Completed Advisory Projects in the Russian Federation

COMPLETED PROJECTS Agro-Industrial Finance Company Russia Corporate Governance Program Development of Automotive Component Suppliers Project Dmitrov Potato and Dairy Production Project Feasibility Study for the Commercial Utilization of Waste Gas Information Communications Technology (ICT) Sector Development Medium-sized Bank Re-engineering Program Northwest Russia Forest Investment Project Northwest Russia Leasing Private Sector Higher Education Investment Opportunities Study Project for Development of the Furniture Manufacturing Sector Russia Banking Sector Corporate Governance Project Russia Leasing Development Group Urals Leasing Volga Automotive Project Volga Automotive Project 2005 - 2007 Supported with funds from the Austrian Ministry of Finance The project worked to strengthen the automotive sector of Russia. It demonstrated modern methods to improve quality at Zavolzhski Motorni Zavod (ZMZ), one of the largest automotive engine producers in Russia, and to demonstrate efficiency improvements at Russian suppliers to ZMZ. Improvements made at these factories should provide a demonstration effect for all of the automotive sector in Russia. More... Russia Banking Sector Corporate Governance Project 2004-2007 Funded by the State Secretariat for Economic Affairs of Switzerland (SECO) The main objective of the project was to strengthen corporate governance practices in Russian banks thereby making Russian banks more attractive to investors and clients. Moreover the project intended to encourage public – private sector dialogue between regulatory agencies and other stakeholders in the banking sector, as well as to support non-governmental business organizations involved in the banking sector. The project built directly on the findings and results of the Russia Banking Sector Corporate Governance Study, carried out in 2003 in order to specially address the particular needs of the Russian banking sector. The project approached board members and managers of Russian commercial banks through a series of seminars, workshops and individual consultations on corporate governance best practices and risk assessment. Eight selected banks from across the country participated in an intensive pilot enterprise program. The project ran from July 2004 to February 2007, and during its lifetime has: conducted 42 specialized seminars for over 1100 participants from 343 banks, banking associations, and government agencies; provided 95 individual consultations to 24 banks; recommended revisions of 245 internal corporate documents (e.g. Charter, By-laws); supported investments in Russian banks of USD 200 million; commented on the Central Bank of Russia’s corporate governance regulation; and advised the Ministry of Economic Development and Trade on new legislation on Related Party transactions, Squeeze-Out Law, and Registrars. Northwest Russia Forest Investment Project 2003 - 2007 Funded by the Government of Finland The goal of the project was to lay the groundwork for investment in the forestry sector in Russia by forming long-term business partnerships between local companies and outside investors and by removing key obstacles to investment in the sector. In 1999-2000 IFC worked with nine of the larger forest enterprises in Northwest Russia to help them develop business plans, understand and overcome the business development obstacles, and begin matching them with Scandinavian partners to obtain know-how, equipment, potential investment. Building on this work, IFC has launched a new project in St. Petersburg. The project worked with major Finnish forest companies and their potential Russian partners to develop and implement investment programs in logging and wood-processing operations in Russia. To improve the overall investment climate in the sector, the project worked in coordination with the World Bank’s programs in the region to strengthen the forestry sector. Agro-Industrial Finance Company 2003 - 2005 Funded by the Government of the Netherlands In June, 2002, IFC's Board of Directors approved IFC financing of $3 million to create the Agro-industrial Finance Company (AFC) in partnership with Rabobank and the Netherlands Development Finance Company (FMO). Rabobank and FMO provided a total of $6 million through IFC's syndicated loan program. AFC financed agricultural enterprises that have supply contracts with major food processors in Russia. This project developed from a Dutch-funded advisory program which worked with Russian diary farms, a dozen of which now supply the Dutch dairy processor, Campina. The project helped Russian dairy farms improve the quality of their milk, strengthened their management skills and facilitated long-term supply contract with Campina. However, in order for these and other Russian farms to grow further, they need access to financing for new technologies and working capital. The creation of AFC has enhanced IFC's efforts to promote the development of Russian farms into competitive and reliable business partners and link them into supply chains of agro-processors investing locally. Development of Automotive Component Suppliers Project 2002 - 2005 Funded by the United States Trade and Development Agency through IFC's Technical Assistance