Annual Meeting 2006 closing statement

Closing address by Jean Lemierre, President of the EBRD

Annual Meeting of the Board of Governors

London, 22 May 2006

THE PRESIDENT: I will not make lengthy comments, but I will make a few remarks on important matters you have raised. I have listened very carefully to you, Governors, and to your comments on the Bank, what we are doing and what we intend to do. 

First, let me refer to policy comments on priorities by Governors representing countries of operations. I will not go into detail, but I would like to say that I have listened carefully to them. They have given very good advice and made valuable remarks about their countries, their expectations and how we should work with them. I would like to thank those Governors for that advice, which I will use in managing the Bank.

My second remark concerns endorsement – and the strong endorsement by you of the strategy for the years to come. There were three main points that go beyond endorsement. The first relates to the EU8 countries. A strong view has been taken on graduation. We have all taken note of the point made by the Governor for the Czech Republic that his country intends to engage in discussion with the Bank’s management about graduation in 2007. We have also taken note of the intentions of many EU8 countries to graduate before 2010. I am sure there will be further discussions, but that is very clear.

I wish to stress here that we need to be clear on the point made by many Governors that the Bank’s graduation policy will be fully respected for the EU8 countries. Graduation is an important process, and the clear indications given by the graduation policy will be respected.

The second point you raised on the strategy concerns moving east and south-east. You made two comments. The first was that we should move, that we should go, and that is good. The second was:  do not be weak on integrity; do not be weak on transition impact; do not be weak on the environment; promote policy dialogue; and respect Article 1. This guidance is important to the Board of Directors and to management. You can be sure that we shall try to be relevant and adapt the policies and tools of the Bank to the situation of individual countries and their stage of transition. But we have very high standards and we shall stick to them. I will work with the Board on ways of doing this in an efficient and relevant way. We shall continue to operate efficiently.

The third point you have made on strategy concerns the staff. I make special mention of the staff because this is going to be hard work. The staff will deliver. They are very good people. They deserve attention and they will do the job. You were right to mention the crucial importance we must attach to staff matters: to fair rewards, the mix of skills, the capacity to position people in the region, your support for a reasonable increase in the budget to enable us to attract and recruit the people we need. I fully agree with you on that, and I am grateful for the support you have given today.

The fourth point related to donors’ initiatives and cooperation. In your statements, I have heard strong endorsement and financial commitments, sometimes very precise financial commitments, to various initiatives which you consider to be priorities. We are, of course, very grateful to you for this, and for your support for such initiatives as the ETC, the Northern Dimension, the environment, the Western Balkans, and climate change and energy efficiency.

I felt there was a strong endorsement and financial commitment on the last two initiatives. That is very important for the countries concerned and for us.  We understand that we have to deliver efficiently, using your financial commitment. The message given by Commissioner Almunia and Phillipe Maystadt about cooperation with the EIB and the European Commission is a strong one.  We fully agree with that and are always exploring ways of improving cooperation.

This year, we have attained an unprecedented level of cooperation with the EIB. Working with the EU Commission and the EIB, we put in place at the beginning of the year an agreement on the implementation of EU funds in the EU8 countries. We call this initiative Jaspers. Yesterday together with the EIB I signed an agreement to create a joint carbon credit fund, using the Dutch example. I would like to express my gratitude to the Netherlands for the very strong support they gave to this initiative a few years ago. They have helped us to take the lead. We are very happy that the EIB is joining us in this common initiative and is able to address the concerns of the private sector as well.

I would like to say a word about this because it is more than just a financial initiative. It is about trust.  Indeed, the Bank and the EIB will make joint proposals to the clients they intend to finance. That is a good signal of trust and confidence between financial institutions, and is very important.

As you know, Mr Chairman, we are working on the implementation of the external mandate of the EU for the future. That will be your decision. External mandates are decided by the Council of Europe following a proposal by the Commission, but Phillipe Maystadt, the Commission and myself have been working on ways to cooperate with the implementation of these mandates.

