Financing from Institutes for Development

Financial institutes for development in many countries of the world conduct their activities with the aim of developing national and regional economies. Mostly they provide their financing for projects that are important for developing high-quality investment and business environment and have social significance, but with a low level of profitability and high risks.

The largest investment volume to Russia comes from the European Bank for Reconstruction and Development (EBRD): throughout the recent five years its share amounted to about a half of all investment from development banks taken together, and Russia has been one of the most important markets of activities of the institute for development. The total number of projects in Russia financed by the bank is about 800. In 2013 Russia acquired from EBRD 1.8 billion euro (2.5 billion dollars). However, owing to the acute external political situation in the first six months of 2014, Russia got only 19 % of the Bank for Development’s investment, and in the middle of July most representatives of the Board of Directors of the organization gave clear instructions to the EBRD management concerning impossibility of investing in the Russian Federation in the nearest time.

The portfolio of the Bank for Development of Russia — Vnesheconombank — is significantly smaller, by the end of 2013 it amounted to 289 projects with the total cost of 3.9 trillion rubles (the extent of Vnesheconombank’s participation was 2.4 trillion rubles). This figure is not impressive enough yet, if one compares the ratio of loans granted by the bank for development to the total investment in GDP. In case with VEB it amounted, according to data of 2012, to 1.9 %, while, for example, in Germany the figure for the KfW Bankengruppe Institute for Development is 5 %, and that for BNDES in Brazil — 7.4 %.

Other large investors are the International Financial Corporation (IFC), part of the World Bank’s group and a key international investor in projects of developing countries throughout decades, the Multilateral Investment Guarantee Agency. The Russian Direct Investment Fund (RDIF), together with sovereign funds of BRICS countries, intends to create the BRICS Infrastructure Fund to join efforts on infrastructure projects.

Development of high-quality infrastructure and anchor industrial and innovation projects, on the basis of which other industries will be able to develop actively, is a permanent priority for economy of states and, respectively, institutes for development, acting on their behalf. Laureate of the Nobel Prize in Physics Pyotr Kapitsa often said, “It is often believed that the one who picked the apple did the main part of the job. However, in reality it is the one who planted the apple tree”.