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That's minmoble.com slash switch switch Hello and welcome to the Battleground Ukraine interview with me Patrick Bishop and Saul David This week we've been talking to Matteo Petrone He's the managing director for Eastern Europe and the Caucasus for the European Bank for Reconstruction and Development now the EBRD was set up after the collapse of communism to bring former communist countries Into Western markets and in the process to promote a democratic institutions He's just come back from LeViv on a brief tour looking at the EBRD's operations there They're going to be absolutely central in maintaining the economy of Ukraine at this moment But also looking forward central to Reconstruction plans. This is what he told us But hey welcome to the podcast you've just come back from LeViv can you tell us your impression of the mood there and how people are coping Well, if I have to judge from the interactions we have with the many companies we are met Mainly met private sector companies and obviously the Viva administration But if I have to judge from the interaction we have from the companies we met people are incredibly determined to See the end of the conflict and not being derailed in their In their plans to grow their companies expand them and ensure that the real economy of the country continues driving No, we stand in the current situation But then you go and visit medical facilities and the hospital will be And and you realize that the human cost of what is happening is huge and that makes you wonder Even more how The resilience of the Ukrainian people in the kind of circumstances can be Supported by stakeholder like us and other partners of Ukraine in the international community I noticed that you visited unbroken which is a sort of holistic A caring center for victims casualties of the conflict not just physical casualties, but also mental casualties Can you tell us something about their work and what you saw there? There are a number of actually of these initiatives unbroken is Is one of them and is a very well-functioning one and clearly there is a strong wish by the Viva administration To ensure that the casualties of the conflict both military and civil are taken care of and indeed there is an holistic approach to that and We visited both the The prosthetic center the rehabilitation center, but also the post trauma stress center But what I think is to be consider also is the father other Ineater initiatives are taking place for instance superhumans Which is a sort of PPP between a number of entrepreneurs this initiative is led by one of the most prominent entrepreneurs in the country And the rest of me sir and in in cooperation with the minister of healthcare and they have the same sort of approach very realistic to the evolution and mitigation of issues related to Amputation and casualties in the of the conflict the father there are there is a proliferation of this initiative is a very sobering a reminder of of the need for Having facades of this sort. There is an obvious reason why there are being set up in Viva, but I'm going forward. There will be need for more of that while the country unfortunately Mateusz I noticed that the EBRD has spent or at least invested $1.7 billion and that was just in 2022 in Ukraine. Can you give us a sense of what sort of projects you've spoken of about a few in Levyve But country wide what this money is is being spent on? Yes, we pleasure. So just to give you a bit of a ground to that we The BLD has invested overall in Ukraine over about 30 years of activities there More than 18 billion euros in in more than 500 projects in the three years before the conflict we invested 3 billion euros And we entered into the conflict period with the portfolio of over 4 billion euros And then we had a plan for 2022 to continue investing in about 1 billion euro and In a number of projects in the private sector in the public sector and obviously On the 24th of February everything changed and And we took the view that We had to make sure we could support the real economy in the country For a number of reasons and the main two are And the fact that we needed the economy to keep going to sustain the social cost of the conflict the media social cost of the conflict But also prospectically the better shape the economy would enter into the reconstruction phase the lesser the cost of the reconstruction phase itself So with that in mind we pledged to invest 3 billion euros in the country in 2022 and 2023 and as you mentioned We end the 2022 with a deployment of 1.7 billion euros plus another 200 million euros deployed alongside by our Under financial institutions and we have focused on five areas really so Support in trade both imports and exports Mainly imports of fuel and exports of of food staff supporting energy security and And we have supported enough to gas the gas company to buy gas to cope with the winter and And and look an air go with a package of Over half a billion euros For liquidity initially and then also for emergency repairs after The the beginning of the of the shelling intention of civilian infrastructure by the Russia Federation and in the infrastructure sector we have supported the railway company who goes to his nitsa with liquidity line so to support immediate operations perational expenditures and the city of vip instead And then there is the entire chapter of food security where we have supported uh companies in the private sector Either the rightfully through loans to these companies or by uh loans to banks that would then online to companies or to cover partially the risk of banks and there is where we have these multiplier effects And the 200 million euros that I mentioned as an addition to our 1.7 billion And finally we started focusing uh support on uh let's say non agricultural companies on pharmaceutical companies because at the beginning of the conflict we thought that was the Uh most pressing origins in the urgent sector but then we widen our scope to um bolster in the resilience of the private sector in general and we invested in uh in the heavy industries for instance um still but also telecom companies a real estate uh we even invested in uh in the fourth private equity fund of one of the most active private private equity asset managers in the country So is the economy still functioning then in in a meaningful sense? Are they exporting goods that you said you mentioned agricultural products but finished goods as well is it is that still sort of ticking along despite the the terrible conditions they're operating on yes it is of course if you consider that the GDP has contracted by 30% things are not rosy uh however the economy keeps going and and as you say if you like it's ticking along there are a number of companies that are are managing well there are other companies that I've even grown particularly in the western part of the country and and there are companies that are not missing the opportunity of a terrible crisis to reform