The EBRD’s Annual Meeting in Kiev
2 June 2008
Read highlights from the European Bank for Reconstruction and Development's (EBRD) Annual Meeting, held last month in Kiev, Ukraine.
During the European Bank for Reconstruction and Development (EBRD) Annual Meeting, May 18-19 in Kiev, the attention of most participants was focused on the passing of the torch from outgoing President Jean Lemierre to a new President, former German Deputy Finance Minister Thomas Mirow. Mirow’s appointment, which was predetermined when major European Union (EU) countries coalesced behind his candidacy, was approved by the Board of Governors and will take effect July 3.
In his remarks at a press conference, Mirow gave little evidence of significant changes in the Bank’s direction. Instead, he spoke about orienting the Bank’s work to respond to major new challenges, including soaring oil and food prices and slowing economic growth in EBRD region of operations. In response to a question Mirow confirmed that EBRD is scheduled to review its mission and operation in 2010 (when the Capital Resources Review is scheduled) and that he would be open to moving the review forward.
Has the transition process in the region proceeded far enough to make the Bank irrelevant? Not surprisingly, Mirow did not address this and other fundamental questions about the EBRD's future.The Australian Government recently announced its intention to leave EBRD in 2010 on the ground that Bank has nearly reached its mission. 2010 will also mark the “graduation” of seven Eastern European countries from EBRD lending programs, following the path taken last year by the Czech Republic. The EBRD stops investing in countries once they are able to attract sufficient private sector investments.
Should the Bank invest more in Russia and Central Asia? In a separate interview, Mirow acknowledged that, as a German official, he considered Russia important as an oil and gas supplier to Europe, but he gave no indication that he would fundamentally change the Bank’s lending priorities. (Emerging Markets, May 19, 2008).
Mirow confirmed Germany’s support for Turkey’s application to become a country of Banks operations. Some members, including the United States, have raised concerns about the potential dilution of the Bank’s focus on facilitating the transition of post-communist countries to market economies and democratic societies. During the annual meeting EBRD’s Board of Directors agreed to review Turkey’s recent application to become EBRD’s country of operation and make recommendations to the Governors this September. The Board of Governors intends to make a decision regarding Turkey application by the end of October of this year.
In another decision, the Board of Governors decided on the allocation of EBRD’s €1.1 billion net revenues from 2007. The Board decided to allocate 80% of the revenue (approximately 880 million euros) to the Bank’s reserve fund to strengthen the Bank, allowing it to take more risk, and sustain current investment levels in the region. EBRD’s current annual investment in the region is almost €5.8 billion. Roughly 10 percent from the 2007 revenue were dedicated to a Shareholder Fund designed to strengthen Bank’s activities in region’s poorest countries. The remaining €135 million will finance the New Safe Confinement - protective structure over Chernobyl’s exploded reactor, and a new interim storage facility for spent nuclear fuel.
In their dialogue with non-governmental organizations, EBRD officials, including outgoing President Jean Lemierre, entertained more critical questions about the Bank’s operations. Are EBRD’s efforts to facilitate the transition process making life better for people in the region? NGO participants cited recent surveys that suggest that most people in the region think that they are worse off than under the old communist regime. Lemierre responded that the transition process is necessarily “painful,” and admitted that he is “frustrated” that, although the transition helps parts of society, it has a negative impact on some people.
Why can’t the EBRD do a better job of monitoring its projects and ensuring that they have a better success rate? It was noted that even the EBRD’s evaluation statistics suggest that a majority of the projects fail to achieve a satisfactory rating. Lemierre agreed that the EBRD needs to do a better job of monitoring and informing the public of both achievements and shortcomings of its projects.
Why does the EBRD appear to be reinforcing national energy policies in the region that promote carbon-intensive and nuclear based technologies? Lemierre and other Bank officials defended EBRD policies, citing in particular EBRD financing of energy efficiency in the region. Although some national governments are out of step, they suggested, the EBRD was contributing to better energy policies.
Lemierre praised the work of NGOs, saying that their questions and criticisms make Bank officials work harder and better. There will certainly be more hard questions and criticisms for his successor.
Additional Information
The Farewell Party... The Joke... The Unbearable Lightness of Detail, CEE Bankwatch, May 19, 2008 (CEE Bankwatch website)
EBRD Annual Meeting Press Conference, EBRD Press Conference transcript, May 19, 2008 (EBRD website)