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Doc. 9825
6 June 2003
The contribution of the European Bank for Reconstruction and Development (EBRD) to economic development in central and eastern Europe
Report
Committee on Economic Affairs and Development
Rapporteur: Mr Braun, Hungary, European People’s Party
Summary
The report - drawn up by the Parliamentary Assembly as part of its role as a parliamentary forum for the European Bank for Reconstruction and Development - highlights the EBRD’s major contribution to economic development in its twenty-seven countries of operations in central and eastern Europe and in the CIS area – with many of the countries concerned indeed showing faster growth than many in western Europe.
The report supports the Bank’s increased emphasis on the least developed among the countries of operations but also recommends that it not, for that reason, overly scale back its work in countries set to join the European Union, since accession itself will pose new economic strains.
The report also discusses the results of the EBRD’s May 2003 Annual Meeting held in Tashkent, Uzbekistan, in May 2003. While the Bank’s member countries and institutions gathered for the purpose rightly commended the Bank on its achievements, the venue itself served to demonstrate that not only Uzbekistan, but also other countries where the Bank has sharply limited its funding such as Belarus and Turkmenistan, have a long way to go before they can be said to satisfy the Bank’s statutory insistence on democracy, the rule of law, the respect for human rights and a market-oriented economy.
I. Draft resolution
1. The Parliamentary Assembly, acting as parliamentary forum for the European Bank for Reconstruction and Development, has taken note of the report prepared by its Committee on Economic Affairs and Development on the Bank’s activities. It commends the Bank on its unique contribution to assisting its twenty-seven countries of operations in building market economies and encouraging private entrepreneurial activity in a framework of evolving democracy, rule of law and human rights.
2. The Assembly notes with particular satisfaction the high growth rates observed in the majority of the EBRD’s countries of operations - including the less advanced - when compared to the established market economies, and the apparent halt to, or even decline in, corruption, economic crime and political patronage observed by the Bank in many of the more successful countries. It encourages the Bank and the countries of operations concerned to make every effort - in co-operation with the World Bank, the European Investment Bank, the Council of Europe Development Bank and the Stability Pact for South-Eastern Europe as well as non-governmental institutions such as Transparency International and Social Accountability International - to ensure that this development can continue, aided by democratic strengthening, the opening and liberalisation of markets and the growth of new companies.
3. While accession to the European Union will open up new business and trading vistas for the countries joining, continued EBRD financial and especially advisory support will be needed there in view of the added fiscal constraints incumbent upon joining and the administrative limits to absorbing major new EU funding. The Bank should ensure optimal synergy between its own projects and EU programmes to avoid overlaps and waste of resources, and give added attention to such areas as municipal and environmental infrastructure projects, the development and diversification of financial services, and other sectors where EU funding is not foreseen and commercial investors may be reluctant to enter independently.
4. The EBRD’s commitment to pursuing its lending in all its countries of operations is to be welcomed, as major financing needs persist in them all. The Assembly also commends the Bank’s increasing lending to Russia, south-eastern Europe and Central Asia and its focus there as elsewhere on sectors where it can serve as a catalyst for modernisation, privatisation, market liberalisation, transparency and corporate ethics – such as in electricity, gas, transport and municipal services.
5. The Assembly also welcomes the EBRD’s increasing emphasis on trade facilitation measures among neighbouring countries of operations, since long overlooked intra-regional trade holds particular promise for rapid economic growth. This task is of particular significance for countries preparing to join the European Union and hence its Internal Market.
6. The Assembly supports the Bank’s major efforts to promote the development of peripheral and rural areas via lending to small and medium sized enterprises, especially those run by or employing women, and to agriculture and agribusinesses. It notes the close relationship between agricultural and overall economic development and hopes that trade liberalisation across Europe can proceed also in this sector, thus permitting countries of operations to realise their full development potential.
7. Finally, the Assembly commends the EBRD on its resolve to pursue firmly the political aspects of its mandate and in this regard supports its decision to cease financial assistance to the public sector in Belarus and Turkmenistan until these countries meet the necessary standards of democracy, the rule of law and human rights, and asks that a similar policy be considered in regard to other countries with a similar situation, such as Kazakhstan and Uzbekistan.
II. Explanatory Memorandum by the Rapporteur
Table of Contents
I. INTRODUCTION
II. BACKGROUND AND GENERAL OVERVIEW OF PROGRESS TO DATE
III. A CLOSER LOOK AT SOME SPECIFIC AREAS
III.a. Agriculture and Rural Transition
III.b. Small Business Credit and Finance
III.c. Municipal and Environmental Infrastructure
IV. TASHKENT ANNUAL MEETING
V. CHALLENGES AND PROSPECTS
VI. CONCLUDING REMARKS
*
* *
I. INTRODUCTION
1. On 14 April 1992, the Council of Europe and the European Bank for Reconstruction and Development (EBRD) signed an agreement of co-operation. Since then, the Parliamentary Assembly of the Council of Europe has carried out an important role in the supervision of EBRD’s activities through the preparation of an annual report as well as by providing a forum for subsequent debates and discussions. This work serves not only to monitor and provide feedback to the EBRD itself, but also to inform the public and gather support from the member states of the Council of Europe. The Parliamentary Assembly hence acts as an intermediary and as a representative for the citizens of its member states, whether these are donor or recipient countries within the EBRD.
2. Having as its objective to yield an assessment of the EBRD’s work, the present report will start with a general overview of the Bank’s achievements since the Assembly’s last report in June 2002 and will then examine a few selected areas more closely. In the final chapters, the report will seek to identify upcoming challenges and make recommendations where necessary for EBRD operations in the future.
3. The report is primarily based on the meeting of the Assembly’s Committee of Economic Affairs and Development at EBRD headquarters in London in January 2003 and on the Rapporteur’s additional meetings with EBRD representatives on that occasion, and following his participation in the EBRD’s Annual Meeting in Tashkent (Uzbekistan). It also relies on various EBRD publications1 kindly placed at the Rapporteur’s disposal by the Bank, as well as on independent sources of information. The Rapporteur thanks, on the Committee’s behalf, the EBRD for their warm welcome in London and for all their assistance provided in the course of the preparation of this report. As a result of his work, he is even more convinced of the EBRD’s important role in easing the – in some countries now more or less completed - transition towards open, market-oriented and privatised economic systems in the Bank’s many countries of operations. This also holds for the major efforts contributed by the countries themselves in trying to make sure that EBRD projects yield optimum results.
