Russia and Germany to set up $1.4bn SME support fund | Volga, Finance, business MarchmontNews.com

Finance, business | Technology & innovation

Russia and Germany to set up $1.4bn SME support fund

22 Jul '11
The RF President Dmitry Medvedev and the German Chancellor Angela Merkel have agreed to set up a $1.4bn joint Russian-German fund to support high-technology innovative and energy efficient projects of Russian small and medium businesses, Forbes.ru reports.

The fund is reportedly to be set up by Russian state corporation Vnesheconombank (VEB) and German state bank of development Kreditanstalt fur Wiederaufbau.

According to Vladimir Dmitriyev, the head of the VEB, the financial structure is unlikely to start working by the end of 2011. The fund will be formed within two to three years, he said.

The parties have not yet agreed on the parameters of capital shares distribution. “We are not saying that it is to be financed on the parity basis between us, KfW and others. We must set an example – as we did with the Regional Banks Capitalization Fund, where we invest $250m, IFC contributed $250m and $50m is put up by the Ministry of Finance – in order to signal to investors that the state and international financial organizations are willing to invest,” Mr. Dmitriyev explained.

The head of the VEB added that the fund is to be based on the joint production complexes that already exist. Specifically, those are the automobile cluster in Kaluga, as well as companies of Energomashholding, Transmashholding, Gazprom and others.

Mr. Dmitriyev told journalists that during the business breakfast with Mr. Medvedev, Ms. Merkel and other representatives of the Russian and German businesses, the participants discussed joint projects in the sectors of energy, transport machine building, supercomputers creation, auto industry and others. “In all these aspects we were talking about localization of production, meaning creation of small companies that could work for these giants. That is what can attract investment in a number of ways, including via the fund we are setting up with KfW,” he added.