Firstly, could you give our readers a brief description of your activities?
SEED is a program managed by the International Finance Corporation which is the private sector arm of the World Bank Group. We began our activities in September 2000. We have 10 donors, among which 9 are bilateral donors and the tenth is the IFC itself. The role of our donors is to provide money to support the development of the small and medium enterprise sector in Bosnia, Albania, Macedonia and Yugoslavia and among our tasks is that of increasing the investment capital that is going into the Small and Medium Enterprise (SME) sector, a mandate that was specifically designated to us by our donors.
The IFC is an organization that manages 6 such programs around the world and the oldest, which is about 18 years old, is operating in Africa. The original model of these programs was basically focused on financing and helping SME-s develop business plans that can be taken to a variety of financial sources, whether they would be local banks with the international credit lines or equity providers or other international financial institutions.
SEED is the newest of the IFC family of these programs and has the broadest mandate of all. I believe the reason we have the broadest mandate is that the donors look at the Balkans and say "if we don't make some changes in the overall business environment and we don't help the local service providers to SME-s a number of SME-s that would benefit from financing will be limited". So, in addition in helping to raise financing and matching needs to the capital providers, the donors have asked us to get involved in some very practical ways to address problems in the business environment. Although we work on a country by country basis, many of the problems were very similar in the countries which are the part of former Yugoslavia. We don't try to compete with the World Bank or other large bilateral donors nor the IMF, who are dealing on a macro level. What we try to do is raise the voice of the entrepreneur who had no voice under the socialist system. Through that voice, that we have gained by working every day with the entrepreneurs helping them develop their business plans and looking for financing, we have the ability to identify very specific issues and bring these to the government, to the World Bank, to the IMF. Here in Bosnia our team has worked extremely closely with the World Bank team who is developing the newest credit to this country. This is a business environment adjustment credit focused specifically on improving conditions for business in BiH. One member of our staff has worked on this side by side with people from Washington and she's been trying to bring the entrepreneurial input and in fact we have helped shape the conditionality of this specific World Bank loan. That's something we are very proud of. I believe this is one of the advantages we have through SEED: that the business person's voice can be represented.
At SEED we have three lines of business, the first is investment services; that is where we provide direct assistance to SME-s who are looking for a way to raise financing. In this regard, we work with those SME-s to evaluate their current business operations. We want to be seen as a quality player in the market place and we want to have a reputation of getting things done. By this we mean that when SEED provides a financing plan, it goes on the top of its pile and does not get lost in the paperwork. Part of how we achieve that is assuring those investors that, we have made a serious and objective review of the companies' current operations and we have made recommendations to improve its current operations. In some cases we will delay the marketing for new investments until we believe the company has made a significant improvement that would give an investor confidence to come to the table. We look into, not only local sources of capital, but also we work very closely with a number of equity providers. Some of them have funds specifically targeted to Bosnia like the Horizonte Investment Fund which is managed by an Austrian group and there are several regional funds; the Soros-OPIC Fund and the Transbalkan fund which is managed by SEAF (Small Enterprises Assistance Fund) and there are other individual investors who are looking for ways to put the capital into this market. We would like to have all of their attention in order to offer them a pipeline of potential deals here.
The second line of business is capacity building and that has two focuses; capacity building to the SME itself and capacity building toward the service providers to those SME-s. To the SME-s themselves we have the ability to help companies that are not bankable today. We think they have a strong management, we think that they have good ideas, good plans, but aren't strong enough financially in some cases or don't have the strength in their management team to do all the things they would like to do. We can provide them with training, we can provide them with specific tools that we would develop in conjunction with local consultants. For instance, there are two brothers who developed software here in Sarajevo (accounting software) and many of the companies that we meet don't really have an MIS system for inventory control nor for their basic financial reporting. This local provider has a very straightforward software program written in the Bosnian language and we helped bring that software into these SME-s, training them so that they can be tailored to their specific business.
So, as part of our job we create a quality value relationship between SME-s and local providers. In former communist economies, those relationships didn't exist as the role of professional consultants didn't exist. Instead, there were people who moonlighted from their jobs as engineers or professors and who might offer their advise separately. Part of what we are trying to do with the capacity building is identify who those professionals are; local consultants, local trainers, business associations, chambers of commerce, who are the traditional providers of services and advice to SME-s.
One thing is to raise money for an SME but if they don't have someone local that they can turn to for advise, money doesn't always solve their problems. They need good tax advice, they need good legal advice, good accounting advice, good market research. SEED uses its ability to provide capacity building into those kinds of service providers to increase the quality of the services, to increase the range of products and to help build this value relationship in the market with the idea that SEED is going to exit the market in five years. What we should leave behind is trust, and a reputation that is going to outlive our program.
