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. Last Updated: 07/27/2016

EDITORIAL: New EBRD President Bullish on Region




The previous president of the European Bank for Reconstruction and Development started work in the wake of the August 1998 financial crisis. I joined the bank this summer faced not by crisis but by the very real prospect that growth this year will return to all 26 countries in which the EBRD operates f the first time that the whole region has experienced growth since before 1989.


I am, of course, pleased by the slightly calmer conditions. But, having been here for three weeks now, it is clear to me that the challenges facing the region and the bank remain highly significant.


Since being confirmed as the EBRD's president in May, I have listened to staff, shareholders, government officials and, perhaps most importantly, clients. Even if I do not have all of the answers about the continuing transformation of Central and Eastern Europe and the Commonwealth of Independent States f and about the role that the EBRD will play in the region f I think I can reasonably offer some perspective on the work that lies aheadof us.


One basic tenet is clear: The bank must continue to promote the transition to a market economy in all of its countries of operations that embrace democratic principles. In Central Europe, the EBRD's work on the municipal level is breaking new ground each day. In Central Asia, the bank is focusing increasingly on the private sector, while continuing to help mobilize private capital for infrastructure projects. And in Southeastern Europe, a region set back by war last year, the EBRD has been playing a leading role in economic recovery.


Over time, there may well evolve a natural progression toward "the East" as the EBRD fulfills its mandate in the more advanced countries. This will be a gradual process that will not involve any immediate shifting of assets by the EBRD from one region to another.


Of course, Russia will continue to play a pivotal role at the EBRD. It is a big country with big needs. The EBRD remained engaged during the crisis in August 1998 and during its aftermath f a clear demonstration of the EBRD's strength and commitment. Now I will certainly want to see our level of commitment in Russia increase over the next few years.


Russia matters to the transition of all Eastern Europe. Indeed, there are scant prospects for peace and prosperity in the region without a prosperous and stable Russia. This is a market of 150 million people with an educated labor force and abundant natural resources.


What's more, our own experience on the ground proves that it is possible to find projects that not only make sense in terms of promoting transition, but that are profitable as well.


And we see some very good signals coming from Russia. The reform program outlined by President Vladimir Putin is promising; implementation is now the key issue.


The EBRD stands ready to play a constructive role. Two things have become clear to me in my short time at the bank. One is that the bank is unique. The other is that it is strong.


No other institution combines a public mandate and public capital with private sector project finance as its main instrument. Its mandate has both a political and an economic dimension. By working with local businesses and entrepreneurs, the EBRD promotes growth from the ground up, cultivating a market economy from the roots.


And the EBRD is strong in four ways. First, it has been through the Russia crisis. That has demonstrated the ability of the bank to act. And institutions, like men, are judged by their deeds, not words.


Second, the Bank's volume of business is healthy and increasing.


Third, the bank has a clear strategy, which was updated last year. It remains a valid blueprint for the period ahead, focussing on the banking sector, small and medium-sized enterprises, infrastructure, enterprise restructuring and policy dialogue.


We will fine-tune as necessary, of course, but I see no reason why we should reopen the strategic debate.


Finally, the bank is guided by a board, management team and staff that have extensive experience and a fine reputation.


If the first 10 years of transition in this country have taught us anything, it is the significance of the investment climate f the way a country's laws, regulations and other relevant public and private institutions affect investment. A strong investment climate reflects a commitment to transparency and the fair and equal treatment of all investors. Without it, small businesses cannot survive and entry by new enterprises and exit by noncompetitive enterprises are delayed. We need to support entrepreneurs because they are the lifeblood of an economy; they provide new ideas and stimulate new momentum.


A strong investment climate will also encourage investors, both foreign and domestic. Foreign investors have a special role to play. Their money f especially if it is directed to roads, railways and the restructuring of large industrial companies left over from communist days f can relieve the often severe strain on public finances.


Even more importantly, it can provide a helpful demonstration to other local businesses, because the money comes bundled with know-how, technical and management skills.


Next year the EBRD will celebrate its 10th anniversary. In 2001, it will be a more experienced and greatly matured institution that has made a significant difference to the transition in this area of the world, turning the business ideas of thousands of managers and entrepreneurs f for example, the ideas of bakers in Bulgaria, shop owners in Russia and steel plant owners in Kazakhstan f into reality. But there are still thousands more to be helped over the next 10 years.


We are not alone in this effort. We are part of a team of international financial institutions f such as the World Bank, the European Investment Bank and the International Financial Corporation f that together are making a tremendous difference in the region. The EBRD is certainly ready to deepen this cooperation and ensure we all continue to play our unique roles in tune with each other.


There is no blueprint for how transition should work. Instead, we are f together with the countries in which we operate f defining each and every day the rulebook that scholars will look back on in time and analyze.


Over the first 10 years of transition, we have redefined history. And, although we don't perhaps realize it just yet, we are already defining tomorrow's history.


Jean Lemierre is president of the European Bank for Reconstruction and Development. He contributed this comment to The Moscow Times.