II. BACKGROUND AND GENERAL OVERVIEW OF PROGRESS TO DATE
4. The EBRD was established in May 1991 to “foster the transition towards open market-oriented economies and to promote private and entrepreneurial initiative” in the countries of CEE (central and eastern Europe) and the CIS (Commonwealth of Independent States). To this end, it assists recipient member countries in implementing structural and sectoral economic reforms to promote private sector development and mobilise investment.
5. Furthermore, differentiating it from other development banks, the EBRD operates under a mandate that has political aspects, in that it seeks to assist only those countries that are “committed to and applying the principles of multi-party democracy [and] pluralism”. EBRD President Jean Lemierre in his statement to the EBRD’s Annual Meeting in May 2002 saw political democracy and economic freedom as the two pillars of sustainable development.
6. The EBRD’s core business is to assist in the financing of projects, primarily in the private sector, that serve the transition process. In its capacity as a development bank, the EBRD seeks to finance operations that are both commercially viable and assist development, including in the environmental field. It cannot always be easy to reconcile the requirements of sound investment banking on the one hand and development banking on the other hand, but the Bank seems somehow to manage and certainly does its best.
7. The EBRD’s operational priorities, adopted in 1999, include: 1) Assistance towards the creation of sound financial sectors linked to the needs of local enterprises and households; 2) Pursuit of commercial approaches and a range of financial structures for infrastructure development; 3) Provision of leadership for the development of business start-ups and small and medium-sized enterprises (SMEs); 4) Demonstration of effective approaches to restructuring of viable larger enterprises; 5) Active approach to equity investment; and 6) Promotion of sound investment climates and stronger institutions.
8. On the basis of these priorities the EBRD seeks to: 1) Adopt a strategic approach to portfolio management so as to balance transition objectives and operational priorities, countries of operations, products and risk categories; 2) Pursue partnerships and effectiveness by ensuring co-operation and exploiting complementarities; and 3) Strengthen its presence in the countries of operation.
9. With 60 member countries and two member intergovernmental institutions2, the EBRD is today active in a total of 27 countries of operation3. As the largest single investor in the region of CEE and the CIS, the EBRD has (as of 31 December 2002) committed € 21.6 billion, for a total project value of € 68.7 billion to 905 private and state sector projects.
10. In 2002, the EBRD made a record commitment of € 3.9 billion toward the financing of 102 projects, 71 percent of which are in the private sector.
11. 41% of the total commitments between 1991 and 2002 went to central Europe and the three Baltic states4. The Russian Federation has received around 22% of all EBRD financing, while only a small proportion has gone to the Caucasus5. South eastern Europe6, eastern Europe7 and the countries in Central Asia8 have through the years received about 37%.
12. As the largest of the countries of operation, the Russian Federation received a record € 1.29 billion (or one-third) of EBRD financing in 2002 in response to the country’s reform progress and renewed interest on the part of strategic investors.
13. The Bank continues to be very active in central Europe and the Baltics supporting further transition while at the same time expanding its activities further east and south in Central Asia, the Caucasus and South-Eastern Europe. All but two (i.e., Bulgaria and Romania) of the ten countries in central Europe and the Baltics have concluded the accession talks with a view to joining the EU in 2004. Following entry, the European Investment Bank (EIB) and the EBRD are expected to continue to work together in this region.
14. In southeastern Europe, the EBRD has maintained a leading role in support of private sector development under the Stability Pact for South Eastern Europe. The pact, adopted in 1999, is a political commitment and framework agreement for international co-operation towards developing a comprehensive and long-term strategy for growth and stability in the region. It seeks to encourage and reinforce co-operation among donors and between countries as well as to streamline existing and upcoming activities and efforts of financial, political and technical assistance. During 2002, the Bank invested € 553.4 million in southeastern Europe.
15. Partly in response to 11 September, the EBRD places particular emphasis on Central Asia through its 2001 Action Plan for the region. It aims to encourage private sector development and accelerate investment projects, especially for small businesses and infrastructure. In central Asia, the Bank is indeed the biggest individual investor if one excludes the energy sector. The remaining two smaller sub-regions - the Caucasus and Eastern Europe - continue to receive EBRD financing, although on a smaller scale.
16. While talking about the Bank’s contribution to the economy and growth in its countries of operations, the Rapporteur would also like to highlight and commend the Bank’s contribution to western economies. West European companies, such as Danone, GM and Vetropac, are indirect beneficiaries of EBRD supported projects. Furthermore, western companies greatly appreciate the expertise on local conditions that the Bank can provide.
17. To date, EBRD has drafted sectoral policies for agribusiness, energy, natural resources, property, shipping and transport. By sector, overall commitments have been evenly divided between financial institutions (FIs), infrastructure and industry and commerce. A smaller share has gone to general industrial activities.
18. One of the Rapporteur’s, and the Economic Committee’s, priorities in London was to learn about what the EBRD has learnt from its past operations so as to assist it in the future. Since 1994, an EBRD Project Evaluation Department (PED), which enjoys operational independence within the Bank, has assessed project performance. To date, 339 projects – 38% of portfolio operations in volume – have been evaluated. Evaluations are carried out ex post (generally one or two years after the final disbursement) and compare expectations with outcomes. Project performance is evaluated on the basis of sound-banking indicators (i.e., project financial performance, fulfilment of objectives, and EBRD effectiveness in terms of profit contribution and bank handling) as well as of mandate-related indicators (i.e. transition impact9, environmental performance and change).
19. Overall, 54% of the evaluated projects received a successful or higher rating. Furthermore, 74% of the evaluated projects were rated as having had an excellent to satisfactory transition impact. Among the primary sectors of operation, infrastructure projects have in general scored higher with regard to transition impact. Financial institutions projects were generally considered to have a good transition impact where competition increased and markets expanded as a result, while industry and commerce projects were
assessed as riskier. The highest transition impact scores were assigned to projects in CEE, while the lowest overall scores were given to projects in the Russian Federation. To date, few projects in Central Asia have been evaluated.
