THE PRESIDENT* – Thank you, Ms Fataliyeva. Dear colleagues, please do not over-run the speaking time limit of three minutes. I call Mr Dragasakis who will speak on behalf of the Group of the Unified European Left.
- Mr DRAGASAKIS (Greece) – My group welcomes the report, which provides a comprehensive overview of the Bank’s activities. The rapporteur, Mr Elzinga, and the Committee on Political Affairs and Democracy deserve congratulations on their work.
Taking into account the facts presented in the report, we agree with the need for the EBRD to continue its funding activities in the countries of eastern and central Europe. We welcome the reinforcement of the EBRD’s presence in the western Balkans, and we consider the expansion of its activities in the southern and eastern Mediterranean region very positive. However, countries with advanced, as they are called, economies in Europe – even in the eurozone – face the same dangers as those mentioned in this report. Apart from Greece, which is already plunged into a catastrophic situation, the entire European south faces the dangers of recession, stagnation and high unemployment. Those problems are becoming even more acute because of persistent capital flight from southern Europe, as Mr Elzinga said. Furthermore, some countries have to cope with massive immigration flows that exceed their capabilities.
For all those reasons, and for other reasons, we should examine the possibility of expanding further the EBRD’s funding activities to encompass the countries of the European south and other European countries with acute problems. As for the criteria, narrow economic indicators such as per capita GDP are misleading. What is the value of such an indicator when a country is faced with youth unemployment of 30% or even 50%?
Putting to one side the humanitarian reasons for such activities, there is no doubt that a deep and long-lasting crisis in the European south will lead to general contagion across Europe. The Council of Europe should, therefore, encourage dialogue and further research into the issues I have mentioned. In addition to the expansion of the EBRD’s role, new financial tools and institutions need to be created to meet the new realities and challenges arising not only in the Mediterranean countries but across Europe.
THE PRESIDENT* – Thank you, Mr Dragasakis. I call Mr Braun
THE PRESIDENT* – Thank you. That concludes the list of speakers.
I give the floor to Mr Lankes, to respond.
Mr LANKES (Vice-President of the European Bank for Reconstruction and Development) – I thank everyone for your comments, especially the positive ones, of course. There were quite a few and I need to be careful with time. I hope that we have other opportunities in the course of this year to discuss some topics in greater detail. I will get back to that.
On graduation from the EBRD, there was an expectation that, as formulated and built into our capital resources review – an exercise that we do every five years – eight central European countries would have graduated by 2010. However, because of the crisis this did not happen, as has been said. There was unanimous support for the EBRD’s return into these countries to support them in the crisis. We now have this expectation built into the next capital resources review, with the expectation that these countries would have graduated by 2015. It is, in the end, up to the countries themselves to take that decision.
We have been working with the countries on a post-graduation scenario to see in what form the EBRD can be helpful through technical assistance, and we have been helping companies from these countries invest in other parts of our region, and through capacity building, with a focus on sustainable energy, for instance. We have been building, together with them, to see how the post-graduation period could look. That may serve as encouragement to graduate. But in the end it is a decision that the countries have to come to themselves.
What about new countries of operations? That point was made not only in relation to Greece, but more broadly to southern Europe. There is nothing in principle that excludes new countries of operations for the EBRD, as we have seen. There has to be a request from the countries, of course, and we have not had a request from any southern EU members for assistance to become recipient countries. There has to be support from the EBRD’s shareholders – three quarters of them have to support this – and that will primarily be based on questions of the EBRD’s mandate and whether a transition-to-market mandate in countries that are relatively developed market economies is justifiable. That is the kind of discussion that one would have in this context.
With regard to Greece, there has been a specific request to assist, but in technical ways, not through financing. The EBRD responded to that in the last quarter of 2012. We identified a number of ways that we can support Greece in this difficult time, including helping to stabilise Greek banks in the Balkans, where they are important players. Other Greek companies throughout the EBRD’s region have lost access to their house banks. Standing by these companies, it becomes easier for the Greek banks to improve the quality of their balance sheets. It is also done through cross-border investments, such as certain projects from Greece into Macedonia, for instance, that are under discussion now. We have also been engaged with the EIB, helping design a trade finance programme. That would be of great importance at the current time.
