EBRD
Reiterates Mission Commitment
at AGM
Priority for SMEs, Corporate
Sector & Private Investment
The
European Bank for Reconstruction
and Development (EBRD) has reiterated
its commitment to the development
of small and medium enterprises
(SMEs), the corporate sector,
with a special emphasis on private
investment. This affirmation
has found an expression at the
Bank's annual general meeting
held recently in Kazan in the
Tartarstan province of Russia.
Following are the excerpts of
EBRD President Jean Lemierre's
speeches both at the opening
and closing sessions of the
meeting, where Bank's board
of directors debated various
developmental issues.
The Bank's Mission
On the mission of the Bank,
there is very strong continuing
support for banking activity,
SMEs, the corporate sector and
the development of the private
sector everywhere. I would say
that there are three areas on
which there is probably a stronger
emphasis than in previous years.
The first is, of course, energy
efficiency and the way energy
efficiency contributes to the
anti-global warming process.
The second is infrastructure.
I have heard many strong statements
about infrastructure and the
private sector and the need
for change. I will add a third
point that I heard from many
of you, and that is power. Clearly,
growth in the region creates
a need for better infrastructure
and better power generation
to supply the infrastructure
needed for economies to continue
to grow.
From the mission point of view,
both geographically and on content,
we should bring in the private
sector even more to finance
all these challenges, without
of course forgetting the pure
private sector, the corporates,
SMEs and the way we do it.
EBRD Investment in Russia
Coming to Tatarstan was an important
decision for the EBRD. It represents
both the frontier and the heartland
of Russia, and is a symbol of
the mix of cultures and religions
and of a thriving society driving
a growing economy.
It represents the future of
Russia and the future of the
EBRD as we focus our investments
more and more on the vast country
outside Russia's two biggest
cities.
In all the countries where we
work, the EBRD is financing
at the frontier.
We are focusing on the geographical
areas that most need investment
to accelerate their transition
to market economies, and on
new areas of activity to meet
the new needs in all our countries
of operations.
In Russia, that means investing
in
• infrastructure in transportation
and in power sector projects
in which the Bank has already
invested -- €1 billion
to modernise and upgrade it
• financing banks to finance
industries
• small businesses and
mortgages for families, and
equity in supermarkets
• a discount airline a
first in Russia
• Russian multinational
high-tech company
• and helping cities across
Russia to provide better municipal
services such as trams and clean
water and district heating to
save energy.
The EBRD doubled the size and
expanded the scope of its staff
in Russia last year, with new
offices in cities such as Yekaterinberg,
Krasnoyarsk, Samara and Rostov.
The EBRD plans a presence in
all the federal regions of Russia.
Our business in Russia doubled
to almost €2 billion, representing
38 per cent of the Bank's 2006
business volume.
This is all part of the vision
shared by the Russian authorities
and the EBRD: a vision of working
with the private sector to diversify
and grow.
Oil and gas are producing enormous
wealth, and the government is
preserving that wealth wisely
by investing it for future generations;
but the Russian economy must
strengthen its industrial force
and diversify to build economic
strength in every sector.
Investment in infrastructure
will be crucial to support industries
that will create jobs. With
foreign or Russian investors;
strong corporate governance
will be a key to sustainable
growth.
Russia has made huge economic
strides by launching a transition
to a democratic market economy.
Russia has opened to competition
and further improvement of state
institutions and fair transparent
regulation will certainly accelerate
economic success.
All of this flows from the choice
Russia made 15 years ago to
adopt the principles of a democratic
market economy. And that choice
has affected the way the Russian
people think too.
Russians Stake their Future
on Business and Industry
The EBRD is carrying out research
to understand better how ordinary
Russians right across the country
see their lives and aspirations
for the future.
One clear finding is that Russians
do not want their country to
be dependent on sale of raw
natural resources.
They see their future as building
on the best of their past --
through industries that depend
on engineering and technical
skills, trained manpower and
ability to market and trade,
as well as raw materials.
Russians believe their country
has great economic potential
through industry.
If they have a universal concern,
it is the state of their own
surroundings.
Government surveys show that
66 per cent of Russians want
better housing, and our own
focus group research found that
in cities big and small, rich
and poor, everyone wants better
municipal services.
The economic progress of the
country can be read in the finding
that urban Russians certainly
do not feel deprived of the
basics of life. But they do
want more access to better consumer
products. This is a picture
of an emerging middle class.
What people fear is that they
won't have access to healthcare
and education.
What they would like is the
ability to enjoy more culture
and they want to travel to learn
and experience other environments.
These trends will shape the
development of business and
the economy of Russia.
But we learn even more: Russians
associate, 'Soviet' times with
stability and a sure future
where people could count on
the State for basic needs of
life.
But Russians associate life
today, in a market system, with
'opportunity' and 'possibilities'.
Unlike just a few years ago,
today, business is widely accepted
and entrepreneurship is increasingly
respected.
People see smaller business
not only as a way to thrive
but equally as bringing personal
freedom and independence.
Through donor funding, the EBRD
has helped more than 400,000
Russians to start small or medium-sized
businesses because, like those
entrepreneurs, the Bank sees
entrepreneurship as a stepping
stone to both prosperity and
an open society.
Entrepreneurs are able to use
their position in the economy
to support better regulation,
fight corruption and back the
political directions that give
them and their families better
lives.