Sector business group |
Sector Team |
Net Cumulative Business Volume % |
Energy |
16.8% | |
|
Energy Efficiency |
1.4% |
|
Natural Resources |
7.5% |
|
Power and Energy |
7.9% |
Financial Institutions |
29.5% | |
|
Bank Equity |
6.1% |
|
Bank Lending |
14.6% |
|
Equity Funds |
5.3% |
|
Non Bank Financial Institutions |
1.9% |
|
Small Business Finance |
1.6% |
General Industry |
13.6% | |
|
General Industry |
13.6% |
Infrastructure |
20.0% | |
|
Municipal & Environmental Infrastructure |
6.8% |
|
Transport |
13.2% |
Specialised Industries |
20.1% | |
|
Agribusiness |
7.6% |
|
Property Tourism and Shipment |
4.1% |
|
Telecommunications, Informatics & Media |
8.4% |
Total |
100.0% |
Table 1. EBRD Financing by sector (1991-2001)
20. On the whole, most countries of operations have registered progress on reform and shown resilience to global economic slowdowns and turbulences, and increased economic and political uncertainty10. The prospect of EU membership has most decidedly accelerated reforms in the ten candidate countries in the Central Europe and Baltics as well as in South East Europe, which have made steady progress. A number of countries that were earlier lagging behind on reform (such as Bosnia and Herzegovina, the Russian Federation and Serbia and Montenegro) have also made significant progress over the past year as a result of favourable political and economic developments. However, most of Central Asia is encountering difficulties on the road to economic and political reform.
21. With regard to recent macroeconomic performance, growth rates have been robust and stable in most countries, although somewhat lower than at the very beginning of the decade11. With an average estimated growth rate of 3.4% for 2002, the economies of the region12 have outperformed the EU, North America and the global economy in general (with the exception of Asia, particularly South East Asia). Inflation rates have decreased steadily, with some EU accession countries reaching overall price stability.
22. With regard to trade, most countries’ current accounts closed in deficit in 200213. While all but three countries14 in CEE have joined the World Trade Organisation (WTO), only three CIS countries15 have (and they do not include the four largest)16. Most CIS countries are, however, seeking to open up trade and speed up reforms to prepare for accession to the WTO. Furthermore, there are major obstacles to trade (and transit) within the CIS itself. South Eastern Europe has fared better in this respect, in that it has concluded a network of free trade agreements between countries in SEE, within the framework of the Stability Pact Trade Liberalisation and Facilitation programme17.
23. At the beginning of the transition process, foreign direct investment (FDI) increased substantially in most countries. However, most of the FDI today goes to only a few of the more advanced transition countries and is still concentrated in a limited number of sectors, such as natural resources. Recently, the CEE and CIS countries (together with other emerging markets) have suffered a decline in FDI and other capital flows.
24. Furthermore, to complete his discussion about more general transition indicators, the Rapporteur wishes to mention the second phase of the EBRD-World Bank Business Environment and Enterprise Performance Survey, concluded in 200218. It shows that the general business environment has improved significantly across most countries since 1999 not only in terms of economic growth but also as regards corruption, economic crime and political patronage of economic life. The study concludes that so-called ‘state capture’ by criminal organisations shows signs of having decreased overall in a number of countries due to two main factors. Firstly, there is more competition in different economic sectors and greater business integration into the life of the society. The second factor is the now easier entry for new companies, brought about by the more stable economic framework conditions established in the wake of the Russian financial crisis of 1998. This has led to a situation where gains from successful and innovative entrepreneurial activity are at lasting greater than those from economic crime and corruption. This development has also led to a shift in the relative importance from the state toward companies. Even the “oligarchs” of the countries concerned today seem to increasingly realise that economic growth will necessitate clear property rules and a fair access to public services.
25. Furthermore, the study shows that some of the less advanced transition countries in South Eastern Europe and the CIS have made strong improvements as regards economic governance. The differences in the business environment of different types of firms19 have also lessened. This suggests that less advanced transition economies might be able to move beyond the initial phase of partial reforms20, which slowed down progress in the first decade of transition.
26. On the whole, therefore, the EBRD can be considered to have been relatively successful in operating according to its mandate of fostering transition towards open market-oriented economies and promoting private and entrepreneurial initiative in the countries of CEE and the CIS, especially considering the difficult environment in which it operates.
27. While much of the project and evaluation information is confidential, EBRD is committed to transparency and accountability as part of its Public Information Policy of 2000. To this end, a summary of the Annual Evaluation Overview Report is included in the Annual Report, while summaries of special studies are published on the Internet. The PED works with other international financial institutions to harmonise evaluation procedures and processes, compare experiences and develop best practices.
28. As regards partnerships and co-operation with other institutions, the EBRD, apart from being a partner of the Stability Pact for South Eastern Europe, also contributes to the so-called CIS-7 initiative. Launched in 2002, it brings together governments, civil society and the international donor community to address the economic difficulties of the seven poorest CIS countries21. Since their independence in the early 1990s, these countries have suffered from severe increases in poverty22 and the rapid build-up of debt. To combat these problems, the EBRD - together with the Asian Development Bank (ADB), the International Monetary Fund (IMF) and the World Bank - called for increased financial assistance on grant terms as well as debt relief for these countries at a conference in Switzerland in January this year.
29. In addition, the EBRD and the Council of Europe Development Bank continue their cooperation. Joint efforts have focused towards financing for municipal infrastructure projects. Low cost funding from the Council of Europe Development Bank, combined with the sometimes higher risks involved in certain EBRD projects, have made for a fruitful cooperation between the two banks.
30. The EBRD has sought to fulfil the political aspects of its mandate by focussing its assistance on countries “committed to and applying the principles of multi-party democracy [and] pluralism”. Countries that still show clear democratic shortcomings, such as Belarus and Turkmenistan, receive little EBRD financing, though the EBRD seeks to continue to maintain a political dialogue with them. It should be mentioned that the EBRD has sent an open letter to Turkmenistan objecting to the lack of democratic improvement and pointing to the resulting consequences for economic development.
III. A CLOSER LOOK AT SOME SPECIFIC AREAS
31. Following the general overview, the Rapporteur wishes now to focus on a number of specific areas, restricted to three due to the necessary brevity of his report.
III.a. Agriculture and Rural Transition
32. The 2002 Transition Report focuses on two important themes, agriculture and rural transition. Over a third of the populations in CEE and the CIS region live in rural areas. They still lag behind urban areas on most economic and social indicators. Poverty and unemployment are commonly substantially higher and the investment climate is often less accommodating for businesses in terms of access to finance and infrastructure.
33. Since the beginning of transition, agricultural productivity and output have declined substantially and persistently in most countries23. Decreases in agricultural output have ranged from between 15 and 30% in Central Europe to more than 50% in some of the Baltic and CIS countries.
