PRIVATE ENTERPRISE P39539 ARTNERSHIP Partnership E H P E R S P E C T I V E T S P R I N G - S U M M E R 2 0 0 5 R U S S I A Kuibyshevazot and Corporate Governance: "There Simply is No Alternative" The International Finance Corporation (IFC) is a member of the Chemical manufacturer Kuibyshevazot, in Samara in Russia's Volga region, World Bank Group. IFC works to has tried to build a company that could not only survive Russia's tumultuous reduce poverty and improve peo- transition period but demonstrate real and sustainable long-term growth. ple's lives in emerging economies Early on, it recognized that this would be impossible without good corpo- by enabling and promoting sustain- rate governance. The company thus readily expressed its willingness to able private sector investment at participate in the Parthership's Russia Corporate Governance Project when the frontiers of economic develop- the project opened its Samara office in mid-2002. Today, Kuibyshevazot is ment. IFC itself is the world's largest multilateral investor in emerging continued on page 8 markets. Who We Are IFC's Private Enterprise Partnership works to develop strong, self-sus- taining economies in the former Soviet Union that serve all levels of society. Together with our donor partners, we assist private compa- nies and governments to: · Attract private direct investment to all areas of the economies, Combining Technical Assistance and Investment: · Stimulate the growth of small and IFC's Strategy for Private Sector Growth medium-sized enterprises, and · Improve the business enabling Interview with Mr. Edward Nassim, IFC's Director for Central and Eastern Europe and Mem- environment. ber of IFC's Senior Management Group where Mr. Nassim is responsible for IFC's technical assistance strategy Countries we serve: Armenia, Azerbaijan, Belarus, Georgia, In the last half century IFC has been best known for its investment work. Kazakhstan, Kyrgyz Republic, But in the last few years the Corporation has devoted a bigger share of re- Russia, Tajikistan, Ukraine, and sources and staff to technical assistance. How significant has technical Uzbekistan. assistance become for the Corporation? IFC is currently spending about $100 million per year of its own and donor We thank our donor partners for funding on technical assistance programs globally. IFC's own annual contri- making our programs possible. bution is $30 million and growing. This year IFC created a Funding Mechanism for Technical Assistance and Advisory Services (FMTAAS) with a budget of $65 million to ensure that technical assistance receives steady In This Issue funding and to help increase funding levels. FMTAAS gives us stability and makes us more disciplined about defining priorities. pg. 2 Interview with Mr. E. Nassim IFC has also been allocating more of its expertise to technical assistance pg. 3 Legislation Update: programs. Currently, about one third of IFC staff worldwide are working on Azerbaijan, Ukraine, technical assistance. Uzbekistan Does the bigger emphasis on technical assistance represent a major shift in pg. 3 Program Launch IFC's business model? pg. 4 Program Update: Georgia It is something that has been developing for some time. We started doing pg. 6 Program in Focus: SME Policy technical assistance many years ago, mostly focusing on short-term initiatives continued on page 2 2 linked to specific invest- investments. In some countries we can make a much bigger ments. Then we realized that in contribution to development of the private sector by help- many countries we couldn't make ing to establish a regulatory framework, building institutions, any investments at all, either be- and promoting international best business practices. cause of the size of their economy Is there a prevalent model within IFC for delivering or because of a weak private sec- technical assistance? tor. So we developed programs to help our client countries No. We currently have a few different models, which suit different regions. We have a trust funds program that uses Mr. Edward Nassim, strengthen the private sector. donor funding to employ consultants for short-term as- IFC's Director for Central Creation of the SME department and Eastern Europe was an important milestone. The signments, usually linked to an investment. We will continue new department set up technical assistance facilities in doing that. many countries to foster SME growth, and these facilities There are also two sorts of longer-term program. One significantly increased IFC's global presence on the ground. model is when IFC and donors contribute to a pool of Technical assistance suits IFC for two money to establish and operate a facility with a life span up reasons. First, we have a long tradition "In partnership with donors we to five years. The advantage of this ap- of assessing risk in developing coun- leverage our resources and ex- proach is that one spends less time on tries and making investments where fund raising. Once all the funding is in pertise to develop better programs private investors are not yet willing to place we can focus fully on operating and to promote sustainable change take