Joint initiatives have emerged this year from the very good dialogue with Phillipe Maystadt and Commissioner Almunia. I think they are trying simply to make the best use of taxpayers’ money, bring skills together, build on the comparative advantages of the two institutions and deliver for the region.

A further remark I would like to make is on governance. You endorsed many initiatives taken by the Bank to improve its own governance. You commented on some of them and put forward proposals, and those will be studied. I would like to respond to two comments. The first is: what about the profit? The Bank is in a new situation. The Bank’s reserves are going to exceed the threshold of 10 per cent of its capital and are increasing. We need to think about what to do. I think your guidance is very clear on that point. From listening to you, your absolute priority is to continue to strengthen the financial capacity of the bank to deliver. I am very happy about this.

The EBRD is a unique institution because we take the risk on our books. We are very proud of that. Incidentally, that is what international organisations should do. We should not ask for too many sovereign guarantees because, especially when we finance the private sector and there is a failure, the people will pay and that is not legitimate. That is why we take the risk on our books. To protect the poor people of a country, we need the capacity to take risks. This is what you, the shareholders, have enabled us to do. We need to continue to be able to do this, moving east and south-east and taking more risks. We shall continue to do that under the guidance on which you have given very clear views.

Most of you have indicated that you would welcome some capacity of the Bank to take charge of and to pay for certain expenses that you have borne for a long time.  The time has come for the Bank to pay for these because they are operating expenses related to projects like TAM/BAS, law in transition, and training on procurement. Initially, these were not seen as normal operations of the Bank but they have become so. They are important to the countries, especially as we move east and south-east. We shall consider, with the Board, how they can be included in the Bank’s budget as a normal expense of the Bank.

Going further is still an open question. I have heard many ideas on this subject. We need first to remain prudent and build reserves. I shall continue discussions with the Board on all the ideas you have put forward, and we shall report back to you.

The second point I would like to make on the governance question relates to the Board of Directors. I heard various remarks about the Board. It is not up to me to respond to those remarks today but I would like to express a strong personal view. I believe that a resident Board is a strength of any institution and not a weakness, and that it is worth having a resident Board.  I make this point to you, Governors. I know that in the past there has been a debate on this subject, but it is a strength. We do a difficult job. We engage in policy dialogue and we take risks. You bring strength to the management of the Bank through your Directors and the dialogue we have in the Bank with the Board of Directors. 

I would always be the first to insist on the importance of a resident Board and that the Board should not be undermined. If it is undermined, the Bank and our capacity to deliver will be undermined. This is an important question of governance. I would like to take this opportunity to thank my colleagues on the Board of Directors for their contribution to the Bank, for the diversity of their views and for their capacity to create consensus. This is exactly the way we need to work to have a strong institution.

I would like to conclude these brief remarks by expressing my gratitude to the British authorities for their support for this meeting once again and for their generous hospitality. I look forward to welcoming you in Kazan next year. Kazan is a symbolic choice that was proposed by President Putin who wishes to have a meeting of the EBRD in Russia and in the regions. Kazan is a symbolic choice for us and the Bank’s Board. The Bank is moving east and going into the regions. It is going to people who want to improve the situation and work hard to achieve very good results. It is very important that you come to Kazan next year where we shall speak about Russia and all the challenges we face as we move east and south-east.

As we come to the very end of the meeting, I would like to remind you of the strong commitment that Mr Zalm and Mr Hilary Benn gave this morning in their opening remarks. Moving east and south-east for me and the Bank’s management means doing more to ensure that more deprived people further south and further east can benefit from the reforms promoted by governments, from the investments that the Bank can promote and from our skills. That is really our challenge. We shall deliver that thanks to the consensus you have expressed today. It is important to me that we have a strong consensus on our strategic priorities. It is a great strength for the institution and the staff of the Bank.

Finally, I would like to thank you for the guidance and vision you have offered for the years to come. Thanks to the skills of the staff, we shall deliver once more. Thank you.