Alfonso Garcia Mora, International Finance Corporation (IFC) Vice President for Europe, Latin America, and the Caribbean
"Ukraine's recovery will be crucial for the whole world."
25.07.2023 19:10

The International Finance Corporation (IFC) is reopening its office in Kyiv after a break caused by Russia's full-scale invasion, without waiting for the war to end. Undoubtedly, this is a powerful signal of support for the people of Ukraine, and the national and global business community, as evidenced by the visit of IFC Vice President for Europe, Latin America, and the Caribbean Alfonso Garcia Mora to Kyiv. An Ukrinform correspondent managed to talk to the distinguished guest despite his busy schedule. In an interview with our publication, Garcia Mora spoke about programs to support private business during a full-scale war, preparations for Ukraine's recovery, and the role of public-private partnerships in financing infrastructure and social projects.

- What are the main goals of your visit to Ukraine? What activities does IFC have in Ukraine?

- I am excited and pleased to be here. I tried to come a few months ago but I couldn't. This time I wanted to meet and talk to the authorities about our support for the country and what IFC has achieved in the last month. I also wanted to personally connect with the companies we invest in and those we are going to support next month.

- Are you funding the private sector during the full-scale Russia’s invasion of Ukraine, and if so, to what extent?

- We have been funding the private sector since Russia’s invasion of Ukraine. We have already invested close to $400 million in private sector companies in Ukraine related to the financial sector and agribusiness, IT, and technology. These are industries that are critical for the country and have a significant role to play. I am a forward-looking person and already thinking about what we can do next. We have a strong pipeline of potential projects where we can invest and continue to support the private sector in Ukraine.

- Recently Russia has been out of grain deal. Will this influence IFC’s activities in Ukraine?

- It is important to keep this situation in mind and be aware, but we have to be resilient and supportive, even if the situation is not the best or becomes complicated. What is happening today is very unfortunate, but I think there are ways to continue supporting, and I am sure there will be mechanisms to resume grain exports. I always say it is not only a terrible situation that we are facing in Ukraine, but also the devastating impact of Russia’s invasion of Ukraine on low-income countries globally, who will not receive the wheat that they need to survive.

- What are IFC’s priorities in Ukraine? Has anything changed in terms of obtaining IFC financing during Russia’s invasion of Ukraine?

- We have two major priorities. The first is to ensure that companies and the private sector are resilient and can continue with business despite Russia’s invasion of Ukraine. The second is to start thinking about how we can build back better and reconstruct in a way that creates a strong country and economy. For that, IFC has approved a $2 billion investment package for Ukraine – comprising $1 billion of our capital, and $1 billion in funding from international donors to help us finance and deploy investments in the country.

- Wow, $2 billion – that’s valuable support for Ukraine.

- Yes, but even more is needed. I am an ambitious person, and $2 billion is a good start, but we will need more. Keep in mind that according to World Bank estimates, there is a need for $411 billion in the country to support reconstruction efforts long-term.

Of course, part of this will be covered by the public sector and government, but a part should come from the private sector. We must identify the opportunities that exist to help the private sector create bankable projects to attract financing. For instance, I’m seeing big interest from Poland and the rest of the international community to invest in Ukraine. Institutions like IFC try to help these companies and capital come to Ukraine.

- Which sectors other than agribusiness are still attractive to foreign investors in Ukraine?

- One thing that goes across sectors is small and medium enterprises. We need to support them because they are absolutely critical to the economy.

Thinking by sector – agribusiness is crucial for the country. Energy will be a key sector because we have to take this opportunity to accelerate the energy transition, and generate an energy mix that is more renewable, green, and sustainable. The third is IT. I think this country has proved its huge IT potential and we have already invested in Horizon Capital, which finances innovative companies in the country. The last one is logistics and transport, because that will be fundamental to Ukraine’s recovery.

So, these are the sectors that we are already thinking about and organizing projects in. Housing is also, of course, a vital sector that will require a lot of investment. The other important thing is that each of these sectors has subsectors behind them. You need materials, steel, bricks and many other things to construct a building, for example. Many companies will need to provide services and products to meet the construction needs for Ukraine’s recovery.

