PRIVATE ENTERPRISE PARTNERSHIP 39531 Partnership P E R S P E C T I V E THE W I N T E R 2 0 0 4 ­ 2 0 0 5 G E O R G I A Strengthening the Leasing Business in Georgia The International Finance IFC helps a leasing company obtain financing and expand markets Corporation (IFC) is a member of the The leasing sector in Georgia has great potential. The country's first survey World Bank Group. IFC works to of the sector, conducted by IFC, estimated a potential market for leasing be- reduce poverty and improve peo- tween US$15.3 million and US$22.6 million. To help Georgian leasing ple's lives in emerging economies companies take advantage of emerging business opportunities, the survey by enabling and promoting sustain- provided detailed information on potential clients organized by sector, com- able private sector investment at pany size and equipment needed. the frontiers of economic develop- ment. IFC itself is the world's largest Georgian Leasing Company (GLC) saw great potential for expanding its multilateral investor in emerging operations across a number of sectors. However, the company found it diffi- markets. cult to obtain the financing it needed to meet client de- mand. GLC turned to IFC for help to improve its Who We Are operations and attract additional invest- IFC's Private Enterprise Partnership works to develop strong, self-sus- ment. taining economies in the former GLC, which mainly Soviet Union that serve all levels of serves small and society. Together with our donor medium enterprises partners, we assist private compa- (SMEs), was the first nies and governments to: leasing company to be · Attract private direct investment continued on page 7 to all areas of the economies, · Stimulate the growth of small and U K R A I N E medium-sized enterprises, and IFC's Partnership and the European Commission to · Improve the business enabling environment. Start Cooperation in Ukraine Countries we serve: Armenia, The European Commission has signed its first agreement with IFC's Pri- Azerbaijan, Belarus, Georgia, vate Enterprise Partnership. The Commission will provide funding for the Kazakhstan, Kyrgyz Republic, continuation of the Ukraine SME Policy Project, which works to improve Russia, Tajikistan, Ukraine, and the business enabling environment for SMEs in Ukraine, with a current Uzbekistan. focus on streamlining the system of permit issuance for business start-up. We thank our donor partners for The results of IFC's latest surveys of the SME sector in Ukraine, con- making our programs possible. ducted with support from the Government of Norway, show that Ukrainian entrepreneurs consider the process of obtaining business permits as one of the key regulatory barriers to business development. Experts estimate that there are over 1,200 types of permits issued in Ukraine. While the current In This Issue legislation offers no legal definition of permits, it allows regulatory agen- pg. 2 Interview with a donor: CIDA cies and local administrations to introduce new permits and alter requirements with minimal oversight or central control. The procedures pg. 3 Program Launch for issuing business permits remain non-standardized and fees are often set pg. 5 Program Update: Georgia arbitrarily at the discretion of issuing officials. At the same time entrepre- neurs have limited access to information on the process of issuing permits. pg. 6 The Partnership's Programming Strategy To address these issues, the project is working with the Ukraine State Committee for Regulatory Policy to adopt a Law on Permits, drafted by pg. 8 Impact on the Ground: the project in cooperation with the Committee. The Law would set a uni- Magadan continued on page 3 2 and for the recipients, I think. It's valuable for the donor as we are able to build a strong working rela- tionship with, and trust in the implementing agency (in this case, IFC). For the implementing agency, I A Donor think that continuity in the donor also allows for Perspective: that strong working relationship and trust to be built, but it also provides the implementing agency Canadian with a level of consistency as they know what to ex- International pect in terms of reporting requirements from the Development donor, and how the donor's systems of approvals op- Françoise Ducros, Director- General, Russia, Ukraine and erate. For the recipients, consistency in a donor Agency Nuclear Programs Division, helps them to gain a greater in-depth knowledge of Canadian International how a particular sector, in this case agriculture, Development Agency (CIDA) works in the donor's country of origin, and helps them to adapt what they see and learn in the donor "IFC projects have made a real contribution to country to their own country's context. building capacity in the recipient countries, and are leaving behind real, useable skills." Besides agribusiness programs in Ukraine, you also supported an agribusiness project in Russia, business development programs in Russia and Georgia, leasing development in Russia and Georgia, and corporate devel- Canada started to support IFC technical assistance opment programs in Georgia and Ukraine. How do you projects back in the 90s, and until now remains one of evaluate these projects? IFC's largest donor and a stable partner for IFC in the CIS countries. How do you