risks. Basically, working and mak- the facility. The disadvantage of this in developing countries. It's our ing progress in high-risk environments model is that in some cases it is fairly common objective and together is our business, and our track record inflexible. Once the facility's work plan we can achieve much more." shows that we have become good at it. is in place, it is difficult to react to po- Second, we have a large number of people on the ground. tential changes in demand and the local environment. We want to combine our knowledge of the private sector The second model is the Private Enterprise Partnership, and our resources on the ground to build a strong com- where IFC funds the overall management and administra- parative advantage. We have been making many changes tion of the Partnership and raises donor funding for each within the Corporation in order to do that. individual project. The time spent on fundraising is a dis- advantage of this model, but the big advantage is adaptability What are these changes? to changing needs on the ground. The Partnership model One key change is that technical assistance facilities now was first started in the former Soviet Union in 2000 and it report to IFC regional departments rather than to the has been very successful. IFC management recently ap- SME department. This reflects closer integration of tech- proved continuation of this program through FY11 and we nical assistance with IFC's mainstream activities because will be seeking Board approval shortly. Other regions have the regional departments are responsible for defining IFC also adopted the Partnership model. strategy around the world. The SME department is now more focused on measuring our effectiveness and training How do all these changes within IFC's technical assis- staff in a number of areas of our core expertise. tance program affect IFC's relationship with donors? Another important change is that we are building a core IFC's partnership with donors has grown closer over the technical assistance staff, who know IFC and have particu- last few years. Donors have been and continue to be ex- lar areas of specialization. These specialists will help to tremely important for what we are doing both in terms of share experience within the Corporation more efficiently their expertise and funding. Within the Private Enterprise and launch new facilities and programs more easily. We Partnership model we work closely with donors, drawing are also looking at changes to our internal project ap- on their special expertise to develop individual projects. proval to help choose technical assistance programs that Donors are involved in determining strategic direction of are best suited to our comparative advantages. facilities and later in governing them. One area where IFC would like to learn more from donors Has IFC defined its long-term strategy for technical is measuring and evaluating the results of technical assis- assistance? tance programs. A lot of money is being spent on technical There are a lot of good things to do in the world. But the assistance and we want to make sure it is spent wisely and question we need to answer is what IFC can do better to the maximum benefit to our client countries. We are than other institutions. Which programs we choose to do looking at new ways of measuring the effectiveness of tech- will also differ from region to region depending on the nical assistance. level of private sector development. Certain product lines I want to take this opportunity to thank our donor partners that we have developed so far will continue to play an im- for their funding contributions. IFC has significantly in- portant role in our future strategy. These include programs creased its own funding for technical assistance programs, to develop SMEs, strengthen financial markets with a fo- but we cannot do it all alone. In partnership with donors cus on leasing services, housing finance, securitization and we leverage our resources and expertise to develop better energy efficiency finance. programs and to promote sustainable change in the de- What's important in our overall strategy is that technical veloping countries. It is our common objective and assistance programs will not necessarily always be linked to together we can achieve much more. thePartnershipPerspective Spring-Summer 2005 LegislationUpdate 3 A Z E R B A I J A N IFC-Backed Decrees Create Incentives for Leasing in Azerbaijan In February 2005, the Cabinet of Ministers of Azerbai- grew from three to seven in 2004, and now has a total of jan granted value added tax and custom duties exemptions 23. From March 2005 till June 2005 the lease volume for the majority of imported leased assets, a move that is improved by $7 million to a total of $18.5 million. expected to further increase the volume of lease finance in the country. By adopting the exemption decrees, Azerbaijan has created new incentives to support its rap- idly growing leasing industry. These legislative changes, as well as the amendments to the country's Tax Code adopted in January 2004, were developed and advocated by IFC's Azerbaijan Leasing Development Project