EBRD: Technical Cooperation to enhance company management

Moscow, February 2013

Dilek MacitDirector

Technical Cooperation

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What is the EBRD?

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• European Bank for Reconstruction and Development

• International Financial Institution• Founded 1991• Rated AAA• Shareholders: 64 countries; EU and

European Investment Bank• Promotes transition to market economies • Works in 34 countries from central and

eastern Europe, central Asia and the southern and eastern Mediterranean

• Capital base of €30 billion• Since 1991 more than 3,000 projects

and €71.1bn of cumulative commitments• In 2011 signed deals worth €9.1bn• Largest investor in the region

Cumulative commitments€ bn

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EBRD’s Objectives

Focus on quality, efficiency, concrete results and return on investment (financial, economic, environmental)

Promote transition by investing mainly in the private sector Mobilise domestic and foreign capital: multiplying effect Foster a competitive environment Stimulate and encourage the development of capital markets Encourage environmentally sound and sustainable

development

To foster the transition of 34 countries from central and eastern Europe, central Asia and the southern and eastern Mediterranean towards open market-oriented economies

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EBRD in Russia – 7 offices, 120 Professionals

St. Petersburg RO

Moscow ROYekaterinburg RO

Vladivostok RORostov RO Samara RO

Krasnoyarsk RO

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• EBRD has an extensive expertise in the Russian market

• More than 30% of all projects value signed by EBRD in 2011 related to Russia

• Total amount of Russian deals reached €2.9bn which is a 27% increase vs. 2010

• Net cumulative business volume was EUR €20.6bn which relates to hundreds of successful projects

EBRD in Russia: extensive expertise…

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ABV Net Cumulative Business Volume (NCBV)

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€ billion

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• EBRD mainly works with the private sector and also cooperates with government especially in developing infrastructure

• EBRD proposes a variety of debt and equity instruments; equity portion of NCBV reaches almost 20%

• EBRD has expertise of executing projects in all Federal districts of Russia

81%

19%

Equity Debt

… across many sectors and regions

86%

14%

State Private17%

13%

7%

5%4% 4%

21%

29%

National

Central

North West

Far East

Volga

Urals

Siberia

South and North Caucasus

NCBV breakdown by sectors in Russia

Annual business volume breakdown by Federal Districts (2011)

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The Technical Cooperation funds are used to finance consultants carrying out work to•support the preparation and implementation of the Bank’s operations and projects throughout project cycle•assist the Bank in developing its clients’ capacity and skills, improving efficiency and strengthening institutions

Technical Cooperation Activities

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Consultancy Contract Awards byEBRD and its Clients*

Total Consultancy Contracts Awarded by EBRD & Clients**

Year Value, € million Number

2011 169.49 2,797

2010 175.00 2,820

2009 137.17 2,821

2008 120.22 2,434

2007 136.18 2,377

* Clients are generally the recipients of loans or equity investments** Including contract awards financed by TC funds, Bank budget and contracts funded from loan proceeds in public sector operations

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“Who” in EBRD

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• Client “buy in”

• Cost sharing

• Client Selection and Engagement: in 2011, 104 consultancy assignments totalling €29.96 million were contracted and managed by the Bank’s clients as the beneficiaries of services

• Implementing the advice

Technical Cooperation – Initiatives to enhance company management

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• Policy dialogue and public sector reform

• Management Consultancy in investee companies

• Legal advice to EBRD’s Office of the General Counsel

• Economic/political analysis, research

• Institution building/training via EBRD’s Enterprise Growth Programme (EGP), Business Advisory Services (BAS), Legal Transition Programme (LTP)

• Information Technology

• Social and Environmental Consultancy

Technical Cooperation activities (non-Project related)

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Why SMEs are Important in EBRD Region?

Generate substantial share of employment, drive innovation and cost efficiency

Make economies flexible, resilient and interlinked

Form source of reliable domestic supplies

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SMEs, the Engine of the Economy

55% of GDP produced by SMEs (1)

Employment impact (2)

67% share of employment provided by SMEs.

86% of new jobs created by SMEs with 250 employees or less.

