MAPO finds bank with little lending and project finance experience to act as its finacial advisor

Published: 12/9/1999

VPK MAPO and Vnesheconombank (VEB) have signed a cooperative agreement, under which VEB will service all new external trade transactions for MAPO. It will also undertake according to MAPO, financial feasibility studies of all MAPO projects and participate in specialist working parties and MAPO financial committees on jointly developed projects. Nikolay Nikitin, General Director of MAPO, said that the agreement would underpin the company"s long-term strategy. The move to appoint the state owned bank to the role of coordinator of the MAPO"s banking and potential future financing function, seems somewhat puzzling given the description of it duties as outlined by Nikitin. Currently Vneshecombank"s activities are primarily acting as an agent for payment of Russia"s debt, they have a limited banking licence, but little experience in lending and as such even less experience in project appraisal. The reasons for the choice of Vneshecombank given its experience are therefore hard ot justify, beyond the fact that it is state owned as is the other current provider of finance to the industry Sberbank.According to other reports, the bank also has similar relationships with Rosvooruzheniye, the arms export agency and Sukhoi. The former however, announced a relationship along similar lines with the City of Moscow Bank, a few months ago. Nikitin has also been at pains to emphasize that MAPO will retain in his view, its role as Russia"s leading military designer, despite its move into civilian production. He claims that over ten military projects are still being developed by MAPO. These include the serial production and large-scale upgrade of the MiG-29, MiG-21 and MiG-31, the development of the multifunctional naval fighter MiG-29K and a number of trainer fighters, including the MiG-AT, and conversion programmes including the MiG-110. According to Nikitin, the fifth generation fighter 1-42, or MFI, is nearly ready for ground tests, although the terms of the flight tests have yet to be defined. These claims bear out earlier doubts over press reports that had suggested that MAPO had put all of its military programmes, bar two, on ice. However, Nikitin still has to contend with the mass resignation of many of his key military designers and the general reluctance to accept the commercial necessity of diversification. Over the last three years, state funding of its own orders has been practically non-existent, so forcing MAPO to use up its own resources. Associated articles:www.concise.org 7th May 1999, 2nd December 1999, 3rd December 1999, 9th December 1999

Article ID: 1201