Transcript Policy dialogue on investment climate in ETCs

Lessons learned from EBRDsponsored high-level investors’
councils
D. Otorbaev
PPD International Workshop
Vienna, 28-29 April 2009
Content
1.
Diagnostics
– Our region
– How to organize the process, risks etc.
– Role of governments
2.
Steps taken to date
– Networking; internal & external processes
3.
How to do things together?
Why smaller countries? Role of capital

Bigger countries (Russia, Ukraine)
– reformers “acquired” power, since they acquired
the capital
– market reforms often faster (larger companies
driven)

Smaller countries (ETCs) (reforms are slower)
– capital spread over many companies
– ‘divide and rule’ law works better
Why smaller countries? Budgets

Bigger countries
– national wealth generated by big companies
(Gazprom, Lukoil, Kaymunaigaz, etc.)
– Role of small businesses not visible (little input to
GDP, and budget revenues)

In all countries of operation the SME sector is
strongly under-developed!
– Institutional/fundamental problem
Why smaller countries? Jobs

Why in smaller countries SME development is
crucial?
– Jobs (agriculture, services)
– Economies are fully dependant on their
performance

Characteristics of private sector
– Fragmented
– Not organized
Why smaller countries? Conclusion

Big companies will fix things on ‘ad hoc’ basis
– They have their own dialogues (‘investment
councils’)

Smaller and medium-sized enterprises
(SMEs) cannot reach the governments

Policy dialogue will help to all private sector
– to channel their messages to the governments
– to strengthen their lobbying power
Role of government


Most of government policies designed to help
the private sector impede its development
Why governments can’t do much?
– Low level of ability or competence
– High level of corruption
– Influence of special-interest groups

How governments can help business?
How governments can help business?
Just get out
of the way!
PPD: Practicality

We should do it based on pure practicality
(not academic or ‘political’ reasons)

To lend more, we have to lower the risks

What are our clients saying during private
conversations?
– They with us not for only for financial contribution
– Protection (“roof”)
PPD: Institutions

Why to protect only on “case by case” basis?

What to do with smaller businesses?

To build “protection” institutions
– Advocacy and lobbying groups (rule of law)

To build public-private partnership/training
– via sustainable dialogue/mandatory capacity
building component
How to make reforms?

To support reformers in the Governments

How to help reformists? To build the ‘team’
– To ‘train’ and to motivate private sector players
– To mobilize Parliaments (including training)
– To support/enforce the ‘fair play’ rules

Finally: to strengthen/train the entire ‘team’

We need a fair referee (leadership of country)
What donors can offer?

To harmonize donors practices in the country
– our shareholders demand

How to make it? (involve WB/IMF, bilaterals)
– conditionality (reforms in exchange to investments)

What private sector needs from the Bank?
– finance, yes; TC, yes. But not only …
– protection
Consultative councils

Bank has good reputation/must use it

Push to start consultative process between
main stakeholders (in each country)
– Governments (chairmanship with the country
leadership)/limited other government participation
– business communities, including foreign investors
– donors
– Parliaments
Consultative councils

Agenda
– Medium term (legislation, regulation)
– Short term (implementation)

The key goal: building the partnership within
the council (building the ‘team’)

TA funds are needed to support small
secretariats of consultative councils
Risks

Lack of commitment from local stakeholders
– Political risk (inability, unwillingness)
– That is why we are not in all ETCs as yet

Lack of local capacity to run the secretariats

Too broad agenda/duplication

Internal commitments/reputational risk
– Sufficient senior resources
First results

Political will - Kyrgyz Republic, Armenia,
Georgia, Mongolia, Tajikistan

Support of secretariats (5 countries/2 years)
– Head, two economists, one lawyer, secretary

Councils are operational in 4 countries (in
Georgia is to be established)
The role of ROs

Setting up the programmes
– To develop the councils’ agendas
– To organize the working groups (with other donors)
– To work with other donors and private sectors

To help to the secretariat

Training and monitoring
The role of HQ

Advisory Board on PPD (endorsed by
ExCom)
– SEECCA BGD (Chairman), Country Directors,
Director of ETCI Team, OCE, LTT

Agenda
– Update on progress and issues arising
– Staff assigned (HQ/ROs)
– Inputs needed from OCE/OGC (LTT)
Building the team

Bank’s mission – let’s be practical (‘win-win’)
– Better investment climate – more investments
– Nobody will lose

Why we have chances?
– Overall economic climates are favourable

Positive result is matter of time

We could do it fast. Let’s do it together
Thank you