in cooperation with the Ministry of Economic Development of Azerbaijan. IFC's project is funded by the Swiss State Secretariat for Economic Affairs (seco). As a result of reforms in leasing legislation and IFC's consultations and trainings on leasing practices, the number of leasing companies operating in Azerbaijan U K R A I N E Ukraine's Law on Permits Passes Its First Reading in Parliament A draft law simplifying the business permit system in 167 statutes, as well as a multitude of other documents. Ukraine passed its first reading in the country's Parliament, The new Law will reduce the number of required permits, the Verkhovna Rada, in late June. The draft was prepared simplify issuance procedures, and regulate the ability of by the State Committee for Regulatory Policy and Entre- government agencies and municipalities to devise new preneurship in cooperation with IFC's SME Policy permits. Significantly, the Law would also make permit is- Development Project, which is funded by the European suance automatic for the majority of business activities. Commission. The President of Ukraine, Viktor Yushchenko, has given The permit system has been a major obstacle to opening strong support to the draft Law, which will go to a second and operating businesses in Ukraine. There are more than reading once Parliament is back in session in September. 1200 types of permits, and their issuance is governed by ProgramLaunch R U S S I A IFC Welcomes the Free State of Saxony as a New Partner In December 2004, the Free State of Saxony, Germany, the Russian Volga Region. The project will start in Octo- and IFC's Private Enterprise Partnership signed a three- ber 2005 in Nizhny Novgorod. This technical assistance year agreement on technical assistance. Under the project will run in parallel to the larger Russia Sustain- agreement Saxony will provide 1 mln Euro to fund a able Energy Finance Investment and Technical Assistance number of IFC's technical assistance initiatives in East- program implemented by IFC with funding from the ern Europe and Central Asia. World Bank's Global Environment Facility (GEF), the The first project under the agreement is designed to Governments of Denmark and Finland, and the IFC promote investments in energy efficient technologies in Sustainable Financial Markets Facility. ProgramUpdate 4 U K R A I N E IFC to Support Corporate Governance in the Ukrainian Banking Sector A survey of 50 Ukrainian commercial Ukrainian banks, helping to increase Banks, which are committed to real banks, conducted by the Partnership their attractiveness for lending and in- changes in their corporate governance in February-April 2004, revealed that vestment and thus to increase market practices, can apply for a more in- banks in Ukraine are mostly aware of liquidity. The project will also encour- depth improvement program tailored corporate governance principles, but age and help banks to measure to the specific needs of that bank and lack motivation or resources to do corporate governance standards of po- based on a more detailed corporate more than the minimum required by tential clients more accurately, which governance assessment and improve- law. The survey also found that corpo- will improve risk assessment and risk ment plan. rate governance criteria are not very management by the banks. In implementing the project, the Part- important for Ukrainian banks in their The project is holding open seminars, nership will look beyond the banks risk assessment of corporate clients. round tables and workshops for staff themselves, working with government To support the development of corpo- of Ukrainian commercial banks, par- entities, banking associations and non- rate governance in the Ukrainian ticularly members of supervisory and government organizations concerned banking sector, the Partnership management boards, middle manage- with the banking sector. The project launched the Ukraine Banking Cor- ment and credit officers. Project will support initiatives to reform cur- porate Governance Project with experts will also provide individual rent banking legislation and develop funding from the Swiss State Secre- consultations to banks, review their self-regulation in the sector, providing tariat for Economic Affairs (seco). internal documents and provide inde- guidance on best international corpo- The project aims to improve internal pendent assessments of their corporate rate governance practices and laws of corporate governance practices in governance system. other countries. G E O R G I A The Partnership's Survey Spurs Further Regulatory Reform in Georgia At first glance, Georgia's legislative spections per business of any CIS 10% compared with 40% in many framework for select administrative country (2.5). CIS countries and more than 60% in procedures compares favorably with Despite this, Georgia has fewer SMEs several EU countries. other countries in the region. For in- per capita than Ukraine and Russia, To identify key barriers to SME de- stance, Georgia can boast a very short and growth of SME numbers has stag- velopment and prepare policy business registration process (5.6 days) nated in