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Victoria Mindova

In times of crisis and significant stagnation of the financial market, each source of funding investing vital resources in the real economy is valuable and contributes to the creation of new jobs and productivity. This goes for the funding programmes of the Black Sea Trade and Development Bank, which in the next four years is planning to invest over € 200 million in the troubled real economy of Greece and around € 500 million in Bulgaria until 2014. The President of the Black Sea Trade and Development Bank, Andrey Kondakov, in an interview with Victoria Mindova, clarified the role of the Bank for the Balkan region and the opportunities it provides for economic development and success.

What is the role of the BSTDB in the Balkan region and why has the bank decided to set up its headquarters in Thessaloniki, Greece?

The Bank was established by the countries participating in the Black Sea Economic Cooperation (BSEC) to serve as a financial pillar to its efforts to strengthen regional development and the growth agenda.  The Bank supports trade and economic cooperation between its member-states by providing project financing, trade financing and technical assistance programmess to public and private sector companies. We see our strategic role in mobilizing resources and fostering investment in the region by mitigating risks that regional and international investors face in our countries of operation.  The value added role of the Bank in the Black Sea region derives not only from the monetary equivalent of our loans, but rather from their strong regional cooperation orientation, development impact and job creation opportunities.

At the time of founding of the Bank, Greece was the only country that was a member of the BSEC and the European Union at the same time. Respectively Thessaloniki appeared to be very well connected with almost all of the Bank’s member-countries. Being headquartered in Thessaloniki, the Bank is closer to its member countries than other IFIs established in Western Europe or the United States.

To what kind of projects does your bank give more emphasis, and in which economical sectors?

Doing business in a broad variety of sectors, the Bank gives priority to energy, manufacturing, transportation (in particular ports and maritime) and telecommunications. The SME sector is among the BSTDB’s high priorities, as we believe that small business development is a major source of economic growth and employment.  The Bank is extremely responsive to the changing economic environment of our countries and has individual country strategies aligned to the corporate operational directions and targets, while taking into account the needs and priorities of our shareholders.

According to the Bank’s medium-term strategic and business plan for  2011-2014, the Bank’s  total portfolio in its member-states is to be increased by 70% and will exceed 1.1 billion at the end of 2014.

The focus of the bank is to support investors and companies in the 11 member countries. Would you tell us a little more about the projects that BSTDB supports in Greece and Bulgaria, and which are main participants in the bank’s capital?

The Black Sea region constitutes a challenging environment for economic activity. The needs of each country differ, but there are common requirements and we are happy that the Bank was responsive to the needs of the region during the financial crisis by providing much-needed funding to companies and the financial sector when international credit markets almost collapsed.

With regard to the projects that we are financing in Greece and Bulgaria, our funds aim to support major manufacturing companies, and the financial sector and to promote SMEs. We also target infrastructure, and in particular tourism and recreation activities, as well as the energy sector, especially that of renewable energy.

The BSTDB was not very active in Greece until recently because of the highly developed Greek banking system and its easy access to cheap EU funds. The total financing to Greece since 1999 amounts to EUR 190 million and is distributed among 12 companies. Since the end of the previous year, demand for BSTDB products in Greece has begun to grow. Currently, the Bank is negotiating financing projects of Greek companies in the country and abroad in the manufacturing, infrastructure and renewable energy sectors. Based on the 2011- 2014 Business Plan, the Bank would expect on average to approve new operations in Greece for approximately EUR 50 million per year or approximately up to EUR 200 million over the four-year period.

The BSTDB has so far financed 26 projects in Bulgaria amounting to EUR 250 million. This is 11% of the BSTDB portfolio. Our strategy is to double our current portfolio by the year 2014. The BSTDB at the moment focuses on lending to small and medium enterprises. We also financed the construction of electric power plants "Maritsa East 3" (two phases), "Kremikovtzi" and "Overgas Inc.", as well as the Suvorovo Wind Farm. We will keep working in these sectors, in coordination with the Bulgarian Government, and we plan to add new ones - such as infrastructure projects, agribusiness and tourism, including cultural tourism, which is very important for the country.

Greek banks have some liquidity problems due to the macro economical crisis that the country is going through. Do you think that the BSTDB provides partial financing for the SMEs through the Greek banks? 

The banking sector throughout Europe is experiencing funding difficulties. For many, the portfolio of loans exceeds by a wide margin their clients’ deposits. In addition, the deterioration of the quality of loan portfolios has resulted in steep increases in provisions, resulting in declines in equity.

In Greece however, the liquid assets of banks are at comfortable levels. It is more the case of a stagnation in the origination of new loans, rather than a contraction in the size of the portfolio. But this does not really reflect a deficit in available funds; more likely the credit freeze is an expression of the perceived risk in the Greek economy and of the cautiousness with which banks approach new credit requests from customers.

Under the circumstances, the BSTDB is providing financing to eligible corporate clients with good business proposals who are temporarily not receiving loans from banks. This in our opinion is more supportive of the Greek economy than trying to channel money through banks, which for a variety of reasons are reluctant to expand their loan portfolio.

Does your bank have any “frozen” projects because of the Greek economical crisis?

No. The operational portfolio of the BSTDB is of high quality. No Greek project is experiencing any difficulties, and we are closely following developments in the Greek economy, standing by to extend new loans under the right circumstances.

What would your advice be to the investors who consider starting a business in the countries where the BSTDB is active? What are the main advantages businesswise of these courtiers?

Clearly, the advice is to set aside any prejudice and confront reality as is. The glass is definitely more than half-full. Investment needs are high, financing opportunities do exist, return on capital is higher than elsewhere, and the impact on the economy is significant.

The business environment is improving rapidly, reforms are being implemented in the labour and product markets, labour is well educated and unit labour costs are low, and countries are well endowed with natural resources. Geographical proximity to wealthy markets and a high degree of integration through trade and investment flows with the EU provide additional appeal.

How do you see the future of the Black Sea Trade and the Development Bank in 10 years?

I believe that the Bank has made significant progress over the last years in its institutional and operational development and has to become a trustworthy partner for other international financial institutions, bilateral donors and private investors in the Black Sea region. By 2020, the BSTDB intends to upgrade its credit rating (A by S&P and A3 by Moody’s currently) and be recognized globally, as a prominent development finance institution for the Black Sea region providing well-focused development assistance and solutions. Thus, the BSTDB would become a preferred partner in the region for clients, multilateral donors and other development partners. 

According to our strategic plan, we shall develop the capacity to originate large-scale projects and reach our total portfolio of operations to EUR 3 -3.3 billion  by focussing on financing operations in sectors with high development impact, such as physical infrastructure and related services, social infrastructure, renewable energy, power generation, transport, municipal services and environment protection.