evaluate your experience on I'm only responsible for CIDA's programming in working with IFC to achieve your objectives? Russia and Ukraine, but I think that everyone in the Central and Eastern Europe Branch here at CIDA Our experience in working with IFC has been very who has come into contact with IFC's Private En- positive. We have found IFC to be a most profes- terprise Partnership has been very impressed with sional and competent partner that has consistently the professional and logical approach which IFC ap- met or exceeded its objectives in the projects that plies to its programming. I think that IFC projects we have funded in Russia and Ukraine. We have have made a real contribution to building capacity been especially appreciative of the way that IFC in the recipient countries, and that they are leaving tries, wherever possible, to use local expertise, behind real, useable skills for the people who receive rather than bringing in expatriates, to implement assistance from IFC's projects. their projects as this helps to build and strengthen local capacity, which is very important to CIDA. Do you foresee significant changes of your strategy in countries such as Ukraine given the recent political What are CIDA's private sector and economic developments? development strategies in Russia and Ukraine? In the case of Ukraine, we don't foresee significant CIDA doesn't have private sector or economic changes in our strategy there. I think that given that strategies per se for Russia and Ukraine. Instead, the focus of our strategy is on governance, the re- the programming strategies for both of these coun- cent political developments and the election of a tries focus principally on governance. By reform-oriented President in Ukraine mean that the strengthening the institutions and means of gover- focus on governance is more appropriate than ever. nance in both of these countries, we are helping to We've always worked with the government of build the enabling environment that will help the Ukraine to an extent to help bring about reforms, private sectors in both of these countries to grow and the new environment there should provide us and flourish as, for example, small- and medium- with even more opportunity to assist them in ad- sized enterprises are encouraged, and as the vancing their reform agenda. conditions for foreign and domestic investment are created. Do you plan further cooperation with IFC's Partnership? A few years ago, CIDA funded IFC's project on farm pri- CIDA is in constant contact with IFC's Private En- vatization and reorganization in Ukraine. Currently, you terprise Partnership. We have a very close working support IFC's Ukraine Agribusiness Development Project, relationship, and we talk about new project ideas which promotes the viability and growth of local farms regularly. We're in the advanced stages of discussion and seeks to mobilize investment in the country's agri- on a mortgage project for Russia which we hope will culture. In your opinion, what are the advantages of be approved in the not too distant future. such continuity in programming for a donor? This type of continuity in programming is very valuable for the donor, for the implementing agency, thePartnershipPerspective Winter 2004­2005 ProgramLaunch 3 U K R A I N E The European Commission continued from page 1 fied framework for issuing business permits by standard- IFC's Partnership has been conducting surveys of the izing application requirements, fees and terms of validity Ukrainian SME sector since 1996. The Partnership for permits, as well as setting time limits for state agen- widely publicizes the findings of the surveys and relies cies to process applications. In addition, the project is on them in its work with government officials and legis- providing hands-on assistance to regulatory agencies in lators to help remove legal and administrative constraints improving their internal procedures for issuing permits. to SME development. Over the past five years, IFC's The Ukraine SME Policy Project also conducts a na- survey recommendations have contributed the adoption tion-wide public education campaign on regulatory or amendment of 13 pieces of legislation regulating issues for entrepreneurs. Ukraine's SME sector. R U S S I A IFC Welcomes Iceland as a New Partner in Russia Iceland and IFC's Private Enterprise Partnership signed and little knowledge of the current and future potential of their first agreement on November 15, 2004. Under the the Russian fish industry remains somewhat a stumbling agreement Iceland will fund a Survey of the Fish Industry block for an increased active participation of Icelandic busi- in Russia. ness operators in this field. Therefore, it is most welcome The economic potential of Russia's fish industry is H.E. Mr. Benedikt Jonsson large. However, relatively little is understood about (left), the Ambassador of the complete extent of the fish industry in Russia Iceland to the Russian Federation, and Edward and its current and future dynamics. Drawing on Nassim (right), Director Iceland's expertise as a world leader in the fish in- for Central and Eastern dustry, IFC hopes to provide a comprehensive Europe Division, overview of the sector in Russia and help identify International Finance Corporation, at the