the last two years. SME recommendations for Government, and is among those with fewest in- contribution to GDP is very low at the Partnership conducted the largest survey of the Georgian SME sector to date, funded by the Canadian Interna- tional Development Agency (CIDA). The survey found that key regulatory issues are still creating obstacles for Georgian business despite recent re- forms. It was found that inspections are still geared to punishment rather than en- couragement of compliance. Almost 60% of inspected SMEs were penal- ized last year and they paid out 27% of Georgia's 2004 per-capita GDP in fines. Over 65% of all SMEs involved in foreign trade viewed customs pro- cedures as a problem, chiefly because of bureaucracy and pervasiveness of unofficial payments. Survey results suggested that the cer- tification and standardization system in Georgia fails to guard consumer thePartnershipPerspective Spring-Summer 2005 ProgramUpdate 5 G E O R G I A safety or promote international trade. Georgian Parliament, Ms. Bur- tions the Partnership joined efforts The system still relies on obsolete janadze, at a large-scale meeting of with the IFC-World Bank Foreign mandatory Soviet standards and does Parliament Committee Chairpersons Investment Advisory Service and the not accept international certification. with heads of leading business organ- Ministry of Economic Development Over 40% of polled SMEs said that it izations. Ms. Burjanadze said that she of Georgia to hold a series of round- remains difficult to obtain permits would use the Survey data in future table discussions to provide a forum and licenses as procedures for issuance work and would personally transmit for a public-private dialogue on re- are not clearly defined, and over 80% the Partnership presentation to the forming the business environment. of surveyed firms said that the tax sys- President and Prime Minister. In addition, the Partnership will fo- tem is a major obstacle to business. "I would like to thank the IFC for cus its efforts on supporting the SMEs are demoralized by high tax their efforts and for making this pres- government in streamlining policies rates, the number of different taxes entation to us today. I also want to and procedures for business inspec- and changeable tax legislation. Levels make it clear that these issues are a tions and issuing permits and licenses. of tax evasion in Georgia are among genuine priority for the Georgian In parallel, the Partnership will carry the highest in the CIS: only 7% of government," Ms. Burjanadze said. out a public education campaign to SMEs claimed not to conceal revenues increase legal awareness among Geor- The Partnership also presented its from the Government. gian entrepreneurs of their rights Survey results to many other audi- and responsibilities within these ad- Finally, nearly 8 out of 10 Georgian ences in Georgia during March and ministrative procedures. SMEs thought that local authorities April 2005, provoking a lively debate do not provide equal conditions for and broad coverage on TV, radio, In July 2005, the Government of all businesses in their region. and in newspapers. Georgia passed the Law on Licens- ing and Permits, many provisions of The Partnership delivered its presen- To help the government find ways which are in line with the Partner- tation of Survey results and recom- to implement select recommenda- ship's recommendations. mendations to the Speaker of the G E O R G I A Financial Disclosure in Georgia Soars by 70% Georgia saw its biggest-ever increase Without IFC's work, this wouldn't successfully shepherded the forms of annual report filings by the dead- have happened. We're seeing the fruits through approval by the National Se- line on April 1 this year, and the of that labor now." curities Commission and the Ministry country's security market watchdog ­ When the project began in 2003, dis- of Finance. the Georgian National Securities closure by Georgian joint stock The project also had the forms printed Commission ­ gave most of the credit companies was very low. In 2002, only and distributed, and organized a series to the IFC's Georgia Business Devel- 36 companies filed annual reports on of seminars around the country on opment Project. The project is funded time. The strategy for improving dis- how to fill them out. Not only were by the Canadian International Devel- closure aimed to do two things ­ the seminars announced at a national opment Agency (CIDA). educate companies why they should press conference, but a personal invi- The number of filings rose 70% from file their annual reports and make the tation was delivered to every joint last year to 364 thanks to new, user- filing process easier. stock company in Georgia. friendly IAS (IFRS) financial forms The project began giving seminars on Racing against the April 1 deadline, and a nationwide campaign teaching the importance of disclosure in 2004. project staff gave seminars to packed companies how to fill them out. Both At the same time, the project worked houses in four regions of Georgia in initiatives were driven by the project's with the National Securities Commis- nine