economiccolloquium presentation nov2014, kneu
TRANSCRIPT
WHERE THE MONEY
COME FROM
Kyiv National Economic University named after Vadym Hetman
COLLOQUIUM
6 November, 2014
Dr., Prof. Leonid Kistersky
AGENDA
Introduction
1. Sources of funding for Ukrainian economy
2. Types of donors and their activities in Ukraine
3. How to attract external resources
Conclusions and recommendations2
INVESTMENT
in finance, an investment is a monetary
asset purchased with the idea that the
asset will provide income in the future
or be sold at a higher price;
the asset belongs to an investor (direct,
portfolio, venture)
CREDIT
money that a bank or business will
allow , somebody to use at a certain
price, conditions and then pay back in
the future;
the money allocated temporarily belong
to a borrower
International Technical
Assistance (ITA)
a grant-based tool for transferring ideas,
knowledge, practices, technologies or skills
to foster economic development;
the purposes of technical assistance are
classified as follows: (a) Policy development,
(b) Institutional development, (c) Capacity
building, and (d) Project or programme
support
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DONORS
international organizations (IO)
international financial institutions
(IFIs)
individual countries
provide soft-term loans and
international technical assistance
2. TYPES OF DONORS AND THEIR
ACTIVITIES IN UKRAINE
European Union
UN
World Bank
IMF
European Bank for Reconstruction and Development
European Investment Bank
Other Donors
TYPES OF DONORS
Multilateral:
EU, UN, ILO, WB, EBRD and others
Most foreign resources come to Ukraine through multilateral channels from international organisations that deliver significant financial assistance, credits on soft terms and ensure financing of the technical assistance programmes.
TYPES OF DONORS (2)
Bilateral:
Individual countries through their Embassies or International development Agencies (IDAs):
USAID, SIDA, CIDA, GIZ
Bilateral donors are governments of the countries delivering ITA through their embassies in recipient countries or through specifically created Funds to administer the earmarked resources.
TYPES OF ASSISTANCE
international technical assistance (ITA) –
EU, USAID, SIDA and others
soft-term loans – WB, IMF and others
ITA
Since 1992, the overall ITA amount granted
to Ukraine by individual donor countries
and international organisations (IO)
accounted for an amount of some
$ 7,5 billion.
ITA management in Ukraine
areas of responsibility for ITA programming,
management and reporting in Ukraine are
shared amongst different government
agencies:
The Ministry for Economic Development and
Trade of Ukraine
The National Agency of Ukraine for Civil
Service
The Ministry of Finance of Ukraine
Ministry for Economic Development
and Trade
plays a leading role in this system – it is
responsible for programming, coordination
and monitoring of the process.
National Agency of Ukraine for Civil
Service
is a key public authority responsible for
implementing certain individual EU
programmes:
TAIEX, Twinning
Ministry of Finance
is in charge of ensuring the ITA receipt in
the public finance management (PFM) area,
consistency of international financial
assistance with the State budget as well as
for attraction of IO resources.
ITA framework
The Paris Declaration principles - a recipient
country itself should define the strategic
development priorities and donor support areas.
The international surveys of institutional capacity
for effective performance of the ITA coordination
functions – Paris Declaration (2005) and Accra
Agenda for Action (2008) indicated a low level of
effectiveness and capacity by the responsible
Ukrainian authorities for ITA coordination.
European Union (EU)
European Neighbourhood and Partnership
Instrument (ENPI):
period 2007-2013
budget - EUR 11 billion 181 million
95% to be allocated to the country and multi-
country programmes
5% - to the cross-border cooperation
programmes.
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ENPI
designed to address the agenda related to sustainable development and approximation of neighbour countries to EU standards;
to support the Association Agreements (AA) as well as other existing and future agreements;
encourage partner countries’ efforts aimed at promoting good governance and ensuring sustainable social and economic development. Ukraine is among the ENPI partner countries.
ENPI - Ukraine
Grant resources are credited to the budget of
the recipient country, if previous goals were
achieved.
implementation of Twinning Programme
through the Institution Building and
Partnership Programme (ІВРР) and TAIEX.
