IFC has a long history in Central Europe, especially in the former Yugoslavia, Hungary, and Poland, and has been heavily involved in the market transition and reconstruction of Central Europe since the early 1990s.
We believe IFC has a solid, though selective, role in Central European countries in the next few years. However, IFC has begun withdrawing from sectors and lines of business where private sector is ready to take over, and is focusing on the regions, sectors and projects where IFC’s developmental role is crucial, emphasizing socially and environmentally sensitive sectors.
Specifically, IFC will (i) participate in difficult privatizations; (ii) help companies engage in intra-regional investments; (iii) build financial institutions and introduce new financing techniques and instruments to bring the Central European and Baltic markets to EU standards, in areas such as housing finance, securitization, electronic banking, promotion of specialized lending focused on energy efficiency or "ecological" lending, distressed asset sales, identification of potential strategic partners interested in acquiring troubled or regional banks, and participation in the establishment of private-sector pension fund management companies.
In Central European countries, most of the new manufacturing and service investments are likely to be in industries that do not have ready access to long-term financing. IFC can play an important role in attracting foreign investors who still have a need for risk sharing and mobilizing long-term financing when only short-term resources are available. IFC’s involvement may be particularly important in projects that are environmentally or politically sensitive.
IFC can also help Central European corporations and financial institutions that are looking for ways to invest directly or reestablish trade and finance links with Eastern European partners. Central European companies may have strong comparative advantage vis-à-vis Western IFC can further the push toward EU accession by introducing cutting edge financial products, private pension funds, life insurance, and securitization, and strengthen financial institutions’ capacity to provide housing and SME finance. IFC plans to continue to advise banks on credit scoring, electronic distribution channels, and origination and securitization of uniform SME loans and make direct investments in business infrastructure.
In Central Europe, remaining power sector and infrastructure privatizations are likely to present opportunities for investment. We may also look into investments throughout the region in new lines of business, such as logistics companies and transport services. Also, as EU accession nears, oil refineries, petrochemical plants, and mining operations are coming under closer environmental scrutiny, and many of these operations have still not been restructured and privatized. The amounts and terms of financing required to make these operations viable under EU guidelines are well beyond the scope of private financiers.
