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Donors help EBRD to double poor country projects
ETC Multi-Donor Fund supporters meet in London
Thanks to a doubling of donor support for projects to boost economic
development in the EBRD’s seven poorest countries of operation, the Bank has
succeeded in more than doubling the annual number of investments under its
Early Transition Countries Initiative (ETCI). The number of signed operations
grew from 18 in 2003 to 38 in the first nine months of 2005.
Donor support for technical assistance in Armenia, Azerbaijan, Georgia, Kyrgyz
Republic, Moldova, Tajikistan and Uzbekistan grew from €8 million in 2003 to
€16 million by the end of the third quarter of 2005, donors heard at ETCI
meetings in London this week. These donor funds have catalysed a burst in EBRD
investment in ETCs, from €53 million in 2003 to €192 million by the third
quarter of 2005.
The initiative was created to focus efforts on the ETCs which have been slower
than other countries in the EBRD region in making the transition from
centrally-planned to market economies. In light of the initiative’s success
and ETC country needs identified by the Bank, the EBRD is asking donors to
expand grants for technical assistance to €25-30 million annually.
Donor funds help create the conditions under which the EBRD can lend money to
businesses. Examples include paying experts to train local enterprises in new
manufacturing technology or marketing skills, and training banks in lending to
previously-underserved clientele such as new entrepreneurs, including the
poor. These monies also help create the economic environment necessary for
business growth, such as advising governments on investment-related law,
training commercial court justices and guiding municipalities in improving
public services.
The difficult business environment in the ETCs is obvious: 80 per cent of EBRD
operations in this zone have required some form of donor-funded technical
assistance, noted EBRD President Jean Lemierre in thanking governments for
supporting the initiative.
Mr Lemierre particularly lauded governments’ willingness to pool contributions
in the year-old ETC Multi-Donor Fund which makes it easier to match donor
funds to needs. Of the €16 million in overall donor funds related to the ETCI,
almost half is via the multi-donor fund; the rest is organised by individual
governments providing funds for specific projects (called ‘bilateral
arrangements’). Countries in the multi-donor fund are Canada, Finland,
Ireland, Japan, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland,
Taiwan and the UK.
“Donor funds pay for technical advice, transferring skills and know-how,”
noted Mr Lemierre. “But the real objective is to catalyse investment and
increase employment. To the poor in our region, your donor funds are like
oxygen.”
The ETCI was approved by the Bank’s Board of Governors in May 2004. “The ETCI
is working,” said Michael McCulloch, a former UK director on the EBRD board
who was consulted in the early preparation of the initiative and submitted an
interim progress report on it this month. He noted internal changes in the
Bank have boosted the ETCI, including an increase in headquarters and field
staff working on ETC projects and development of new investment products
tailored to the countries’ needs.
At the London meetings, donors approved technical cooperation funding to help
EBRD’s Business Advisory Services in the Caucasus, municipal development in
Georgia, and to support microfinance in Moldova, Uzbekistan, Azerbaijan and
the Kyrgyz Republic. Projects already underway include a €1.1 million loan to
boost electricity production by Bazenc CJSC of Armenia and €3.1 million to the
city government of Tbilisi, Georgia, to restore public transport by replacing
some of the 1100 buses lost to civil conflict and theft.
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