ENPI – Ukraine (2)
The ІВРР programme provided for support
under two areas: "Support to Civil Society
and Local Initiatives" and “Key
Institutions”.
TAIEX Programme– Technical Assistance
Information Exchange Office – was
introduced to strengthen the administrative
capacity of the Ukrainian public authorities.
BILATERAL DONORS
USAID - for USA, it is the only ITA delivery
channel to recipient countries.
Many EU Member-States also provide TA
on a bilateral basis on top of their main
efforts through multilateral channels,
however, they are much less than their main
input to multilateral cooperation.
BILATERAL DONORS (2)
The biggest Ukraine’s bilateral donors are:
USA, Canada, Great Britain, Germany, the
Netherlands, Sweden, Japan;
providing support through the special
international development agencies (IDA):
USAID, Swedish IDA (SIDA), and Canadian
IDA (CIDA).
INTERNATIONAL FINANCIAL
INSTITUTIONS
providing significant financial assistance and
financing ITA.
the ITA share in their resources:
not more than 10%;
ITA component, as a rule, is financed through the
grants provided by the governments of individual
developed countries for administrative purposes.
The largest external funding sources for
Ukraine are the World Bank Group and IMF.
The World Bank Group (WB)
comprises institutions providing both financial and
technical assistance to Ukraine:
International Bank for Reconstruction and
Development (IBRD),
International Finance Corporation (IFC),
International Development Association (IDA),
Multilateral Investment Guarantee Agency
(MIGA).
World Bank activity in Ukraine
The major goal:
to assist the Government in transition to market economy, in particular in recovery of sustainable economic growth and improvement of the living standard in the country.
The World Bank cooperates with the Ukrainian governmental structures, non-governmental organisations (NGOs), multilateral institutions and donors.
For project preparation the World Bank draws the grant resources from many sources
WB Country Assistance Strategy
(WB CAS)
Country assistance strategy for Ukraine for 2012-
2016;
Estimated programme funding - $ 970 mln.
Provides loans only for productive purposes, to
public institutions or under the state guarantees:
Maturity period – up to 30 years
Grace period – up to 7,5 years
Average interest rate – around 4% (LIBOR+
Spread + commission fee)
International Monetary Fund (IMF)
Ukraine’s biggest creditor
cooperating at the governmental level
providing finances for:
covering the deficit of balance of payments;
establishing the market economy principles.
IMF provides ITA under three areas:
support of fiscal and currency policies;
drafting and revision of economic and
financial legislation, relevant rules and
procedures;
capacity building of central banks,
treasuries, tax and customs services
IMF lends: only to public institutions - like Central Bank,
Treasury, Stabilization funds.
Access to credit is limited to certain conditions.
Maturity period –up to 5 years;
Grace period – up to 3 years;
Average interest rate – around 6 %
(+ 0,5 % commission fee).
Cooperation stages with Ukraine:
1994 - 1995 $ 760 mln.
1995 – 1998 $ 1,9 bln.
1998 – 2002 $ 2,6 bln.
2002 – 2008 $ 600 mln.
2008 – 2013 $ 14,5 bln.
European Bank for Reconstruction
and Development (EBRD)
works in two ways:
providing soft loans guaranteed by the
government
private enterprise lending on commercial terms.
Ukraine ratio is 30 and 70%;
Short to long-term maturities, from 5 to 15 years;
Project-specific grace periods may be
incorporated;
Average interest rate – LIBOR (0,6) + 5-6%.
EBRD in Ukraine
During 1993-2013 - 337 projects worth 8.6 billion Euro were funded.
Sectoral structure of the Bank's loan portfolio in the public sector:
Transport infrastructure - 50%
Energy sector - 39%
Financial sector - 8%
Communication - 2%
Development of municipalities - 1%
In 2011 the EBRD Board of Directors approved the Bank’s Strategy for Ukraine for 2011-2014 which envisaged about Euro 1 Bln. annually for development projects. To the above sectoral structure agriculture has been added.
