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Board Governors applaud ‘re-focusing’ of EBRD

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Hilary Benn, UK Secretary of State for International Development.

Gerrit Zalm, Chair of the Board of Governors and Minister of Finance for the Netherlands

EBRD Secretary General Horst Reichenbach, Chair of the Board of Governors Gerrit Zalm, EBRD President Jean Lemierre and UK Secretary of State for International Development, Hilary Benn.

The EBRD’s plans to invest more staff and capital in the challenging investment environments south and east of the more successful central European economies was lauded in speeches by members of the Bank’s Board of Governors Monday.

During the opening session of the EBRD’s 2006 Annual Meeting, Hilary Benn, UK Secretary of State for International Development, itemised three challenges ahead for the Bank. First, he agreed with proposals that the Bank focus more on south-eastern Europe, Russia, Ukraine, central Asia and the Caucasus while reducing investment in central Europe.

He paid particular attention to sub-regional programmes introduced by the EBRD to address issues inhibiting economic growth: the Early Transition Countries Initiative for the seven poorest in the Commonwealth of Independent States, and the new Western Balkans Initiative for Albania, Bosnia and Herzegovina, FYR Macedonia, and Serbia and Montenegro, including Kosovo.

Second, he reminded the EBRD that it should do more “to ensure poor people benefit from reforms the Bank promotes”. Third, he spoke highly of a new EBRD initiative that will simultaneously improve energy efficiency, invest in renewable energy and reduce the climate change impact of growth in the region. The latter, he said, is “one of the greatest problems of our time”.

Donor support needed

Deepening investment in these more difficult business environments will require donor support, Minister Benn said. “The UK welcomes the new Western Balkans Fund which will not only help build the capacity for businesses to borrow, but will also create a partnership between the Bank and donors that will help make all our efforts more effective. We stand ready to contribute.”

He said the UK government is delighted the EBRD has made sustainable energy and climate change a priority. “Progress will be good for the region, good for business and good for the people…We stand ready to provide financial support and look to other donors to do the same.”

Gerrit Zalm, Deputy Prime Minister and Minister of Finance for the Netherlands, noted some milestones achieved in the EBRD’s first 15 years of operation marked by the 2006 annual meeting. Minister Zalm, Chairman of the Bank’s Board of Governors, said transition has been a success in many of the EBRD’s countries of operation, particularly central Europe where eight countries have joined the European Union.

Zero budget growth

The Bank itself is also a success, he said. “The EBRD has very carefully managed the resources that shareholders have put at its disposal. It has stuck to a zero real budget growth for 11 years in a row. Also, the EBRD has been both careful and innovative in its project selection. It has been able to combine transition impact with a healthy profit. This is a truly remarkable achievement.”

However, along with many other Governors he said the time had arrived to refocus the institution, and that process was well underway as marked by the shift toward south and east delineated in the proposed new five-year strategy for the EBRD. Minister Zalm noted this shift has been underway for some time. “Between 2001 and 2005 the share of the annual business volume in the advanced transition countries fell from 47 per cent to 16 per cent…All in all, we should all be satisfied with this result.”

To support the emphasis on greater investment in more projects of smaller size in less-developed economies relative to those which recently joined the European Union, he noted the Board has approved, for the first time in over eight years, an increase in EBRD staff numbers. The increased risk the Bank will take in these environments means larger reserves will be needed than in the past, to which the Bank’s recent record profits will contribute.

Written by EBRD Senior Writer Kate Dunn.

22 May 2006