signing potential business and investment opportunities. ceremony in Moscow. H.E. Mr. Benedikt Jonsson, the Ambassador of Ice- land to the Russian Federation, commented, "Iceland has had a longstanding cooperation with Russia, and formerly the Soviet Union, in fisheries and the fish industry. The recent major changes in Russia's econ- and encouraging that the agreement between the Govern- omy have attracted much interest among Icelandic business ment of Iceland and the International Finance Corporation operators in these fields in particular who have long sensed is now realized to undertake a Survey of the Fishing Indus- the great potential therein. However, the complex nature try in Russia." R U S S I A Denmark Joins IFC-World Bank Program to Catalyze Investments into Energy Efficiency Projects in Russia In December 2004, Denmark and IFC's Private Enter- often required for EE investments. EE financing is also prise Partnership signed their first agreement. Under the new for financial institutions and is perceived as risky and agreement Denmark, in partnership with Finland, IFC complex. At the same time the potential clients of EE fi- and the World Bank's Global Environmental Facility nancing have limited experience in preparing project (GEF), will co-finance the Russia Sustainable Energy Fi- proposals that would meet banks' requirements. nance Program. The program works to establish a To stimulate investment in EE, IFC and GEF will pro- sustainable market capacity to develop and finance com- vide select Russian banks with credit lines and partial mercial investments in efficient use of energy. credit portfolio guarantees for EE projects. IFC's Part- The demand for energy efficient technologies in Russia is nership will provide technical assistance to build energy strong. However, there is little capital available to adopt efficiency finance expertise in the financial sector and them. IFC's review of the energy efficiency (EE) market among local clients. To improve understanding of energy in Russia revealed that despite the large demand, banks efficiency market opportunities, the Partnership will dis- are not actively financing energy efficiency projects. The seminate information on model deals and potential Russian financial sector lacks access to long term capital, opportunities. ProgramLaunch 4 R U S S I A IFC to Help Russian Banks Address Corporate Governance Challenge According to the survey of 52 Russian vate Enterprise Partnership launched the working practices of the Supervi- banks IFC conducted, the banks iden- the Russia Banking Sector Corporate sory Board and the Management tified corporate governance as a key Governance Project. The project will Board, disclosure and transparency area for further improvements. Russ- advise Russian banks on improving policies and practices, and internal ian banks came to realize that good their own corporate governance prac- control systems. Selected banks may corporate governance helps them at- tices and help them introduce participate in a comprehensive corpo- tract strategic investors, raise funds in corporate governance issues in their rate governance improvement capital markets, increase operational credit assessment practices. The proj- program that includes a diagnostic of efficiency, minimize credit losses, and ect is funded by the State Secretariat current practices, tailored recommen- protect minority and other stakehold- for Economic Affairs of Switzerland dations and implementation support. ers' rights, which will eventually build (seco). Furthermore, the project fosters the investor and depositors confidence The project trains and advises Russ- ongoing reform in the banking sector and trust. ian banks on those corporate by facilitating the dialogue between To help Russian banks strengthen governance issues they identified as legislative authorities, government their corporate governance, IFC's Pri- important to their operations such as agencies, and the private sector. T A J I K I S T A N IFC to Support the Development of the SME Sector in Tajikistan through Inspections Reform IFC's Partnership launched a two-year At the request of the government of their resources more effectively technical assistance initiative to im- Tajikistan, the Partnership will now and to ensure implementation of prove the business enabling cooperate with the State Agency for legal reforms; environment in Tajikistan by facilitat- Antimonopoly Policy and Support to Inform entrepreneurs across the ing reform of the business inspections Entrepreneurship on reforming the country of their rights and respon- regime. The Tajikistan SME Policy business inspections practices. The sibilities during inspections of their Project is supported by the Swiss State project will: business; Secretariat for Economic Affairs (seco). Work with the Repeated, and not always properly reg- government on ulated business inspections, as well as improvement of low legal awareness among entrepre- the legal frame- neurs are serious constraints to the work regulating growth of small and medium businesses inspections in or- in Tajikistan. These are the findings of der to reduce the SME sector survey conducted by overlapping in- IFC in Tajikistan in 2003 with support spections and to from seco. Drawing on the key find- clarify