European Investment Bank (EIB)
is the European Union's nonprofit long-term lending institution established in 1958 under the Treaty of Rome. Basically operates in EU region
Priority sectors:
SME
Construction
Transportation
Energy
Industrial projects
EIB Cooperation
The EIB funds projects with a minimum value of 25 mln. Euro, as part of the loan - up to 25% of project cost: Maturity period – up to 25 years
Grace period – 2-6 years
Average interest rate – EURIBOR + commission/administrative fee + payment for economic/political risks
The EIB cooperates with some 120 countries with the EU share of 80% of the Bank’s resources
Back in 2007 the EIB allocated for the 7 CIS countries (including Ukraine) Euro 3,7 bln. on a competitive terms till 2013;
Ukraine accounted for some Euro 1,3 bln. directed to energy and transportation sectors.
European Investment Fund (EIF)
founded in 1994 to specialize in SME and
venture capital investment.
The EIB is the majority shareholder
supported by the European Commission
and private banks.
Black Sea Trade and Development
Bank (BSTDB)
multilateral development bank based around the 11 countries is a regional economic organization.
supports economic development and regional cooperation by providing trade and project financing, guarantees, and equity for development projects.
supports both public and private enterprises in its member countries and does not attach political conditionality to its financing.
Ukraine’s share in the authorized capital – 13,5% (around Euro 52 mln.)
Credits received by Ukraine – Euro 313 mln.
Ratio of the indicators – 1/6
3. HOW TO ATTRACT DONOR
RESOURCES
Project framework
Targeted use
Application forms
Limited budget
Result oriented
Impact/ influence on economy sector
SHORTER PATH TO FUNDING
Project Cycle Management (PCM):
is a term used to describe the management
activities and decision-making procedures
used during the life-cycle of a project
(including key tasks, roles and
responsibilities, key documents and decision
options).
PMC highlights three main
principles:
1. Decision making criteria and procedures are
defined at each phase (including key information
requirements and quality assessment criteria);
2. The phases in the cycle are progressive – each
phase should be completed for the next to be
tackled with success; and
3. New programming and project identification
draws on the results of monitoring and
evaluation as part of a structured process of
feedback and institutional learning.
PCM principles help to ensure that:
benefits generated by projects are likely to
be sustainable;
to support the achievement of these aims,
PCM requires the active participation of key
stakeholders and aims to promote local
ownership.
PRACTICAL EXERCISE
Choose an appropriate donor source:
A. EU Technical Assistance Project
B. Bilateral donor
C. Soft-term Bank Credit (WB, EBRD….)
D. I M F Credit
E. Investment
N Type of Assistance Source
1 1.5 year project to support implementing the Association
Agreement requirements in Environment legislation
2 Build new high tech measurement instruments enterprise in
Bila Tserkva
3 Providing small financial support to Civil Society projects
4 1 Expert for 6months on developing EU financial control
regulations in the Ministry of Finance
5 2 training courses of 1 week each in Ukraine on Internal
Audit for EU Funds
6 2 mln. project to reconstruct highway junction construction
on Odeska square
7 1 beuro for balance of payment support
8 1 meuro project to develop training program and staff
teaching capacity in English in Kyiv National Economic
University named after Vadym Hetman
9 3 mln. project for road reconstruction Kyiv – Brovary
Key to exercise:N Type of Assistance Source
1 1.5 year project to support implementing the Association Agreement
requirements in Environment legislation
A
2 Build new high tech measurement instruments enterprise in Bila Tserkva E
3 Providing small financial support to Civil Society projects B
4 1 Expert for 6months on developing EU financial control regulations in the
Ministry of Finance
A
5 2 training courses of 1 week each in Ukraine on Internal Audit for EU
Funds
A,B
6 2 mln. project to reconstruct highway junction construction on Odeska
square
C
7 1 beuro for balance of payment support D
8 1 meuro project to develop training program and staff teaching capacity in
English in Kyiv National Economic University named after Vadym
Hetman
A,B
9 3 mln. project for road reconstruction Kyiv – Brovary C