Highest employment growth rates by businesses with up to 100 employees and less than 2 years old.

Data based on formal enterprises, informal businesses will increase the figures

SMEs contribute more to employment in low-income countries than higher-income countries

18% of 18-24 years old are unemployed in Central and Southern Europe and FSU, 28% youth unemployment in SEMED

(1)Median on 24 EBRD countries of operation.(2)World Bank study of 47,475 MSMEs in 99 developing countries and ILO 2012 study on youth unemployment.

19/04/23

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What are the Key Challenges for SMEs in Russia?

Low share of SMEs in Russia:

• different estimates put it at 12-21% of country GDP

• significantly lower than in developed countries

Lack of available financing

Tax system

Administrative barriers and

red tape

Weak management

practices

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EBRD’s Comprehensive and Integrated Approach

• EGP targets medium size companies in need of management strengthening

• BAS aims to help SMEs use local consultants for specific assignment

• Typical BAS project €4,000 (50% cost share) and lasts 4 months

• Number of SBS projects >12,000

• Over €200mn of donor funds utilised

• Financing to local banks for on-lending to SMEs

• Russia Small Business Fund

• Energy Efficiency Programme (RUSEFF)

• EBRD’s Trade Facilitation Programme

• Private Equity Funds

• Venture Capital Investment Programme

• Debt, equity and quasi equity instruments (RSBF-Technical Assistance)

• Term: 3 to 7 years on average; foreign or local currencies

• For both new and existing enterprises with €50mn of existing/ prospective revenue

• Partnership with other investors or banks

• Bank provides for up to 35% of total project cost

Technical assistance (SBS)

Indirect financial support

Direct financial support

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EBRD SME Financing via Partner Banks

in Russia, the EBRD works through 25+ financial intermediaries, for MSME’s support, including:

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Russia Small Business Fund

Since 1994

Loan size$1-200ths

Program size: up to $450m

About 100,000 sub-loans to

SME

Over 8,700 loan officers

15 banks

~300 cities in Russia

RSBF supports finance for Micro and Small Enterprises (“MSE”)

Specialised credit lines to partner-banks + Technical Assistance to help build lending capacity for SME

of the partner banks have so far been trained under this programme

currently co-operate

Totalling $1.2bn disbursed and currently outstanding under the RSBF – partner banks leverage EBRD funding with own money

fits MSE needs

covered

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EBRD Russian Sustainable Energy Financing Facility (RuSEFF)

Engaging local financial institutions

Combining credit line with technical

assistance

$ 200 million of EBRD financing

www.ruseff.com

Assisting SMEs to implement energy efficiency and renewable energy investment opportunities

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Promotes foreign trade to, from, and within the EBRD region

EBRD Trade Finance Facilitation Programme (TFP)

Assumes political and commercial payment risk undertaken by participating banks (issuing banks, 27 in Russia)

Guarantees to international commercial banks (confirming banks, 22 in Russia)

Competed 12,500+ transactions supporting over €7.8 bn in trade (June 2012)

TFP

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EBRD has invested in 49 Russia/CIS focused funds

49 funds and 26 fund managers

80% of the capital invested by these funds has been in Russia

EUR 1.17 bil committed to the funds with total capital of EUR 5.06 bil

More than 368 companies have been invested in:

60% of which have been either service-related or telecoms/media

ca 65% of which are now exited from

Active fund relationships in Russia

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• EBRD’s Small Business Support (SBS) has been helping Micro, Small and Medium sized Enterprises (MSMEs) since 1993

• 2 instruments: the Enterprise Growth Programme (EGP) and Business Advisory Services (BAS)

• Run on a not-for-profit basis with donor funding in 24 countries

SBS at a glanceOver €200m donor funding

1,800+ EGP projects

12,300+ BAS projects

Nearly 800 market development activities

Business Expertise in Addition to Financing

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Consultants Bring International Know How BAS Fosters Local Expertise

• EGP supports the introduction of international best practice on a cost sharing basis

• SMEs with the potential of becoming future leaders in their market

• International advisors with at least 15 years of professional experience and expertise in the specific business sector

• BAS assists individual enterprises to engage with local consultants on a cost sharing basis