rights and ings of the survey, the Partnership obligations of in- developed and presented to the gov- spectors and entrepreneurs; Conduct another survey of the reg- ernment recommendations on Work with inspecting agencies on ulatory environment for SMEs to improving the business enabling envi- reforming their internal proce- monitor the progress of reforms. ronment in the country. dures, in order to help them use B E L A R U S IFC Continues its Work to Improve the Business Enabling Environment in Belarus Today, in Belarus there are only three preneurs believe that their troubles lie gal and other business related infor- SMEs per 1,000 residents, half the in contradictory and frequently chang- mation. level of Russia and Ukraine and a third ing laws regulating business entry and the level of Uzbekistan. According to operation. Entrepreneurs find it diffi- To improve the business enabling en- a survey conducted by IFC in March cult to keep up with all the legal vironment and to improve Belarusian 2004, 90 percent of Belarusian entre- changes due to a limited access to le- SMEs' access to information and busi- thePartnershipPerspective Winter 2004­2005 ProgramUpdate 5 B E L A R U S ness support services IFC's Partner- development. Drawing on the find- neurs with legal, business, and finance ship launched a two-year technical ings of the surveys the Partnership related information to help them com- assistance project in Belarus, funded will develop specific recommenda- ply with unstable regulations. It will by the Swedish International Devel- tions and work with the government also advise on improving SME's busi- opment Agency (Sida). on improving the business environ- ness efficiency as well as assist them ment for SMEs. in getting access to financing. The The Belarus Business Enabling Envi- portal will be modeled on a toolkit ronment Project will conduct annual To improve SME's access to informa- IFC launched in Ukraine in 2003 surveys of regulatory and administra- tion, the project will develop an (www.VlasnaSprava.info) that cur- tive framework for business, which Internet portal--the Belarus SME rently reaches about 800 small will help identify impediments to SME Toolkit, which will provide entrepre- businesses each day. G E O R G I A IFC Conducts Georgia's First Survey of Corporate Governance After the fall of the Soviet Union, they have to file an annual report with focus its efforts. The Project contin- Georgia privatized over 1,800 state- the National Securities Commission ues its series of seminars and owned enterprises. Almost overnight, (NSC). External auditors are often consultations to educate Georgian these businesses were nominally trans- selected by management rather than businesses about corporate gover- formed into modern corporations and shareholders. Supervisory boards are nance. In addition, the Project has were challenged with novel concepts more often than not unpaid and often developed (together with the NSC) of share-holder rights, supervisory improperly include members of man- forms to simplify financial disclosure boards and annual reports. With few agement. experienced managers, little under- The importance of standing of the recent corporate law the survey to Geor- and virtually no guidance, these new gia is two fold. First, corporations struggled to survive as it serves as a bench- best they could. Small surprise that mark, against which they continued to conduct business as to measure future they had in Soviet times--relying on improvements. Sec- secrecy and personal relationships ond, the survey and usually for insiders' gain. equips the Georgian In an effort to better understand the government with in- corporate practices of Georgian com- formation to make panies, IFC's Georgia Business immediate policy Development Project conducted the decisions. Although country's first detailed survey of cor- both the NSC and porate governance practices. The the Georgian Stock survey, entitled Corporate Gover- Exchange are committed to improv- nance in Georgia: Survey Results ing corporate governance in Georgia, and has finished drafting model cor- 2004, was released in December 2004. both suffer from a lack of financing porate documents that companies can Funded by the Canadian Interna- and staff. In determining where to al- easily adopt and which reflect good tional Development Agency (CIDA), locate their scant resources, the corporate governance practices. In a the survey polled 152 companies in agencies have so far had to rely on promising development, Bank Re- various regions across Georgia. anecdotal reports and public percep- public (one of the Project's client companies) recently announced sig- The survey paints a picture of wide- tions. As Michael Djibouti, Chairman nificant reforms to strengthen the spread deficiencies in basic corporate of the NSC, explained, "the results of role of its supervisory board. As more governance practices. Only 6% of the survey are crucially important for companies follow Bank Republic's ex- companies have an independent mem- the future work of the Commission ample in strengthening their ber on their supervisory board. Only and will serve as a cornerstone of our corporate governance practices, they 8% have a by-law that addresses any tactics." will improve their