days. Three hundred companies corporate governance program, in sion to design a new set of financial attended, almost half of all operating close association with the Georgian forms. The new forms were simple to joint stock companies in Georgia. The National Securities Commission. use and incorporated the new IFRS scale and warmth of the response ex- "We are extremely happy with our re- reporting standards that Georgian ceeded expectations, proving strong sults this year," said Mikhail Djibouti, companies use. The project drafted demand for clear explanation of the Chairman of the Commission. "I don't the forms, solicited and incorporated hows and whys of financial reporting. think there's any doubt the new finan- comments from businesses and ac- cial forms are responsible for this. counting organizations and then ProgramInFocus 6 Improving the Business Environment for SMEs The objectives of IFC's Private Enter- their legal rights and responsibilities information on the obstacles facing prise Partnership are to promote private during an inspection, as access to such SMEs. The results of our surveys sector investment; support the creation information is extremely limited. As a reach hundreds of government offi- and growth of businesses, particularly result, in Tajikistan, businesses report cials each year, facilitating policy small and medium enterprises (SMEs); that 98% of inspections end in unoffi- decisions and simplifying monitoring and improve the business enabling en- cial payments. of private sector reaction to reforms. vironment. To reach these objectives For example, in Uzbekistan, the gov- In Ukraine, regulatory agencies and the Partnership has developed four ernment has already acted on 18 municipalities issue over 1,200 differ- core program areas: survey recommendations, and has in- ent types of business permits. New cluded 14 of our additional 1. Improving the regulatory envi- permits may be introduced at any time, recommendations in its Action Plan ronment for small and medium while the issuance process can change for further reforms, signed by the sized businesses (SMEs) at each agency's discretion and issuing President in March 2005. 2. Building business partnerships officials are given significant leeway in Enhanced the Regulatory Environment between large and small companies setting permit fees. As a result, the av- erage permit takes a month and a half for SMEs 3. Developing financial markets to obtain and costs $260, or twice the In Uzbekistan, the Partnership's 4. Improving corporate governance average monthly wage. work with the government to im- practices and regulations prove the inspections system has The first issues of the Partnership Per- IFC's Solution resulted in a significant decrease in spective, in 2002-2003, discussed the the number of inspections per firm Partnership's work in these program To create a hospitable environment since 2001, from an average of more areas in detail. Over the years our pro- for SMEs the Partnership works di- than six to less than two a year. The grams have evolved to reflect the rectly with governments, NGOs and Partnership is now working with changing needs of our client countries the private sector to enhance the reg- three key inspecting agencies to stan- and to reflect the lessons we learned ulation of business. We: dardize inspections regulations as during the implementation of our pro- Conduct annual surveys of the SME well as to introduce check lists for grams. Starting with this issue the sector to identify the main admin- mandatory use by inspectors. These Partnership Perspective will review istrative obstacles to SME develop- measures will increase the trans- the new angles in the Partnership's ment, as well as to monitor the parency of inspections procedures four core program areas. We are be- progress of reforms. and clarify agency requirements for ginning with our SME Policy Program. entrepreneurs. Draw on survey findings to provide The Partnership started its SME pro- governments and other stakehold- In Ukraine, in cooperation with the gram with conducting regular surveys ers with practical recommendations State Committee on Entrepreneur- to analyze the business environment to streamline regulatory proce- ship, the Partnership drafted a Law for SMEs. We also worked with busi- dures, such as inspections of on Permits and conducted a broad ness associations and consulting businesses and issuance of permits. advocacy campaign among parlia- companies to build SME business sup- ment members and through the Assist government agencies in port services. The focus of our SME national media. The draft Law has drafting legislation and regulations, program has shifted to advocating pol- recently passed its first reading in as well as with implementing icy changes in order to create a more Parliament. changes to enhance the quality of hospitable business environment and the regulatory process. In Tajikistan, the Partnership spon- working with governments to help im- sored a series of roundtables to plement these changes. To date we Provide entrepreneurs with easy- gather consensus on the content of have focused on two issues our