speeches

World Grain Forum, St Petersburg, 6 June 2009

President, Director-General, Ministers, Ladies and Gentlemen,

Good afternoon and many thanks to the Russian authorities for organising this important event. We are grateful to be here with you today, because the EBRD has always attached high importance to the agricultural sector and all related questions.

It was only a year ago that the world was facing a rapid surge in food prices which caused serious concerns. Today the issue has been somewhat pushed into the background as we are undergoing a global financial and economic crisis. But the question of how to secure food supplies and establish functioning markets remains a burning issue. Therefore it is most timely that we have gathered here today.

When discussing this issue the Russian Federation stands out because of its enormous potential. Great progress has been made in recent years. Farm land area and agricultural productivity have been enlarged significantly. Last year Russia enjoyed a record harvest which also boosted exports. Today Russia is the world’s third largest wheat exporter and fifth largest grain producer.

But there remains significant untapped potential. According to studies by the FAO, around 6 million hectares could be returned to production with no major environmental cost. With this, and increased yields, Russia could reach levels as high as around 120 million tons, an increase of more than 60 percent from the current level.

The FAO also identified strong potential in Ukraine, Kazakhstan and other countries of the CIS. The question is what can and needs to be done to develop this opportunity into a permanent source of wealth.

There are three major elements we can identify:

1. Infrastructure development
2. Regulatory regime
3. Private sector involvement.

1. Increased production and yields are a blessing, but they can also be a burden: Russia’s market infrastructure is not yet fully prepared. The capacity of railways, sea ports and grain elevators is not sufficient for an increased flow of grain and other agricultural products. The investments remain enormous.

Under the current circumstances such financing is difficult to obtain. But it is vital that investors – sovereign and private - remain able to maintain their activities and are not forced to abandon critical investments. The EBRD is offering its support here: Our crisis response package identifies key infrastructure projects as one of our priorities.

2. Agricultural development in the Russian Federation and the wider CIS region would also be boosted by the resolution of legal issues and the clarification of remaining uncertainties. For instance, land tenure issues with high transaction costs are still a serious constraint for producers.

Another crucial issue is access to appropriate financial instruments for the agricultural sector. To achieve this, legislation must enable collateralisation of agricultural land and commodities through warehouse receipt systems.

Other bottlenecks for further progress are the deficit in skilled labour and professional management. The strengthening of agricultural training and academic institutions is needed to improve this situation.

3. Despite the current economic circumstances private sector involvement remains key for the sustainable long term development of our economies. The crisis has enhanced the role of the state and one of the lessons will be that a functioning market needs good and workable regulations.

But at the same time it is also clear that the role of private businesses cannot be replaced. The vitality, creativity and productivity of the private sector remain the foundation of our economic model. This is also true for the agricultural sector.

As an international financial institution the EBRD can play a special role as the link between the authorities and private sector investors. We are state-owned, but we act like a private investor. 84 percent of our €5.1 billion investments last year were in the private sector.

We are engaging with the private sector in a permanent dialogue to understand the needs and demands of investors. Our role is to be instrumental in addressing administrative or institutional constraints for private investors and foster market-based solutions.

Ladies and Gentlemen, to date, the EBRD has committed over €1 billion in more than 40 projects with a total project value of over €5 billion to assist the agribusiness sector in Russia. We are the single largest private investor and we are supporting large as well as small scale investments. Our portfolio includes investment projects in a number of sectors with strong linkages to agriculture and farming but also working capital finance facilities.

The Bank has worked with leading multinational agribusiness groups and with major Russian groups and I am pleased to see many of our partners represented in the audience here today. This forum provides an important opportunity not only to address key issues but also to establish and deepen relations between the authorities and the business community. Mister President, we are grateful for that and we wish this conference every success.

Thank you for your attention.