operations, build corporate governance issues. Almost Meanwhile, the IFC project in Geor- investor confidence, and hopefully at- 40% of companies don't even know gia has used the survey's findings to tract much needed financing. ProgramInFocus 6 Building Partnerships for Sustainable Economic Growth: Our Programming Strategy In the Spring 2004 issue of the Part- IFC core competence neutral broker allow us to enable sys- nership Perspective we described IFC's temic changes in the business Enabling investment Partnership business model from the environment. We draw on these organizational viewpoint--the struc- Donor support strengths to develop unique value- ture of the Partnership's funding and added technical assistance programs, Country Need and Potential the structure of its central and project often in sectors where no other donor- Development Impact management. This article reviews an- funded organizations operate. All of the Partnership's staff is based other essential component of the in the field. The vast majority of our We believe that one of the most valu- Partnership's business model--our staff are local professionals. We draw able contributions we can make is to programming strategy. on our local presence and knowledge facilitate the transfer of knowledge The Partnership's unified manage- to identify areas that most signifi- and successful practices in delivering ment supported by stable funding cantly hinder our client countries' technical assistance to other countries from IFC allows it to take a compre- economic development. We design and sectors. The Partnership designs hensive and strategic approach to programs that help our client coun- and pilots technical assistance initia- programming. The mission of IFC's tries address gaps in the development tives which can be replicated in the Private Enterprise Partnership is of specific sectors and that bring future. Sector-based, rather than geo- aligned with IFC's mission of advanc- about high development impact. graphic, organization of the ing growth, reducing poverty, and Partnership's management allows us IFC Core Competence improving people's lives in developing to build in-depth expertise in certain Based on our assessment of the client countries. IFC achieves its mission product areas, learn the lessons dur- countries' needs, we then look for ar- through sustainable investments in ing project implementation and eas in which IFC has competitive private companies in emerging perfect each project model for repli- advantages. Closely integrated with economies. The Partnership amplifies cation in other countries. This IFC's investment work, we bring IFC's the development impact of IFC's in- approach to programming has en- private sector knowledge and global vestments by delivering broad abled the Partnership to reduce the expertise of sustainable investments in technical assistance projects that pro- cost of initiating similar programs, to emerging markets. As an investor, IFC mote the economic development of launch new programs more quickly, understands and knows how to ad- surrounding communities, support and to leverage donor contributions dress the key obstacles the markets small enterprises, transfer business more effectively and magnify their and companies face in developing and know-how and sustainable practices impact. attracting capital. For example, IFC's across sectors, and seek to improve expertise of investing in leasing com- Enabling Investment the overall business climate. The Part- panies around the world helped the The Partnership draws on IFC's in- nership's overall objectives are to: Partnership develop technical assis- vestment expertise to design programs Promote private sector investment tance programs that fostered the that pave the way for increased in- market conditions for the growth of vestment in locally owned enterprises. Support the creation and growth the leasing sectors in Russia, Ukraine, IFC's ability to mobilize private in- of small and medium-sized enter- Central Asia and the Caucuses. IFC's vestment creates incentives for local prises position of the leading investor in companies to implement change. Fur- Improve the business enabling en- Russia's housing finance sector is guid- thermore, technical assistance vironment ing the design of the Partnership's programs that result in investment new technical assistance program to have a greater demonstration effect as These objectives drive the Partner- create a favorable legislative and mar- other local companies begin to see ship's programming strategy. Our ket framework for the sector's the value of change while investors programs are designed to meet at least sustained growth. grow more confident working in the one, and usually two or all three of region. these objectives. We measure the re- Through 12 years of implementing sults of our programs on how well technical assistance programs in the In designing our programs we work these objectives are met. former Soviet Union and by using lo- closely with IFC investment staff. cal professionals, IFC has in-depth Good examples of such collaboration Beyond meeting the Partnership's knowledge of the countries we work include our programs on promoting overall objectives, our programming in and has gained credibility with lo- good