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The times – and the EBRD – are changing

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The line up from left to right: Jean Lemierre, Adnan Terzic, Vojislav Kostunica , Milo Djukanovic, Vlado Buckovski, Karl-Heinz Grasser, Emmanuel Maurice.

EBRD President Jean Lemierre.

The 27 former command economies in which the EBRD invests are very different now than in 1991 when the EBRD was formed to assist in their transformation to market economies rooted in democracy, Bank’s President Jean Lemierre told the EBRD Board of Governors Sunday.

And so, he said at the opening session of the Bank’s Annual Meeting, “the EBRD, too, must change, and even faster than our countries of operations.”

“It is a deep challenge for the Bank because it means adapting our business model to new conditions that will be at least as difficult as the mission we undertook following the fall of the Berlin Wall,” said Mr Lemierre. “It means both renewal and fundamental change within the Bank.

“The new business model of the EBRD must deliver the kind of value-added that the Bank’s work on privatisation and market structures brought a decade ago. Today our bankers must be at the leading edge of a new market place. There is an appetite today for creative ways to bring more equity investment, especially to help mid-sized businesses become bigger international enterprises. The market need help to work in traditionally public sector projects, such as providing municipal services.

“We will develop capital markets in the region and use capital markets as tools to promote investment, for example by financing in local currency, as we have recently done in Russia. We are also finding ways to improve the flow of remittances from abroad into formal banking institutions. And we need a model that encourages innovation in sectors such as energy, where the future is in solutions beyond traditional oil and gas supplies.”

Karl-Heinz Grasser, Chair of EBRD’s Board of Governors and Austria’s Minister of Finance, noted the Bank’s year-old Early Transition Countries Initiative for the seven poorest countries in the Commonwealth of Independent States: Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan.

“This initiative was designed to enable the Bank to take more risk and to develop a wider range of financial instruments so that more projects could be completed in these countries,” said Mr Grasser. “The Bank is thereby able to contribute to poverty reduction in the Early Transition Countries through promoting private sector growth and by developing small and medium-sized enterprises.

“As the Board of Governors we have to bear in mind that operating in more difficult environments can mean a larger number of small investments. This entails greater risk-taking on the part of the Bank, as well as increased project costs. It may also have an impact on (EBRD’s) profitability. At the same time we have seen a decline in the number of Bank projects in the new EU countries. Achieving a balanced portfolio will require very prudent risk management by the Bank in the period ahead.”

Mr Lemierre will be working with the Board to adapt the EBRD business model in line with its move south and east, as part of the Bank’s next strategic review which will be completed in 2006.

22 May 2005