EBRD president pledges continued investments in the region

RIGA - The president of the European Bank for Reconstruction and Development, Jean Lemierre, this week resumed his tour of the Baltic states which was cut short in September, following the terrorist attacks in the United States.

After meeting with Latvian President Vaira Vike-Freiberga, Lemierre told journalists the bank was ready to take greater risks in the Baltic states in the event of a global economic slowdown. "We're really strongly confident in the Baltic states," he said. "The EBRD has been with Latvia in better times, it will be more with Latvia if there are difficult times. There were questions about the world economy before last month's terrorist attacks, but growth in Latvia is high. The EBRD can take on a larger part of the risk of private investors in order to support their efforts."

The bank aims to attract investment to formerly communist countries of Eastern Europe by investing money alongside other investors, thus reducing their risks. In total it has invested 1 billion euros ($917 million) in the Baltic states since its foundation 10 years ago, a third of this in Latvia.

In future the bank would pay more attention to rural Latvia and not only the capital, said Lemierre. He stressed the need for continued investment in the runup to European Union accession and emphasized the bank's work with small- and medium-sized companies as well as the restructuring of large state-owned companies and privatization of the Latvian Shipping Company.

The shipping company is one of the largest companies in Eastern Europe that is still set for privatization. The third attempt at privatizing it failed earlier this year - Lemierre said he hoped the next attempt would be more successful and repeated the bank's offer of help in the process.

Lemierre was very open on his stance in the Latvian pulp mill project, which is being considered for the Jekabpils region and has taken many twists and turns.

"I've said to the Latvian prime minister (Andris Berzins), that if the investors (Swedish and Finnish timber companies Sodra Cell and Metsaliittoo Group) want us to be a part of this project, we are prepared to help," he pledged. "I understand that there are still very important discussions ahead on supply of wood and the dynamic social impacts the project will have."

Metsaliittoo Group's representatives told the Finnish press Sept. 27 that they are tired of Latvian politicians stalling on the project and that if a clear answer on the forest supply issue hasn't been given by this fall, they'll pull out of the project entirely.

The Swedish and Finnish partners have already invested some 10 million markkaa ($1.54 million) in the project, but Metsaliittoo CEO Eric Lagerwall told the Baltic News Service, "There's no desire to sink any more money into an uncertain project."

According to preliminary plans, the Latvian state was to contribute 150,000 hectares of forest to the project and to grant felling rights in another 350,000 hectares, but lately the Latvian side has said it would rather supply money to the project instead of timber.

Metsaliittoo and Sodra have employed Kari Narsi of PCE Corporate Finance, an expert on East European economy, as an adviser to the project. His opinion is that the Latvian side's indecisiveness is partly caused by the large size of the project.

The entire Latvian pulp mill adventure could cost up to 1.2 billion euros.

"We're ready to bring our money," Lemierre offered.

In addition to his warm words on the Baltic states Lemierrre was also up beat about the outlook for Russia where the bank invested 700 million euros in 1997, prior to the economic crisis there.

"By the end of this year, I guess our investments there this year will have reached 700 million euros again," he said.

Lemierre expressed confidence in the soundness of the investments the bank is making and cited the example of Russia, where 99.3 percent of the 60,000 to 70,000 loans the bank has made have been repaid.

"They pay back their loans in order to receive more loans, and this is what's happening in Latvia too, and this is why Latvia is enjoying this rate of economic growth."

On Oct. 2 Lemierre went on to Estonia, where he met with Prime Minister Mart Laar, Finance Minister Siim Kallas and Tallinn Mayor Tonis Palts. Lemierre visited the headquarters of the Estonian power company Eesti Energia where he inquired into the company's investment plans, including plans for a sea cable between Estonia and Finland and possible unification of the Estonian national power company and Latvia's Latvenergo.

The EBRD is ready to provide credit for renovation of Estonia's Narva Power Plants should the owners Eesti Energia and the U.S. company NRG have any problems borrowing the necessary money, Eesti Energia board member Sandor Liive said.