by Georgi Georgiev
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in more than 100 countries, IFC uses its capital, expertise, and influence to help eliminate extreme poverty and promote shared prosperity. In fiscal 2013, IFC’s investments climbed to an all-time high of nearly 25 billion U.S. dollars, leveraging the power of the private sector to create jobs and tackle the world’s most pressing development challenges.
What are the challenges facing the economies of SEE?
The SEE region is very well integrated into Europe and the challenges in SEE are, in may ways, the challenges of Europe itself. Number one is growth and number two is job creation, which are closely related. The SEE region is expected to return to growth in 2013, which concerns pretty much all the countries. Even though growth will be at low levels, it is still positive compared to what is happening around SEE – with the exception of Turkey. The problem is that these countries need higher growth to create more jobs and they need higher growth to attract more investment. This is also linked to the credit recovery in the region because the deleveraging that is still taking place in Europe has an impact on the SEE economies.”
How can the SEE governments overcome these challenges? What sort of opportunities are these market conditions creating for IFC’s engagement in the region?
Since up to 80-90% of new jobs are created in the private sector, the SEE stakeholders must work to create an environment that would encourage private sector investments and also linked to that is the need to improve competitiveness. A lot has been done to improve the investment climate across the region but there is still work to be done. Beyond that, the SEE governments need to look at what are the competitive advantages of their respective economy and then focus on specific sectors. In terms of raising competitiveness, I think all the governments in the region are well aware of the challenges ahead. What we see is that maybe the smaller countries in the region are slightly ahead in this respect compared to the larger ones. From the IFC’s point of view, we see opportunities to engage in the region’s financial services sector – because you need liquidity to keep business going and growing on a dayto- day basis – agribusiness also, which is very important for job creation in the region but needs to address some productivity issues and find access to new markets, and the other key areas are infrastructure and renewables, especially small hydro.
What has the IFC tentatively planned in terms of funding commitments in the SEE region in the coming fiscal year?
In the aftermath of the serious impact on the region from the global financial crunch and the subsequent slow recovery, the IFC – alongside the World Bank of which it is part – thought there was a need to step up our engagement and do more. So in the last fiscal year, we invested about 1.1 billion U.S. dollars in the Western Balkans – including mobilised co-funding from other investors. Looking ahead, for our own account we would like to invest 400-500 million U.S. dollars a year in the Western Balkans. But I think our major role, biggest opportunity and mandate is to keep mobilising thirdparty funds for the region. The IFC can help the region but it also needs us to bring along other investors and, in my view, this is critical. When it comes to Bulgaria, Moldova and Romania, we disbursed funding of around 300 million U.S. dollars during the last fiscal year, mobilising an additional 60 million U.S. dollars or so, and we see room for more commitments there.
Could you dwell, in particular, on IFC’s operations in the region’s biggest market, Turkey?
In Turkey, we invested about 1.0 billion U.S. dollars in financing for our own account during the last fiscal year. A lot of it was in infrastructure which has been a very busy space. We were also very active in the financial services sector. In Turkey, the IFC is especially looking to back projects in the country’s less developed regions where infrastructure development is a priority. So we would be looking to do more in that area.
Which industries in the SEE region do you see as most underfunded at the moment?
Clearly, infrastructure is one. I also see opportunities in the agricultural sector. Then there is the manufacturing industry. The problem there is that it is a cyclical business and it is well integrated into the rest of Europe and if Europe is not chugging along, then there is also not much activity in manufacturing.
How do you see the development of the renewable energy sector in the region?
When it comes to renewables, our objective is to promote climate change-related investments, energy efficiency and cleaner production technologies. When you look at energy efficiency and cleaner production technologies, they can make a big difference in terms of reducing energy consumption in the region. In SEE, the IFC would like about 20% of our total funding program to be in renewables. Governments in the region are experiencing a strain on their budgets and the revenue side is going down and, subsequently, the various incentive schemes for renewables are coming under review. But what we are seeing is that we can still find renewables projects in the SEE region that are sustainable on a commercial basis. The IFC is also very actively involved in advising the governments in the region in the development of their regulatory framework while also consulting private companies on the drafting of projects, especially on small hydro. In the area of small hydro, good opportunities exist in Albania and Macedonia where the IFC is engaged. But you can also look at places like Montenegro which also has significant untapped potential. Small hydro and wind are currently the most bankable types of renewable energy in the region.