Donor programme showcase

Almost half of all EBRD investment are supported by technical cooperation assignments. The need for TC is more intense in some countries and sectors than others. The nature of the TC support also depends on the transition stage of the country and the specific needs of the sector.

Raising the bar in the Kyrgyz legal system

The growth of market economies has brought courts in former Soviet countries a heavy new workload in finance-related cases, which were practically unknown until a decade and a half ago. Now Kyrgyz judges are benefiting from a new EBRD programme that is helping them to strengthen their expertise in administering modern commercial law.

The first course for judges, organised under the EBRD’s Legal Transition Programme, took place in June 2006. It brought 90 judges and lawyers from the National Bank to spend three days training in insolvency law by Lake Issyk-Kul, 200 km east of Bishkek.

“This is the first time that we have undertaken a judicial training programme of such proportions in the Kyrgyz Republic,” said Dilfusa Boronbaeva, the then director of the Kyrgyz Republic’s Judicial Training Centre. “More importantly, this is the first time that commercial law training has been considered in a systematic way. And our judges desperately need training.”

More courses are scheduled throughout 2007, gradually covering all key sectors of commercial law. The EBRD programme will also generate various new tools for Kyrgyz judges, including a law library, and will send some junior judges to Kazakhstan and Russia for internships.

The existence of reliable courts is of key importance for investors such as the EBRD. International and domestic bankers and business people need court decisions to be predictable and based on understandable laws and precedents. This training initiative signals that the international community is determined to address the problem.

The trainers for the insolvency module of the course were two local stars of insolvency practice – Supreme Court Deputy Chairman Aibek Davletov, who has published books on insolvency, and Judge Antonina Rybalkina. Both completed a Training of Trainers course in May 2006, which stressed interactive teaching techniques, including role-plays and working with a facilitator.

The project is funded with €700,000 from the Bank’s Early Transition Countries Fund, €700,000 from Japan and €160,000 from Switzerland. The International Development Law Organisation (IDLO) is acting as project implementer and the EBRD’s partner in the programme.

Phase One of the programme, carried out in 2005, consisted of a survey of judges to identify training needs. Phase Two is expected to ensure a more reliable application of the law by individual judges and to provide a template for similar initiatives in other countries.

Transforming the fortunes of a porcelain factory in Kazakhstan

With Funding from the Japan-Europe Cooperation Fund (JECF), the Turn Around Management Programme (TAM) transformed the fortunes of a porcelain factory which used to employ over 2,000 people and produce 21 million ceramic pieces every year. By 1999, after the collapse of their Russian market, production had fallen to 120,000 pieces, the number of employees was down to just 116 and the company was reporting a loss. At this time, management turned to TAM for assistance.

The majority of factory equipment was long out of use ad in poor condition. The TAM team advised that the old site should be closed down and a new factory developed. The company followed this advice and financed the new construction by selling off the old machinery as scrap.

TAM helped transform the factory from an outdated ceramic workshop to a small, modern porcelain factory which now has good prospects for survival and growth. In the process, a demoralised workforce became a highly motivated and efficient team. At the end of the JECF funded TAM assignment, production had more than doubled and, after years of annual deficit, the company is making a profit.

Supporting a major expansion of one of Russia's leading ice cream producers

The Lipetsk-based ice cream producer, Lipetski Khladokombinat, developed very favourably after the Russian economic crisis of August 1998. Its sales increased by about 50% and net profits more than doubled to $1.3 million in 1999.

As the company reached full capacity, new investments were required. The company could not finance such a fast growth with borrowing alone and in September 1999 the Eagle Black Earth Fund invested $2.4 million in the company's equity in return for a strong minority share. The company used the proceeds from the fund's equity investment to finance equipment to increase production capacity, to purchase refrigerators for new sale outlets and as working capital. In order to help the company manage its growth, substantial TC funding by the EU Tacis programme supported marketing, sales, distribution, assistance with gaining ISO certification, and further automation of the financial department. This resulted in a reorganisation of the commercial departments and the distribution organisation.

The company is now one of the largest ice cream producers in Central and Southern Russia. Sales in 2002 grew by 7% on the previous year and the company made a profit in 2002. The Eagle Black Earth Fund shares have recently been bought out by existing Lipetsi Khladokombinat shareholders.

Azerbaijan power generation and transmission

In view of long -term oil sector reform aiming to self-sufficiency, the Azeri government recognized in 2001 the need to replace large unsustainable indirect subsidies to Azerenerji. The United States Trade and Development Agency approved $355,000 in 2002 to help Azerbaijan implement an energy sector reform programme. This included prepararing a development plan for power transmission and generation. As Azerbaijan continues to face power shortages, part of the assignment is to assess the scope of renewable and thermal power development and improved system reliability.

The consultant prepared alternative demand load forecast scenarios, a least-cost generation and transmission expansion plan, and recommended priorities for improving power system reliability.

Komi municipal services development project

The EBRD is involved in the Komi municipal services development project which involves a loan to the city water utilities - Vodokanals - of Syktyvkar and Vorkuta in the Republic of Komi in north-west Russia. The main objectives of the project are to finance investments to rehabilitate the drinking water and waste-water infrastructure of the two cities, and to ensure sustainable technical and financial management of the services.

The total cost of the project is estimated at around €30 million, with EBRD loans of €10 million for Syktyvkar Vodokanal and €5 million for Vorkuta. Grant financing for the project has been provided by Sweden for consultants to carry out the feasibility studies. During the implementation phase of the investment programme, Canadian-funded consultants help the Vodokanals define and implement measures to improve their financial and operational performance through a corporate development programme. In addition, a grant of €5.9 million has been approved by the Northern Dimension Environmental Partnership, further improving the affordability of the project.

Trade finance training programme and advisory services

With support from Austria, France, Ireland, Luxemburg, Japan, Switzerland, Taiwan and UK, the EBRD has been conducting training programmes on trade finance, targeted at issuing bank staff. Training sessions have been held in 19 of the Banks' countries of operation and have been attended by more than 400 trade finance specialists from some 130 banks. Bank staff from Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Georgia, Kazakhstan, Kosovo, the Kyrgyz Republic, FYR Macedonia, Moldova, Romania, Russia, Serbia and Montenegro, Tajikistan, Turkmenistan, Ukraine and Uzbekistan have participated in the training. 

The courses have expanded the professional knowledge of staff in the issuing banks and have enabled them to offer better services to local exporters and importers. As a result of the training, local banks have been able to increase their trade finance business and contribute to the development of international trade, particularly exports. 

In addition to trade finance training, a need has been identified for advisory services to be provided to banks with limited trade finance experience. The objective of the services is to increase the operational and technical skills of the banks’ trade finance departments and improve the delivery of trade finance services to their clients (local importers and exporters). Banks will also learn how to efficiently structure complex trade finance transactions and to better understand and mitigate risks associated with trade finance transactions. The assistance is delivered in the form of consulting services by trade finance specialists and will be tailored to the needs of individual banks. 

With support from Netherlands, Germany, Ireland, Canada, Switzerland and Taiwan, the EBRD could hire consultants to deliver trade finance advisory services for the banks in Russia, Azerbaijan Armenia, Georgia and Central Asia (Kazakhstan, the Kyrgyz Republic, Tajikistan and Uzbekistan), Ukraine respectively.