- Will this stimulate the economy?

- Yes. Stimulating the economy is fundamental. We need to create jobs to incentivize people to return to Ukraine. We will need all capabilities and capacities for the recovery. The best way to attract people back is with a vibrant private sector.

- IFC is going to reestablish an office in Kyiv. What does this mean for Ukraine?

- We already did this yesterday. We reopened our office in Kyiv, which is great. I was with the vice president of the World Bank, with both of us there to show how important this was to our institution.

Of course, we didn’t stop our work in Ukraine, even when the office was temporarily closed. We continued a lot of work virtually, but we wanted to be present with larger numbers of employees. And we wanted to give a signal that we are here with you. Our people are in Kyiv and working shoulder to shoulder with Ukraine and ready to step up.

There will be a huge need to step up, so we have to scale up our work presence; we will hire more people in Ukraine. Because we really believe that the recovery of this country is going to be critical - not just for Ukrainians, who are the main priority, but also for the rest of the world. 

- If IFC reopens an office here, there are reasons for optimism. What are these reasons?

- We are optimistic. I am not an expert on conflicts, and I don’t know when Russia’s invasion of Ukraine will end. However, I think we can do many things even if this situation continues.

On February 24 last year, no one thought it would last this long. It has lasted longer than expected, but we have proved that we can do many things even in this situation. That is why we decided to reopen our office now rather than wait for Russia’s invasion of Ukraine to end - to provide a signal to the Ukrainian people and businesses that we are here and working to help the country.

- IFC conducted large-scale analytical work on the participation of private investors in reconstruction. What are the main conclusions of this work, and what should the state do to make it possible for these investors to come?

- That study was conducted by the World Bank together with IFC to assess the magnitude of the country’s recovery needs, and it found that $411 billion is needed for that. Then we decided to break it down by sector – how much for agribusiness, construction, transport, energy, etc.

We now have pretty good analyses of what is needed in each sector for recovery and reconstruction. Now we know what is required, how do we mobilize all this capital? Where is this financing going to come from? We have been discussing this with the government and various institutions, because we will need coordination among banks and the international community. First, what should be financed by the public sector? Where are the opportunities for the private sector to invest?

Once we find this opportunity, we must work out how much support we need. Would it be blended funding or concessional funding? We need to estimate the risks of these investments.

Then we need to decide how to structure these investments in a way that the private sector can invest without taking 100 percent of the risk. We could use some donor financing to absorb part of the risk - to allow the private sector to come in without taking all the risk.

That is why coordination will be fundamental in this situation, and why we have to reopen the office in Kyiv, because we need to coordinate this work. It will be critical; we must emphasize this.

- The state could help investors by approving the relevant legislation. Is IFC coordinating with the government around this?

- Many reforms are needed, which is what we emphasized in Lugano last year – the first conference after Russia’s invasion of Ukraine. We discussed Ukraine’s reconstruction and recovery needs and the key reforms that will unlock the country's capacity.

IFC is working very closely with the government to drive legislative and regulatory reforms to create more competition, specifically in sectors where the state remains dominant. We can open these up for competition when it makes sense.

- Do we have the necessary instruments to mobilize private capital? Are there any instruments or experiences from other countries that could be brought to Ukraine to make it happen? This is the role IFC can play.

- We are the only global institution working with the private sector. IFC has offices all over the world. I have told the Prime Minister and the cabinet to use IFC as an honest broker. We are here for you. We are here as long as needed, and what you have to do is to please come to us. We will bring our experiences from Brazil, Malaysia, South Africa, and elsewhere in the world to ensure Ukraine’s recovery is solid and successful.

- What about public-private partnerships? I know that IFC actively supported these before the full-scale invasion and there were successful port projects. Is this work continuing?

- Well, that’s exactly the thing that I had in mind. Thank you for this question because public-private partnerships could be a key instrument in Ukraine.

