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. Last Updated: 07/27/2016

EBRD in St. Petersburg: Advising on Investment

Last weekend, thousands of bankers, investment fund managers, business managers, diplomats and lawyers converged on St. Petersburg for the third annual meeting of the governors of the European Bank for Reconstruction and Development.

The words most often heard in the buzz of conversation at this forum, where countries present their projects requiring investment and urge delegates to commit their funds, were "lean," "focused" and "concrete." These apply in particular to the EBRD under the new management of Jacques de Larosi?re, which has cut spending and concentrated its efforts on projects rather than politics.

The EBRD was criticized last year for having dispensed little of its funds, but such criticisms did not take full account of the EBRD's responsibilities for evaluating proposals and ensuring that funds are invested in viable projects. Despite the difficulties, by the end of February 1994 the EBRD had committed 563.4 million ecu (approximately $500 million) to 22 projects, including oil, telecommunications and support of small and medium enterprises.

Institutional and private investors are also interested in clearly defined projects that will produce goods and services for which there is a market. Russian companies in need of investment are not always able to judge whether there is a market, but here are consultants and investment bankers able to help them evaluate their projects and attract finance. However, investors who lack the privileges and political raison d'?tre of the EBRD are also still worried about the political and economic environment in which any such investments would be made.

Despite encouragement by Prime Minister Viktor Chernomyrdin speaking at the conference and his promise to provide conditions that will attract foreign investment, there is still a fair amount of skepticism: Prospects for investment were not helped by the recent scare over the possible application of a 23 percent tax on foreign investment.

Nevertheless, those who want foreigners to enter the Russian market should be encouraged by the large number of people at the conference and their obvious willingness to invest if conditions are right and the framework for investment is stable.

Which brings me to an anekdot I was told by a Russian banker with a lifetime's experience in banking and a rather cynical outlook. In the 1930s there was a finance minister who was so tough that he was known as the "iron minister." Needing to raise income, he noticed that Russians were fond of apples and that apple trees were abundant. He therefore imposed a tax on the trees, whether they bore fruit or not. The people cut down the trees. Sound familiar?

Marcia Levy is an attorney at Norton Rose. She has been practicing law in Moscow for three years.