themselves and to expand the broad to buy other companies abroad one of the transactions we have closed this year is for uh in the pharmaceutical company that has both a subsidiary in central Asia uh to diversify its production activities but there are also foreign investors that are willing to double down in in Ukraine one of the transactions we are working on currently is uh is to support a foreign investor that is already present in the country that is willing to expand his production facilities there or there are local investors local entrepreneurs that indeed are expanding their production facilities both abroad and in the country itself now that I think the image people have of Ukraine before the war began it was not an entirely positive one in a sense that uh I think there was a feeling uh that it there was ingrained corruption there uh a kind of quasi-russian set up with oligarchs running this show um you must be satisfied to some degree that the reforms that Zelensky uh promised have actually begun and presumably are going to continue into the post-war era is that an accurate assessment of how you see things I think after may done Ukraine has engaged in a reform agenda and a reform path which uh has brought very significant positive results it has not been by any stretch of imagination a linear trajectory we have a number of uh blunders in in the anti-corruption fight in the in the corporate governance area but overall the reform of the economic ecosystem of Ukraine has been a positive one over the last eight to nine years now and the reduction of space of corruption has happened the reform of the banking system has happened there are a number of areas where things have progressed well um what the conflict has brought to surface is the willingness of the leadership to continue on that reform agenda um but most importantly my view is the importance of the civil society in the country which has been thriving in the history of the in the 30 years history of the country and we wouldn't have had the orange revolution and then made down without the civil society that Ukraine has and convinced that after the end of this conflict the civil society will be the guardian of a folder reform and strengthening of the democratic institutions in uh in Ukraine well that was all very interesting join us in part two when we'll hear the rest of the interview with Mateo Petrone welcome back to our interview with Mateo Petrone of the European Bank for Reconstruction and Development this is what he told us in the second part of the interview is it possible Mateo to begin the process of reconstruction before the war ends we're getting a lot of questions on the podcast you know understandably people are concerned about what's going to happen to Ukraine after the war but is this a process that has actually already begun at least as far as the EBRD is concerned well to some extent indeed that that is something that has begun and most of what we have done in 2022 and by the way we had a strong support of bilateral donors because we couldn't take the entire risk of this 1.7 billion in our balance sheet so we had the support of the US Canada the UK Germany France the Netherlands Norway etc but most of what we had done was provision of liquidity but we also have started a financing for instance emergency repairs as I mentioned for UriNego and one trend that we are seeing going forward in 2023 is that our pipeline is building up more as an opportunity to finance investments than the operational expenditures I think the area of reconstruction is a very gray one in that sense it's not gonna there's probably not going to be a discontinuity point first of all because the economy needs infrastructure now we cannot wait for the peace to happen in order to have new auto transformers or new electricity generation capacity or a functioning array with system and secondly because we don't know what kind of form peace would take could be contain conflict it could be a temporary or a truce that it could be actually a peace treaty we really don't know and and we cannot wait for that in order to to consider financing new investments in the country what parameters do you set on your reconstruction activities is it just simply a matter of physically building back or are you also looking at social issues like employment the trauma caused by war is that a big component in your plan it is a big part that the issue of human capital is really front and center of what we're trying to do in the country already now and the share of how that we are investing in companies in the real economy addresses somehow the issue of human capital and and we are also having very constructive discussions and provision of technical assistance we have a strong partnership with the minister of economy the minister of digital transformation and the minister of education in in addressing what we call labor market resilience translates in supporting both the public sector and the private sector in absorption of the labor and internally displaced people and people that have been deeply affected by by the war the way we approach the issue of reconstruction or recovery of the Ukrainian economy is indeed an inclusive one whereby we are going to focus our effort in supporting those companies that are able to absorb workforce both internally and absorb all those refugees that had to live the country now that are willing to come back to Ukraine so that is is very much at the center of our activity but we take the economic perspective of that we don't do social programs for people affected by it very decarplified. Well last question from me Mateo we're a history podcast and we always try and bring in some historical perspective that this seems to be to be a very unusual if not unique situation nonetheless there are kind of models in the 20th century that one can perhaps make a comparison with I'm thinking of the Marshall Plan for example is there anything that you look at that you think has some significance or relevance to the problems that you're facing at the moment? Well definitely the Marshall Plan is one of those things that we've been looking at from our perspective because we are really by by mandate a bank that focuses on on financing private sector investments we are really looking at how in particular in perspective in during the reconstruction phase we cannot try private sector investors in the country as you know there are a number of possible estimates on how the reconstruction phase how much the construction phase would cost there is an estimate done by the World Bank in September of $350 billion actually the Ukrainian authorities indicated before that $750 billion some people believe that we are beyond the $1 trillion all of these will not be achieved without a very strong role of the private sector and for that to happen you need to create an ecosystem that actually is attractive for the private sector to come to the country somehow the Marshall Plan was focusing on these aspects as well and