Annual Meeting 2003

Opening address by Jean Lemierre, President of the EBRD

Twelfth Annual Meeting of the EBRD Board of Governors
Tashkent, Uzbekistan
4 May 2003

Presidents, Governors, Ladies and Gentlemen,

Welcome to this Annual Meeting. And welcome to Central Asia.

We are in a region which needs our attention, and our sensitivity to its history and character. The countries of Central Asia are among the least advanced of the countries of operation of the Bank, and have some of the severest poverty.

But they have great potential.

Uzbekistan has the capacity for far more investment ...

Here in Uzbekistan, here in Central Asia, two lessons after 12 years of experience in transition have specific relevance to unlock that potential:

• Prosperity comes from commitment to open markets and democratic principles;

• And close relations with neighbours drive progress at home

I am grateful to President Karimov for opening his country for our discussions of these key elements of investment climate. Uzbekistan has the capacity for far more investment than it has today, and greater economic development.

Political benchmarks first ... Then, economic benchmarks ...

The EBRD could invest much more but only if Uzbekistan takes some fundamental steps to improve the investment climate. We understand that it may take time, but there must be a clear direction. And to help, the EBRD has recently set some benchmarks for Uzbekistan.

Political benchmarks first: political liberty, freedom of the press and for NGOs. Human rights must be respected. Then, economic benchmarks: reducing trade barriers, ending foreign currency controls, and developing a private sector.

We have listened to your statement and to your words, President Karimov, with expectation. They were strong words, about democracy, about the private sector, about the role of NGOs. They were strong words, but some of us may have expected words on human rights and on economic progress. It could constitute a clear step forward to make clear that Uzbekistan is a land of respect for human rights and that Uzbekistan can reach eventual agreement with the IMF. Only these words and commitments and implementation of these commitments can help Uzbekistan to realise its potential. The Board of the Bank has taken the decision to review progress in one year, in close coordination with the OSCE and the IMF. It is clear for us that investors will help Uzbekistan to grow its activities only if these points are met. I must say on a very personal basis that I have got some comfort about the engagement of civil society here in Uzbekistan after a very interesting forum that took place this morning in the context of the Annual Meeting of the Bank. There were exchanges of views, discussions and willingness to understand the situation and to make progress. That must be understood as an asset towards making necessary changes in Uzbekistan.

But Uzbekistan cannot make progress in isolation. It cannot progress without its neighbours; and, likewise, their progress will depend on Uzbekistan.

The EBRD is willing and eager to help ...

Each of the countries of Central Asia is different: some have natural resources, some are very poor. Political progress is uneven. Some are more successful in attracting investment by having a better business climate than others. But none can make sustainable progress without the others.

All these countries are concerned by what comes across their borders. We can understand that they are vigilant of terrorism from abroad. The only cross-border trade today may be drugs which can ruin societies and economies. And health standards vary over border lines.

Certainly, borders can pose threats. But in Central Asia the greatest threat of all is poverty. Open economies and societies, cross-border trade, exchange, and free flow of people and goods across borders - this is what will drive growth and combat poverty.

The challenge is to make compatible what seem to be incompatible goals of openness and security. As a European I can tell you that we have already been through this and we have learned the hard way: openness is the only solution.

There are many governments, international institutions, NGOs, willing to support Central Asia with specific measures to suppress border-related crime and corruption -- measures such as training border guards and customs officials and improving the public service and judicial system.

The EBRD is willing and eager to help. The EBRD can be an effective tool for you to fight poverty. And we have tools: financing small business to create jobs and build democracy; special programmes to provide financing to farmers and to encourage trade through guarantees for import and export.

We work with the ADB to develop infrastructure that will help trade, especially between countries. We are grateful to donor agencies which have established the Central Asia Risk Sharing Special Fund that allows the Bank to make higher investments; and governments which support capacity building. The EBRD is ready to devote more resources to achieve quicker results. We are reviewing the tools we use.

We can be more efficient with a better coordination among international institutions and a harmonisation of our processes to reduce the cost of the projects. And our efforts would be more effective with parallel efforts by the international community -- following the lead taken by many of you in setting a priority on the CIS 7 countries. But in order for these efforts to work well, you, the Presidents of Central Asia, must provide the political leadership that attracts the investors to come. Notably, there must be respect of the rule of law, predictability of decisions, improved governance. I feel that together we have taken an encouraging step towards these shared goals, just today here in Tashkent.

