (Sept. 04)
  EBRD Commitments to SEE:
  EUR 1 billion+ per year
EUR million          Annual business volume
   1400

   1200


   1000

    800

    600

    400

    200

      0
              1999    2000   2001    2002      2003   Sep-04

                             Total   Private
 EBRD in SEE: Annual Commitments

(in EUR m)            2001   2002   2003   Sep-04
Romania               288    447    384     203
Bulgaria               65    182    241     153
Croatia               281    318    125      59
Serbia & Montenegro   233    135    149      87
West Balkans + Mold   113    111    200     102
Total                 980    1193   1099    604
  EBRD Annual Business Volume
  by country
 EUR million
500
450
400
350
300
250
200
150
100
 50
  0
      Romania     Bulgaria       Croatia     Serbia & Mont.   West. Balkans &
                                                                 Moldova
                1999   2000   2001   2002   2003   Sep-04
EBRD and infrastructure in SEE

   EBRD has been very active in the energy,
    municipal and transport sectors
    Cumulative: 80 projects worth EUR 8.3 billion
                EBRD financing: EUR 2.2 billion
    Pipeline:    37 projects
                 EBRD financing: EUR 0.5 billion
   Private sector financing taking off in municipal
    utilities (Sofia, Zagreb, Bucharest), power
    (Bulgaria), airports (Tirana)
EBRD role in Stability Pact regional
infrastructure projects
   Currently the EBRD is financing 21 active
    Stability Pact projects (out of 51) - all under
    implementation
     Total project cost: EUR 2.2 billion
     EBRD financing EUR 800m
   EBRD working on 4 new regional road projects in
    Albania, BiH and S&M:
     Total cost EUR 640m, financing EUR 225m
    EBRD: Infrastructure strategy
   EBRD will continue to support projects:
     which have a regional focus and strengthen
    the economic links in the region: power, transport
     which strengthen local authorities: municipal
    utilities
   Dual public and private approach:
    - efficient use of public debt capacity
    - non-sovereign approach / commercialisation
    - involvement of private sector where possible
   Reform still needed: regulatory and
    commercialisation / privatisation
Key challenges
   Remaining privatisations and move to green-field
   Improve investment climate across the board: rule
    of law, clear regulations, level playing field, public
    and corporate governance
   Institutional building at all levels: State, utilities,
    financial institutions, regulatory bodies
   Unlock potential for FDI: intra-regional and utilities
   Broaden and deepen SME support
   Expand trade, incl. intra-regional
Conclusion

   South-eastern Europe is improving as an
    investment destination - but more to be done
   Stability Pact and donor support, together with
    EU accession/stabilisation process and IFIs,
    have been mitigating risks and provided
    leverage.
   Private sector still expected to play a bigger role
    and complement bilateral and multilateral
    financial flows
EBRD Contacts

   Olivier Descamps
    Business Group Director, Southern and Eastern
    Europe and the Caucasus
    Tel. +44 20 7338 7164 - Email: descampo@ebrd.com
   Claudio Viezzoli
    Director, Albania, Bosnia and Herzegovina, FYR
    Macedonia, Kosovo - SEE Coordinator
    Tel. +44 20 7338 6775 - Email: viezzolc@ebrd.com
   Peter Sanfey
    Senior Economist - Lead Economist for SEE
    Tel. + 44 20 7338 6227 - Email: sanfeyp@ebrd.com

				
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