Early Transition Countries Initiative is 10 years old

By EBRD  Press Office
@ebrd

One of the most imaginative strategies created by the EBRD to engage with its countries of operation, the Early Transition Countries Initiative, celebrates its 10th anniversary this week.

The initiative, launched at the Bank’s Annual Meeting in 2004, was a commitment to engage more effectively with the smallest and poorest economies through smaller-scale deals (though in larger numbers) than had previously been possible.

This involved a far bigger appetite for risk than before on the Bank’s part, the nurturing of reform efforts in the institutionally weak countries involved, and reaching out to international donors for backing.

It was a daring departure for a bank that had, until then, turned down deals of less than US $5 million, and whose work had largely been big-ticket, foreign-investment-led projects or public sector or privatisation work – a style that had kept engagement levels low in very small and vulnerable countries.

“The philosophy of the ETC Initiative has always been ‘small is meaningful’,” said the Bank’s Managing Director, Olivier Descamps, who bills himself as “the proud father of the ETC.”

“We had to launch it because it was the only way for the Bank to be useful in countries which were at the early stage of development. We had to change our approach. We had to go small-scale. We had to go local. And we had to take a certain number of risks, but also reach out to the donors, to pull it off.”

“One of the specific challenges in the Early Transition Countries was the weak institutional counterparties. In order to prepare the right projects, and give the right advice to governments and to management teams of local enterprises and financial institutions, we had to capture the donors’ ability to provide very scarce – but so crucial – technical assistance and grant financing.”

A decade on, as the EBRD prepares to thank the initiative’s donors at an ETC Fund Assembly in Tbilisi, Georgia, this week, the Bank is proud of how well its bold initiative in what is now 10 countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova, Mongolia, Tajikistan, Turkmenistan, Uzbekistan and Kyrgyz Republic) has worked.

“The ETC Initiative, launched in 2004, deserves whole-hearted praise,” said EBRD President Sir Suma Chakrabarti. “Over the past decade, by focusing on smaller projects in the Bank’s chosen ten countries of operation, it allowed us to make a larger contribution to transition in the Bank’s most vulnerable nations. At the same time as contributing to one of the Bank’s core strategic directions of ‘moving south and east,’ it has also helped the ETC countries narrow the gap with wealthier countries.”

 

 
Marking the tenth anniversary of the EBRD's Early Transition Countries Initiative which aims to stimulate economic activity in the Bank's countries which still face the most significant transition challenges.
 

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Clients are grateful, as Kyrgyz Republic Prime Minister Joomart Otorbayev made plain while addressing the EBRD Annual Meeting in Warsaw in May.

“Some time ago the EBRD accepted that the Early Transition Countries concept was not about volumes of operation but amounts of projects, and that was the focus of your priorities. This model worked very well,” Mr Otorbayev said. “Let us continue with this model and let us not neglect smaller countries of operations.”

Among successes noted by today’s ETC Initiative Director, Chris Clubb, is an increase in the number of projects financed in ETC countries from fewer than 20 a year to more than 115 a year. ETCs now make up more than 30 per cent of the Bank’s financing projects, from a start-point of 8 per cent. Where the Annual Business Investment was less than €150 million in 2004, it is now more than €1 billion.

The EBRD has increased financing for municipal projects improving water, waste water, solid waste and public transport to improve the quality of life for more than six million citizens in more than 50 municipalities. Lending in local currencies – to decrease foreign exchange risk – has been encouraged since 2009, and in 2011-13, the EBRD provided local currency loans benefiting 100,000 micro-, small and medium businesses a year (an increase from zero when that programme began).

The Bank’s work with donors has helped mobilise more than €70 million a year of donor funds, and a best-in-class Small Business Services advisory programme now operates in every country, providing advice on business building to more than 1,000 SMEs a year. This growth has been achieved without jeopardising sound banking principles, too – non-performing loans remain at acceptable levels.

The EBRD has just approved funding for the ETC until 2016. Asked what his hopes were for the ETC Initiative’s long-term future, Olivier Descamps pointed to the new Small Business Initiative, recently launched and a commitment to do more to foster small business not just in 10 countries but in all 34 countries where the Bank works.

“The ETC initiative was one of the foundation stones in preparing the launch of the Small Business Initiative, and in the future I think, in due course, it is the SBI which will be a bank-wide goal. So what I would hope is that the legacy of the ETC will be to bring the SBI to be the next generation of ‘small is meaningful’,” he said.