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Speech delivered by: Sir Suma Chakrabarti, EBRD President
Event: Vienna Economic Forum
Date: 24 November 2014
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EBRD President Sir Suma Chakrabarti delivered this address at a panel at the Austrian National Bank annual conference on European economic integration - "The Rebalancing Challenge in Europe - Perspectives for CESEE" today.
Good morning. It is a great pleasure to be invited to join this panel along with such distinguished company.
As my co-panellist prime ministers are aware, south-eastern Europe (SEE) lies at a critical juncture. The region has struggled to bounce back from the crisis of 2008-09 and growth levels are well below the levels enjoyed in the first half of the previous decade. But the region is also full of potential. The question is whether countries can fully embrace the reform programme needed to unlock this potential.
To see why the region is falling short at present, one has only to look at current growth rates and short-term prospects. EBRD economists expect growth in the SEE region this year to be below 2 per cent. While FYR Macedonia and Montenegro are doing reasonably well, countries such as Croatia and Serbia are in recession, and others are recording relatively modest levels of growth. Prospects for 2015 look better, but growth rates of 2-3 per cent may not be strong enough to alleviate unemployment and poverty levels.
A key problem in the region is scarce access to credit, as banks deal with the legacy of the crisis and a large stock of non-performing loans. The EBRD is working with its partners, within the framework of the Vienna Initiative, to formulate a comprehensive response to this difficult problem.
Taking a wider perspective, what needs to be done more fundamentally is to re-energise the reform process and develop a sustainable growth model. I suggest a four-pronged approach, focusing on the four “I’s”:
Integration: One piece of good news is that regional integration is becoming a reality. In regions like the Western Balkans integration and regional cooperation are indispensable for building trust and political stability. The existing level of regional cooperation is a valuable experience, which we would like to share with our countries of operations in other transition regions. In February this year we organised a high-level summit “Investing in the Western Balkans” at the EBRD HQ in London. The meeting brought together prime ministers from all countries in the Western Balkans region and today’s co-panellists played important roles. They were joined by business leaders as well as a few hundred existing and potential foreign investors. We successfully promoted the region as a whole as an attractive investment destination. The summit focused on the challenges of developing regional interconnectivity in transport and energy, but also started a serious dialogue – together with other international financial institutions and key stakeholders – about the priorities and the coordination of regional policies. We intend to continue and build on this process. The EBRD will organise and host a follow-up meeting in 2016. The Western Balkans summit hosted by Chancellor Merkel in Berlin in August this year gave a serious boost to regional cooperation, and I am looking forward to contributing to the next summit in Vienna next year.
Investment climate: Attracting much-needed investment in order to build a sustainable growth model requires not only a stable macroeconomy, but also further improvements in governance and the business environment. The EBRD has recently developed a new Investment Climate and Governance Initiative and is working closely with countries where it invests on improving the climate for doing business. In recent weeks I signed Memoranda of Understanding with the prime ministers of Albania and Serbia aimed at strengthening cooperation within the framework of this initiative.
Institutions: The quality of institutions, especially in the public sphere, is often the Achilles’ heel of countries in the SEE region. We know that for countries to succeed they need good-quality, inclusive institutions as well as depoliticised, stable and merit-based civil service. I hope that countries in the region will continue to address this problem, with the help of the EU and international financial institutions.
Innovation: Long-term growth for SEE countries will require firms to step up their innovative activities in the region. The EBRD recently published a report on this topic, entitled Innovation in Transition, and I hope that countries in the SEE region will find it useful and instructive. The report highlights some of the policies that governments can introduce to foster innovative activity. Some are long-term in nature, such as enhancing human capital through educational development. However, the rewards for far-sighted policies are immense.
In conclusion, I would like to emphasise that it is not only countries in the region that have to change but also international institutions like the EBRD that must be open to the needs of our clients and ready to adapt as necessary. I am personally committed to working with other international financial institutions, within the framework of the “new multilateralism” approach, to improve our coordination and maximise our joint efforts for the good of the people in the region.