34. The beginning of transition also saw a collapse in earlier trade relations and a consequent change in trade patterns. Most countries still export mainly to other transition countries, but agricultural imports from OECD countries have risen. In fact, most countries have experienced agricultural trade deficits vis-à-vis OECD countries. This can, however, only partly be ascribed to lower productivity, as trade policies, especially barriers to imports, have also played a substantial role. Particularly early to intermediate transition countries (such as Moldova and Ukraine) face major trade barriers with regard to their agricultural exports. Some transition countries also maintain significant levels of protection themselves, preventing greater regional trade. Still, agricultural productivity remains a major barrier to greater exports to whatever destination.
35. While the agricultural sector has under-performed overall, agricultural performance varies widely between countries. In general, countries with better conditions at the start of the transition24 have completed more reforms and experienced higher agricultural output growth rates than countries with worse initial conditions. The EBRD has also found statistically significant relationships between agricultural productivity growth and: 1) general economic reforms; 2) terms of trade; 3) individual land holding share and restitution of land. First, overall liberalisation and privatisation have, for the most part, had positive consequences for the agricultural sector. Second, improved terms of trade have generally implied better performance. Third, actual changes in land ownership and control have been important. The higher the share of individually owned or controlled farmland, the higher the level of output and productivity growth25.
36. Progress in agricultural reform has also been closely related to the degree and quality of democracy. Usually, the more stable democratic countries have been the most committed reformers. Similarly, progress in agricultural reform has commonly been slower to the extent that vested interests dominate in overall political and economic life26.
37. Nevertheless, across the board, agricultural progress and rural transition have been relatively neglected components of overall reform. Rural transition issues have traditionally revolved around reforming agriculture, increasing farm productivity and promoting land reform. Non-farming activities and agro-related businesses have, however, also suffered substantial decline in some countries. Rural areas therefore also need to promote non-farm activities in order to diversify their economic activities for the purpose of sustainable development. To assist in this process, the EBRD seeks to help countries to strengthen market linkages by improving the links between rurally based firms and their customers, suppliers and financial institutions.
38. Agribusiness in particular has become one of the priority sectors for the EBRD. By June 2002, the EBRD had invested € 1.5 billion in this sector. The funding has been spread across a total of 116 projects27 in 21 countries of operation28, with the bulk (93%) going to the private sector.
39. The EBRD’s Second Agribusiness Operations Policy of 2002 sets out its strategy for the sector29. Following the first version of the policy, the focus will be on ‘downstream’ agricultural production, mostly in agro-processing, marketing and distribution. This approach has proven effective in providing farmers with reliable cash funding, working capital adapted to seasonal needs and technology transfer. Funding for
agribusinesses has been made available either directly to such businesses or through SME credit lines (see Section III.b below). Direct commercial financing to agriculture proper has, however, proven more difficult. The EBRD is therefore assessing new financing instruments specifically targeting this sector.
III.b. Small Business Credit and Finance
40. The promotion of small businesses has always been high on the EBRD agenda. As “catalysts for change and innovation”, in the EBRD’s jargon, they are considered strategic in adopting new technology, products, services and marketing methods30. An important way to support small enterprises has been through the provision of credit and finance, which are otherwise not readily available for this category of businesses. An EBRD survey of 515 banks in 16 transition countries between 1994 and 1999 showed that reform does not necessarily increase lending to customers31. Another study claims that the degree of financial intermediation of the local banking systems throughout South Eastern Europe (possibly excepting Croatia) is extremely low and that, overall, the banking system largely fails to respond to the demand for finance from the private sector32.
41. Small business credit or finance is considered a key element for the development of countries’ private sectors and consequently remains a priority. As a first step, the EBRD has aimed to assist in the development of sound financial sectors.33 To this end, it has sought to: focus on banks as the main channels to reach a large number of enterprises; build the skills and capacities of local financial intermediaries to provide small business finance; enhance the capacity of local financial intermediaries to access other commercial sources of finance; and - in order to overcome the frequent reluctance to lend to small businesses on the part of commercial financial institutions - demonstrate that small enterprise finance makes good business.
42. In summary, EBRD’s financial instruments for small business support include: 1) credit lines through financial intermediaries; 2) leasing finance; 3) equity funds; and 4) the Bank’s Direct Investment Facility.
43. In line with its financial sector objectives (see footnote 33), EBRD financing to small businesses is mainly of an indirect nature, that is, it operates via financial intermediaries (such as banks or funds). That is to say, the EBRD extends loans to financial intermediaries, which in turn lend to small enterprises.34 The most targeted EBRD operations in this area are the Micro and Small Business Programmes. Since the mid-1990s, the EBRD has channelled € 508 million through such programmes, in 11 countries of operation35.
44. Almost two-thirds (62%) of this funding has gone to the Russia Small Business Fund (RSBF). Started in 1994, it is EBRD’s first programme providing commercial finance for micro enterprises and small businesses. To date, the specialised micro/small business bank KMB and its partner banks have extended 115 000 loans totalling USD 1.1 billion. Loan quality has been excellent, with less than 1% of the portfolio considered at risk. Indeed, loans continued to perform even during the 1998 financial crisis. The success of the RSBF is well recognised and its model has been applied in many other countries of operations36.
45. The EBRD has also joined the International Finance Corporation (IFC), commercial banks and other partners in the creation of specific micro-finance institutions (MFIs). Such institutions are now up and running also in Albania, Azerbaijan, Bosnia, Bulgaria, Georgia, Moldova, Romania, Ukraine, and Serbia and Montenegro (including Kosovo). Over 131 000 loans37, typically ranging from € 100 to 200 000 and totalling € 929 million, have been disbursed through the MFIs to date.
46. Furthermore, in April 1999, the EBRD and the European Commission launched the SME Finance Facility to provide financial intermediaries with financial and technical support to finance micro-enterprises and SMEs in EU candidate countries in central Europe and the Baltic region. To date, 25 banks and seven leasing companies in all the ten countries foreseen to join the EU in 2004 have signed loans worth a total of € 445 million. This, in turn, has translated into 12 300 loans for a total of € 312 million. While the biggest loan amounts to € 250 000, the average loan is around € 25 00038 and two-thirds of the total number are micro-loans (ranging from USD 50 to USD 10 000)39. Furthermore, the response time for loan applications has decreased substantially over the years. Total commitments to the Facility are expected to reach € 710 million40, with around € 100 million earmarked for technical assistance and co-operation.
47. Overall, credit lines through banks and other financial intermediaries have proven effective channels for delivering micro and small loans where banks do not usually pursue SME business. Significant progress has been achieved in the local banking sector and major international banks are now also present in many countries (especially in central Europe and the Baltics). Nevertheless, small business credit lines have generally worked better when financed through specific micro or small enterprise programmes, funds, or banks rather than through loans to commercial banks, as the latter often do not channel money to small businesses at all.
