In an effort that could increase the modest flow of foreign capital into Eastern Europe and the Soviet Union, British newspaper publisher Robert Maxwell has formed a special venture capital fund and seeded it with $52 million.
Merrill Lynch & Co., the Wall Street securities firm, has pledged $5 million to the Maxwell Central and East European Partnership L.P., which is meant to grow to $250 million through contributions from other investors.
Maxwell, already an active investor in the region, said yesterday during a visit to Washington that the fund is likely to buy an unfinished Moscow office building. Space in the building, which needs about $10 million in work, is to be leased to foreign companies. A Soviet newsprint project is another prime candidate for funds. He declined to give details.
Visiting Washington for the annual meeting of the World Bank and International Monetary Fund, Maxwell said in an interview that the fund will offer both money and technical expertise. Major companies such as General Electric Co. and the Italian car maker Fiat have expressed interest in advising it, according to Merrill Lynch.
The fund is intended to help the region reverse "the loss of 70 years of opportunity" during communist rule, Maxwell said. It will be "interested in everything that makes money." Investors will face comparatively high risks, but potentially high profits, he said.
The demise of communism in Europe in the past year set off predictions that Western capital would stream in to help modernize outdated industries. However, factors ranging from political uncertainty to unconvertible local currencies have kept the flow comparatively small. Hungary has received the largest amount of U.S. money, estimated by the Commerce Department at $800 million.
Before the fund can buy anything, it must raise at least $100 million more. The money must be provided in chunks of $10 million or more.