About the ETC initiative

In early 2004 the EBRD launched a new initiative to increase its activities in the eight ‘Early Transition Countries’ (ETCs). These are the poorest EBRD countries of operations: Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Mongolia, Tajikistan and Uzbekistan.

The initiative aims to stimulate market activity in these countries by using a streamlined approach to financing more and smaller projects, mobilising more investment, and encouraging ongoing economic reform. The initiative builds on international efforts to address poverty in these members of the Commonwealth of Independent States (the former Soviet Union).

The Bank will accept higher risk in the projects it finances in the ETCs, while still respecting the principles of sound banking. To increase its investments in these countries the EBRD has allocated more staff to work on ETC projects and has created a new team dedicated to the initiative.

More than 50% live in poverty

The ETCs have lagged behind the rest of the region in their transition to market economies and more than one out of every two people live below the poverty line.

Economic development is hindered by a number of factors:

• national debt is extremely high in most of the ETCs;
• reform and improvement of key institutions – banks, courts and regulatory authorities, state enterprises, infrastructure – is slow, as is the transition to democracy and stability;
• business skills are lacking;
• domestic markets are small, distances large, borders are difficult to cross (whether by goods or people);
• basic services from roads to telecommunications are not in good shape.

This poor investment climate, which discourages foreign investment, will be addressed by the initiative:

• at the micro level of individual project finance and advisory services to local enterprises and financial
• and the macro level of policy dialogue and institutional reform in selected sectors.

Focus on private sector

Priorities for each of the ETCs will be set out in the relevant EBRD country strategy and will take into account national poverty reduction strategies.

The EBRD initiative emphasises private sector development, particularly in micro, small and mediumsized enterprises (MSEs and SMEs). These enterprises offer the greatest opportunities for creating sustainable employment and prosperity. They also can have a positive impact on a country’s transition to democracy: their owners have a stake in improving the ways laws and regulations are made and implemented, and in reducing corruption.

The EBRD has developed and/or adjusted several financing instruments dedicated to the funding of local entrepreneurs and enterprises, to better address ETC needs.

Donor support

Support from the donor community is a key element in EBRD’s strategy for the ETC countries. The ETC Initiative's impact depends on the coordinated efforts of the EBRD and donor governments and organisations that provide grants in support of the Bank’s ETC investments.

Read more about donors and the ETC Initiative.