corporate governance practices strategy is defined by the following cal governments, companies and other and helping local small businesses key considerations: stakeholders. The political capital we compete for contracts with large nat- Client country need and potential acquired and our perceived role of a ural resource and manufacturing development impact thePartnershipPerspective Winter 2004­2005 ImpactOnTheGround 7 companies. Overall, the Partnership's programs to date have facilitated $714 From Pilot Projects to Technical Assistance Products million, including $108 million from One of the key aspects of IFC's Partnership programming strategy is take on projects that have the potential IFC, in direct investment. In addition to be replicated across countries and sectors. We develop innovative programs, test and improve the imple- the Partnership carried out small busi- mentation model during the pilot stage, build staff expertise, and replicate the programs, essentially building ness and community development them into technical assistance products. This approach helps us deliver maximum return on donor contribu- programs around investment projects tions. Each new project within a technical assistance product line takes less time to be launched, is less totaling $345 million, including $36 resource intensive, and produces predictable results. million by IFC. For example, the Partnership drew on its leasing development program in Russia to launch similar initiatives in Central Asia in 2001, in Azerbaijan and Georgia in 2003, and in Ukraine and Mongolia in 2004. In the first Donor Support three years of replicating its leasing program, the Partnership has contributed to improving leasing legisla- Last but not least, we develop our tions in Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Over 1600 people participated and programs in close collaboration with benefited from over 70 professional trainings on how to run a leasing business. The improved leasing legisla- our donor partners. Thus, our pro- tion and advisory efforts of the projects facilitated $72 million of investments, including $9 million by IFC in gramming strategy reflects donor the leasing sectors of these countries. government project priorities and The Partnership replicated its Ukraine Corporate Governance initiative in Russia and most recently in Azerbai- funding availability. The Partner- jan and Georgia, providing over 10,000 consultations and 200 seminars on corporate governance to over ship's programs provide an effective 4,000 companies and banks and introduced corporate governance topics to the curricula of over 75 universi- and cost efficient vehicle to donors to ties. We advised governments on over 50 pieces of legislation or regulations affecting corporate governance on topics ranging from issuing additional shares to information disclosure and reporting. The Partnership also deliver funding to targeted sectors transferred its corporate governance experience to other sectors. This year it is starting a corporate gover- and regions. nance project for the banking sector in Russia and Ukraine. Our centrally managed financial con- The Partnership worked with a dozen Russian dairy farms to enable them become suppliers to a Dutch dairy, trols system allows us to monitor how Campina. This work laid the foundation for similar projects with Ukrainian farmers supplying tomatoes and each donor dollar is spent, while our fruits to major food processors. impact assessment provides quantita- Having started in Ukraine, the Partnership now carries out regular surveys of the business enabling environ- tive and qualitative feedback on our ment for SMEs in Belarus, Georgia, Tajikistan, and Uzbekistan. We draw on survey findings to provide programs. This allows us not only to governments and other stakeholders with practical recommendations to streamline select administrative pro- monitor how effectively the donor cedures, such as inspections of businesses and issuance of permits for business activity. For example, in funding is spent, but also guides the Uzbekistan, the authorities took account of 18 IFC recommendations to implement reforms in registration, li- use of donor resources most efficiently censing, taxation, foreign trade, and issuance of business permits. In Ukraine, in-line with our recommendations, the government adopted 13 pieces of legislation affecting SMEs on such issues as busi- for new programs. ness start-up, inspections, taxation, leasing, and state support to small business. G E O R G I A Leasing in Georgia proved operations, OPIC provided a The project's leasing team is currently US $1 million loan to the company. drafting changes to the Law on the continued from page 1 "Promotion of Financial Leasing Ac- established in Georgia. It was founded "This new investment enables us to tivities" to further encourage the in 2001 with the support of Tbiluni- meet market demand. In a short pe- growth of the country's leasing sector. versal Bank. Although the bank enjoyed riod of time we have already made two The development of leasing will in- a good reputation and a stable posi- more transactions in new sectors," crease access to financing for local tion on the market, it could not afford GLC CEO Georgi Putkaradze said. enterprises for capital