Annual Meeting 2007 closing statement

Closing address by Jean Lemierre, President of the EBRD

Annual Meeting of the Board of Governors

Kazan, 21 May 2007

THE PRESIDENT: I have listened to you very carefully and of course I have taken note, and will make the best use of, all the remarks you have made.  Most of them are going in the same direction. That is clear guidance.

I would like to comment on four points that I have heard. The first concerns the Bank’s mission; the second income allocation; the third the way we operate; and the fourth cooperation.

On the first point – the Bank’s mission – I believe I heard a very strong endorsement of the shift in the Bank’s activities, in accordance with what you approved last year. I have heard a very strong endorsement of our activities in the regions of all the countries, and of course in Russia this is clear to you all. I agree with you that the Capital Resources Review gives a very strong indication regarding activities in the early and intermediate countries. This is a clear point of the Capital Resources Review strategy and it is a point you have reminded us of clearly today. I fully share with you that view; the management of the Bank is fully committed to this. In other words: more activities, more transition impact, and use the better conditions in the market and in many countries to support the transition process and quickly to go further. 

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.

The second point concerns income allocation. Many of you have said that we should take this as a very positive question, not one to divide us, as we  move forward.  When I joined the Bank this was not the situation we were in; that was after the 1998 crisis, and there were questions at that time. Today the Bank is in a different situation, thanks to the hard work of many countries, many investors and Bank staff, and thanks to the risk you have agreed to take according to the mandate. I see a strong and overwhelming majority in favour of the allocation of income for 2006 to the reserves of the Bank in a context in which, moving east and south-east, we are taking more risks. You are encouraging us to do that, and are supporting the efforts of the Bank to increase the actions our mission calls on us to take.

I would like to say to the Governor representing Poland that the ETC and early and intermediate countries are very important to the institution. . I understand that in fact you support this and not the contrary. You want a stronger Bank to deliver this. Your “no” is a very strong support for what we are doing. If you will allow me to say this, I take that as a “yes” for this strategy. That is not a legal “yes”, I understand, but a political and managerial “yes” to deliver more in the early and intermediate countries and the ETC countries. You certainly do not want to put at risk the Bank’s capacity to deliver this.

There is a debate about the future of income allocation, and I have heard many views. The main view favours the mission-based allocation of income.  Mission-based allocation of income is capital and technical assistance. Most of you have stated this position clearly, based on prudence, taking risks, but also capacity to increase the delivery of the mission. Some are in favour of a dividend and some are not. I have heard various views. There is a debate, and we must work through the debate. Together with management, I have a strong commitment to engage with the Board of the Bank on all these options. But what I also urge is a deep sense of support for the mission we must carry out for the people of the region. We are a transition bank; we are not a commercial bank. I am clear about the fact that I am open minded about all these questions. We should bear in mind the spirit of the Bank where profit is important but transition impact is certainly the primary mission you have given the shareholders on which to deliver.

My third remark concerns a few principles governing the Bank’s actions.  Integrity is a high priority. The fight against corruption is clear. We need to make sound assessments moving east and south-east, and that can be difficult. There are debates. It is not an easy challenge, but one we have to address. There is no doubt about the point most of you have made when you said that is a key element of what we want to deliver.

A further element is the environment. We are going to review the Environmental Policy. I share the views expressed here on the importance of this. We want to increase the scope of the environmental policy to cover new questions, such as social issues, gender and ethnic communities. There are many questions to be addressed especially at a time when many Governors would like the Bank to look at large infrastructure projects. We need to do this and it is timely. Tomorrow, I will be having meetings with NGOs, as many of you have probably done. This is a good opportunity to engage with civil society about the way we operate and what we have in mind.

My fourth point relates to cooperation, on which I will refer to several issues. The first is cooperation with donors, which is important. Here in the margins of the Annual Meeting we have had some discussions with donor countries. I would like to express once again my deep gratitude for their generosity I know that for most of you there are difficult budget choices at home, but you make them to support the Bank’s mission and the various priorities you have and which we share. I think we should move forward in two directions. The first is to engage more with you donors about how to deliver. Many discussions have taken place on the way international financial organisations and donors should engage. Very interesting points were made during the donors’ meeting, especially by the United Kingdom delegation. I think we need to consider that and to work hard on these questions to improve what we are doing together. 

The second issue is income allocation. From listening to you, most of you have a very strong wish that part of the income of the Bank should finance technical assistance. Many of you finance technical assistance. We have to work together on how to set up the appropriate governance system so that we can mix, in a smart and efficient way for the Bank’s mission, on the one hand a new commitment by the institution using part of the Bank’s profits under your guidance, and on the other your own resources which, I hope, you will continue to donate for the Bank’s mission.

Another remark on cooperation concerns cooperation with other institutions.  In 2006, we had a key decision, the agreement between the Commission, the EIB and EBRD, with the blessing of the European Council, on the management of European resources in many of the Bank’s countries of operation.It is a new approach, which you welcome. We in the EBRD understand our responsibility to move forward and to implement this agreement with the EIB in the most efficient way for all the countries; that is very important. We need to work hard to deliver it, and a start has already been made. The view of the management of the Bank is that it is a priority .

We are engaging more in many new areas, especially with our colleagues in the Asian Development Bank. Here I have had fresh discussions on this. We have explored fresh cooperation and have agreed to work together in a new environment in which the mix of private sector and public sector money is changing. I think that this dimension of cooperation among institutions – and I have not mentioned many other institutions with which we work, such as the NIB, the World Bank and the IFC – is well known and well established, but I see new areas of cooperation especially with the EIB.

Having said that, I did not answer all the points that you made, but my colleagues and I have listened to you and I have tried to capture the main points. We have a very strong commitment to deliver. This is the tradition of the EBRD. We try to stick to our words. We are committed to the mission and to the debates that we have with you. We need your guidance to provide the elements necessary to obtain a clear vision about what we are going to do.

I would like to thank the Board of Directors of the Bank. The Board of Directors is very committed. The results that we have achieved are attributable to the Board. I say to you, the Governors, that the Board of the Directors is an important institution. I will not enter the debate about whether it is too costly, on which some of you have remarked. The Board’s efficiency is crucial to the management of the mission and engages with the management of the institution, which is important and good; and that is the way in which we need to continue to work together. This has always been the strong tradition of the Bank and we need to continue to operate in this way.

I would like to thank the Russian Federation for its hospitality here. It has been a very good initiative to come to Kazan. I thank the Tatar authorities and the authorities of Kazan. Please express our gratitude to them for the excellent preparation, which has been undertaken in a very friendly and positive way. We have all felt that we have been in a dynamic city, a dynamic region, with people who are willing to move forward, and this is very strong encouragement to all Governors and business people to engage in and continue the work.

Mr Chairman, I also express my gratitude to you. You have helped the Board of Governors to provide guidance to the management of the Bank. Thank you to all of you. (Applause)