... the Presidents of Central Asia, must provide the political leadership that attracts the investors to come ...

President Karimov invited the heads of state of Uzbekistan's neighbours from Central Asia to the Caucasus to come to Tashkent. Five Heads of State joined Ms Short and myself for a discussion about flow of goods and ideas across borders. This is the kind of discussion that brings each of these countries closer together. And I am confident there is going to be an active follow-up of these discussions.

There was progress in transition in 2002 ... But there is still much more need to reform ...

When I visited a small biscuit factory here and when I met with many local NGOs yesterday I saw the evidence that there is no sound economy without respect for people and links with other countries.

These are the lessons of transition -- lessons built on the experience of the whole region where the EBRD operates. They are at the core of its strength in 2002.

Because there was more political predictability and more reforms have been implemented, economic growth in the region exceeded growth in the world as a whole at 3.7 per cent. It is forecast to grow further in 2003. There was progress in transition in 2002, especially among the countries with the poorest investment climate. But there is still much more need to reform and to soundly implement reforms, since almost half the countries stopped or slowed the pace of new reforms last year.

Across the EBRD region, promoting the rule of law and fighting against corruption remain high on the agenda. Anti-terrorism measures and steps to suppress money-laundering have been undertaken in many countries. But each country has set its own priorities and taken a distinct approach.

Eight countries of Central Europe and the Baltics were invited last December to join the European Union in 2004. This will confirm a new political status that recognizes how much they have achieved in promoting transition. But transition will continue well past the date of accession and the Bank will continue to support that transition. Our strategies will adapt to their new needs: investment in middle-sized businesses, financing the real economy, improvement of municipal services.

Russia is a very important partner of the region, not only for its size and its economic weight. Its growth is a driving force for many countries. Recent events in the Balkans -- with the assassination of Prime Minister Djinjic -- show how fragile transition can be. And among all the countries of the region, trade and investment, linkages among all the countries of the region, are growing.

The founders of the EBRD understood this priority. This Bank was established to nurture stability through shared values between neighbouring countries. The building of relationships between the enlarged EU and the other countries of the east and southeast is a challenge and an opportunity for which the EBRD is well prepared.

Governors, in 2002 the investments of your Bank have reached 3.9 billion Euro and have attracted a total of 8.8 billion Euro which represents more than a quarter of the foreign direct investment of the region. In 2002 we have taken stock of the Bank's role in financing sustainable development.

Many projects put a value on, and preserve, environmental resources. The efforts to promote energy efficiency have been enhanced. And the restructuring of the energy sector, such as Russia is undertaking, is another significant contribution.

Sustainability is also achieved when nuclear facilities are decommissioned or made safer. You have provided us with 1.6 billion Euro to manage an extensive programme of nuclear safety. Sustainability also means more attention to the social dimension: we need better understanding of the social impact of our projects. Tariffs for public utilities must be compatible with the means of the poorest. And it means enhanced cooperation with the other international financial institutions to mitigate the social consequences of the transition process.

The EBRD's small business activity is vibrant and contributes to sustainability, as well as democracy. Last year alone we invested more than half a billion Euro for 124,000 loans to small businesses.

All the Bank's activities will be achieved best if we constantly improve our own governance and transparency to facilitate a better dialogue with communities.

In the past year, after wide consultation, the Bank took important new initiatives by creating a new mechanism to address complaints to the EBRD. And there were significant revisions to two more policies for transparency and disclosure.

... we are here for an Annual Meeting of openness, dialogue, progress, criticism - because this is the best way to make progress ...

You, Governors, have designed the strategy that has helped to bring so much progress for the region.

You have given us the road map, in medium-term strategy, for furthering transition in all the countries of the region. Donor countries and communities bring a lot to our action by their generous commitment. The Board, the management, and the staff of the Bank implement this strategy in close dialogue with the countries of the region, the business community, both domestic and foreign, the NGOs.

Governors, there were many questions about your decision to hold the Annual Meeting of the Bank in 2003 in Tashkent. This decision was taken in 1999 and, rightly, there were questions. Ms Short is right, we are here for an Annual Meeting of openness, dialogue, progress, criticism - because this is the best way to make progress. I hope this Meeting, by its clarity and the quality of views and visions, will help all countries of the region, will help us, and above all will help Central Asia and Uzbekistan to make a difference by being open and attractive for investors. All of us here need to have a vision of shared values and fluid borders because this is the only vision that can bring a sure way to a prosperous future for the people of the region.

Thank you.