The two lines of business previously mentioned are underpinned by a commercial philosophy. If we are going to have a relationship of trust and a reputation of quality between the service providers and the SME-s there has to be some sense of value, they have to pay for something they value. So, unlike other donor programs that are fully subsidized, we sell the services and we attempt to get a 100% cost recovery at local market rates. Some of the costs have to be subsidized up front as we create a market that didn't exist. The goal is a 100% cost recovery at local market rates. SEED's mandate as an organization, is to look at our own professional staff and try to spin them off as independent service providers. So that people doing the business plans and financing plans here at SEED should eventually exit SEED and be able to sell those services as single consultants or join new development banks or join new investment houses. It's similar to what people do in capacity building and training; they should be able to become entrepreneurs themselves and sell their services. We try to have an entrepreneurial spirit even in the office; we are investing in our staff, we are investing in their skills and we are trying to help them build a foundation to go into business themselves.
The third element of what we do which doesn't have a commercial underpinning is a business environment work and that's a public good. We look at what is missing in the business environment and together with other donors try to extend the impact of a program. We are not going to ask the government to pay us if we've been asked to help amend or update a law or write a new law that doesn't exist. For instance, SEED is taking a lead in agreement with other donors on developing leasing legislation in all four of our countries. Leasing as an option is very important to SME-s; they don't have to raise the same level of collateral that they would to buy the assets if they are simply going to lease it. Other things that we do in the business environment is to look for ways to partner with other donors. Too often other donor programs have money only to develop a new law, maybe develop a new system, but at the end of the day no one knows how to use it. There is no awareness; "A business law has changed, that's interesting, but what does that mean to me, how do I get information? I don't know". So, SEED looks for ways to inform people about large donor programs that are having an impact, particularly here, the legal reform having to do with commercial business has been huge over the last few years. Is it all being implemented and enforced? No. Because there is not a broad enough level, no understanding in day to day implementation. So, we look for ways to partner with business associations and economic institutes to reach entrepreneurs, to reach the law faculty, to reach bankers and try to help them begin adopting the changes.
So, that's more or less what we do. You might say that's a lot. We have about 30 million $US committed today for the four countries across our five year program. We hope to raise some additional funds and add more donors to the table. The program has been built bearing in mind a mid term review where the donors will have an independent evaluation of our work to date and can look at our work through original business plans and what that means currently. That's really the formal opportunity for donors who provide additional funding if they haven't already signed up for the five years. So, that would be coming up in the end of 2002, beginning of 2003.
Another area where we try to focus our activities on is in indicating or hand picking a number of sectors that we think can be high-growth sectors in the region. The sectors that we have worked on so far include agro business, construction, which is both construction in materials as well as project management, herbs, tourism and ICT (information and communication technology). That doesn't mean that if a project doesn't fit in our sectors we say: "I'm sorry, we can't help you". We see those sectors as a way to focus our three lines of business.
For instance; the investment services team that is working very closely with entrepreneurs are able to say: "Why don't you help business associations in the agro business area? Or in a construction sector"? If we really want to have a policy impact and develop the service providers we should work across the sector. . That has helped us focus our work and learn more about the sector.
You pointed out earlier that you list important Web links. One of the products we have developed is called seebiz.net. It's a local language site developed for the fruit and vegetable sub-sector, wood products and I think the third one is dairy in Bosnia. It is a web sight designed for people that are interested in a sector, people that are interested in investment, domestic investors who are interested in developing their own business, a number of service providers, people who are specialized in consulting in that industry, tax advisors, accountants. Whoever looks into this sector will see what are the relationships with the EU, how does one export from Bosnia into the EU, what are the requirements. And the fact that it is in the local language enables people to send their questions, their comments with the idea that we would find someone locally who would like to own the site and then have a sort of member subscription. It's been a very popular tool, we showed it to commercial attaches, many of the embassies, a lot of donor groups. Now comes the test, to see if people will like it. The other thing that we offer is a public information and business development center. The World Bank everywhere in the world has a public information center connected to its office and it's a wonderful resource of all the publications and studies that the World Bank group does. In addition we have two computers hooked to the internet that can be used free of charge, anyone can walk in from the street, five days a week, do research and we have one person dedicated to provide some consulting. This internet tool is something that we are going to give to local consultants around BiH who will sell their advises to the clients. That's our goal; to arm the local service providers with additional tools.
About the investment climate in BiH, what do you think are the competitive advantages of BiH in relation to the other countries in the region?
That's a standard question. The good news for Bosnia is, as most of the countries in the region, they have an extremely skilled work force. They have a highly educated population and extremely skilled work force. Some of them are leaders in the world in some areas. You mentioned you have met with "Hidrogradnja"; that company owns the building we are sitting in and it's considered one of the world leaders in construction project management. They are putting up big hydroelectric projects in the Middle East. So, the Bosnians have a very good reputation for the engineering skills, project management skills, processing skills. Bringing a factory here or any kind of production line, I think, an investor would find not only capable work force but also a willing work force. There are people who are really anxious to return to a normal life, productive business life. There is a lot of demand here by the local population to get back on its feet and not to depend on the International Community as the only employer.
| What is your policy to promote companies beside the training programs and technical assistance, what can you tell us about this?