48. Leasing finance has become a growing business for the EBRD, with a total of € 118 million committed to 11 leasing companies in 11 countries41. Leasing offers dual benefits, in that the leaser retains title (enabling asset-poor SMEs to gain access to credit) even as the lessee enjoys tax benefits. The legal environment for leasing is generally improving in the region, a development which is likely to allow the EBRD to expand this kind of operations significantly over the coming years.
49. The EBRD’s equity funds (usually between € 12 and 20 million) also channel finance to SMEs. Over the years, the EBRD has invested in more than 80 private equity funds, in about 800 separate investments42. Of the total EBRD equity fund portfolio of € 953 million, two-fifths (€ 385 million) have to date been committed to funds that target SMEs. Smaller businesses are, however, rarely actual “beneficiaries” of these funds – either because the credit lines are too large or because the procedures are too cumbersome for smaller companies. It is expected that SME equity funds will remain a relatively small part of the EBRD’s efforts to support small business credit and finance.
50. The Direct Investment Facility invests EBRD’s own private equity in companies with strong local management and in markets where private equity funds are scarce. So far, a total of € 24.5 million have been invested in 20 projects in a wide range of business sectors and in 11 countries43. However, as investments range from € 400 000 to € 3 million, smaller companies are not the most common target group.
51. In addition to the more direct forms of financing outlined above, the EBRD also supports business advisory services and engages in policy dialogue with regard to small business credit and finance. Business advisory services programmes, primarily using local consultants to advise small businesses, are currently underway in 11 countries of operation. More than 2 200 assignments have commenced to date, of which 1 700 have been completed. All programmes benefit from institution building support from several donors, most notably the European Commission (particularly through the SME Finance Facility). In terms of policy dialogue, the EBRD works with national and regional governments on a daily basis to improve the legal and regulatory environment for private sector and business finance. The Legal Transition Team has played an important role in furthering secured transactions laws, while the Group for Small Business is working to improve the environment for small business credit and finance in early and intermediate transition countries.
52. Finally, the EBRD continues to explore new initiatives and means of assisting SME access to finance and credit. In particular, the EBRD is collaborating with multinationals towards financing local partners, assessing mezzanine finance44 for advanced markets, exploring micro-finance opportunities through NGOs, as well as considering other means of small business support (including training) together with partner banks.
III.c. Municipal and Environmental Infrastructure
53. The municipal and environmental infrastructure sector is gaining in importance, especially in the countries of central Europe and the Baltics. The EBRD also implements its environmental mandate by financing municipal infrastructure (as well as energy efficiency) projects.
54. As of June 2002, the EBRD has invested a total of € 1.6 billion in the municipal and environmental infrastructure sector. The funding has gone to 62 projects45 in 19 countries of operation46, primarily in Central Europe and the Baltics. Given the sector’s characteristics, most (80%) of the funding has gone to the state-owned/public part thereof. The sector received € 188 million or 5% of total financing in 2001 and € 211 million or 8% of total financing in 2000. In 2001, financing for municipal infrastructure included urban transport projects in Poland and Serbia and Montenegro, water / wastewater treatment projects in Croatia, Lithuania and Poland, and a toxic waste clean-up project in the Russian Federation. During 2002, the Bank spent € 770 million in environment related investment.
55. Established in 2001, the Municipal and Environmental Infrastructure Team of the EBRD has, together with the Danish Environmental Protection Agency, commissioned the preparation of a ‘toolkit’ of best-practice techniques for assessing the social and political acceptability of urban water and wastewater tariffs. Such a toolkit should assist in assessing the risks of non-payment, social dissatisfaction and political resistance commonly associated with increasing water and wastewater tariffs.
56. Furthermore, the Northern Dimension Environmental Partnership (NDEP) was launched in 2001. It provided donor funding of over € 110 million in order to promote and finance environmental investment and remedy nuclear pollution in northern Europe, with a focus on northwest Russia.
57. As mentioned also in Section II above, infrastructure projects in general scored the highest as regards the transition impact. The municipal sector has seen some progress in reform in 2002, but not enough to justify a higher transition indicator rating for the countries concerned. On environmental performance, there has been substantial improvement as regards municipal and environmental infrastructure projects.
58. In future, the EBRD is likely to focus on infrastructure restructuring and commercialisation, including private sector participation, especially in Central Europe and the Baltics. Priority will also be given to strengthening corporate governance. Private sector participation is also anticipated in the Russian Federation47 in 2003. Furthermore, in the Russian Federation in particular, the EBRD hopes to continue to attract commercial banks to long-term municipal infrastructure development. Among the sectors where the Bank hopes to set such a modernising example are semi-publicly financed infrastructure projects and sectors undergoing liberalisation, such as those for electricity, gas, transport and municipal services. But the Bank also seeks to assist regions in particular need, such as Kaliningrad, St. Petersburg and the Sachalin peninsula. Municipal and environmental infrastructure will remain important within the framework of the Stability Pact for South Eastern Europe.
IV. TASHKENT ANNUAL MEETING
59. The Rapporteur attended the Annual Meeting of the Bank held in Tashkent, Uzbekistan, in May 2003. The basic message from the representatives of the various member countries and member institutions was one of satisfaction with the Bank’s operations across its whole area of operations. It was noted that in 2002, a year of global economic slowdown, the EBRD had spent a record volume of 3.9 billion euros on 102 new projects and had mobilised € 4.9 billion in co-financing from other financial institutions.
60. The Annual Meeting again stressed the Bank’s economic and political mandate, and its role in promoting the rule of law and fighting corruption. It recalled that its founding charter foresaw it as not simply an instrument for economic growth but also for political change.
61. There was general agreement and acceptance of the Bank’s strategy for the countries set to join the European Union in 2004. The Bank received strong support to continue its assistance for the development of middle-sized enterprises and for improving municipal services in these countries.
62. The Meeting also endorsed the Bank’s increased funding in Russia, given the country’s potential to become a driving force for economic development elsewhere in the region. The same held for south-eastern Europe, where particular importance will be given to promoting cross-border programmes.
63. The social dimension, which formed the core of the Bank’s 2000 Transition Report, clearly remains so. The EBRD President emphasised the need for the Bank to pay more attention to the social impact of its projects in close cooperation with other international financial institutions.
