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"PRIVATE CAPITAL KEY TO SUCCESS
FOR TRANSITION ECONOMIES"
Michael Bleyzer, President, SigmaBleyzer
The Ninth Meeting Of The OSCE Economic Forum
Prague, Czech Republic, May 18, 2001
| Event: |
The Ninth Meeting of the OSCE Economic
Forum
(Organization For Security And Cooperation In Europe)
|
| Theme: |
"Transparency and Good
Governance in Economic Matters" |
| Dates: |
15-18 May, 2001 |
| Location: |
Czernin Palace, Prague, Czech
Republic |
| Speech: |
Michael Bleyzer, President, SigmaBleyzer
and Member of the
United States Delegation to the OSCE Economic Forum |
| |
Prague, Czech Republic...
May 18, 2001... Michael Bleyzer, President and CEO of SigmaBleyzer,
an American-Ukrainian International Banking Group, which manages
the largest private equity fund in Ukraine, the Ukrainian Growth
Fund UGF), spoke at the ninth meeting of the Organization For
Security And Cooperation In Europe (OSCE) Economic Forum, held
in Prague. Bleyzer, in his presentation, told the Forum delegates,
"Attracting large sums of additional private capital to
all of the transition economies of the former Soviet Union is
critical and absolutely necessary to their long-run success
in building market economies and democracy. Strong market economies
and democracies cannot be built without private capital taking
the lead over all other sources of capital."
The theme of the meeting this year
was 'Transparency and Good Governance in Economic Matters.'
Bleyzer stated very strongly in the meeting, "The absolute
key to attracting large sums of private capital, especially
Foreign Direct Investment (FDI), needed by transition economics
is a set of government policies that create an environment friendly
to the flow of private capital. Good governance is the key to
attracting private capital and thus the key to success for transition
economies."
Mr. Bleyzer served as an official
member of the United States delegation to the OSCE meeting as
a representative from the private business sector. There were
55 countries at the Forum represented by over 250 delegates.
The Bleyzer presentation was during the Third Session of the
Working Group A, The topic for the session was "Creating
a Business -Friendly Environment and Supporting Small and Medium
Size Enterprises". The president of SigmaBleyzer spoke
on the subject of "How To Finance A Transition For A Transition
Economy" and focused on "Attracting Capital Through
Good Governance".
The key points made by Michael Bleyzer during
his presentation in Prague were:
(1) ATTRACTING
PRIVATE CAPITAL IS CRITICAL...
"Attracting private capital to finance a transition economy
is critical because the transition normally takes place because
the previous state of affairs, "the point of departure"
is from a "centrally planned economy" that has failed.
The "destination point" - a market economy operating
in a democracy based on the rule of law is not easy to build
when the economy is in ruins."
"Therefore finding private capital
to finance the transition process is the key to successful transition.
Most transition economies begin attracting capital in a form
of debt, initially public, politically motivated, eventually
moving to private debt, structuring it as bond offerings. Finally
the more successful transition economies move over to equity
and more specifically private equity."
(2) DONORS
AND RECIPIENTS CREATE NEGATIVE ENVIRONMENT...
"In transition economies a major problem exists because
of the culture created by 'donors' and 'recipients' which negatively
influences the environment for true investors. The donors "donate"
the funds and the "recipients" receive and spend the
funds, rarely creating sustainable changes in the economy or
society in the
process."
"Therefore, the recipient countries
are not conditioned correctly for real private investors to
enter the market in large numbers. The investors are looking
for a very different attitude and environment on the part of
the countries and businesses in which they invest - investors
are looking for growth, profitability, return on capital, etc."
"Donors should use caution in the amount
of funds they provideand should concentrate on building democracy
and market economy. Donor funds made available to transition
economies should have specific pre-conditions which have to
be met before dispersal and also very specific requirements
as to the use of funds to ensure the achievement of the basic
objectives to build democracy and market economy."
(3)
"ENVIRONMENT NECESSARY FOR PRIVATE INVESTMENTS...
"The environment necessary for private investments can
only be created through good government policies, therefore
good governance is the key to attracting private capital. Governments
must define and implement concrete measures that have been proven
to increase the flow of private capital. Governments must liberalize
and deregulate business activities, provide a stable and predictable
legal environment and improve corporate and public governance
and eliminate corruption."
"Bleyzer said the International Private
Capital Task Force (IPCTF) was created in early 2000 by an agreement
between the Ukrainian government and SigmaBleyzer. The IPCTF
studied, and benchmarked the major governmental policies necessary
to attract private capital to transition economies."
"The IPCTF report outlined in detail
nine government policy areas which directly influence the flow
of private capital. The study showed that for a change in government
policies to have a truly significant and sustainable positive
impact on the flow of foreign direct capital all nine policy
areas outlined in the IPCTF report
are essential."
"Governments must also implement policies
which aim at improving 'Transparency', encourage 'Simplicity'
and facilitate 'Predictability' in business activities."
"The final report of the IPCTF which
outlines in details the complete findings and recommendations
of the study has been published. Copies are available for conference
delegates."
(4)
UNIFORMITY AND SPECIFICITY AND SPECIAL CIRCUMSTANCES...
"There has been a lot of discussion at this Forum on the
need for specificity and the need to understand the 'special
circumstances' of some countries, particularly those in Central
Asia. While this topic may be an interesting intellectual exercise,
from my point of view it is irrelevant."
"True private capital in large volumes
will never come to the transition countries, which do not comply
with common international standards for doing business, transparency,
accounting standards, independent audit, stable and predictable
legal environment, low corruption rates, low barriers to trade
and capital movements, etc."
Bleyzer closed by saying "The road
to create a capital-friendly environment is pretty clear and
very uniform, in terms of its characteristics.As long as everyone
understands that, the discussions about more or less specific
ways of getting there could take place, but only when the goal
is essentially achieved can they count on
getting significant amounts of private capital in,"
The final report of the IPCTF study, "Accelerating
The Flow Of International Private Capital To Ukraine" and
other related documents can be found on
www.SigmaBleyzer.com and www.volia.com
FOR FURTHER INFORMATION CONTACT:
E. Morgan Williams, President
Ukraine Market Reform Group
Mobile In Kyiv, 380 44 459 332
E-Mail: morgankiev@yahoo.com
Web: www.ArtUkraine.com
or
Alex Chapko
Head, Public Relations Department
SigmaBleyzer, Kyiv, Ukraine
Tel: 380 44 224 94 87
E-Mail: alexc@sigma.kiev.ua
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