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Czech Republic strategy

Graduation of EBRD operations in the Czech Republic  (254KB - PDF)

Graduation of EBRD operations

The Czech Republic is an open market-oriented economy and continues to meet all the conditions specified in Article 1 of the Agreement Establishing the Bank. The government of the Czech Republic has expressed, in a letter dated 19 March 2007, "the desire that EBRD operations in the Czech Republic be considered to have 'graduated'". The letter conveys the “hope that a decision could be taken by the EBRD Board of Directors in the second part of this year and that it would become effective by year-end."

Pursuant to Article 11.2 of the Agreement Establishing the Bank, the Board of Directors is required to “review, at least annually, the Bank's operations and lending strategy in each recipient country to ensure that the purpose and functions of the Bank are fully served”. The review must involve “the consideration of, inter alia, each recipient country’s progress made on decentralisation, demonopolisation and privatisation”. The Board’s review of the Bank’s operations and lending strategy in the Czech Republic for 2007 should be made taking account of the request from the Czech authorities.

In view of the request of the Czech authorities and of the conclusions of the report, it is proposed that, effective 31 December 2007, the Bank’s operations in the Czech Republic be considered to have graduated. In effect, the Bank will no longer consider or approve new operations in the Czech Republic after that date. By exception, in order to accommodate clients who have relied on the Bank’s support in developing financing structures for their projects, operations that will be at an advanced stage in the internal approval process at the end of 2007, will continue to be processed. It is expected that five small size projects may be in this category, if they proceed as expected: a biomass energy project, the second generation of an equity fund targeting SMEs, the fourth generation of a regional equity fund, and two follow up projects, one involving the expansion and rehabilitation of railway stations, the second involving energy efficiency upgrade for 2 malting plants.

In addition it is proposed that, after graduation and for as long as necessary, the Bank continue to manage its portfolio of lending, investment, guarantee and technical assistance projects in the Czech Republic, which will thus remain a country of operations. In respect of such projects, the Bank will fulfil its commitments and exercise its rights, including through the provision of additional finance necessary to protect its interests. It should be noted that the maturity of the debt facility with the longest tenor is 2021 and that some of the equity investments have no scheduled or agreed exit dates. As the EBRD office in Prague is to be closed before the end of November 2007, the Czech portfolio will be managed by staff from sector teams at Headquarters and by the regional team as appropriate. The Board will be kept informed of the evolution of the Czech portfolio through the Board Monthly Information Reports and the Quarterly Risk Reports.

Finally it is proposed that, in the absence of new operations in the Czech Republic, the Board of Directors determine that the annual review and country strategy work performed in accordance with Article 11.2 of the Agreement Establishing the Bank, be discontinued in respect of the Czech Republic.

The Board is satisfied that such proposals would be consistent with the Agreement Establishing the Bank and with A Policy on Graduation of EBRD Operations.

The President, on behalf of the Board, congratulates the Czech authorities for the remarkable achievements of the country. The Bank will will discuss Czech participation in regional initiatives following on their contribution to the Western Balkans Fund and opportunities for future cooperation with, and support to, Czech companies expanding their operations in the other countries of operations of the Bank. Several projects of this type are in early stages of negotiations, mainly in the energy sector. The Board and management, thanks the staff in the Prague Resident Office for their dedication.

Last updated 8 June 2010