64. Financing for SMEs and driving forward reform in the energy sector will continue to be a priority. Participants and member states also welcomed the Bank’s efforts to promote reform and progress in the agribusiness sector.
65. Naturally enough due to the venue of the Annual Meeting, Central Asia was very much in the focus of the discussions, both in the plenary sessions and in the corridors. This held particularly for the political and economic situation in the host country of Uzbekistan. Indeed, last year’s Assembly Resolution 1287 (2002) on the Bank’s activites expressed the hope that “the Bank’s decision to hold its next annual meeting in Uzbekistan in 2003 will provide an opportunity to improve the situation in that country as regards democracy, human rights, the rule of law and the functioning of civil society”.
66. Even though the venue decision was controversial, clearly it was meant to engage Uzbekistan, and the Central Asia region as a whole, in a dialogue for change. The Bank for its part intends to increase its funding to the region and underlined this by inviting to the Annual Meeting numerous representatives of international financial institutions, private businesses and civil society. Thus, over two hundred NGO representatives active in the region were present and given ample space in the debates to air their views. The Meeting also took up the issue of cooperation among countries in the region, a domain sorely neglected by the countries themselves but deemed of vital importance by the Bank. The presence of five heads of state from the region was encouraging in this regard and perhaps a noteworthy step in the Bank’s efforts to persuade the countries to open up their borders to more trade, and a greater exchange of people and ideas.
67. The speech of the President of Uzbekistan, Mr Islam Karimow, did not live up to the expectations of either this Rapporteur or of other participants, in that it scarcely addressed the crying need for reform of the country’s political system in the direction of democracy, the rule of law and respect for human rights, and of the economic system away from what is essentially a communist-type, central planning system and toward more market and private initiative. Mr Karimov basically presented the country’s economic situation as if everything was in order. Nor did he at all reply to the criticism made by the United Nations about systematic torture in Uzbek prisons.
68. This led EBRD President Jean Lemierre to say, in his concluding press conference, that President Karimow’s speech had not lived up to expectations. Central Asia, said Mr Lemierre, has considerable economic potential, to which the EBRD wants to contribute with capital and know-how. However, the biggest danger to the region lay in the political field. The EBRD’s Chief Economist, Mr Willem Buiter, added that the decision as to whether Uzbekistan would become an economic “power house” or a social “house for the poor” lay entirely in the political arena. He and many other speakers called for urgent reforms in the economic and political fields. The Bank will now monitor future developments in Uzbekistan closely on the basis of seven “bench mark criteria” to measure progress in the political and economic arena.
V. CHALLENGES AND PROSPECTS
69. In the light of the preceding discussion, there is no doubt that significant achievements have been made with regard to the transition towards open market-oriented economies and the promotion of private and entrepreneurial initiatives in CEE and the CIS. While the Rapporteur commends the progress made to date, many future challenges should be borne in mind. Both the EBRD and the CEE and CIS countries themselves need to focus on the road ahead, and draw on lessons learned, in order for transition and development to remain sustainable.
70. Despite stable growth rates in 2002, macroeconomic prospects for 2003 are less optimistic. Significant, and interrelated, problems continue to cloud the global economic outlook, including geopolitical uncertainties, lessened business confidence, volatile prices for oil and other commodities, and fiscal current account imbalances in many countries. The general economic slowdown and fiscal problems in many industrialised countries also affect the prospects for increases in overseas development assistance (ODA). Similarly, FDI and other capital flows may decrease due to dented business confidence.
71. The EBRD’s definition of countries in transition is very broad, ranging from Uzbekistan to Poland and the Czech Republic. The Rapporteur gained the impression that the Bank will continue its activities in all its countries of operations including the more advanced in central and Eastern Europe. The argument is that the demand for capital is considerable not only in central Asia but also in Central and Eastern Europe. The Bank argues that its contribution is still needed since the local capital markets in most of the countries of operations are not deep and varied enough, and that the banking sector is often still in its infancy. The EBRD essentially moves in when no other investor is prepared to carry all the risk. Furthermore, the Bank speaks of ‘additionality’, by which is really meant that it steps in, in order to encourage other private investors to join in the undertaking. One example of ‘additionality’ over a limited time span is the partial privatisation in 1996 of a major Croatian pharmaceutical company. As this company wanted to start new research activities and no other private investor came forth, the EBRD contributed loans. However, as the company more recently wished to buy up a smaller west European company in the same business, the EBRD refused participation, since several private banks had declared their readiness to ensure financing of the deal.
72. Any continued economic slowdown in the EU will affect exports from central Europe and the Baltics. The central European and Baltic countries will also face increased fiscal constraints in their preparation for EU accession. Persistent external and fiscal imbalances will remain a concern, with the Baltics region and Slovenia as possible exceptions. Central Europe and the Baltics are expected to continue to show relatively high growth, although perhaps less pronounced than at present.
73. South East Europe is not expected to suffer from any significant slowdown, although persistent external deficits remain a problem, especially if ODA is reduced. Continued reform efforts, increases in FDI, as well as improvements and growth in intra-regional trade remain key to further progress.
74. With regard to the CIS, the impressive economic growth of the Russian Federation (as well as other fossil fuel exporters) has relied rather heavily on oil and gas exports and will therefore in future have to be accompanied by continued efforts at reform. Agricultural reform may well soon start to pay off in Ukraine. Higher growth in Central Asia is foreseen for few countries. In Kazakhstan, visible progress towards market economics has not been matched by transition to multi-party democracy and political pluralism. In Uzbekistan, progress towards market economics and multi-party democracy has been slow and characterised by setbacks. Turkmenistan is suffering from political and economic reform paralysis.
75. Overall, the EBRD faces a challenge in seeking to increasingly target less advanced transition countries, without therefore overly reducing support for the more advanced, EU accession countries, including the Rapporteur’s own country Hungary, which still need assistance to complete reforms and successfully integrate into the EU.
76. On agriculture and rural transition, the primary challenge consists in the consistency and acceleration of agricultural reforms (especially with regard to the establishment of land property rights) as well as in the participation in the global liberalisation of agricultural trade. It will also be important to strengthen market linkages among rural companies (including agribusinesses) and between farms, their clients and suppliers, as well as to improve physical infrastructure and access to finance. The EBRD needs to provide continued support to industry and commerce without neglecting rural areas.
