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The EBRD's Early Transition Countries Initiative

The EBRD's Early Transition Countries Initiative

The Early Transition Countries Initiative aims to stimulate economic activity in the Bank's countries which still face the most significant transition challenges: Armenia, Azerbaijan, Belarus, Georgia, Kyrgyz Republic, Moldova, Mongolia, Tajikistan, Turkmenistan and Uzbekistan. More than 50 per cent of the population in these countries lives below the national poverty line.

The EBRD launched a new initiative to increase its activities in the ten ‘Early Transition Countries’ (ETCs) in 2004.

The initiative aimed to stimulate market activity in these countries by using a streamlined approach to financing more and smaller projects, mobilising more investment, and encouraging ongoing economic reform. The initiative builds on international efforts to address poverty in these members of the Commonwealth of Independent States (the former Soviet Union).

The Bank accepts higher risk in the projects it finances in the ETCs, while still respecting the principles of sound banking. To increase its investments in these countries the EBRD allocated more staff to work on ETC projects and created a new team dedicated to the initiative.

Economic development in the Early Transition Countries is hindered by a number of factors:

  • national debt is extremely high in most of the ETCs;
  • reform and improvement of key institutions – banks, courts and regulatory authorities, state enterprises, infrastructure – is slow, as is the transition to democracy and stability;
  • business skills are lacking;
  • domestic markets are small, distances large, borders are difficult to cross (whether by goods or people);
  • basic services from roads to telecommunications are not in good shape.

The initiative addresses this poor investment climate:

  • at the micro level of individual project finance and advisory services to local enterprises and financial
  • and the macro level of policy dialogue and institutional reform in selected sectors.

Priorities for each of the ETCs are set out in the relevant EBRD country strategy and take into account national poverty reduction strategies.

The EBRD initiative emphasises private sector development, particularly in micro, small and medium sized enterprises (MSEs and SMEs). These enterprises offer the greatest opportunities for creating sustainable employment and prosperity. They also can have a positive impact on a country’s transition to democracy: their owners have a stake in improving the ways laws and regulations are made and implemented, and in reducing corruption.

The EBRD has developed and/or adjusted several financing instruments dedicated to the funding of local entrepreneurs and enterprises, to better address ETC needs.

Donor support

Support from the donor community is a key element in EBRD’s strategy for the ETC countries. The ETC Initiative's impact depends on the coordinated efforts of the EBRD and donor governments and organisations that provide grants in support of the Bank’s ETC investments.

Apply for financing

To be eligible for EBRD funding, projects must:

have strong management
have strong commercial prospects
involve significant equity contributions in-cash or in-kind from the project sponsor
benefit the local economy and help develop the private sector
satisfy sound banking and environmental standards.

The EBRD also requires detailed information about the project, the sponsors and the size and type of finance required.

Following receipt of this information, the Bank can determine possible financing options.

Prospective borrowers are encouraged to approach the EBRD at an early stage of their project, where your first point of contact is the respective local EBRD Resident Office in the country concerned or the Early Transition Team at the EBRD Headquarters in London.