Alice Trudelle: Before the global financial crisis hit in 2008, the EBRD was in the process of decreasing its funding to Poland. With the crisis threatening to set back the Polish economy’s transition process, in the following years EBRD investment in Poland went up sharply, growing to unprecedented levels of €900 million in 2011. What is the EBRD’s current strategy for Poland?
Lucyna Stańczak: Our wider strategy across the region is to shift gradually away from more advanced countries, such as Poland, to less advanced ones, such as Ukraine and countries in Southeastern Europe.
Poland has always been considered a well-developed country in our region, but the financial crises across the region changed this picture. As a result the EBRD has substantially increased its business in Poland and for this year we still plan to invest between €500 million and €600 million.
Do you see another wave of the European financial crisis, and therefore a renewed need for EBRD financing in Poland, as probable?
The influence of the euro zone financial crisis continues to have an impact on our region. In Central Europe it may result in the further slowdown of growth. This year there will be a visible slowdown, also in Poland, with the EBRD forecasting GDP growth for 2012 at 2.9 percent. This is largely linked with external factors, a sign of the continued recession in the EU.
This year we have a slowdown in investment and in internal demand, and one might say Poland’s trade links with the euro zone are not so strong, but the relationship is there and the Polish economy is not immune to the ongoing recession. The euro zone crisis may also further impact the Polish banking sector. One of the key risks is lower appetite for credit, in particular credit to industry, and this has a direct impact on growth.
The EBRD is seeking to help Poland reduce its dependence on foreign private financing. What risks does too much reliance on foreign financing entail, and what are possible solutions?
This is a conclusion that dates back to 2010, when the global crisis exposed weaknesses in the economy, such as banks and consumer exposure to mortgages denominated in Swiss francs, uncertainty regarding the strategies of foreign banks in Poland and stronger volatility of non-FDI capital flow in the region. These factors created strong vulnerabilities and risk for borrowers, consumers and the real economy, and they are still valid concerns.
We believe that in countries such as Poland, the local currency capital market should constitute a safe alternative where you are not so exposed to external shocks and exchange risk.
In 2012, the EBRD helped consolidate the Polish banking sector when we invested zł.332 million in Bank Zachodni WBK to back its merger with Kredyt Bank. However the key EBRD objective in Poland is to support the development of the local currency capital market. The bank would like to support the Polish banking sector in fundraising on local capital markets, such markets being important alternatives for addressing banks’ medium-term liquidity needs (either in the form of unsecured bonds, cover bonds or securitization).
Another of the EBRD’s proposed solutions is to engage local institutional investors such as pension funds, mutual funds and insurance companies in the private equity industry. In particular, private equity in our region could act as an important source of capital for small and medium-sized enterprises (SMEs) and these are SMEs that provide a large contribution to the real economy in countries like Poland. During the financial crisis they saw credit availability slow down, and although we saw some recovery, funding is not back to pre-crisis levels yet.
The EBRD has been active in Poland’s privatization process, notably participating in the landmark privatization of telecoms operator Polkomtel. What are the next privatizations and restructuring processes in which the bank plans to be involved?
Private sector involvement remains the EBRD’s priority, and therefore privatizations continue to be at the top of our agenda in Poland. Our equity investment of E200 million to facilitate the privatization of Polkomtel in the fall of 2011 was the EBRD’s largest equity investment in Poland at the time.
We also invested in the first stage of the privatization of Enea in 2008, and at the time the government declared that the company would be fully privatized. Of course the market will have an impact on the right time and the strategy for further privatization, but we believe this will happen soon.
Any privatization decision, particularly today, is dependent on several factors: the macro environment, rights valuation, investors’ appetite and many others. They are also not immune from politics, but we see a strong commitment from the government to continue privatizing key sectors, such as energy, chemicals and others and we are open to provide our support for those.
Energy efficiency and renewables are another important sector of EBRD involvement in Poland. How do you view the government’s latest draft bill on renewable energy, which sees significant cuts in funding for renewables starting from next year?
The draft law remains to be analyzed, but we are happy the legislation has been defined and investors have new material for revisiting their investment decisions. Over the last year we have seen a substantial slowdown, if not a halt, in investments in the renewable energy sector, because investors were cautious, not knowing the future regulatory framework. Anything that leads to stability in this area is welcome.
It is too early for us to make a judgment, but we expect to have a stable scheme that will unblock investments, and an approach that is more economic-oriented to promote a wider variety of renewable energy sources.
From Warsaw Business Journal by Alice Trudelle
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