Enhancing good governance with donor support

By Lucia Sconosciuto

Enhancing good governance with donor support

EBRD donors fund policy reform, capacity building and corporate governance assistance

Well governed economies grow faster and in a more sustainable way. At a national level, good governance means that better policies and more transparency can help improve a country’s business climate and build the trust necessary to attract foreign investment.

At a corporate level, following best international standards improves the management of companies. This results in reduced costs, higher standards and increased competitiveness.

The EBRD tackles both of these dimensions with policy reform and technical assistance activities supported by donors, who in 2016 cumulatively provided over €23 million for such activities in the Bank’s regions.

The United Kingdom, Italy, the Central European Initiative, Luxembourg, the Slovak Republic, the EBRD’s Ukraine Stabilisation and Sustainable Growth Multi-Donor Account, the European Union (EU) and the UN Development Programme are among the most active donors that have continued to back the EBRD’s Investment Climate and Governance Initiative.

The Initiative assists reform-minded governments in taking measures to improve the ease of doing business in their countries.

One such example is in Serbia where, with support from the UK government’s Good Governance Fund, the EBRD launched a project in 2016 to promote the use of commercial mediation in the resolution of disputes among the business community, saving them and the courts time and money.

Serbia adopted a new law on mediation in 2014 but its implementation is not complete yet and entrepreneurs still mostly rely on settling disputes in court rather than taking advantage of alternative dispute resolution mechanisms. The project is helping the Serbian authorities to train and accredit mediators.

Further activities focus on raising awareness among key actors in the business and legal communities about the benefits of commercial mediation and on cooperating with Serbia’s universities to develop mediation-related curricula in their law faculties.

In Tunisia another 2016 project, launched with funding from Korea, is helping improve the transparency and effectiveness of public procurement by developing regulations and electronic procurement tools to increase competition by engaging more local companies to sell their goods or services through more business-friendly electronic tenders.

The project is specifically helping to develop regulations for competitive online bidding based on the UN Commission on International Trade Law’s Model Law on Public Procurement, innovative electronic procurement tools and a help desk for the Tunisian eProcurement system. This will not only improve value for money and but also help to avoid corrupt practices within the procurement process.

The EBRD and the EU are also instrumental in Ukraine’s drive to reform its public administration by backing the establishment of Reform Support Teams. These teams of national and international experts started work in 2016 on the implementation of Ukraine’s reform strategy.

The direct financial impact of the work of the Business Ombudsman Council for Ukraine is equivalent to roughly 2.3 billion hryvnia (around US$ 100 million), explained Algirdas Šemeta, the Business Ombudsman, on a visit to the EBRD.

 

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The project is financed by the EBRD’s Ukraine Multi-Donor Account*, established in November 2014 to support Ukraine’s efforts to improve its business climate and return to a path of sustainable growth.

The EBRD also helps its clients improve corporate governance by supporting efficient operations, better risk management, and increased accountability and transparency. With its Legal Transition Programme, the Bank conducts rigorous corporate governance reviews and develops action plans that address companies’ governance shortcomings.

The plans are then agreed by the clients, incorporated into the contract for the loan or equity investment and their implementation is monitored as an integral part of the EBRD’s work. In turn, better governance makes our clients more attractive for other investors.

Donors support this long term value-adding approach to EBRD investments by funding advisory services targeting specific governance challenges. In 2016, for example, the Bank approved a regional programme funded by the EBRD’s Southern and Eastern Mediterranean Multi-Donor Account** to strengthen corporate governance in family-owned enterprises dealing with industry, commerce and agribusiness in preparation for investments.

As an EU candidate, Albania is harmonising its legislation with the acquis communautaire. The Bank of Albania is benefiting from the EBRD’s Legal Transition Team’s technical assistance – funded by Luxembourg – to strengthen its supervisory procedure on selected internal governance and risk management issues and align them with the legislation and practices in place in the EU.

Milica Delevic, EBRD Director, Governance and Political Affairs, said: “The need to improve the quality of both state and private sector institutions and make sure they work well together is one of the most important lessons of the Bank’s first 25 years. Our donors and partners are instrumental in making the reforms advancing transition happen.”

*The  contributors to the Ukraine Stabilisation and Sustainable Growth Multi-Donor Account are: Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Poland, Sweden, Switzerland, the United Kingdom, the United States and the European Union, the largest donor.

** The contributors to the SEMED MDA are: Australia, Finland, France, Germany, Italy, the Netherlands, Norway, Sweden, Taipei China and the United Kingdom.