Emerging Markets, May 2015
EBRD President Sir Suma Chakrabarti has identified small to medium companies as “the engines of an economy, and we want to make sure these engines are fired up.” But companies themselves complain of problems with human talent, opaque policy and inconsistent availability of capital.
Sir Suma said the EBRD’s policies on the development of the region’s companies would be informed by four pillars of government activity “that are key to the development of a successful private sector”: policies that underpin a modern market economy, effective institutions that are “accountable, legitimate, transparent and competent”, strong political leadership, and a long-term perspective.
He described the EBRD’s role as “to be an advocate of the business community”, reflecting corporate concerns to the region’s authorities.
Those concerns are numerous, even among companies that have thrived in the region. “If you don’t use optimism in this region, you’re dead, because the challenges come every day,” said Vaja Jhashi, president and CEO of Trans Oil group, an agricultural commodity leader in the Back Sea region.
“The biggest obstacle to the private sector is the availability of capital,” he said. “You can have all the vision, all the business plans in the world, but if you don’t have money to go with it and support from financial institutions it’s not going to work.
“You have the car but you don’t have the gas,” he said.
Ruben Vardanyan, founder and chairman of RVVZ Foundation, bemoaned the lack of long-term commitment to education in the region, both in terms of vision and execution. “Unfortunately, it does not exist in most of the countries we are talking about today,” he said.
For Theirry Deau, founding partner and CEO of Meridiam, an asset manager specializing in public and community infrastructure, the biggest challenge is “the inability of the government to partner with us. The human capital is not developed consistently enough to have people engage and put together complex social infrastructure.” He also complained about inconsistent policies that are insufficiently friendly to investors, “from fiscal policies to tax to regulations that should make things more simple and transparent.”
And Gokalp Cak, general manager of ICL Transport & Logistics in Turkey, said: “The biggest problem we have is staff.“
Chakrabarti acknowledged that “regulation, red tape and excessive taxes can of course stifle economic activity with some serious consequences,” and pledged to work with governments in the region “to allow private business to thrive and flourish.”
He also noted that broader economic growth does not automatically translate into a favourable environment for new business. “The belief that the rising tide lifts all boats conceals serious imbalances and rising inequalities,” he said.