EBRD ON MICROFINANCE, POWER PROJECTS IN BELARUS

C O N F I D E N T I A L SECTION 01 OF 02 MINSK 001020

SIPDIS

DEPT FOR EB, EUR/ACE, AND EUR/SCE
DEPT PLEASE PASS USAID
SIPDIS

E.O. 12958: DECL: 12/13/2017
TAGS: ECON EFIN EAID PINR BO
SUBJECT: EBRD ON MICROFINANCE, POWER PROJECTS IN BELARUS

REF: 06 MINSK 689

Classified By: Ambassador Karen Stewart for reason 1.4 (d).

Summary
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1. (C) The EBRD signed a charter to open a microfinance bank
in Minsk Belarus December 12. The bank, with seven investors
and start-up capital of USD 7 million, needs 19 permits to
begin operation but could be ready for business by mid-2008.
In a briefing for the Ambassador, EBRD representatives said
that the GOB was seeking private investment for coal-burning
power plants, alternative fuel projects and municipal
services. End summary.

EBRD Adds to Belarus Microfinance Work
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2. (C) Michael Davey, EBRD Director for the Caucasus,
Moldova and Belarus, briefed the Ambassador and emboffs
following the December 12 charter signing for Minsk's new
EBRD-sponsored microfinance bank, the Belarusian Bank for
Small Business. According to Davey, the bank has seven
shareholders, including two IFIs, EBRD and IFC, and five
private entities -- KFW, Commerzbank of Germany, Swedfund,
FMO, and U.S.-based Shore Capital. The bank's initial
capitalization is 7 million USD. Shore Bank International
will operate the bank. EBRD Small Business Group Director
Chikako Kuno noted that while the bank has been chartered, it
still needs 19 permits before it opens for business,
hopefully by mid-2008.


3. (C) Kuno told the Ambassador that the new microfinance
bank project builds on earlier work done by EBRD in the
sector in Belarus. Through technical assistance and loans to
two private banks over USD 85 million in small business loans
has been distributed to small and medium sized enterprises,
with the average loan approximately USD 6000. This project
was expanding to include the participation of an additional
three private banks; Kuno said that previous experience
showed that the EBRD microfinance bank and microfinance EBRD
provides through existing private banks would be in creative
competition with each other, with the new bank's efforts
further encouraging private banks to meet the credit needs of
SMEs. Davey and Kuno noted that technical assistance to
train loan officers in private banks would end in early 2008
without the infusion of an addition 600,000 USD and they
asked the Ambassador for USG assistance to continue this
project. The Ambassador noted that USG assistance policy was
to focus on de
mocracy and the independent media, but promised to raise the
issue with Washington.

Semashko Visits EBRD London HQ, Talks Focus on Energy
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4. (C) Davey told the Ambassador that Deputy Premier
Vladimir Semashko had recently visited the EBRD's London
headquarters for consultations. Semashko told the EBRD that
Belarus was interested in private investment in the areas of
power generation and municipal services. According to Davey,
Semashko said the GOB planned three new coal-fired power
plants that would be fueled by coal from Poland, and it was
open to private investment in perhaps all three of them.
(Note: According to Davey, Semashko did not raise Belarus'
plans to construct a nuclear power plant. End note.) Davey
said Semashko was also interested in private investment for
alternative fuels and renewable energy, like biomass and
hydroelectric power. Davey noted that the EBRD would send
regulatory and power sector specialists to Belarus in January
to evaluate if Belarus' legal and regulatory environments
would support public private partnerships in the power
sector. Semashko also reportedly sought private investment
for municipal services
such as solid waste disposal and some water projects.

Comment
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5. (C) The search for private investment for key "energy
independence" projects demonstrates just how low the GOB is
on cash. We agree with Davey's assessment, however, that
although the GOB declares its openness to private investment,
it is probably not prepared for the transparency and the open

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tender process necessary to attract serious Western funds for
these projects.
STEWART