77. As regards small business credit lines, major challenges for individual banks as well as the EBRD include the raising and securing of funding to maintain portfolio growth, the weaning off of companies from donor assistance after the start-up period, the broadening of loans (to include for example also agricultural loans), and the continuing regional expansion of MFIs. The challenges ahead for the local financial markets (particularly in Central Europe and the Baltics with a view to EU accession) include the development of the kind of financial services that can assist local economies, such as mortgage finance, leasing subsidiaries, consumer finance, and pension schemes.
78. With regard to municipal and environmental infrastructure, the EBRD must continue to seek and ensure important private sector participation and financing for these most commonly large and long-term projects.
79. Operationally, given the diversity of the region, the EBRD should seek to tailor-make operations to each country’s situation. While many countries share similar characteristics and face common problems, they all have to cope with their own particular complications. The scope for EBRD blueprint models is therefore limited.
80. More generally, the EBRD, whose mandate has political aspects, treads a delicate balance. As it tries to strengthen democracy through economic development, the resources it provides serve as an encouragement for and means toward change and reform, while any lowering of democratic standards or any backtracking on reform can result in reduced funding, with sometimes major consequences for a region or a vulnerable group of people, which it would of course seek to avoid. The EBRD also faces the challenge of satisfactorily acquitting itself of its double mission of being a development bank on the one hand, and a commercially viable lending institution on the other. So far, the EBRD has managed these challenges remarkably well, thereby putting paid to the doubts harboured by many of its critics at the time of its creation in the early 1990s. We can now safely say that the countries of operations would not have been as well off today if the EBRD had not existed, and that European peace, prosperity and integration would not have been the same.
81. A final challenge lies, not with the Bank but with the countries of operations, in their willingness to pursue reform in the many fields impingent on economic development. Political commitments need to be followed up by concrete and effective action, with a realistic timetable. While change requires time and patience for tangible results to result, the transition process also needs to keep up its momentum. The Rapporteur recognises that reform and transition are difficult processes and often lead to economic, political and social tension, especially within the globalisation process. Nevertheless, reforms need to continue unabated.
VI. CONCLUDING REMARKS
82. In conclusion, the Rapporteur commends the EBRD as well as countries of operations on the important transition progress made to date. However, in the light of the substantial challenges remaining, further efforts are necessary.
83. There needs to be a strong focus on the less advanced transition countries. While the EU accession countries still need a degree of support, EBRD operations in these countries may well, for example, concentrate on projects where commercial lenders are reluctant to invest without support from multilateral institutions such as the EBRD.
84. Many EBRD donor countries, including those in the euro-zone area, are now under severe fiscal constraints and are affected by the global economic slowdown. However, there is a continued need for continued strong support from the EBRD donor community for further and intensified support in the form of financial, political and technical assistance for EBRD operations. The Bank continues to play an important role in the transition process, especially in the less advanced countries of operations.
85. There needs to be a continued focus on SMEs, including agribusinesses. With regard to central Europe and the Baltics, the Rapporteur would particularly welcome further support for SMEs (for example via improved fiscal polices and finance) in order to ease transition.
86. As for small business credit and finance, the EBRD would be well advised to target micro-enterprises and small businesses more directly, by concentrating on smaller business banks, funds, or programmes. This crucial area of activity also needs to be expanded further and beyond the Russian Federation and the EU accession countries.
87. It is also important that financial and technical assistance can proceed jointly and that the various actions are well co-ordinated. To this end, the Rapporteur strongly encourages further collaboration with other international institutions and donor countries (as well as with NGOs and civil society) in line with initiatives such as the Stability Pact for South Eastern Europe and the CIS-7 Initiative48.
88. In this regard, the Rapporteur welcomes the new level of transparency reached as regards EBRD operations thanks to its Public Information Policy and hopes it can be enhanced even more.
89. Finally, the Rapporteur strongly supports the Bank’s efforts to increase intra-regional trade and co-operation, not least in co-operation with other institutions, in particular the EU, that seek to reduce various barriers to trade, such as in agricultural products, for EBRD countries of operations.
* * *
Reporting committee: Committee on Economic Affairs and Development
Reference to committee: Standing mandate.
Draft resolution unanimously adopted by the committee on 9 May 2003.
Members of the committee: Mrs Zapfl-Helbling (Chairperson), Mr Kirilov, Mrs Burbiene, Mrs Pericleous-Papadopoulos (Vice-chairpersons), Mr Açikgöz, Mr Adam, Mr Agius, Mr Agramunt, Mr I. Aliyev, Mr Anacoreta Correia, Mr Andov, Mr Arnau, Mr Assis Miranda, Mr Ates, Mr Berceanu, Mr Braun, Mr Brunhart, Mr Budin, Mr Çavusoglu, Mr Cosarciuc, Mr Crema, Mr Djupedal, Mr Duivesteijn, Mr Elo, Mr Eyskens, Mr Figel, Mr Floros (Alternate: Mr Koulouris), Mr Galchenko, Mr Galoyan, Ms Griffiths, Mr Grignon, Mr Gusenbauer, Ms Hakl, Mr Haupert, Mr Högmark, Mr Jonas, Mr Kacin, Mrs Kestelijn-Sierens, Mr Klympush, Mr Korobeynikov, Mr Kraus, Mr Lachnit, Mr Le Guen, Mr Leibrecht, Mr Liapis (Alternate: Mr Pavlidis), Mr Makhachev, Mr Masseret, Mr Melcak, Mr Mikkelsen, Ms Milicevic, Mr Naumov (Alternate: Mr Umakhanov), Mr Öhman, Mr O’Keeffe, Mrs Patarkalishvili, Mrs Pintat Rossell, Mr Podgorski, Mr Popa, Mr Puche, Mrs Ragnarsdottir, Mr Ramponi (Alternate: Mr Rigoni), Mr Reimann, Mr Riccardi, Mr Rivolta, Lord Russell-Johnston, Mr Rybak, Mr Schreiner: Alternate: Mrs Durrieu), Mr Severin, Mr Seyidov, Mr Slakteris, Ms Smith (Alternate: Mr Banks), Mr Stefanov, Mr Tepshi, Mr Torbar, Mrs Vadai, Mr Voog, Mr Walter (Alternate: Baroness Hooper), Mr Wielowieyski, Mr Wikinski, Mr Zhevago, Mr Zvonar.
N.B. The names of those members present at the meeting are printed in italics
Head of Secretariat: Mr Torbiörn
Co-Secretaries to the committee: M. Bertozzi, Ms Ramanauskaite and Ms Kopaçi-Di Michele
1 Including: Annual Report 2001; EBRD Investments: 1991-2001; Transition Report 2002 - Agriculture and Rural Transition; and a number of other Working Papers.