this is actually where we're going to focus our activities including when we invest in public sector infrastructure or in supporting public sector state owned enterprises the way we we approaching those phases improving the governance of those companies commercializing those companies engage in of course not now but prospectically in pre privatization processes in order to create a level playing field that would make the business environment of crane attractive for in particular for for an investment but also in environment where local entrepreneurs would thrive and there we have the issue of the de-olegalization of the economy you mentioned the oligas were running the show indeed that was the case and and I think people like us and and other institutions like ours need to play a role to ensure that this is not going to be the case going forward one last question for me Mateo it won't keep you long just really a question about Russia the banks relationship with Russia the Russian authorities and how the last year and indeed I know you've been involved in as you say in Ukraine for a long time before that but how in particular has the full scale invasion of Ukraine affected that relationship so the relationship with Russia has changed already after the annexation of Crimea we stopped investing in Russia since then and and we have started winding down our portfolio there to give you a sense in 2013 our portfolio Russia was about eight billion dollars or euros now and at the end of last year was was about 800 million so a factor of 90 percent reduction and we took immediately after the 24th of February 2022 a very strong stance against the aggression and our governors our shareholders then decided to activate the article of our bylons that foresee that neither Russia nor Belarus may access our financial support any further and therefore we are not activating Russia anymore we are not activating Belarus anymore we close our offices we have equated our teams from there all the ones that didn't want to be evacuated left the bank right and Mateo thanks so much for that was absolutely fascinating all very interesting I was pretty stunned by that number that he came up with for one estimate of how much this is all going to cost at the end one trillion euros where's that going to come from yeah but it's interesting isn't it Patrick he pointed out that of course a certain amount is going to come we're going to be publicly funded but the majority is going to have to come from private finance which is why the EBRD's work is so vital I mean the figure I was stunned by was 18 billion euros has already been spent by the bank in Ukraine admittedly over the last 30 years so that's pretty much since the end of the Cold War as you mentioned at the beginning Patrick but but they were really beginning to ramp up operations and even during 2022 when conditions are obviously pretty tricky you know they'd spent 1.7 billion euros the equivalent roughly to dollars on you know a wide array of projects which we now see are absolutely vital not just keeping the Ukrainian economy running but also preparing for the future yeah it does speak again about the resilience of the Ukrainian people doesn't it I mean astonishing to think that in the midst of all this that some companies not just surviving they're actually expanding their operations and I think it does bode well for the future also interesting that they actually took a pretty strong line with Russia from the outset as long as goes 2014 they basically closed down operations closed down the office which is in stark contrast what you know a lot of other companies in the west and banks and all the rest of it really waited till the last minute and beyond before they waived well to a very lucrative relationship with Russia it's also very encouraging I think Patrick when when we take the slightly longer viewers Mateo was explaining since 2014 to realize that these reforms that have been going on in the Ukrainian government in their banking system in their economy more generally aren't actually genuine not ideal and blunders were made as he put it but generally speaking they're heading in the right direction and the current government as Mateo points out has a vested interest now in keeping keeping those reforms genuine and sustainable because they ultimately want to join the EU yeah there's it's very much current and stick isn't it and I was impressed at the extent to which the EBRD takes the long view and doesn't sort of basically link financial aid to immaculate behaviour on the on the part of the recipient of the aid I'm thinking particularly of place like Hungary and Serbia which do get quite a lot of EBRD Dosh yet have not been actually particularly positive in this conflict they've they've um either sat on the fence that were leaned well over the fence towards Moscow but that hasn't caused the money to dry up I think the argument is okay you know there were a long road towards membership of the EU well the Hungary's already in it but in the case of Serbia they want to join the EU and rough treatment by saying okay unless you behave yourselves you're not getting any more money it's probably not the way to go it may seem a little kind of softhearted from our perspective but probably in the wrong long term the bank knows what it's doing as it's proved in Ukraine and that is the right approach yeah I think we'll we'll be looking back as a historians Patrick in 20 or 30 years time and saying you know some good did come out of this war for Ukraine it speeded up a process it maybe it was a road it was going down anyway but it speeded up that process into bringing it into the you know into into the fraternity of western nations and you know you and I both believe I think and we're not ideal odds by any stretch of the imagination but we both believe that the Ukrainian people the majority of the Ukrainian people apart from the die-hards who want to be attached to Russia will be better off as a result of that well on that positive note we'll finish there do join us on Friday for an update on news our analysis of it and answers to the many questions we've been getting from all thisness goodbye want your most burning finance and investing questions answered here's a podcast you should be listening to courtesy of acas recommends are you ready for some personality in your personal finances hi I'm jenny's torres Rodriguez let me know money expert and host of the award-winning podcast yokido the nettle on this show we're serving up POC friendly personal finance knowledge always with a side of sass we're not talking about avocado toast and lattes on this show we've got real relatable personal finance knowledge that makes you feel seen heard and finally understood consider me you're super cool slightly risque but always honest financial fairy godmother together we'll tackle the nettle in a fresh new way so you can finally become for that also with your denietto check out our weekly 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