I can explain it very simply – let the private sector finance what it can. I mean, the needs are enormous - $411 billion. So, how do we fund them? The government doesn’t have this money, nor do public finances internationally. We must think about what the private sector can finance and let them do it. Ensure the mechanism exists, competition exists, and that there are no captive resources. Let’s clear the rule of law; the private sector will finance that.

- In some sectors, the private sector won’t be able to finance projects because the risk is too high and will require an extremely high return to justify the risk. So, we have to make it feasible, but how?

- This is where PPPs come in. We can structure these projects so that the public sector can bring part of the financing and cover part of the risk, and the private sector can cover another part. There are many ways this could be structured, but this is how to minimize the presence of the public sector and catalyze and mobilize private financing. It may not always work; the private sector could say no. But we need to follow this path to think about how we will work on the recovery. It is the only way to maximize the financing we need.

- What projects do you see as the most conducive for PPPs during the recovery?

- There are several. We have hard infrastructure like ports, transport, roads, railways, logistics, and energy. All these sectors are being financed through PPPs worldwide, which is why we are already working with the Ukrainian authorities to structure PPPs in these sectors and leverage our experiences in India and other markets.

However, there is not only this hard-core infrastructure or energy; we can also use PPPs in health and education. What do I mean by using PPPs for these projects? We would need a lot of money to reconstruct hospitals and create hospitals and schools. Again, public resources will be limited, so how can we catalyze private capital? We are financing a lot of social infrastructure, as we call it, in the world using PPPs. It is super successful because it is a good way of financing infrastructure, and people will benefit directly from that infrastructure, which is very much needed. Unfortunately, the government doesn’t have the capacity to finance all this social infrastructure. Private capital can be crowded in to make it happen.

Your question is super important because we need to think about PPPs, not just as financing instruments to construct roads. It is not just for that. It can be used to build hospitals, schools, and public transportation. It is also for waste management and water sanitation. There are many things that we can use this instrument to finance.

These social projects, like schools and hospitals, do not generate direct profits, so the state should guarantee it to investors with these PPP projects. Is this right?

So, we need these projects to be bankable. By that I mean that we have to create conditions that are profitable for the investors. If we talk about private investors like you and me, if we decide to invest in these PPPs and we invest our savings there, we need to have something in exchange, because those are our savings. So we must ensure that we get what we invested plus our return, whatever that is.

There are different ways to do this depending on the asset that we are investing in. There are various ways to structure the PPP to be feasible. So, it will require some support from the public – yes. You can guarantee minimum income, and a stable and predictable cash flow, or you could say cash flow analyses don't make sense, but the state will be here if the hospital cannot provide the income to the investors. In that case, the state jumps in and provides support. It could be structured in many ways, depending on the type of investment.

- Did you meet with top-ranked officials in Ukraine? What are your personal impressions of the visit?

- I was very impressed, first of all, by the energy and the commitment – it is absolutely impressive. The authorities of this country and the commitment that they have to resilience is incredibly impressive and inspiring. If you were to ask me to use one word, I would say inspiring – this is my impression of the Ukrainian authorities. They are very smart and well-prepared people and are here to make a difference and help Ukrainians to survive this terrible situation, and we are with them as well.

- There was an air alarm yesterday. What did you feel?

- I went down to the shelter with my gadgets. I didn't know how long it would last, and in 20 minutes it was over. What was quite impressive was how naturally people behaved. People went down to the shelter to wait until it was over and then went back to sleep.

I was walking yesterday and I saw that the city is still the same beautiful and lovely place I used to know when I came here four years ago.

Oleksandra Klitina, Kyiv

While citing and using any materials on the Internet, links to the website not lower than the first paragraph are mandatory. In addition, citing the translated materials of foreign media outlets is possible only if there is a link to the website and to the website of a foreign media outlet. Citing and using materials in offline media, mobile apps, Smart TV are allowed only with written permission from Ukrinform. News and publications marked as "Advertisement" and "PR" and articles in the section "Releases" include promoted content, and an advertiser is responsible for the content.

© 2015-2023 Ukrinform. All rights reserved.

Website design Studio Laconica

Extended searchHide extended search
By period: