BDO Training A2F Module 2005

1
The World Bank Group In the Caucasus
Vincent Rague Senior Manager International
Finance Corporation
Black Sea Trade Development Bank, Annual
Meeting Yerevan, Armenia - June 6, 2005
2
The World Bank Group
IFC is owned by its 176 member countries, which
collectively determine policies.
International Bank for Reconstruction and
Development, 1945
International Finance Corporation, 1956
Multilateral Investment Guarantee Agency, 1988
International Centre for Settlement of Investment
Disputes, 1966
International Development Association, 1960
3
World Bank Group Institutional Roles

• IBRD lends to governments of middle-income
  developing countries.
• IDA provides concessional loans to governments of
  the poorest developing countries.
• ICSID facilitates the settlement of investment
  disputes between governments and foreign
  investors.
• MIGA provides guarantees to foreign investors
  against noncommercial risk.
• IFC promotes sustainable private sector
  investment in developing countries.

4
COMMON CHARACTERISTICS in COUNTRIES of THE
CAUCASUS

• BEYOND TRANSITION?
• Systemic transformation to Market Economy
• Rapid GDP Growth
• IncLusion in various regional initiatives/programs
  
• Aspiration of a common future to integrate into
  regional, European and global economy.

5
COMMON CHARACTERISTICS in COUNTRIES of THE
CAUCASUS

• LEGACY ISSUES
• Shared geography, size, population
• Previous non-market systems
• Legacy of regional and enthnic conflict
• Collapse in output
• Weak local Institutions
• Low living standards and similar profile of the
  poor

6
KEY CHALLENGES TO HIGHER INVESTMENT

• Reducing remaining ethnic tensions/resolving
  political issues
• Completing transition to market, with particular
  efforts usually needed in reducing the size of
  the public sector, restructuring/privatizing
  large enterprises, improving the business
  environment, and strengthening governance and
  fighting corruption.
• Mobilizing more trade, foreign and domestic
  investment improving the business climate to
  attract more FDI

7
KEY CHALLENGES TO HIGHER INVESTMENT (cont.)

• Reducing unemployment/improving labor market
  performance
• Adjusting high current account deficits in the
  face of declining aid flows
• Complementing strong country-level reform with
  movement on a common path to greater integration
  into regional, European and world economies.

8
THE WORLD BANK IN THE CAUCASUS

• The WBG has a presence in all countries and its
  operations are based on agreed assistance
  strategies for each country.
• In each country, the WBG also focuses on donor
  coordination, aid mobilization, and information
  exchange on assistance.
• THE WBG PROVIDES A PACKAGE OF SERVICES AND
  PRODUCTS
• WB provides IBRD loans, IDA credits,
  analytical/advisory work, TA
• IFC loan and equity investments target private
  companies, SME credit lines through banks and TA
• MIGA provides investment guarantees
• WBI provides training and capacity building

9
WORLD BANKS POLICY AGENDA IN THE CAUCASUS

• MACROECONOMIC STABILITY
• GROWTH AND COMPETITIVENESS improve investment
  climate, private sector development,
  infrastructure and education
• SOCIAL INCLUSION poverty reduction, MDGs, human
  development and post-conflict issues
• GOVERNANCE Weak public institutions, quality of
  public services
• GLOBAL ISSUES the Environment, Natural
  Disasters, Money Laundering, Drugs, and Human
  Trafficking.

10
FRAMEWORK FOR THE WORLD BANK IN THE CAUCASUS

• Formulate individual Country Assistance
  Strategies (CAS) to ensure programs have greatest
  impact at country and regional levels
• Identifies areas where there are cross-border
  externalities economies of scale, and
  opportunities for scaling up
• Support Regional Cooperation through Knowledge
  Generation and Sharing Regional Strategies, but
  national projects Multi-country Facilities and
  grants and Regional Projects, if conditions
  permit
• FOCUS on Transport and Trade, Water and Energy
  Business Environment and Human and Social
  Development, especially education

