The EBRD in Ukraine

By Anton Usov


Odessa-based Euroterminal, Black Sea Port of Odessa

A quarter of a century of partnership and commitment

The EBRD is a unique financial institution for Ukraine. Its development in the country goes hand in hand with Ukraine’s modern history and the Bank has always been a trusted partner. Over the years, the ship has been expertly navigated through stormy waters by six country directors and an international staff.

Almost a quarter of a century ago (23 years, to be precise) the EBRD’s operations started in a Soviet-style hotel. Today, the EBRD manages a €5 billion portfolio in Ukraine, one of the largest among all its countries of operations. The Bank has accumulated a lot of experience and success implementing projects in all sectors, where it works with total investments of around €11 billion, ranging from pharmaceuticals to grain trading and glass manufacturing to nuclear safety.

 

 

There are signs of the EBRD’s activity everywhere in Ukraine. Kiev’s busy international airport, Boryspil boasts high-tech air-navigation equipment financed and procured by the Bank. The 800-kilometre motorway connecting Kiev with the EU was financed by the EBRD and voted the best road in the country on numerous occasions. Successful municipal transport projects in Lviv and Kiev offer modern and comfortable transport solutions for locals and tourists, who have started to discover this beautiful and diverse country.

Impressive grain handling, storing and logistics projects have revived shipping along the Dnieper River and created numerous brand new grain terminals in the ports of Nikolayev and Odessa. In January 2016, the completion of the Beskyd tunnel in western Ukraine ended a 130-year wait for the removal of a major bottleneck in trans-European transport. The Bank’s strict procurement rules have become a benchmark for all public sector projects in the country.

Ukraine, however, carries a difficult legacy which will take effort and time to overcome. Chernobyl is one example of this. When the EBRD was asked by the G7 to manage the Chernobyl Shelter Fund in 1997, nobody could foresee that this would become a €2.1 billion undertaking which is now nearing a successful conclusion with the finalisation of the gigantic New Safe Confinement. This is something the people of Ukraine will never forget.

The EBRD pioneered many concepts and ideas which have translated into successful programmes, especially in energy efficiency and sustainability, where the EBRD remains one of the key financiers with more than €2 billion in commitments. The EBRD’s fingerprints are indeed everywhere in Ukraine, be it a wind-farm in the south, a solar-power generation facility (an EBRD first) in the west or a biomass plant in the north.

Another key achievement in Ukraine is the introduction of lending to small and medium-sized enterprises. In early 1990s local banks tended to ignore this vital sector of the economy. It was the EBRD that changed this and to date has provided extensive funding of over US$ 800 million to the sector as well as advice and training to local banks. Many of these small businesses have grown into major companies and industry leaders with high business and integrity standards.

The EBRD promotes private sector engagement in the development of key infrastructure in Ukraine and particularly in the port sector. The first project of this kind was a US$ 18 million investment in the Odessa-based Euroterminal – a so-called “dry port” facility, the logistics complex, owned by a British investor, for container handling in the area adjacent to the Odessa sea port. The completed and fully operational project has already helped improve the efficiency of port operations, as well as having a significant environmental and social impact by organising the traffic in and out of the port and removing heavy trucks from the streets of central Odessa.

“We are proud of our long-standing cooperation with the EBRD. The Bank’s investment not only boosts the Odessa sea port development, but also helps increase country’s transit capacity and make Ukraine a competitive player in Black Sea region,” says Euroterminal owner Pavel Lisitsin.

Euroterminal has set the pace for new private infrastructure investments, where EBRD partners and Euroterminal have started developing grain drying and cleaning industrial processing facilities. Beyond Odessa, the EBRD is also working on developing a new grain terminal in the area of the neighbouring Port Yuzhny jointly with MV Cargo and Cargill.

The Bank is also a strong supporter of Ukraine’s agribusiness sector. The fertile soil provides the basis for the country to again become a “bread basket” far beyond its borders. As of March 2016, the EBRD has invested over €2 billion into a wide range of projects. The EBRD continues to play an important role in the sector’s recovery beyond financing – this includes policy dialogue to boost transparency and competitiveness, and the development of new trade links.

In the aftermath of the global financial crisis of 2008, the EBRD provided almost US$ 900 million to support liquidity of systemically important banks in Ukraine. The EBRD’s Trade Facilitation Programme in Ukraine has supported over 1,900 trade transactions worth almost €2 billion to date.

In recent years the EBRD has stepped up policy dialogue in Ukraine. Grant funding from the Bank’s shareholders and donors support are crucial for initiatives like the Ukraine Business Ombudsman Council to fight corruption and the National Reforms Council. Significant resources have been committed to support the preparation of the planned privatisation of state-owned enterprises.

Francis Malige, EBRD Managing Director for eastern Europe and the Caucasus, says: “In Ukraine, we are truly blessed to have been a consistent trusted partner of the country for so long, When a truly reform-oriented government emerged, we were ideally positioned to accelerate, not only with investments but also with policy dialogue. And accelerate we did. In banking sector reform we were the first proponent of the core new regulation against related party transactions. In gas sector reform we knew exactly what to do with Naftogaz, thanks to years of work from the team. We have also helped improve the investment climate - the business ombudsman was the first effective and operational institution in the fight against corruption. I have been impressed with the ability of colleagues across the Bank to mobilise expertise and go the extra mile at this critical juncture.”

The EBRD has achieved a lot in Ukraine under challenging circumstances. This is testimony to the Bank’s commitment and the dedication of its staff who have now been demonstrating for almost a quarter of a century that impossible is nothing.