That is what most Russians say
they want.
It is clear that Russia has
changed.
This country, with virtually
no tradition of a market economy,
has fundamentally adapted to
a way of life that values choice
and the freedom to pursue one's
own destiny.
The ability to choose has become
part of the definition of a
middle class, thriving through
a fair regulated market and
anchored in democracy.
As so many countries have learned,
the period of adaptation can
be difficult, but the combination
of open societies with open
markets will clearly bring sustainable
prosperity.
In today's connected world,
open societies and open markets
are an inevitable combination.
Integration of Russia with the
World Economy
The EBRD shares another great
vision with the policymakers
of Russia: Russia needs to be
firmly integrated into the world
economy in order to attract
investment and build its own
economy.
It will require partnerships
with foreign firms to build
the infrastructure and industries
Russia needs to develop.
Membership in the World Trade
Organisation will be a crucial
step for Russia linking into
the global economy.
The launch of the process to
join the Organisation for Economic
Cooperation and Development
offers a crucial dimension of
economic and social policy development
that will tighten international
ties and underpin understanding.
It is a shared duty for us all
to support Russia's efforts
to lock in to global standards
and practices through the international
community and through investment.
Russia, rightly, sees foreign
investment as a two-way process.
Russia is seeking the foreign
financing and know-how that
will accelerate its own development.
At the same time, Russian firms
are becoming real multinational
enterprises and it is legitimate
for them to turn to investment
abroad.
This is a progression that is
at the heart of all the international
financial institutions, “that
trade and investment bind countries
into mutual cooperation, understanding
and stability, permanently and
pragmatically.”
That is the story of the EBRD
region.
EBRD Countries' Progress
Some of the EBRD's 29 countries
of operations have made such
progress that they will no longer
need the kind of financing that
the EBRD provides.
Ten EBRD countries made such
political and economic progress
that they became members of
the European Union.
The EBRD and its Board have
taken the view that eight of
those new EU countries will
have completed their transition
to a full market economy by
2010.
After each country 'graduates'
out of EBRD operations, beginning
with the Czech Republic this
year, the EBRD will no longer
do new business, but will turn
to working with investors from
those countries to invest in
EBRD countries further east.
Focus for the Future
The EBRD will do more work in
Russia and in south-eastern
Europe, Ukraine, Kazakhstan
and the least advanced countries
of the Caucasus and Central
Asia.
Across these countries, the
economy grew by a robust 6.8
per cent last year, driven by
strong domestic demand stimulated
by real increases in credit
and wages.
Expansion is forecast to continue,
at 6.3 per cent for the region
and almost 7 per cent for the
CIS countries, in 2007.
This healthy economic environment
has helped to draw record amounts
of foreign direct investment
to the region, with a sharp
increase to $65 billion.
This is the backdrop for the
Bank's record business volume
last year, and for our careful
strategic planning for where
to direct the EBRD's resources.
Over the past three years, the
Bank has increased four-fold
its financing to the poorest
countries of the Early Transition
Countries Initiative, including
in Mongolia, which became a
country of operations in 2006.
There was a parallel push to
expand operations in south-eastern
Europe through the donor-funded
Western Balkans Initiative.
In these countries, the Bank
takes on more risk and devotes
more resources to project preparation
with the help of donor countries.
The Bank financed 80 new ETC
projects last year totalling
€ 290 million, and the
biggest share of all Bank commitments
last year was in the early and
intermediate countries.
Across the region, there is
a tremendous opportunity for
adding to energy supply by avoiding
waste of energy.
The EBRD took an early lead
in helping countries realize
that opportunity by setting
ambitious goals to promote sustainable
energy, especially through energy
efficiency improvements as part
of our financing to industries.
And the Bank is working with
municipalities to save energy,
in transportation, district
heating and efficient housing.
Here, at the Annual Meeting
in Kazan, we have enriched that
discussion with regional governors
from Russia and mayors from
the EBRD region who are here.
In energy-rich countries and
energy-importers alike, the
economics, environment and energy
supply agendas coincide, making
promotion of sustainable energy
a top priority for the EBRD.
As the Bank moves into more
challenging investment environments,
20 percent of volume is now
in the form of equity, which
is a vehicle for setting high
standards of business practice
and corporate governance through
participation on the boards
of companies.
Financial institutions drive
the real economy and the EBRD
has developed forms of financing
to match the evolving needs,
from more mortgage and consumer
finance lending for the growing
middle class to lending in local
currencies for municipalities
trying to avoid exchange rate
risk.
The EBRD has taken a prominent
role in helping to deepen and
strengthen capital markets to
open competition through transparency
and fair regulation.
Underpinned by a new Energy
Policy, the Bank has put sound
sustainable practice at the
centre of its operations.
The Bank's Environmental Policy
is being reviewed this year,
providing an opportunity for
dialogue with many interested
experts and non governmental
organisations on how the EBRD
can contribute to sustainability
that is based on environmental
protection and high social standards
such as gender balance and respect
for the rights of workers and
ethnic communities.
This is the policy that underpins
the EBRD priority of supporting
and engaging with an active
and dynamic civil society.
In total, the Bank committed
€4.9 billion last year
to 301 projects in many sectors,
using many approaches to accelerate
transition to a market economy.
Due to the expertise and skill
of the staff, and to propitious
market conditions, profits rose
to €2.4 billion in 2006.
