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World Bank Says Investment Up 50 Percent In Region

  • Robert Lyle

Washington, March 12 (RFE/RL) - The World Bank says that the nations of Central and Eastern Europe and Central Asia saw an increase in foreign direct investment in 1995 of almost 50 percent over 1994 to 12,000 million dollars.

The bank, in its annual World Debt Tables report released today in Washington, says privatization with foreign investor participation helped spur the flow. Kazakhstan and Uzbekistan, for example, opened their tobacco industries while Hungary saw the "most spectacular rise" to 4,200 million dollars in foreign direct investment.

This compared to 1994 when the region experienced a fall in the sales of state-owned enterprises. The bank says The decline in 1994 may have been due to the slowdown in Hungary and the Slovak Republic where governments re-examined privatization programs and strategies.

For the entire region, which for the bank includes not only the nations of Central and East Europe and the former Soviet Union but also Turkey, Greece, Malta and Cyprus, export earnings in 1995 "more than outpaced the seven percent increase in external debt."

The bank says that debt stocks rose last year to an estimated 380,000 million dollars, with Russia, Turkey, Poland and Hungary together accounting for 65 percent of the region's outstanding debt.

The composition of that debt "differs widely," adds the bank, noting that Hungary and Turkey owe a very small amount to official creditors while Poland owes about 75 percent of its debt to official creditors while Russia has an "almost equal balance of official and private debt."

While debt was up seven percent, the indicators and ratios for the region were generally improved. The bank says the debt to export ratio for the region "improved to 144.6 percent in 1995 as compared to 153.7 percent in 1994." The lower the ratio, generally, the better because it indicates that export earnings can more readily pay for external debt.

Within the region, however, the bank says some countries, like Russia, saw their debt to export ratio rise (to 169 percent) while Bulgaria saw its ratio improve (to 162.2 percent) because of a 15 percent increase in export earnings and Poland lowered its ratio to 182.2 percent with a 19 percent increase in export earnings.

In the aggregate, says the World Bank, there was a total resource flow to the region in 1995 of 26,700 million dollars (including both private and official resources), which was unchanged from 1994. However, the make-up of that flow changed significantly, with official flows (from other countries and international institutions) declining 16 percent to an estimated 9,400 million dollars, and private capital flows increasing by 11 percent to an estimated 17,300 million dollars.

Bank officials say that while official flows are important, especially for some of the countries of the former Soviet Union and former Yugoslavia, the increase in private flows indicates a continued move toward global markets. Of course, they add, the private flows are "still heavily concentrated" in Hungary, Greece and Turkey, but Poland, the Czech Republic and Russia are increasingly drawing private capital.

Private debt -- loans from banks and other private financial institutions -- declined further in 1995, says the bank, as a result of the large repayments falling due on commercial bank loans and bonds contracted in previous years in addition to a slow down in borrowing by Turkey.

However, says the bank, Europe and Central Asia were able to maintain access to markets and continued to attract "the third largest regional share of portfolio investment flows." It says the "Czech Republic, Estonia, Romania and Russia were among the first-time issuers (of bonds) in 1994."