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UNICREDITUNICREDIT ISPI ISPI
EU Enlargement: Internationalisation and local development EU Enlargement: Internationalisation and local development
The evolving role of the EBRD in the new EU members
Fabrizio SaccomanniFabrizio SaccomanniVice President, Risk Management – EBRDVice President, Risk Management – EBRD
Rome, 9 July 2004Rome, 9 July 2004
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The EBRD – Basic FactsThe EBRD – Basic Facts
Founded in 1991 to help transition to market economy in 27 statesFounded in 1991 to help transition to market economy in 27 states
Owned by 60 states and 2 intergovernmental organisationsOwned by 60 states and 2 intergovernmental organisations
Capital = € 20 billionCapital = € 20 billion
Total outstanding facilities (Dec. 2003) = € 18.4 billionTotal outstanding facilities (Dec. 2003) = € 18.4 billion
Commitments: Commitments: 20032003 1991 - 20031991 - 2003
– number of projects 119 1,017number of projects 119 1,017– EBRD financing € 3.7 B € 22.7 BEBRD financing € 3.7 B € 22.7 B– resource mobilisation € 5.3 B € 45.8 Bresource mobilisation € 5.3 B € 45.8 B
Geographical composition of commitmentsGeographical composition of commitments– Central Europe and Baltic Region (CEB): 40 %Central Europe and Baltic Region (CEB): 40 %– South Eastern Europe (SEE): 20 %South Eastern Europe (SEE): 20 %– Commonwealth of Independent States (CIS): 40 %Commonwealth of Independent States (CIS): 40 %
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The EBRD’s strategy to promote The EBRD’s strategy to promote transitiontransition
Financing of projects conditional on:Financing of projects conditional on:
– sound banking sound banking
– additionalityadditionality
– positive transition impactpositive transition impact
– respect for the environmentrespect for the environment
– effective policy dialogueeffective policy dialogue
4
The Transition Process – Definition The Transition Process – Definition and Indicatorsand Indicators
Development of a market economy system based Development of a market economy system based on private sector development and on reform of:on private sector development and on reform of:
– markets and trade regimesmarkets and trade regimes
– enterprise systementerprise system
– infrastructures (telecoms, electric power, infrastructures (telecoms, electric power, railways, roads, water and waste water)railways, roads, water and waste water)
– financial sector (banking and non-banking)financial sector (banking and non-banking)
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The Transition Process – Definition The Transition Process – Definition and Indicators (Cont’d)and Indicators (Cont’d)
EBRD developed set of indicators to monitor process EBRD developed set of indicators to monitor process of transition in general and to assess transition of transition in general and to assess transition impact of individual projectsimpact of individual projects
Each indicator uses a measurement scale ranging Each indicator uses a measurement scale ranging from 1 to 4+, where:from 1 to 4+, where:
1 = little or no change from rigid central planning 1 = little or no change from rigid central planning 4+4+ = standards of industrialised market economy = standards of industrialised market economy
Average indicator computed for each countryAverage indicator computed for each country
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Accession does not mean the end of Accession does not mean the end of transition processtransition 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
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Accession does not mean the end of Accession does not mean the end of transition process (cont.d)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.
Transition indicators for the new EU member countriesTransition indicators for the new EU member countriesCountries Enterprise Markets and trade Financial Institutions Infra-
structure
Large-scale privatis-ation
Small-scale privati-sation
Gover-
nance & enterprise restruc-turing
Price liberali-
sation
Trade &
foreign exchange system
Com-petition
policy
Banking
reform &
interest
rate liber-
alisation
Securities markets & non-bank financial institutions
Infra-structure reform
Czech Republic
4 4+ 3+ 4+ 4+ 3 4- 3 3
Estonia 4 4+ 3+ 4 4+ 3- 4- 3+ 3+
Hungary 4 4+ 3+ 4+ 4+ 3 4 4- 4-
Latvia 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
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Transition in new EU members Transition in new EU members deceleratingdecelerating
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)
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Decline of FDI to CEB in 2003, as large privatisations completed Foreign Direct Investment (US$ million, net inflows)
0
5,000
10,000
15,000
20,000
25,000
30,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003(p)
CEB SEE CIS
Source: EBRD
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EBRD transition agenda in new EU EBRD transition agenda in new EU membersmembers 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
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1.1. EBRD Operational strategy in EBRD Operational strategy in the private sectorthe 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
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1.1. EBRD Operational strategy in EBRD Operational strategy in the private sector (cont.d)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
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2. EBRD Operational strategy in 2. EBRD Operational strategy in the financial sector 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
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2. EBRD Operational strategy in 2. EBRD Operational strategy in the financial sector (cont.d) 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
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3. EBRD Operational strategy in 3. EBRD Operational strategy in the infrastructure sector 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)
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3. EBRD Operational strategy in 3. EBRD Operational strategy in the infrastructure sector (cont.d) 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
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Main challenges of the EBRDMain 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 post-enlargement: need to adjust to new organisation/financial procedures