surveys to-understand information on a new Inspections Law. These highlight as serious barriers to SME regulations affecting their business. roundtables drew together key growth ­ inspections of business by politicians, regulatory officials, busi- government agencies and issuance of ness association leaders and technical Results business permits. assistance providers active in the For example, in Tajikistan, an average Equipped Governments with Informa- country. Based on these discussions, small business undergoes 16 inspec- tion to Make Policy Decisions an Inspections Law was recently tions per year, which run a total of 17 The Partnership's SME surveys, in drafted by the government, taking business days. At the same time entre- Belarus, Georgia, Tajikistan, Ukraine, account of the Partnership's expert- preneurs have a poor understanding of and Uzbekistan, provide first-hand ise and input. thePartnershipPerspective Spring-Summer 2005 LegislationUpdate 7 Improved Entrepreneurs' Knowledge of In Ukraine, IFC employs a Web site, IFC's Partnership implements SME Their Rights www.vlasnasprava.info, to provide policy programs in Belarus, Georgia, In Uzbekistan, IFC and the Ministry entrepreneurs with information on Tajikistan, Ukraine, and Uzbekistan of Justice developed an easy-to-read business regulations. The Web site with funding from Canada, the Eu- handbook explaining the inspection also provides information on services ropean Commission, Sweden and process step-by-step, and highlight- that SMEs need throughout their de- Switzerland. As these countries im- ing the rights of businesses during velopment cycle, including access to prove their practices for business the inspections process. More than finance and business advice. Vlas- inspections and permit issuance, the 32,000 copies of the booklet have nasprava is now one of the top Partnership will work with them to been distributed through business as- business Internet sites in Ukraine address other problematic areas of sociations, government agencies, and and attracts over 80,000 hits each regulation, such as export procedures newspaper reprints. Thanks to the month and has more than 4,500 reg- and tax administration. The Partner- brochure, the share of entrepreneurs istered users. IFC has transferred the ship is also looking to expand its work stating that they have a good under- Web site to an independent Ukrain- in SME Policy to CIS countries which standing of their rights during ian NGO, the Business Technologies lack programs for improving regula- inspections rose from 30% to 51%. Development Center. tion of the private sector. U Z B E K I S T A N The President of Uzbekistan Signs Four New Decrees to Improve the Business Enabling Environment In June 2005, the President of Uzbekistan signed four de- prevents tax authorities from demanding additional docu- crees which will stimulate SME growth and contribute to mentation. Compulsory contact of firms with tax authorities an improved entrepreneurial climate in the country. Over is thus reduced threefold while the number of reports the the course of the past year, the Partnership's Uzbekistan average SME files each year is halved. SME Policy Project, funded by the Swiss State Secretariat Transferred Select Powers of Inspecting Agencies to for Economic Affairs (seco), has worked closely with the Courts. The second Decree takes away rights of regulators Ministry of Economy, the Ministry of Justice, the Chamber to close a business, freeze its bank account, impose severe of Commerce and Industry and the State Demonopoliza- fines or confiscate goods. These actions are now strictly tion Committee to draft these Presidential Decrees. within the purview of the court system. In addition, this According to the Partnership's estimates the new decrees Decree annuls the ability of the Public Prosecutor's Office on SME reporting and inspections will cut the cost of do- to inspect businesses, unless the inspection is the result of a ing business in Uzbekistan by $27.4 mln per year. criminal investigation of violations to tax or currency legis- lation. New decrees on SME reporting and inspections liberate over $27 million per year which can now be invested in the Uzbek Economy Reduced Excessive Powers of Inspecting Agencies. $M The third Decree limits the size of fines which may be 30 placed on a business as a result of violations found in the 25 course of an inspection. The maximum amount of these 20 fines is now reduced or waived in the case of a first offence 15 and for offences which are unintentional or effectively 10 harmless. The Decree also requests the Cabinet of Minis- 5 ters to place a proposal before Parliament to ensure that a 0 firm fined in excess of 20% of its assets has a 6 month grace Reduction in Profits from Cost of Total Annual Excessive avoidance of employee time Savings Penalties period to pay the fine. shutdown freed from due to minor excessive infractions reporting Simplified SME Taxation. The fourth Presidential De- cree replaces the previously complex system of SME taxation Reduced Reporting Requirements for SMEs. The first with a single tax equal to 13% of sales. Presidential