Trust Funds Program The Partnership worked with selected Russian manufacturers of automotive components to improve their manufacturing processes, product quality, and management practices to help these companies become suppliers to foreign auto producers. The project also assisted foreign component producers to establish production in Russia. The initial phase of this project complemented an approved IFC $100 million loan to a Ford Motor Company's assembly plant outside of St. Petersburg. Dmitrov Potato and Dairy Production Project 2002 Funded by the Canadian International Development Agency (CIDA) through IFC's Technical Assistance Trust Funds Program The project worked with Russian farms to increase the production and quality levels of their milk and potatoes through modern technologies and proper crop rotation methods. The project was implemented in partnership with a Canadian-Russian joint venture that produces and will supply the farms with high-grade virus-free seed potatoes. This partnership with the joint venture enabled Russian farms to improve production and become suppliers to major food processors. Feasibility Study for the Commercial Utilization of Waste Gas 2003 - 2004 Funded by Bavaria via IFC's TATF Program The advisory services provided consisted of a feasibility study to test the technical and commercial viability of capturing waste gas and recovering gas from low-pressure wells. The project sought to identify economically viable alternatives to flaring or venting waste gas, conduct an environmental and regulatory analysis, and provide recommendations for possible investment. Information Communications Technology (ICT) Sector Development 2003 - 2005 Funded by the Government of Finland This project assisted Russian Information Communications Technology (ICT) companies to improve their competitiveness in global markets and promoted investment in the sector. Specifically, the project assisted Russian ICT sector companies in certification procedures, provides training in software development processes, creates functional portal to support companies in partnerships, and advised on project management issues. In addition, the project provided expert services to Finnish companies, including comprehensive data about the current ICT market in Russia, assistance in locating, finding and matching companies, partnerships and possible investment and project financing possibilities in the ICT sector, support in analyzing potential local partners, and assistance in legal issues such as IPR's and other contract related matters. Northwest Russia Leasing 2002 - 2005 Funded by the Government of Finland The goal of the project was to stimulate the growth of the leasing sector in Northwest Russia in order to increase financing options available to small and medium enterprises. The Partnership worked with national and regional government officials to improve leasing legislation. The Partnership helped to stimulate the growth of the local market for leasing by providing training, consultation, and specialized information on leasing to local leasing companies and commercial banks. To help SMEs make informed investment decisions, the program also provided training on how to evaluate financing options, work with leasing companies, write business plans, and manage leasing finance. The Partnership also identified investment opportunities in leasing companies for the private sector and IFC. The project has also built links between Russian leasing companies and Finnish exporters. Corporate Governance Program 2001-2005 Funded by the Government of the Netherllands and the State Secretariat for Economic Affairs of Switzerland (SECO) The goal of this program was to improve the investment climate in Russia by strengthening corporate governance practices at the company level and corporate governance regulation at the national level. The program worked directly with Russian medium and large enterprises in four of the country’s regions (starting with St. Petersburg and Samara) to train and advise managers on internationally-accepted corporate governance practices and compliance with local legislation. Based on the results of this company-level work, the program helped match outside investors with Russian companies that demonstrate good governance. On the national level, the program worked with Russia’s Federal Securities Commission and the Russian Parliament to improve corporate governance regulation and to strengthen its enforcement. The program also seeked to raise public awareness of the importance of good corporate governance and the protection of shareholders’ rights. The project conducted comprehensive public education campaigns through specialized publications and the media. In addition the program worked with educational institutions to introduce corporate governance topics into law and management courses. The program worked closely with the Private Sector Advisory Group of the OECD/World Bank Global Corporate Governance Forum to foster private sector support for corporate governance reforms. It has also supported the work of the OECD in the formulation of a Corporate Governance White Paper (a set of recommendations on corporate governance) which was presented to the Russian government in Spring 2002.

