EBRD issues new Russia Strategy for 2007-08
London, United Kingdom – A new two-year strategy for Russia commits the European Bank for Reconstruction and Development to take on increased risk in its biggest country of operation, particularly in the form of equity, and foresees the Bank playing a major role in helping to renew Russian infrastructure, especially in the all-important power sector.
The document will act as a roadmap for the Bank, the largest financial investor in Russia with €7.2 billion of accumulated commitments over the past 15 years. The new strategy calls for equity investments to grow to 20 percent of annual business volume. In 2005, equity represented 12 percent of the EBRD’s Russian portfolio.
In the power sector, the EBRD expects its portfolio of commitments to grow to between €1.5 billion to €2 billion thanks to a range of debt and equity investments by the end of the new strategy period. The Bank’s Russian power portfolio currently consists of €727 million of signed commitments.
The EBRD document says the corporate sector generally in Russia is becoming increasingly important. It calls specifically for more investment in local manufacturing companies that need to broaden their capital base in order to become more competitive. The Bank will support market-based industrial restructuring in those companies that can demonstrate improvements in corporate governance.
Under a separate long-term plan approved earlier this year, Russia’s share of EBRD financing is due to reach 41 percent by 2010 as the Bank scales down its operations in central and eastern Europe. Last year, commitments to Russia accounted for 24 percent of all EBRD deals. The Bank is doubling the size of its Russia staff to meet the challenge.
The Bank’s priorities, outlined in the 2007-08 strategy, include increasing funding for the modernisation of Russian infrastructure in the power, transport and municipal sectors and helping all its clients become more energy efficient.
The EBRD intends to continue playing an important role in the development of the financial sector and capital markets and will maintain its commitments to the Russian corporate sector, including through offering support to foreign direct investment.
The new strategy commends the continued political stability and strong macroeconomic performance, but notes that further progress in democratic governance would help unlock Russia’s obvious economic potential, including through foreign investment. While Russia remains committed to the principles of multiparty democracy, pluralism and market economics, in accordance with the Bank’s mandate, the strategy notes concerns in the international community over the Russian authorities’ continued weakening of the checks on executive power, and it calls for more even-handed application of the rule of law and firmer protection of human and civic rights.
The new strategy was adopted by the EBRD Board of Directors representing the 60 governments and two intergovernmental institutions which make up the Bank’s shareholders.