articles | 06 February 2017

EBRD gears up for annual meeting in Cyprus

This year, Cyprus will host the annual meeting of the European Bank for Reconstruction and Development (EBRD).

Taking place over May 9-11, the annual meeting rotates among all the 36 countries in which the EBRD invests, as well occasional meetings at its head office in London.

Initially set up in 1991 to invest in central and eastern Europe, not long after the fall of the Berlin Wall, the EBRD has since expanded its reach and now invests as far south as Egypt and Morocco and as far east as Mongolia. In May 2014, Cyprus became the first eurozone recipient country, followed in 2015 by Greece.

The annual meeting, which normally hosts 2,000 participants, has both a formal element and a broader, business element.

“It is the annual meeting of EBRD shareholders, so the institutional part of the conference is a meeting of our 67 shareholder countries,” said Krkoska.

“In addition to the institutional part there is the business part, where we have bilateral meetings and panel presentations on topics such as green economy, inclusion, small-and medium-sized enterprises (SMEs), the banking sector, energy,” Krkoska said.

This year, the main topic is ‘Targeting Green and Inclusive Growth – Meeting Regional and Global Challenges’.

At the same time, the annual meeting is an opportunity for the country of operation to make presentations to potential investors.

“We organise 10 investment forums for individual countries. And always the hostcountry has its own investment forum. … It is quite an intensive programme over three days.”

Parallel to the annual meeting is the Civil Society Programme, where civil society organisations (CSOs) can discuss the EBRD’s investment projects and policy documents with the EBRD board.

What makes the 2017 Annual Meeting different is that it will be the first one to be held in the Eastern Mediterranean.

“Usually the large countries such as Poland, Ukraine and Kazakhstan appear in regions where they feel they would attract most interest from investors. This is the first annual meeting in the eastern Mediterranean, so we would expect a lot of interest from Greece, Egypt, Jordan and other countries where the EBRD operates,” said Krkoska.

Practical support for SMEs

One of the key events at the annual meeting will be the Trade Facilitation Programme.

“It is important to stress it in Cyprus because it is one of the areas in which we are most active,” said Krkoska.

“It shows that Cyprus is a very trade-driven island and this particular kind of transaction we support is very much needed.”

The EBRD, an AAA-rated bank, provides guarantees to local banks, so that they are accepted as counter-parties in large transactions, despite Cyprus’ junk rating. Last year, the EBRD provided around $50m in this kind of support.

“For example, last year we provided guarantees for the export of construction services from Cyprus to Egypt,” said Krkoska.

Supporting SMEs is in line with the private-sector focus of the bank.

“Ingeneral, about 70-80% of our business is with the private sector, but in some less developed countries there is a need to help, for example, commercialise energy companies before they can be moved to the private sector.”

The EBRD was already involved in the Limassol port concession through a loan to Interorient Ship Management.

If the government ever succeeds in its plans to privatise the telecoms operator, Cyta, or the Electricity Authority of Cyprus (EAC), “we would be involved”, Krkoska said.

The EBRD is also quite active in investing in renewables, having invested in five photovoltaic plants, including what will be the island’s largest.

“Judging by the numbers I have seen, it should increase solar power production by 20%,” he said.

Another area in which the EBRD has been more active is through advisory services for SMEs.

“We have so far provided assistance to more than 50 SMEs, to help improve their managerial and export capabilities — so they can grow faster and export more,” said Krkoska.

Cyprus is just at the beginning of the programme, but on average in other countries, the programmes lead to a 14% increase in turnover and jobs a year after the programmes.

Household NPLs should see the most progress

The EBRD is best known of course for its €107.5m investment in Bank of Cyprus (BoC) and €20m in Hellenic Bank. This has helped bring in expertise to tackle non-performing loans (NPLs).

“We nominated independent board directors for Hellenic Bank and Bank of Cyprus who are experts on NPL workouts.”

These are not EBRD staff, but directors selected on the basis of their expertise.

Krkoska is cautiously optimistic about the banks in Cyprus.

“I think that the local banking sector is moving in the right direction. A lot of progress was achieved,” he said, citing the amount of restructuring in the past 12 months, the repayment of Emergency Liquidity Assistance by BoC and its listing on the London Stock Exchange in January.

“At the same time, there’s still a lot to be done,” he adds.

He also expects NPLs among households, which have not come down as fast as corporate NPLs, to start declining more quickly.

“It is easier to restructure household debt now that there is stability. If the economy continues to grow as it does, loans to households should be the area of NPLs where we shall see the most progress,” he said.

Beyond 2020

The EBRD’s mandate officially expires in 2020. Asked if it could be extended in the event of a solution of the Cyprus problem, Krkoska said: “It is up to the shareholders. If there is a request for our support post-reunification, we would of course be more than happy to look at it.”

Areas he expects the EBRD to be active would be support for SMEs, infrastructure upgrades and energy-sector connections between the two communities.

“There are lots of areas where investment will be needed,” he said.

And if hydrocarbons production starts before or after 2020, there could also be a role for the EBRD there, too.

“There is an expectation that hydrocarbons production will happen after 2020. But if there is a project to build export pipelines, we could help Cyprus to integrate its energy system in the region.”

Source: InCyprus

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