• Specific projects with a rapid payback

• Aimed to increase the supply and quality of local advisory services

• Targeted market development activities to create a sustainable market of support for the SME sector

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EBRD has a Proven Impact on Enterprise Performance

Enterprise Growth Programme (EGP)

Business Advisory Services (BAS)

1,800 projects with SME’s with typically 100-500 employees

1,300 advisers from 64 nationalities

In 2012, EGP clients secured €62 million of investments

12,300 projects with MSME’s with up to 250 employees

Nearly 4,000 local consultants engaged

21% of enterprises received an external investment

18% average increase in turnover

29% average increase in productivity

36% average increase number of employees

37% average increase in turnover

43% average increase in productivity

20% average increase number of employees

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EBRD SME Clients

EGP projects by industry

BAS projects by industry

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Strengthening New Business in Vladivostok

28 staff members were trained

Increased efficiency

Company’s turnover increased by 53% in

2011

Employment almost doubled

BAS helped Sidimi Resort introduce an automated system of cashless payments and restaurant management software

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BAS in Federal Districts of Russia

Far Eastern439 BAS Projects

North West213 BAS projects

Kaliningrad145 BAS projects

€9.1 million of donor funding

797 projects undertaken engaging 275 local consultants

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BAS Advice in Russia

BAS has supported a wide range of projects

Computerised Financial/Management Information

System 26%

Computerised Manufacturing

Systems3%

Development Planning

10%

Energy efficiency1%

Engineering Studies

8%Environment

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Feasibility Studies10%

Market Analysis & Planning 16%

Other 1%

Reorganisation/ Restructuring

14%

Quality Management &

Certification 11%

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EGP provided state-of-the-art solution to long-term energy efficiency

The project enables the company to have independent power supply

Optimising Electricity Production in Yekaterinburg

EGP assisted Ural Technical Rubber Plant to bridge investment plans and costly external engineering required for tender specification

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EGP in Federal Districts of Russia

Far Eastern33 EGP projects

Siberian41 EGP projects

Ural19 EGP projects

North Caucasus4 EGP projects

Southern11 EGP projects

Volga 8 EGP projects

Central41 EGP projects

North West68 EGP projects

€15.9 million of donor funding

225 projects implemented, 10 are ongoing

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• Consultant market development activities strengthen the local business advisory services market

• Consultants disseminate market best practices• Business matching initiatives provide businesses

access to markets and knowledge exchange• Policy dialogue promotes better business

environments

EBRD Interventions Go beyond Direct Enterprise Assistance

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Proposed SBS Support in Russia

EGPIntroduction of industry-specific management expertise to minimum 16-17 enterprises each yearSector Development ActivitiesTotal 48-51 projects

Over 2013-2015, SBS will assist enterprises in Southern, Ural, Siberian, and Far Eastern federal districts

BAS Assistance provided by local

BAS specialists: minimum 125 enterprises each year

Minimum 12 Market Development Activities

Total 375 projects

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Proposed SME Support in Federal Districts of Russia

Far Eastern district 30-35 BAS projects5 EGP projects

Southern district30-35 BAS projects4-5 EGP projects

Siberian district30-35 BAS projects4-5 EGP projects

Ural district30-35 BAS projects4-5 EGP projects

Approximate annual allocation

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How to contact us

Project enquiries (existing EBRD projects only) Tel: +44 (0)20 7338 6282 / fax: +44 (0)20 7338 7380

Business Development and project proposals Tel: +44 (0)20 7338 7168 / fax: +44 (0)20 7338 7380

Small Business SupportTel: +44 20 7338 7356, Fax: +44 20 7338 7742, E-mail: egp@ebrd.com

Technical CooperationTel: +44 (0)20 7338 6124 / fax:+44 (0)20 7338 7451

Procurement opportunities via web site: www.ebrd.com

General enquiriesTel: +44 (0)20 7338 6372 / fax: +44 (0)20 7338 6690

PublicationsTel: +44 (0)20 7338 7553 / fax: +44 (0)20 7338 6102

eSelection Tel: +44 (0)20 7338 7307 / Fax: +44 (0)20 7338 7451