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| Home > News & events > 2004 feature stories > Loan helps revive Kyrgyz industrial town | ||||||||||||
Loan helps revive Kyrgyz industrial town |
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Glass factory deal part of new EBRD approach Like much of the former Soviet Union, the town of Tokmak in Central Asia's Kyrgyz Republic is littered with broken down, abandoned factories that didn't survive the end of central planning. Four years ago a German entrepreneur arrived to breathe life into the dying industrial town by investing in a decrepit glass factory that is once again a major employer and exporter and at the cutting edge of technology. Vladimir Steinert was trading cotton and fuel in the Kyrgyz Republic when he came across Tokmak's derelict float glass factory, 45 minutes from the capital, Bishkek. It would prove a good fit in his existing investment portfolio: making glass requires a lot of heat, meaning a lot of fuel, which Mr Steinert could readily supply from his existing businesses. With cash flow from his other ventures and two years of hard work, Mr Steinert was able to re-open the newly modernised plant in 2002 under the corporate name of Interglass, producing panes for the construction industry. Now an employer of more than 1,400 people in Tokmak who work in shifts around the clock, Interglass has sales of about $26 million per year, mainly through exports to Russia and Kazakhstan. Those sales are expected to grow by 50-100 per cent through a $7.4 million EBRD loan, signed by Bank President Jean Lemierre on his recent trip to the Kyrgyz Republic. The loan will finance new production lines for tempered and mirror glass. Smaller loans, more risk "This is an example of the EBRD approach to investing in the Kyrgyz Republic," said Mr Lemierre, speaking above the factory din as he greeted Interglass staff assembled for the loan signing ceremony.
"A loan of $7.4 million is on the small side in terms of what the EBRD is used
to doing in larger countries making their transition from command to market
economies," Mr Lemierre continued. "But this loan is large in the context of
the Kyrgyz Republic, which is one of the Bank's smallest and poorest countries
of operation. If the EBRD is to be effective in such countries, we have to
tailor our investment approach to the local reality, which means making
smaller loans and equity investments, and taking greater risk than we might
elsewhere. This is the aim of the EBRD's new Early
Transition Countries Initiative
"Mr Steinert, we bring the money, but it's up to entrepreneurs like you to do the job," Mr Lemierre continued. "We appreciate your commitment to creating employment and to improving the situation in Tokmak. The country is open to investment and trade. I expect to return to Kyrgyz Republic soon to do more such investments to help build the Kyrgyz economy." Taxes support local services Interglass contributes about $500,000 in taxes to the economy each month, of which $150,000 goes to the local municipality which has already used it to improve services, said Tony Myron, the EBRD's chief banker for this investment. In addition to its large factory workforce, Interglass employs about 300 more staff in sales and distribution, plus 400 in its Kyrgyz cotton and textile businesses. "Part of the EBRD investment will be used to improve energy efficiency in the glass factory," said Tony Myron. "Not only will that reduce Mr Steinert's costs and reduce waste of precious resources; it will reduce greenhouse gas emissions that could eventually yield carbon credits to be traded under the Kyoto Protocol – a first for the Kyrgyz Republic." Daniel Berg, Head of the EBRD office in Bishkek, noted this is the EBRD's first loan to an industrial manufacturer in the Kyrgyz Republic. "We have done very well lending to the smallest entrepreneurs through micro-credit on the one hand, and to large enterprises such as the Kumtor Gold Mine and the Hyatt Hotel. We seek more and more to invest, through loans and equity stakes, in medium-sized companies such as Interglass, where sustainable growth and employment will build the country's future." The EBRD also signed a $4 million co-financing facility with Kyrgyz Investment Credit Bank. Through this facility, the EBRD and KICB will invest up to $1.1 million each in medium-sized Kyrgyz businesses. This doubles the finance available to any given KICB client while respecting the Kyrgyz bank's exposure limits. The national Consultative Council on Foreign Investment met at the glass factory so that Mr Lemierre could take part in it during his short visit to the country. Prominent diplomats, foreign investors, government leaders and the EBRD President spoke of the need for ongoing reform to create a true market economy in the former Soviet republic. 17 December 2004 |
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