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EBRD President reaffirms commitment to Russia, says implementation of reforms is key to economic success
Jean Lemierre, President of the European Bank for Reconstruction and Development (EBRD), today completed talks with the Russian government and said the economic reforms announced by the new administration are a bold step in the right direction. But he stressed that the ultimate success of these measures will hinge on how they are implemented.
Mr Lemierre, making his first official visit to Russia since taking office in July, reaffirmed the Bank’s continued support for Russia. He is signing deals worth over €50 million during his three-day visit, reinforcing the EBRD’s position as the largest single private investor in Russia, with cumulative commitments of about €3.1 billion.
The new deals include one of the country’s first privately financed large infrastructure projects and the EBRD’s first long-term loan to a Russian industrial firm since the 1998 financial crisis. They keep the Bank on track to make at least €700 million in new commitments in Russia this year, compared with €217 million in 1999.
"Even after the 1998 crisis the EBRD has remained steadfast in its commitment to Russia, and we intend to play an important long-term role in the country’s transition to a fully-fledged market economy," Mr Lemierre said. "Europe – as well as the rest of the world – needs a stable and prosperous Russia."
Mr Lemierre said after meeting with Prime Minister Mikhail Kasyanov that the Russian economy is showing great resilience only two years after its financial sector was shattered. "The government has taken a number of courageous and innovative actions," he said. "The proposed tax reform and the plans to adopt a balanced budget for 2001 are particularly welcome. Russia’s leaders are clearly committed to moving forward. Now, foreign investors await proof that Russia’s investment climate has changed."
Mr Lemierre, who also held talks with Trade and Economic Development Minister German Gref and Central Bank Governor Viktor Gerashchenko, said the EBRD attached high priority to reforms that would enhance the credibility of the legal system, because this is fundamental to doing business in Russia. He also welcomed the government’s promise to dismantle bureaucratic obstacles to trade and simplify customs procedures.
Details of the Bank’s strategy for Russia are posted on the internet today for the first time – the result of its ground-breaking public information policy. The strategy can be found at www.ebrd.com.
In particular, the EBRD will seek to:
- promote restructuring, competition and sound corporate governance in those sectors that face severe challenges as a result of the heavy legacies of the Soviet era.
- continue to promote the development of a dynamic private sector, particularly through financing small and medium-sized enterprises (SMEs).
- contribute to the creation of a reliable financial sector – working both with local and foreign insitutions – capable of fulfilling its true functions of transferring resources to the real economy
- finance increased investment in infrastructure and municipal and environmental projects.
The three deals that Mr Lemierre signed yesterday in Moscow and a fourth that he expects to sign later today in St Petersburg all go toward fulfilling the new strategy:
- €17.3 million (US$ 15 million) loan to the Chelyabinsky Electrolytic Zinc Plant, the largest zinc smelter in Russia. This is the first EBRD long-term loan to the Russian industrial sector since the 1998 crisis. The money will allow the plant to comply with new international and Russian environmental standards, expand production and produce higher grade zinc.
- €3.5 million (US$ 3 million) contribution to a total €11.5 million (US$ 10 million) capital increase broadening the ownership of KMB-Bank, the main vehicle through which the EBRD’s highly successful Russian Small Business Fund Programme is being applied. The new shareholders are Germany’s DEG (Deutsche Investitions und Entwicklungs Gesellschaft) (22 per cent) and the Netherlands’ Triodos Bank BV (8 per cent). This will leave the EBRD and the non-profit-making Soros Economic Development Fund (SEDF) each with stakes of 35 per cent.
- €23 million (US$ 20 million) subordinated loan to Raiffeisenbank Moscow that will strengthen the capitalisation of the bank and support its aims of developing retail operations and providing medium-term finance for Russian corporates.
- €9.5 million (US$ 8 million) loan (to be signed later today in St Petersburg) to finance construction of a state-of-the-art air cargo terminal at St Petersburg’s Pulkovo airport that should make a major contribution to improving the transport infrastructure in northwest Russia. This will be one of Russia’s largest privately-financed infrastructure projects.
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