2 The institutions are the European Union and the European Investment Bank.
3 Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, “the former Yugoslav Republic of Macedonia”, Moldova, Poland, Romania, Russian Federation, Slovak Republic, Slovenia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Serbia and Montenegro (formerly the Federal Republic of Yugoslavia).
4 Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, and Slovenia.
5 Armenia, Azerbaijan, and Georgia.
6 Albania, Bosnia and Herzegovina, Croatia, “the former Yugoslav Republic of Macedonia”, and Serbia and Montenegro.
7 Belarus, Moldova, and Ukraine.
8 Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.
9 Measured in terms of project contribution to: Market structure and extent - (1) competition, (2) market expansion; market-supporting institutions and policies, (3) private ownership, (4) market frameworks and market-based behaviour patterns, skills and innovation, (5) skill transfers, (6) demonstration effects, and (7) standards for corporate governance and business conduct.
10 Notable exceptions include Belarus, Turkmenistan and Uzbekistan as well as to some extent also Poland.
11 The rrecent slowdown can be largely ascribed to the weakening global economy and the eroding competitiveness of the CIS. Strong domestic demand and consumer spending have, however, been key for what sustained growth there has been. In the Russian Federation and other oil producing countries, sustained growth rates have relied on sales of that product to a considerable extent.
12 With the notable exception of Poland.
13 Only the Russian Federation, Slovenia, Turkmenistan, Ukraine, and Uzbekistan registered current account surpluses in 2002.
14 Bosnia and Herzegovina, “the former Yugoslav Republic of Macedonia”, and Serbia and Montenegro.
15 Georgia, Kyrgyzstan, and Moldova.
16 Kazakhstan, the Russian Federation, Ukraine, and Uzbekistan
17 15 of 21 agreements have been concluded and others are under negotiation.
18 The survey sought to evaluate economic governance and the performance of state institutions, and assess the impact of any shortcomings in their regard on the business environment and growth.
19 For example small newly established private companies and larger state-owned enterprises.
20 Characterised by insecure property rights, corruption and limited investment.
21 Armenia, Azerbaijan, Georgia, Kyrgyzstan, Moldova, Tajikistan, and Uzbekistan.
22 An estimated 35% of these countries’ populations live in extreme poverty.
23 With the exception of Albania, Czech Republic, Estonia, Hungary and the Slovak Republic, where changes in agricultural labour productivity have been positive. Growth in overall agricultural output has also been slightly positive in Albania, Kyrgyzstan, and Romania.
24 In terms of fewer distortions inherited from pre-transition regimes and higher level of development (measured by the level of GDP per capita and certain social indicators).
25 The methods through which ownership and control have been transferred have also had an effect on output and productivity. Countries that have implemented land distribution policies have usually performed the worst.
26 There is thus a significant negative relationship between progress on agricultural reform and the share of agricultural labour of total employment. That is, the more reform there is, the fewer employees are needed.
27 Some of these are extensions of earlier projects, or form part of other projects.
28 In all countries of operation except Azerbaijan, (FYR) of Macedonia, Slovenia, Turkmenistan, Uzbekistan, and Serbia and Montenegro.
29 Objectives include: Continued finance to ‘downstream’ the food and drink sectors (in order to support ‘upstream’ primary production and promote competition, market expansion and the transfer of skills); Expansion in the range of products specially geared to the agribusiness sector; Improvement of rural credit systems; and Increased policy dialogue and institutional building with countries and other development institutions. To reach these objectives, the EBRD seeks to adapt its operations to needs of individual countries, especially since regional (as well as intra-country) diversities are many.
30 EBRD President Jean Lemierre, Opening Address at the EBRD Annual Meeting in Bucharest, Romania, May 2002.
31 EBRD Working Paper 71 “Banking Reform and Development in Transition Economies”, Steven Fries and Anita Taci, June 2002.
32 EBRD Working Paper 64 “Financial Structures to Promote Private Sector Development in South-eastern Europe”, Francesca Pissarides, June 2001.
33 EBRD financial sector objectives include: supporting competitive, healthy and sustainable financial systems; increasing the diversity of financial institutions and range of financial instruments in local sectors; and reaching the real economy (particularly SMEs) through financial intermediaries.
34 The banks are selected on the basis of their financial strength, branch network, client knowledge, and commitment to engaging in sustained lending to micro enterprises and SMEs.
35 Albania, Azerbaijan, Bosnia and Herzegovina, Bulgaria, Georgia, Kazakhstan, Moldova, Romania, Russian Federation, Ukraine, and Serbia and Montenegro.
36 To date, over 65 000 loans worth € 400 million have been disbursed in Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Ukraine, and Uzbekistan.
37 47 000 of which through KMB under the RSBF in the Russian Federation.
38 On average € 12 000 for micro-enterprises and € 48 000 for small businesses. Recipient micro-enterprises and small businesses had, respectively, an average of 8 and 23 employees, € 536 500 and € 1 398 400 in annual turnover, and € 217 000 and € 596 900 in assets.
39 “Back to Nursery School”, The Economist, 14 September 2002.
40 With support to the tune of € 600 million from the EBRD and € 110 million from the European Commission.
41 Including leasing finance under the SME Finance Facility.
42 “Capital Punishment”, The Economist, 14 September 2002.
43 Azerbaijan, Belarus, Bulgaria, Kyrgyzstan, Latvia, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Serbia and Montenegro.
44 A 'mezzanine' fund (mezzanine finance), also known as subordinated debt or quasi-equity, is a risk-absorber senior to equity but subordinated to bank debt. (Definition of the European Parliament)
45 Some of which are extensions of earlier projects or part of other projects.
46 All countries of operation except Albania, Armenia, Belarus, Bosnia and Herzegovina, Georgia, Kyrgyzstan, Tajikistan, and Turkmenistan.
47 More specifically in St. Petersburg, where private sector involvement is foreseen in the construction of new waste-water treatment facilities.
48 The CIS-7 Initiative is an international initiative to promote poverty reduction, growth and debt sustainability in low-income CIS countries: Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Uzbekistan, and Tajikistan. The Initiative brings together the 7 CIS countries that are the focus of the Initiative, the four sponsoring organizations (Asian Development Bank (ADB), EBRD, IMF and International Development Association, IDA, of the World Bank) and a group of bilateral creditors/donors. The latter includes countries that have provided financial assistance to the CIS-7 over the last decade and are interested in continuing their support. Currently 24 countries participate in the CIS-7 Initiative and in addition 6 organizations/countries hold the observer title.