Fostering Transition in the Fostering Transition in the Agribusiness SectorAgribusiness Sector

Sam FankhauserSam Fankhauser

Director for Policy Studies and Sector StrategyDirector for Policy Studies and Sector Strategy

Office of the Chief Economist - EBRDOffice of the Chief Economist - EBRD

Berlin, 4 May 2006Berlin, 4 May 2006

OverviewOverview

1. The EBRD Agribusiness Portfolio- Commitments, regions, segments

2. EBRD’s Approach: Transition Impact- Methodology and selected investments

3. The Way Ahead- Achievements and remaining challenges

● Overview о Portfolio о EBRD approach о The way ahead о Conclusions

1. EBRD’s Agribusiness Portfolio1. EBRD’s Agribusiness Portfolio

62

101

273

232

352

298

409

481

324

425

150

207

0

50

100

150

200

250

300

350

400

450

500

94 95 96 97 98 99 00 01 02 03 04 05

EBRD annual commitments in Agribusiness 1994 - 2005 (million EUR)

Regional Projects

18%Early and

Intermediate35%

Russia28%

Advanced countries

19%

Distribution & retail

Edible oil

Food manufacturing

Commodity programmes

Food packaging

Other

о Overview ● Portfolio о EBRD approach о The way ahead о Conclusions

Source: EBRD 2005

2. Transition Impact in Agribusiness 2. Transition Impact in Agribusiness projectsprojects

Structure and Extent of Markets– Competitive pressure

– Market expansion

Markets Institutions and Policies– Private sector participation

– Institutions, laws and policies

Market-based Conduct, Skills and Innovation– Transfer and dispersion of skills

– Demonstration effects

– Corporate governance and business conduct

о Overview о Portfolio ● EBRD approach о The way ahead о Conclusions

Selected investments: Structure and Selected investments: Structure and extent of marketextent of market

о Overview о Portfolio ● EBRD approach о The way ahead о Conclusions

Bunge (Ukraine) EUR 43.8 million working capital

loan to finance seasonal purchases of sunflower seed

Bunge is the world’s largest oilseed processor, with sales of US$ 25 billion.

DOEP edible oil plant producing branded bottled refined sunflower oil with a leading market position in Ukraine and Russia.

TRANSITION IMPACT: Increase in competition in the edible oil crushing sector, market expansion through upward linkages to farmers by providing physical inputs and training

Selected investments: Market Selected investments: Market institutions and policiesinstitutions and policies

Frikom (Serbia Montenegro) EUR 10.1m long-term debt

facility One of the good examples of

regional expansion of key local players

Supports local farmers - increased demand of quality inputs including vegetables and milk

о Overview о Portfolio ● EBRD approach о The way ahead о Conclusions

TRANSITION IMPACT: supporting the recent privatisation of the largest frozen food manufacturer in Serbia Montenegro

Selected investments: Market-based Selected investments: Market-based conductconduct

о Overview о Portfolio ● EBRD approach о The way ahead о Conclusions

Marbo (Regional)

• EUR 10m long-term debt plus EUR 3m follow-on

• One of Serbian success stories in the agribusiness sector

• Constant capacity increase which leads to increased demand of quality potatoes

TRANSITION IMPACT: improvements in corporate governance

None

Minimal

Moderate

Significant

Very significant

0

1

2

3

4

Est

on

ia

Hu

ng

ary

Kyr

gyz

Rep

.

Lat

via

BiH

Bu

lgar

ia

Cze

ch R

ep.

Geo

rgia

Lit

hu

ania

Po

lan

d

Ro

man

ia

Cro

atia

Ru

ssia

Kaz

akh

stan

Ukr

ain

e

1991-2000 2000-2005

о Overview о Portfolio о EBRD approach ● The way ahead о Conclusions

EBRD’s impact on Agribusiness

3- How have we done so far?3- How have we done so far?

Source: TIR

Determinants of performanceDeterminants of performance

Country’s reform progress Resource allocation (EBRD staff hours) Synergies with IFIs /donors (e.g., SEE, EU, FAO) Additionality constraints (especially CEB) Article 1 constraints (BL, TU, UZ)

о Overview о Portfolio о EBRD approach ● The way ahead о Conclusions

What’s left to do in the sector? What’s left to do in the sector?

0 1 2 3 4

CEB

SEE

CIS

Structure Institutions Conduct

= negligible = small = medium = large

о Overview о Portfolio о EBRD approach ● The way ahead о Conclusions

Average size of the remaining challenges

Source: ATC

Concluding remarks: remaining Concluding remarks: remaining challengeschallenges

о Overview о Portfolio о EBRD approach о The way ahead ● Conclusions

CE

B

Development of active land markets Promote farm restructuring and rural developmentDevelopment of market-based food distribution/packaging ind.Restructuring of some of the remaining state-owned enterprisesPromotion of new agricultural finance schemes

SE

E

Land privatisation and farm restructuring Privatisation and restructuring of agro-processing companies and

development of related services (retail, distribution, packaging) Appropriate financial schemes for agriculture, including improved

collateral services

CIS

Land privatisation and farm restructuring; Development of agibusiness and related services (such as retail

and packaging) Provision of credit to the agricultural sector

Source: ATC

Fostering Transition in the Fostering Transition in the Agribusiness SectorAgribusiness Sector

Sam FankhauserSam Fankhauser

Director for Policy Studies and Sector StrategyDirector for Policy Studies and Sector Strategy

Office of the Chief Economist - EBRDOffice of the Chief Economist - EBRD

Berlin, 4 May 2006Berlin, 4 May 2006