We tend to promote the companies that we represent on a one to one basis. Generally from the moment the project is conceived until the time we implement it we have already been thinking about where we might market that company. When we initiate a project we have a two page document that is circulating among our management team to make sure that it fits our criteria, that we are doing this project for the right reasons, that it's a proper use of SEED resources, that we are not duplicating with another donor, etc. But part of that document studies the potential for success. Who do we think will be interested in this deal? Is this an equity investment? We are building our reputation with the equity providers and just now I was looking at one of these documents for a company in a cable business and there are two equity investors that in the early stage said "yes, we are interested" and one of them has already done a cable deal in the region. So, even before we approve a project we are thinking about whether there is a way out, is there a successful partnership. If the answer is "no" it's probably not a project that we are going to go through and invest time on. There is probably something about that company that needs to be improved because we can't determine the potential.
We spend a lot of time trying to know and gain the confidence of the investors who are interested in this region. The people who are here or around are pretty easy to identify, it's easy for us to visit them or invite them to our offices and we make presentations to them and show them how we do our work. One of the things we are trying to do is to show the investors, although we have a standard approach, a standard model that we do for financial projections. One of the lessons is that sometimes we force reports into the private sector and expect that they are going to be happy with how we view the world rather then asking the questions of each individual investor. What's the most important to you? How can we give you information in a way that reduces your time and answers your question? So, hopefully, if there are investors who are reading this report and are looking for SME-s deals to do in Bosnia we would hope that they contact us. If we find a capitalist who would like to include Bosnia in his portfolio then we want to make sure that the basic elements of how they approach a deal will be included. That's how we create a relationship, we trust them, they trust us. That's a market responsive attitude we are trying to build in our own staff and the consultant staff we work with. If they can build their business and have a market responsive approach they are much more likely to be sustainable and profitable.
Can you give us some examples of the companies you helped?
In terms of the Bosnian companies there is "Dijamant" a company that is a bottler of mineral waters and juices, they are probably one of the most modern factories in BiH. This gentleman who is on the cover of the annual report is the owner of the "JAPET" company who is developing software in Bosnian language. The newest deal that we are signing and we are very proud of is our first equity deal and it is with the company called "FRATELLO" from Banja Luka in the RS. They are doing trading of seafood products and will develop into a processing company. The equity is going to be provided by the "Horizonte fund" that has been increasing its work in BiH since it was established. We are really thrilled about this investment. There will be a ceremony on Friday morning in Banja Luka, so there will be a press release. Another exciting deal that we worked on is "Bamcard" that is providing transactions, processing and clearing for credit cards here in Bosnia. They plan to introduce their own card. So, as you can see there is a variety that goes from production companies to services, training.
According to you what would be your greatest achievement as the director of SEED, something you are really proud of?
That's an easy question to answer because our greatest success is all around us, in the staff. I've been in BiH for 6 years. I came right after the war in 1996. At that time I was working on privatization. We were working across the cantons in the Federation, setting up a team of people to work with the cantonal privatization agencies. At that time I said to my staff: "I don't need to know why, I only need to know if there is any location in this country where you don't feel comfortable working". And each one of them, of course individually came to me and told me where they didn't feel comfortable, traveling or working in 1996. Many of those same people now work for me and my question to them has always been the same, just that this question is not anymore about BiH but about the four countries in which SEED works. What I'm most proud of is that people from all of our offices are traveling freely and are working together on sector based teams in these three lines of business. And no one cares about nationality issues. No one has shown hesitation. They are not forced, but there is a business reason, there is a reason to go on with living and doing things that is reuniting the people, young people, people with energy and vision. That's what is making my coming to work every day so special, these people. Most of the people lived somewhere else during the war, but they've returned because this is their country, because their families live here and because they believe in the future. They don't want to work for me forever. They want to work on their own, in private companies in this country. All they are looking for is the opportunity. And if we can bring investors here I can guarantee that they won't find better staff. Over the last year we have grown from about 28 people to 75 people across our four countries. It's been a tremendous growth period; I mean, you don't open 6 offices in four countries overnight. We are already being approached by people who want to hire some of our staff. I'm like their parent, my heart is tearing but I'm so proud that a private company wants to get some of my staff because they think they are so good. The other half of me says " no, you can't have them!". But we say to each of our staff: " if you get a good opportunity go with our blessing". That's the goal, although so far, no one has left.
