Building Industrial Supply Chains and Developing Communities

CURRENT PROJECTS
Russia Far East Business Development Project
Volga Automotive Component Supplier Development Project

COMPLETED PROJECTS
Development of Automotive Component Suppliers Project
Information Communications Technology (ICT) Sector Development
Northwest Russia Forest Investment Project


THE CHALLENGE
In the CIS region, industry developed along Soviet guidelines largely independent from international competition. A legacy of centralized planning has also created operational inefficiencies and poor business practices. As a result, few SMEs are able to meet the strict manufacturing requirements of global customers and access the benefits that foreign investment can bring.

THE IFC APPROACH
IFC implements two types of linkages programs in the CIS region: community development projects, centered around extractive industries, and industrial supply chain projects, focused on improving standards and quality. We do this by:

Partnering with existing or potential large manufacturers. IFC works closely with large companies to assess their supply chain needs and identify promising local suppliers. We have helped IKEA and the Ford Motor Company develop long-term relationships with Russian suppliers. We have helped the Kinross Gold Corporation (formerly Bema Gold) source locally in the Russian Far East.

Developing the business practices and strategies of promising local suppliers. With its partner firm, IFC identifies select pilot companies and conducts in-depth advisory work to improve management, efficiency and quality. These pilot companies then provide a demonstration effect for the entire sector, to serve as a model for other companies to improve.

Developing the larger community and influencing the sector. Linkages projects reach outside the direct supply chain by working with local businesses and entrepreneurs on issues of business planning and access to finance.

Facilitating access to finance for local entrepreneurs. IFC helps financial institutions to develop funding mechanisms for SMEs, so local companies can access finance to expand. In the Russian Far East, we have helped 12 local banks introduce alternative repayment options, and launched a microfinance fund for small and micro entrepreneurs.

Maximizing Local Benefits
The presence of large companies can be a powerful way to develop local communities, especially in remote regions. Large companies can transfer valuable skills and knowledge by working with SMEs, and provide a market for specialized goods and services for the greater community. IFC is the largest multilateral investor in the world, and we understand the priorities and challenges of large companies. We have more than 10 years of experience in Russia, and a deep understanding of SMEs and the barriers to doing business.

ACHIEVEMENTS TO DATE as of July 1, 2007
$5 million in supply chain contracts. By working with large companies to build sustainable local linkages, IFC helped SMEs gain access to supply chain contracts.

$640,000 in costs removed as a result of improved efficiencies. 77 companies have reported improving operations through their work with IFC, resulting in higher efficiencies and increased output.

Built local sustainability. 6 Russian consultancies have increased their knowledge and capacity through working with IFC projects and have expanded into national and international markets. One consultancy, Prioritet, has increased its client base tenfold after its work with IFC.

Increased industry and sector awareness. To ensure sector-wide impact, IFC projects have produced and distributed easy-to-understand materials on production techniques, including 2 films on operational efficiencies. Strong industry demand has resulted in the sales of videos on automotive techniques to more than 60 factories in Russia.

CONTACT INFO

IFC Advisory Services in Eastern Europe and Central Asia
Ivan Ivanov
Senior Operations Manager, Linkages
36/1 Bolshaya Molchanovka Str., 3^rd Fl.
Moscow 121069, Russia
Tel: +7 (495) 411-7555
Fax: +7 (495) 411-7556

International Finance Corporation
SME Department
Sujata Lamba
Manager, Global Linkages Unit
2121 Pennsylvania Avenue, NW
Washington, DC 20433, USA
Tel: +1 (202) 473-5279
Fax: +1 (202) 974-4834