Transcript No Slide Title

UNICREDIT
ISPI
EU Enlargement: Internationalisation and local development
The evolving role of the EBRD in the new
EU members
Fabrizio Saccomanni
Vice President, Risk Management – EBRD
Rome, 9 July 2004
The EBRD – Basic Facts

Founded in 1991 to help transition to market economy in 27 states

Owned by 60 states and 2 intergovernmental organisations

Capital = € 20 billion

Total outstanding facilities (Dec. 2003) = € 18.4 billion

Commitments:
– number of projects
– EBRD financing
– resource mobilisation
2003
119
€ 3.7 B
€ 5.3 B

Geographical composition of commitments
– Central Europe and Baltic Region (CEB):
– South Eastern Europe (SEE):
– Commonwealth of Independent States (CIS):
2
1991 - 2003
1,017
€ 22.7 B
€ 45.8 B
40 %
20 %
40 %
The EBRD’s strategy to promote
transition

Financing of projects conditional on:
–
–
–
–
–
sound banking
additionality
positive transition impact
respect for the environment
effective policy dialogue
3
The Transition Process – Definition
and Indicators

Development of a market economy system based
on private sector development and on reform of:
– markets and trade regimes
– enterprise system
– infrastructures (telecoms, electric power,
railways, roads, water and waste water)
– financial sector (banking and non-banking)
4
The Transition Process – Definition
and Indicators (Cont’d)

EBRD developed set of indicators to monitor
process of transition in general and to assess
transition impact of individual projects

Each indicator uses a measurement scale ranging
from 1 to 4+, where:
1 = little or no change from rigid central planning
4+ = standards of industrialised market economy

Average indicator computed for each country
5
Accession does not mean the end of
transition process

Structural reforms to be completed in:
- state-owned enterprises
- heavy industry and agriculture
- energy, telecoms, transport sectors

Low level of financial intermediation relative to
GDP
- capital markets and non-bank intermediaries
at early stage of development
6
Accession does not mean the end of
transition process (cont.d)

Establishment of a market-oriented body of laws and
regulations still to be achieved
- need for efficient enforcement at local level

lmplementation of acquis communautaire requires
substantial investment
- 4-6 per cent of GDP investment in
environment and infrastructure

Administrative and project implementation capacity
broadly inadequate to task
- lack of experience at regional – municipal level
hampers absorption of EU funds.
7
Transition indicators for the new EU member countries
Countries
Enterprise
Markets and trade
Largescale
privatis
-ation
Smallscale
privatisation
Governance &
enterpris
e restructuring
Czech
Republic
4
4+
3+
Estonia
4
4+
Hungary
4
Latvia
Price
liberalisation
Financial Institutions
Securities
markets &
non-bank
financial
institutions
Infrastructure
Trade &
foreign
exchang
e system
Competition
policy
Banking
reform &
interest
rate liberalisation
Infrastructure
reform
4+
4+
3
4-
3
3
3+
4
4+
3-
4-
3+
3+
4+
3+
4+
4+
3
4
4-
4-
3+
4+
3
4+
4+
3-
4-
3
3-
Lithuania
4-
4+
3
4+
4+
3
3
3
3-
Poland
3+
4+
3+
4+
4+
3
3+
4-
3+
Slovak
Republic
4
4+
3
4+
4+
3
3+
3-
2+
Slovenia
3
4+
3
4
4+
3-
3+
3-
3
Transition in new EU members
decelerating

Indicators confirm that further transition efforts
are needed in:
- enterprise sector
- financial sector
- infrastructure

Momentum of transition process slowed-down in
2003 in most countries (except Latvia and Slovak
Republic)
9
Decline of FDI to CEB in 2003, as large
privatisations completed
Foreign Direct Investment (US$ million, net inflows)
30,000
25,000
20,000
15,000
10,000
5,000
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
(p)
CEB
Source: EBRD
SEE
10
CIS
EBRD transition agenda in new EU
members

Focus on private sector development
- promote creation of private enterprises (SME)
- assist in the process of privatisation

Foster financial intermediation
- encourage efficient allocation of savings
- promote capital market development and
non-bank intermediation.

Contribute to modernisation of infrastructure
- assist national and local authorities to make
effective use of EU Cohesion and Structural Funds
11
1. EBRD Operational strategy in
the private sector

Support to SME lending facilities through local
banks and in collaboration with EU

Participate in privatisation of state-owned
enterprises together with local and foreign
strategic investors

Introduce new financing products and structures
in agricultural enterprises
12
1. EBRD Operational strategy in
the private sector (cont.d)

Promote the development of mortgage markets
to increase financing for housing and tourism
development

Promote the recourse to structured financial
products, equity and quasi-equity instruments
13
2. EBRD Operational strategy in
the financial sector

Develop a broader range of financial instruments
for SME and other priority segments not
adequately served by local banks

Increase local banks capacity to incur risk by
offering credit enhancements and risk-sharing
facilities
14
2. EBRD Operational strategy in
the financial sector (cont.d)

Support securitisation of mortgages and other
receivables

Participate in the development of insurance
companies, pension funds, asset management
companies to improve the range of savings
instruments and the supply of long-term capital
15
3. EBRD Operational strategy in
the infrastructure sector

Support tariff adjustment and phasing out of
subsidies in the utility sector (water, power,
heating)

Support privatisation and liberalisation of power
sector to improve competitiveness of downstream
industries

Promote commercialisation and restructuring of
transport infrastructure (roads and railways)
16
3. EBRD Operational strategy in
the infrastructure sector (cont.d)

Decentralise and commercialise municipal and
environmental infrastructure

Provide financing for the development of public-private
partnerships in the new infrastructure sector (i.e. air
transport)

Improve cross-border linkages in power and transport
sectors
17
Main challenges of the EBRD

As transition advances, EBRD to move out of
new EU member states: market to determine
timing and modalities

In the meantime, EBRD will compete with larger
flows of low cost financing to sovereign
borrowers: need to coordinate action with EU
Commission and EIB

Internal EU governance has changed postenlargement: need to adjust to new
organisation/financial procedures
18