Sometimes things take too long, but I remember that I'm in a transition country, things can't happen as quickly as we would all like. When I have one of those days I just take a walk through my office and I look at the energy and the devotion of my staff and I know that I stay because of them. The reputation of SEED in the market place is built by them, we trust them. My task is just to remove the obstacles from their way, everything else is done by them. Because sometimes you need an outsider to open the doors.
What are the future projects that SEED is going to be involved in?
Going into the next fiscal year we're going to continue building in the same sectors we've been working on this year. Particularly because we've learned so much, it wouldn't make sense to throw all of these fixed investments away. We're going to give a big push to development of business associations. We are just about to sign a partnership agreement with associations in all four of our countries but in Bosnia we'll be working specifically with the employers confederation, in both, RS and the Federation. We'll be working with "Una" which is the association of women entrepreneurs in both entities. We're going to continue our focus on building skills for consultants. We have a training program where we help local consultants learn how to better manage themselves. We have a really inventive program that we started this year and continue to next year in two municipalities: Zenica and Prijedor. We're using the local economic development model and have a group of stakeholders, as well as the government team and specific local economic development team in both municipalities. It's a ten month program. Both of these municipalities have paid 10 000$ each as their contribution to the program. We're using World Bank specialists in the area and the idea is that both of these municipalities have strong basic SME-s and what can we do with them and what are the skill gaps in the current local population, training that they need, what are the opportunities for developing market based companies that conserve a new economy rather then the old economy. It's a pilot program and I'm very excited about it.
Another big area we are going to focus on next year is entrepreneurship. One thing that the investor needs to understand about the Balkans is that entrepreneurship is associated socially as being tied to the black market and war profiteering. Children don't go to their mothers and say "Mom, I would like to be an entrepreneur". They would probably be sent to their room without dinner. "You should be a lawyer, an engineer". So, we need to change the image of the entrepreneurship and show that it is a valuable contributor to the economy and no longer needs to be associated with the negative side of business. We are trying to create a program that would attract also doctors, engineers and others who think that they don't need to know anything about the entrepreneurship and give them a safe environment, to develop some of their skills, to raise the awareness about entrepreneurial culture. Because some of the engineers who are part of large state companies will find themselves without a job as these companies become privatized. What will they do? They should at least consider to become an entrepreneur. Even if they just decide to sell their skills to the incoming investor, they still need to have an entrepreneurial spirit. So, we are trying to develop ongoing, once a month programming. We've already developed a publication that looked at a number of successful entrepreneurs in BiH and asked them how they did it. The title is "They've done it, you can do it too". So, this is going to be a big focus for us across the region. We'll continue fund raising, we are trying to attract some of the regional equity investors that haven't done the deals in BiH yet and our goal is to get them here and to find the deals that fit their investment portfolio.
Can you tell us about you background and your experience as the director and as a woman?
Well, I guess there are number of ways to answer that question. I've been living and working in Central and Eastern Europe for the last eleven years. I graduated at management school and at the time when I was doing my MBA, it was just after the wall had come down and things were beginning to open up, when I got an opportunity to do some business in Poland in the summer of 1991 and to work with the Ministries, assessing a number of companies in the agro processing businesses for privatization in the early days before the privatization programs were formed. So, I fell in love with transitional economies, consulting and business development and have stayed in that line of business ever since. I came to Bosnia in 1996, I used to be employed by "PriceWaterhouseCoopers" which enabled me to work in Poland, Russia, Ukraine, Bulgaria, Bosnia, and in the end in Pakistan. I think there are tremendous opportunities in these countries. So, to be able to be part of this history and to live it, is incredible and having started in this business 11 years ago, people sometimes call me an expert. It has nothing to do with age but with the energy, market perspective and tremendous amount of stubbornness. My first rule, which I learnt in Poland is "until I have five versions of NO my job has not yet begun". You ask several persons for a piece of information; some of them don't have it, some are not allowed to give it to you, some simply don't want to give it to you. You get all sorts of excuses and reasons, but you can't proceed with your work. Then I developed a strategy to get people to say "yes". That's how I learned to survive and it became a challenge to me. But it's hard; many of the reforms are still in process, there is a lot of good will, but also a lot of bureaucracy still exists, but if you are patient and persistent good deals are here to be done. And there are a lot of partners out there to help you and SEED is one of them.
In this part of the world women are highly educated and particularly here in Bosnia some people make the mistake of thinking that there is a strong Muslim culture. But in this country women dress like everywhere else in the world, there are very few women who choose to be covered. Women are working, here we employ more women than men. I find this a very fair and rewarding environment to work in. But I wish there were more women executives. The IC hasn't helped much in this sense because this was an unaccompanied post in the earlier days. Most of the people who came to this post were professionals who left their family behind. Only now the various embassies and international organizations are allowing this to be an accompanied post or even beyond that, a family post. That will begin to change the nature here, and that's starting to happen and that's a very good sign.
Thank you very much.
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