The FINANCIAL — “Keeping the banks operational, keeping the confidence in the banking system is much more important than the amount of money we invested,” said Jyrki Koskelo, Vice President of IFC, in an exclusive interview with The FINANCIAL.
Over more than a decade since Georgia became a member of the International Finance Corporation (IFC), a member of the World Bank Group, IFC has committed around USD 449 million in 30 projects across a variety of sectors in the country. The last fiscal year for IFC has been an exceptional one in terms of the amount invested – more than USD 200 million. However, according to IFC officials, it is not the volume of investments that matter, but the development impact that the IFC activities actually have. “Keeping the banks operational, keeping the confidence in the banking system is much more important than the amount of money we invested,” said Jyrki Koskelo, Vice President of IFC, in an exclusive interview with The FINANCIAL.
Koskelo spoke about the future plans of IFC in the region and made comments on the global financial crisis. “I think it is premature to say what will happen in the future, but the good news is that collapse has stopped,” Koskelo said.
Q. What is the rationale behind IFC’s commitment to expand its presence in Georgia and Armenia and open a new hub office in Tbilisi, which will cover these two countries?
A. The rationale is very simple. We are driven with the need of improving the development impact that we have in the market and doing it from far away doesn’t make a lot of sense. So, since we are committing and increasing our activities in the region the only logical way of doing it is to expand the office and the staff of the organization in the region. I am delighted that Thomas Lubeck will head this office based in Tbilisi, because he has over 10 years of experience of working on Georgia. Thomas and I have also worked closely on innovated projects in India, Sri Lanka, Russia, and Ukraine.
Q. What are the priority areas for IFC in Georgia?
A. Historically our portfolio reflects the needs that have appeared in the country. Currently it is dominated by the financial sector – we played a major role last year during the crisis for the financial sector to keep it operational.
In the future we want to diversify. Globally we are aiming at a portfolio where about a third of it is in a financial sector, about third – in the infrastructure, and the third – in the real sector – agro industry and general manufacturing.
In Georgia, the plan is to increase our impact both on the advisory as well as on the investment side. On the investment side we will do more in infrastructure, most likely in energy efficiency, hydro energy as an example. The other priority is the agro industry, where, I believe, there is a significant potential underexploited in this country.
On the advisory side, we have been active in the business enabling environment and corporate governance. We expect to launch some efforts in agro industry and food safety. We will also be active in handling non-performing loans and energy efficiency.
These are the plans that we have. However, whether they materialize or not depends on the market, on our clients, on our partner banks, and also on the Government. In general I would rather talk about what we have done in the past and would just add that due to the new office opened here we expect to do more.
Q. Speaking about the past, how would you assess what has already been done in Georgia?
A. The past year for us is a good example of our response to the financial crises. We had an exceptional year – we had more than USD 200 million worth of investments in this country. We together with our colleagues at EBRD, with the support of our Georgian partners and in cooperation with the Government played a significant role in keeping the financial sector together, allowing investments, trade, and confidence in the financial sector to remain and, I think, it is remarkable to see it actually happened.
It is one of the most positive things that I have seen. It showed how during the worst crisis we have actually stepped up – that is exactly our role and the development impact. We believe that we should not be focusing on the volume numbers, but on the development impact – keeping the banks operational, keeping the confidence in the banking system is much more important than the amount of money we invest.
Q. During fiscal year 2009, the World Bank Group committed USD 12.5 billion in support to its members and to private business in the Europe and Central Asia regions. The World Bank Group commitments in the region grew in fiscal year 2009 by 58 percent, as financing was rapidly approved to help cushion the impact of the global economic crisis on the poor and to position countries for post-crisis recovery. In your view, can this amount of allocated money make any difference in the region?
A. It certainly can make a difference – that is very clear. The real question on everybody’s mind is “is this is enough”. I think the World Bank Group alone cannot make things right and we have to look at the two elements on this overall. There is not enough public funding globally to keep global trade or global activities function. The critical element is to make sure that the confidence of the private sector continues to remain, because private sector money is needed and private sector activities keep the things moving.
The World Bank Group has a programme to try to do the best we can. During the crisis there is a huge increase that we are trying to do, which we are delivering. Because we do not see that the private sector money coming back is enough, so there is a need for the public sector institutions to continue building confidence on the market. I hope the private sector money comes faster. But my sense is that we need to be prepared from a public side to support for another couple of years.
Q. Looking ahead, how will the global financial crises impact IFC’s activities globally and in Georgia?
A. In a crisis like the current one or the Argentina crisis, the Asia crisis or any other crisis, the need for long-term investors and institutions that create confidence is increasing significantly. So, what happens during the crisis is that IFC goes countercyclical and invests more in terms of actual investments but also more in terms of advisory. In a crisis like this, we need to increase activity. Once the crisis is gone, if we are not needed, we should move away.
Q. Some of the international organizations are speaking about signs of recovery from the crisis. What is your impression? Are there any positive signs of recovery worldwide and particularly in Georgia?
A. I think the best way to describe the situation is that there was a significant collapse of the economy late last year. Now the situation has been stabilized globally and in some places, in isolated industries, glimmers of hope have appeared. I think it is premature to say what the future will look like, but the good news is that the collapse has stopped. Some markets will recover faster than others and it is up to each country and business in the countries to try to be developed in better terms than some others. Accordingly it is up to Georgian business, the Georgian Government and Georgian nationals to create the conditions necessary to emerge from the crisis quickly.
Written By Tako Khelaia
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