Decree concerns compulsory reporting. The Partnership's latest Uzbekistan SME survey report revealed The Uzbekistan SME Policy Project has been working that each Uzbek business submits an average of 133 differ- with the Government of Uzbekistan since 2002 with seco ent statistical and tax reports to government agencies each funding. To date, the Government of Uzbekistan has acted year. The new Decree reduces the number of compulsory on 18 recommendations from the Project in addition to the reports to 65, establishes reporting on a quarterly basis, and most recent ones described above. LegislationUpdate 8 R U S S I A Kuibyshevazot and Corporate Governance continued from page 1 committed to better corporate gover- the wild 1990s rather successfully. rectors will be introduced to enhance nance practices, including improving However, following the financial crisis board efficiency, dividend and infor- its annual report and adding inde- of 1998 and new economic growth in mation disclosure policies are being pendent directors to its board. This the early years of 2000, Yuriy and his prepared, and all these steps will be progress has helped the company ob- fellow directors understood that more supervised and monitored by a new was needed to place the com- corporate secretary. pany on sustainable footing "The major improvements to our cor- in terms of financing, opera- porate governance system underway tional efficiency, and sound will allow us to build an internation- strategic decision making. ally competitive company, speak the The opening of IFC's Russia same language as foreign investors, Corporate Governance Pro- and increase our chances of attracting ject office in Samara offered long-term financing at competitive an excellent opportunity for rates," Yuriy said. "Succession plan- the company to move in this ning and a more vigilant board are direction. Since 2002, the but two key elements from which we project has provided 20 con- will benefit. There is, in short, no al- sultations to Kuibyshevazot, ternative to bringing our corporate tain a $15 million loan from IFC at and senior officers and directors of the governance practices in line with in- competitive rates. company have attended 17 corporate ternational best practice." Founded in 1952 and privatized in training events. The company has al- The rewards in terms of long-term fi- 1992, Kuibyshevazot produces raw ready published an annual report in nancing have already been demon- materials for chemical polymers and is accordance with international stan- strated by an IFC loan of $15 million among the ten largest Russian pro- dards, board committees (including an to Kuibyshevazot for the purchase of ducers of nitric fertilizers. It is listed audit committee) and independent di- railway cars. as one of Russia's 200 largest compa- nies by Expert, one of Russia's leading A Broader View business magazines. Kuibyshevazot has traditionally benefited from its Kuibyshevazot is only one of 1,956 companies the Partnership's Russian Corporate Governance Project reputation as a strong, stable company has supported. In only three years, the project has helped Russia improve corporate governance practices by: and has received numerous awards, including "Best Russian Exporter," Conducting 297 training events for 3,539 corporate officers and providing 2,466 consultations to 473 companies given by the Russian Ministry of Eco- nomic Development and Trade. Yet Advising the Russian government on six corporate governance related laws, supporting Russia's two stock exchanges and assisting the securities regulator to draft the first national code of cor- when Kuibyshevazot first learned porate governance about good corporate governance, the Assisting 24 universities to implement 46 corporate governance courses, reaching 3,011 students company's directors and senior man- annually agers were doubtful as to the true Training journalists, publishing and distributing corporate governance materials, and supporting value added that this new `reform ini- corporate governance institutions. tiative' could bring to the company. The project has transferred its corporate governance know-how to the Independent Directors Associa- The company's board, led by its expe- tion, with the aim of providing ongoing support to Russian companies and their directors in their efforts to implement good corporate governance practices (www.nand.ru). rienced chairman Yuriy Shulzhenko, had created a rudimentary but work- The Russia Corporate Governance Project was funded by the Agency for International Business and Cooperation (EVD) of the Dutch Ministry of Economic Affairs and the Swiss State Secretariat for able corporate governance system that Economic Affairs (seco). helped it steer through and survive 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: Irina Likhachova Tel.: + 7 (095) 411-7555 Fax.: + 1 (202) 974-4312 Tania Lozansky Fax.: + 7 (095) 411-7556 Anvar Meliboev Tamar Razmadze www.ifc.org/pep Svetlana Pletneva e-mail: ifcpep@ifc.org Marina Vorobyova Currency is given in U.S. dollars throughout unless otherwise specified. thePartnershipPerspective Spring-Summer 2005