11
IFC Products and Services

• To assist private enterprise in developing
  countries, IFC
• Provides loans and equity for viable projects
• Mobilizes capital from other sources
• Provides technical assistance and advisory
  services

12
IFC Support to SMEs

• Three focus areas are
• Improving SMEs Access to Finance
• Linking SMEs to Larger Companies
• Technical Assistance through Project Development
  Facilities (PEP, based in Moscow for this region)

13
How Big Is IFCs Investments in SMEs?
IFC Investments Targeting SMEs (FY04)
Banks Micro Finance Institutions Leasing Private
Equity Funds

• 718 Million (Commitments)
• 2.1 Billion (Outstanding)

14
IFC Has a Multi-Dimensional Strategy for the
Region

• TA is now integrated, with appropriate
  segmentation and focus on frontier areas
• The PEP focuses on SMEs and business environment
  but in line with the IFC medium/longer term
  regional strategy
• Emphasis is on infrastructure, especially
  regional PPPs
• Other TA selectively aims to gain IFC an
  investment foothold/visibility, while addressing
  country needs
• Investment activities will continue a strategic
  shift
• More regional and industry investments
• GM/FM Opportunistic moves
• Focus on increase of activities in frontier areas

Going Forward
15
Project Development Facilities
PDFs are a key vehicle for IFC support to the
private sector, especially SMEs through targetted
interventions.
16
IFC in the Caucasus Region Armenia
17
IFC in the Caucasus Region Azerbaijan
18
IFC in the Caucasus Region Georgia
19
IFC in the Caucasus Region Ukraine
20
IFC Contact
Vincent Rague Senior Manager SOUTHERN EUROPE
CENTRAL ASIA DEPARTMENT ISTANBUL,
TURKEY Vrague_at_ifc.org Tel. (90-212) -
282-4001 Fax. (90-212) 282 -4002
21
PEP PROJECT PIPELINE

• Corp. Governance

• Agribusiness

• SME Policy

• Supply Chain

• Financial Markets

• Volga Auto Suppliers
• SUAL Komi Linkage
• Energy Efficiency

• Stavropol Poultry

• Russia

• Banking Corp. Governance

• Vegetable Supply Chain
• Dairy Supply Chain
• Agri-Insurance
• Fruit Supply Chain

• SME Policy Development

• Ukraine

• SME Policy / Toolkit

• Leasing

• Belarus

• Georgia

• Housing Finance

• Wine sector development

• Housing Finance
• Bank Training

• Azerbaijan

• Oil and Gas Suppliers

• Housing Finance
• Bank Training

• Corp. Governance

• Kazakhstan

• Housing Finance
• Bank Training

• Kyrgyz Rep.

• Kyrgyz Dairy

• KEY
• will be launched
• highly likely
• concept stage

• Housing Finance
• SAS Replication
• Bank Training

• Tajik Tomatoes

• Tajikistan

• Housing Finance
• Bank Training

• Uzbek Dairy Suppliers PhaseII
• Fruit of Fergana

• SME Policy Development III

• Uzbekistan

22
Current PEP Projects

• Corp. Governance

• Agribusiness

• SME Policy

• Supply Chain

• Financial Markets

• Corp. Governance
• Banking Sector Corp. Governance

• AFC
• NW Forestry
• Dmitrov Potato

• ICT Connector
• Magadan Linkages
• Automotive components

• NW Russia Leasing
• Housing Finance

• Russia

• Corp. Development

• Agribusiness

• SME Policy

• Leasing

• Ukraine

• Belarus

• Business Associations

• Georgia

• Corp. Governance

• SME Survey

• Leasing

• Azerbaijan

• Corp. Governance

• Leasing

• Kazakhstan

• Leasing

• Leasing
• Microfinance Legislation

• Kyrgyz Rep.

• Mongolia

• Leasing

• Leasing
• Microfinance Legislation
• SAS Rural Finance

• SME Policy

• Tajikistan

• Uzbek Dairy Suppliers

• SME Policy

• Leasing
• Microfinance Legislation

• Uzbekistan