Tuesday, November 13, 2007

Interview with Jean Lemierre, President, EBRD

On the sidelines of attending “The European Bank for Reconstruction and Development: Focus on Eastern and South Eastern Europe,” an event organised last week at the Parliamentary Assembly of Council of Europe, Jean Lemierre, President of the EBRD spoke to Tejinder Singh (Tito) about the EBRD’s expanding role with a new policy to go further east and south in a changing world since its inception in 1991 when communism was crumbling in central and eastern Europe and ex-soviet countries needed support to nurture a new private sector in a democratic environment.

Q: With a “no-dividend” policy for 2006 although mentioning record profits, how strong is the EBRD position to expand its business?

A: The decision to put all of the profits for 2006 into reserves was fully consistent with the new strategy for the bank unveiled in May 2006 which foresees a shift in the bank’s activities further east and south and the assumption of greater risks. The bank needs these reserves in order to prepare for possible greater risks as we increasingly step up the pace of our investments, especially in the former Soviet Union and in the Balkans. Business volume in 2006 was 4.9 billion Euro and we expect roughly the same magnitude of investment in 2007.

Q: What is your opinion on how best to use the profits?

A: The final decision on the use of the profits will ultimately be taken by our shareholders but the debate on how to allocate income started at our Annual Meeting in Kazan this year. This issue needs a thorough debate and the discussions will continue until our next Annual Meeting in Kiev in 2008. There are three options under consideration. In addition to adding further to reserves there will be the option of using funds to support the bank’s activities, in areas such as providing technical assistance, training, supporting nuclear decommissioning projects and also supporting the bank’s activities in promoting energy efficiency. And then there is the option of returning some of the profits to the shareholders. The shareholders will take this decision.

Q: You are extending your role to Balkans and the Commonwealth of Independent States. How far you ready to go in Mediterranean other than EU members?

A: An expansion outside of the current countries of operation is not under discussion.

Q: How soft are the EBRD loans and what kinds of activities are being financed?

A: Not soft at all. The EBRD does not provide soft loans. If it did it would be competing with the private sector which is precisely what the Bank does not do. The bank invests either with loans or with equity stakes, usually in projects where the commercial sector is either not prepared to go at all or not prepared to invest alone. By investing in such projects the EBRD provides what we call “additionality.” The projects are aimed at promoting the process of economic transition, whether by working to improve corporate governance, possibly by taking a seat on a company board, or by helping to develop management or to support efforts to cut energy costs via energy efficiency measures. The bank is active across all sectors. Development of a vibrant financial sector is particularly important to the development of a market economy overall. But we are also active in working on infrastructure projects to help remove the bottlenecks that are obstacles to economic development. And we support private sector industry, either by direct loans or by loans to banks which then act as intermediaries and lend on to micro and small and medium enterprises.

Q: How much does politics play a role in loan dispensing? Does EBRD give any consideration to human rights records of the countries?

A: Politics and human rights do play a role. This is stipulated in Article 1 of the bank’s founding treaty which says the Bank will foster the transition towards open market-oriented economies and promote private and entrepreneurial initiative in countries “committed to and applying the principles of multiparty democracy, pluralism and market economics.” Where this is an issue we restrict our activities largely to investments purely in the private sector. And we also use policy dialogue to help produce positive developments.

Q: What is your vision for EBRD in coming years?

A: The vision is to carry out our role in supporting the further transformation of the economies in the areas where we are active; To see more countries in Europe preparing the way to accession to the European Union and benefiting from that membership; To see other countries increasingly becoming an integral part of the global economy, by joining the World Trade Organisation and playing as an equal partner in the global economic arena; To see in oil and gas rich countries a greater diversification of the economy to build for a sustainable future.
The process of transition has been hard. The collapse of the previous system was a huge shock. The pain endured by many people was great. The vision is also to see all people in the region ultimately benefiting from this huge challenge.

Interview with: Jean Lemierre taken at the end of June 2007 for New Europe, the European Weekly - Issue : 736

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