investments to to finance a capital increase in the leas- "Thanks to IFC, we entered a new fuel Georgia's economic development. ing company. market--the printing business. We didn't know it had such a great poten- The Partnership's Georgia Business IFC's Georgia's Business Development tial and we are able to satisfy current Development Project is funded by the Project helped GLC develop a busi- demand there." Canadian International Development ness plan to attract other investors. Agency (CIDA). IFC's leasing team consulted and trained GLC in lease accounting and Leasing Helps a Small Business Compete and Grow legal issues that enabled the company The Rezoni Printing House in Georgia is small but well-regarded. However, faced with rapidly improving to improve its internal operations and technology, it was starting to loose competitiveness and clients because of outdated equipment. As a financial performance. IFC also facili- small company, it lacked collateral to obtain a bank loan to buy equipment. tated communication between GLC That's when Rezoni started considering leasing equipment. "When I approached GLC, I knew very little and the U.S. Overseas Private Invest- about leasing. I thought it would be extremely difficult to lease something," Revaz Razmadze, Director of ment Corporation (OPIC), which was the printing house, recalled. "GLC exceeded our expectations. We obtained a beneficial price and terms considering investments in Georgia's of delivery. GLC not only selected the right equipment but negotiated several additional parameters for leasing sector at that time. Based on the same price," Mr. Razmadze said. Since using the new equipment, Rezoni's number of customers has GLC's strong business plan and im- quadrupled and its income has doubled. ImpactOnTheGround 8 R U S S I A IFC Helps Magadan SMEs Enter Mining Supply Chains To extend the benefits of multimillion mining investments in Russia's remote far pany's sales to the mining companies northeast to local communities, IFC's Partnership works with small and medium- increased by 50 percent. sized companies to link them to mining supply chains IFC is now assisting Dragmet-Snab in assessing the market viability of Andrey Maltsev is the director of sentatives of local small businesses setting up a warehouse and one-stop Dragmet-Snab Ltd., which supplies participated in the event, along with shopping facility to meet the demand steel products and provides trans- purchasing managers of several large portation services to the mining gold mines in the Magadan region, industry of the Magadan region. which are majority-owned by foreign companies. At that seminar, An- drey Maltsev met with the Bema P u r c h a s i n g Group, which supplies Julietta mine, a joint in- vestment of IFC and the Bema of Magadan mining companies for Gold Corpora- spare parts and consumables. If suc- tion. Andrei's cessful, this facility would allow the company subse- mining companies to source more quently concluded equipment, supplies, and materials a long-term con- locally instead of flying or shipping tract with Bema them from other parts of Russia or Founded in 2002, the company today for steel supply. After concluding the abroad. This would significantly re- is a leading steel supplier in the re- supply contract with Bema and set- duce transportation costs, which are gional market. ting up an inventory of structural extremely high because the region is Maltsev attributes much of his com- steel, as IFC had advised, the com- so remote and depends completely pany's success to the advice and on air and sea for trade. support he received from the Part- nership's Russian Far-East Business Development Project. The project is funded by the Canadian International A Broader View Development Agency (CIDA). Since IFC's Partnership started working in Ma- Maltsev's relationship with IFC dates gadan in April 2002, 23 local companies have to 2003, when he attended an IFC received previously unavailable market infor- seminar for local companies that had mation for 603 product lines within the mining potential to become suppliers to the supply chain. Seven SMEs in the mining supply mines. The workshop provided local chain have been chosen for in-depth tailored assistance, and three of them with IFC's sup- suppliers with a unique opportunity port have concluded mining supply chain for face-to-face discussions with the Andrey Maltsev (right) is one of the 60 entre- contracts, totaling $230,000 per year. mining companies, which currently preneurs in the Magadan region working rely on suppliers from outside the with IFC on ways to overcome basic barriers Magadan region. Seventeen repre- to conducting business efficiently. The Partnership Perspective is Editors: Irina Likhachova 36 Bldg. 1 Bolshaya 2121 Pennsylvania Avenue, NW a publication of the IFC's Private Svetlana Pletneva Molchanovka St., 3 rd Floor Washington, DC 20433, USA Enterprise Partnership. Moscow 121069, Russia Tel.: + 1 (202) 458-0917 Contributors: Elena Bushuyeva Tel.: + 7 (095) 411-7555 Fax.: + 1 (202) 974-4312 Tania Lozansky Fax.: + 7 (095) 411-7556 Svetlana Pletneva Tamar Razmadze www.ifc.org/pep Eduard Yakubob e-mail: ifcpep@ifc.org Currency is given in U.S. dollars throughout unless otherwise specified. thePartnershipPerspective Winter 2004­2005