Russia Leasing Development Group
Funded by the Canadian International Development Agency (CIDA) and the British Know-How Fund (BKHF)

In October 2002, the Partnership concluded its Russia Leasing Development Group project. This project played a key role in developing a competitive leasing market in Russia. When we started in 1997 the market was in an early stage of development and very few people knew what leasing was. We began with public education campaigns explaining what leasing was and its benefits to national and regional governments, entrepreneurs, bankers, and mass media across Russia. To build local technical expertise on leasing, we trained thousands of people across 35 of the 89 regions of Russia. In addition, we provided more than 1,400 consultations to Russian and foreign companies on the legal, accounting, and taxation aspects of leasing operations in Russia. Some of the companies which IFC advised on starting leasing operations in Russia include KMB Bank, Citibank, Raiffeisen, MMB, ING, Rabobank, ABN-Amro, and Daimler Chrysler.

To ensure the sector’s long-term stability and growth we drafted and advocated amendments to the Tax Code (passed in August 2001) and the 1998 Law on Leasing (passed in January 2002). The amendments eliminated contradictions among Civil Code, Tax Code, and the Law on Leasing and significantly reduced investment risk stemming from previous legislative uncertainty. Furthermore, IFC complemented the Partnership’s technical assistance program with investment. IFC has invested $19 million of its own resources and mobilized $45 million from Western co-investors in four Russian leasing companies: Deutsche Leasing Vostok, Delta Leasing, Baltiskii Leasing, and the Agro-industrial Finance Company.

Today, the leasing market is approaching $2.3 billion, six times its size at the time of the 1998 financial crisis, and still growing.

Urals Leasing
Funded by the United Kingdom Department for International Development (DFID) through IFC's Technical Assistance Trust Funds Program

This project was modeled on the work of the Russia Leasing Development Group (see above). Operating out of a regional office in Ekaterinburg the project focused on promoting leasing development in the industrial and financial centers of the Urals region -- Ekaterinburg and the Sverdlovsk Oblast, Chelyabinks, and Perm.

Medium-sized Bank Reengineering Program
To strengthen the banking sector in Russia, IFC combines investment with customized technical assistance programs. The Partnership works with medium-sized banks to help them restructure their organization and operations, improve their procedures and policies, enhance their information management systems, and expand their lending practices to SMEs. Currently, the Partnership is implementing the following projects in the banking sector:

Probusinessbank Re-engineering Project
Funded by the United Kingdom Department for International Development (DFID) through IFC's Technical Assistance Trust Funds Program

This project complemented IFC's a six-year $5 million subordinated loan to Probusinessbank. IFC advised the bank on developing its expansion strategy and reviewed its organizational structure, credit approval process, and asset-liability management. Due to improved performance and reputation in the business community, Probusinessbank attracted an additional $18.5 million in external financing in 2001. In the October 2002 rating review of the bank, Fitch’s experts emphasized that the relations between Probusinessbank and IFC “facilitated greater transparency of the bank and strengthened risk management processes.”

NBD Bank Re-engineering Project
Funded by the Government of Norway through IFC's Technical Assistance Trust Funds Program

This project complemented IFC's $2.5 million loan to NBD, a Nizhny Novgorod-based bank specializing on SME lending. The project helped the bank improve its management information systems and internal audit function.

Center-Invest Bank Re-engineering Project
Funded by the Government of Norway through IFC's Technical Assistance Trust Funds Program

This project complemented IFC's $2 million loan to Center-Invest, a bank in Rostov-on-Don, specializing on SME lending. The project worked with the bank to strengthen its management and operations, including revision of the bank’s product line and cost structure to improve its overall profitability, the development of a new growth strategy, and staff training on credit practice, internal audits, and asset-liability management.

Project for Development of the Furniture Manufacturing Sector
Funded by the Government of Norway and by IFC through IFC’s Technical Assistance Trust Funds Program

The goal of the project was to introduce environmentally efficient production technologies into Russia’s furniture manufacturing sector. Together with IKEA, a Swedish home furnishings retailer, the Partnership worked with IKEA’s local furniture suppliers to upgrade their management practices and introduce modern production technologies. These improvements aimed to help the suppliers meet IKEA’s high standards of quality and environmentally safe production methods in order for the suppliers to qualify for IKEA's global supplier network. The goal is to lay the groundwork for increased investment in the furniture manufacturing sector as IKEA seeks to expand its operations in Russia. The company, with IFC financing, opened its first store in Russia in the Spring of 2000 and plans to open a number of additional stores in Russia in the near future.

The project also worked with IKEA's suppliers to develop factory improvement plans, including recommendations on how to achieve process optimization through energy efficient and environmentally safe production technologies. The objective was to demonstrate the profitability of investing in energy-efficient technologies. IFC and IKEA will explore the possibility of creating a joint financing vehicle to help Russian furniture manufacturers acquire these technologies.

Private Sector Higher Education Investment Opportunities Study
Funded by the Swedish International Development Cooperation Agency (Sida) through IFC's Technical Assistance Trust Funds Program

To promote increased investment in the private education sector, the Partnership conducted a survey to profile educational institutions for potential IFC and private investment. The survey also identified specific areas in which technical assistance can significantly contribute to the development of the sector.