Private Sector Development and EBRD Activities in SouthEastern Europe: Recent Developments and NearT

1
Private Sector Development and EBRD Activities
in South-Eastern Europe Recent Developments and
Near-Term ProspectsJean-Marc Peterschmitt and
Peter SanfeySofia, 20-21 June 2002
2
Key Messages

• Private sector development lies at the heart of
  the new phase of the Stability Pact
• Enterprise and financial sector reforms remain
  major challenges
• Donor community and IFIs must continue to play a
  crucial enabling role

3
Privatisation

• Encouraging progress, particularly in large-scale
  privatisation
• but momentum has slowed recently in some
  countries
• New commitments to the process, but
  implementation is key

4
Progress in large scale privatisation, 1994-2001
Progress in large scale privatisation, 1994-2001
Progress in large scale privatisation, 1994-2001
Large scale privatisation
Large scale privatisation
Large scale privatisation
average EBRD transition indicator score
average EBRD transition indicator score
average EBRD transition indicator score
4
4
4
3.5
3.5
3.5
3
3
3
2.5
2.5
2.5
2
2
2
1.5
1.5
1.5
1
1
1
0.5
0.5
0.5
0
0
0
1994
1995
1996
1997
1998
1999
2000
2001
1994
1995
1996
1997
1998
1999
2000
2001
1994
1995
1996
1997
1998
1999
2000
2001
SEE-8
CIS (excluding Moldova)
SEE-8
CIS (excluding Moldova)
SEE-8
CIS (excluding Moldova)
CEB (excluding Croatia)
CEB (excluding Croatia)
CEB (excluding Croatia)
Source EBRD Transition Reports
Source EBRD Transition Reports
Source EBRD Transition Reports
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Capital Flows

• Significant upturn in total flows in the past two
  years
• FDI up, but still well below levels in central
  Europe and the Baltic states
• Greenfield FDI remains limited, in difficult
  investment climates

6
Total net private and official flows to
South-eastern Europe
7
FDI flows per capita, 1999-2002
US
8
FDI and progress in transition

• Capital flows and reform are closely correlated
• Limited lending to banking sector, despite
  significant reforms
• Corporate governance and enterprise reforms
  lagging behind

9
International bank lending to the banking sector
(flows per capita) and the EBRD banking sector
transition indicator
Slovenia
10
International bank lending to non-bank private
sector (flows per capita) versus restructuring
transition indicator
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Key Steps to Foster Investment

• Liberalise trade regimes FTAs can help attract
  new foreign investment
• Improve investment climate strong commitment to
  Investment Compact is essential
• Strengthen integration with west, through EU
  accession negotiations, SAAs, and WTO
  negotiations

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Stability Pact Private Sector Initiatives

• Ten initiatives launched in March 2000EUR 356m
  pledged
• Three priorities (1) Trade facilitation (2) SME
  financing (3) SME support and development
• Implementation significant progressDonor
  funding of EUR 123m firmly committed on projects,
  matched by IFIs EUR 183m

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Trade Facilitation

• EBRD programme guarantee trade documents by
  issuing banks in the region (imports/exports)?
  27 banks in SEE participate? To date 476
  transactions for EUR 90m? Institution building
  of banks and SME support
• World Bank programme working capital loans/
  guarantees, export credit insurance, pol. risk?
  Active in BiH Albania (next FRY)? 84
  different operations supported

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SME Financing (1)

• Micro-finance banks 7 countries covered? To
  date 32,000 small loans, USD 189m? Annually
  23,500 SMEs, USD 140m? Demonstration, know-how,
  competition and improvements to regulatory
  regimes
• EBRD/EU SME Facility (Romania Bulgaria)? 9
  banks in Romania Bulgaria, EUR 100m? 1,000
  loans for EUR 32m

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SME Financing (2)

• Small Equity Fund Albania Kosovo? EUR 18
  million capital? 14 investee companies
• Private Equity in SEE? EBRD participates in
  funds with EUR 440m committed to the region and
  EUR 285m disbursed

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SME support initiatives

• IFCs SEED programme. In fiscal year
  2002? enterprise level support 55 SMEs? 37
  capacity building/training projects? 22 business
  enabling initiatives
• Business Advisory Service and TurnAround
  Management Programme? 166 SME advisory projects
  under BAS? 142 SME management support projects
  under TAM

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EBRD strong presence in the region

• 200 projectsCumulative commitments EUR 4.6
  billionof which 55 are private sector
• Annual commitments flows in 2001 of EUR 980m
  multiplied by 3 compared to 1999
• Commercial co-financing of EUR 100m
• Pipeline remains strong EUR 2.1 billion 27
  compared to 1999

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EBRDs commitments to SEE are growing
EUR million
FRY
Annual business volume
19
EBRDs Annual business volume by country
EUR Million
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Key challenges

• Improve investment climate across the board
  clear regulations, level playing field,
  governance, rule of law
• Institutional building at all levels State,
  utilities, financial institutions, regulatory
  bodies
• Unlock potential for FDI, including PPPs in
  infrastructure
• Broaden and deepen SME support
• Expand trade, incl. intra-regional

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Conclusion

• South-eastern Europe is improving as an
  investment destination
• 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 much
  bigger role and complement bilateral and
  multilateral financial flows

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EBRD Contacts

• Olivier DescampsBusiness Group Director,
  Southern and Eastern EuropeTel. 44 207 338 7164
  - Email descampo_at_ebrd.com
• Jean-Marc PeterschmittDirector, Albania, Bosnia
  and Herzegovina, FYR Macedonia, Kosovo - SEE
  Coordinator
  
  
  Tel. [phone] - Email
  peterscj_at_ebrd.com
• Peter SanfeySenior Economist - Lead Economist
  for SEETel. 44 207 338 6227Email
  sanfeyp_at_ebrd.com