Does a country need to be democratic to be a shareholder? Yes, in principle. Countries that become shareholders of the EBRD have to subscribe to its charter. The example given of Egypt in 1991, for instance, was pertinent. Perhaps these conditions were not quite as strictly applied at the time. With regard to more recent member countries, such as Turkey, for instance, and new countries of operations in the Mediterranean, there has been a careful review, to which all our shareholders have contributed and agreed.
Some difficult questions were asked by Mr Van der Maelen about choices made on issues of sustainability and the way that projects address people’s needs. There was also the question of ethical investment. Let me just say a couple of things about that. First, in supporting the private sector – 80% of the EBRD’s projects are directly with private counterparts – you have to work in a demand-driven way, primarily. You cannot force anyone to take your money and to do the things you want them to do; these are private decisions by the companies.
We have to act partly in a demand-driven manner, but we can also act strategically, especially if we have something to offer these clients that they are interested in. Let me deal with these two types of projects. Where we are demand-responsive, we have a detailed screening process by the staff and then by the board, which represents 66 countries. Projects are sent to the capitals and are reviewed from many different perspectives. Various issues that have been mentioned here are part of that discussion. For example, governance in these companies is important and a component of almost every investment we make.
Questions were asked about the environmental impact of projects. The Bosnian road project mentioned had an important component relating to displaced persons, but, in other cases, an environmental action plan might be agreed with a client. A transition impact review will also be made to assess how, through better transparency and other measures, a project can contribute to transition. Those are examples of how, through detailed reviews, an effort is being made to ensure that the Bank’s projects respond to its mandate.
In other cases, the Bank can be strategic – for instance, when it has the capacity to provide technical assistance, which can be attractive to clients. In 2006, 6% of the Bank’s projects were in the sustainable energy area, but last year that figure was 25%. A determined effort has been made, therefore, with the help of donors who have allowed us to do energy audits, for instance, and to help companies design energy efficiency plans and other things.
We can do the same with gender. An interesting project in Istanbul recently helped a ferry company to design more female-friendly facilities and to hire women into management positions. The company was interested, because we were able to help it. In such situations, we can proactively get clients to move in certain directions. In most cases, we make an effort to ensure that the projects correspond to our mandate.
The question of monopolies was raised. This is an issue that the board often debates. The sorts of questions we ask are: “Does it make sense? Does the benefit to the country of the project outweigh the risk that we might create more dominant market structures?” It is a constant concern and we often do not proceed because of it. When we do, it is because we feel that there are mitigating factors.
Another question concerned tax havens. Of course, we have large shareholders with a strong interest in this question. A few years ago, the Bank adopted an offshore jurisdictions policy. We essentially submit to OECD’s judgment, and when a country is on a certain list, we do not allow ownership to be held from it, directly or indirectly. When an offshore element is involved, special due diligence will always be shown on the tax side to assess whether companies are using them as tax havens or for other purposes. The projects contain a detailed legal annexe that gets scrutinised by our shareholders, and sometimes we refrain from working with clients because we have doubts about that. We also place conditions on clients to encourage them to change their domiciliation. That has happened a couple of times, but it tends to be quite difficult with private clients.
Anything I could say now about the link between democracy and development would be superficial. It was, Mr Bugnon, at the heart of the creation of the Bank. The year 1991 saw the end of history, according to Mr Fukuyama, and the idea that democracy and markets relate to, and drive, each other is built into the Bank’s charter. This year, we decided to study that issue again – we are probably not the only ones to do that – and investigate how it has been playing out in and outside our region. Most likely, we will produce a report on the subject later this year. It would be hugely interesting to discuss it with the sub-committee when it visits London in – we hope – the second part of the year. It would be interesting to compare our results with those of the sub-committee.
Finally – I am talking at length, I know – I turn to the Khmelnitsky-Rivne nuclear project. It is important to stress that it was not a modernisation project, as you know, but a safety project. We are operating in the nuclear field only to increase the safety of existing plants, not to increase capacity.
THE PRESIDENT* – Thank you, Mr Lankes. I call Mr Elzinga, the rapporteur, to respond.
Mr ELZINGA (Netherlands) – I thank Mr Lankes for his address, for the answers he provided and for naming the Council of Europe, together with the UN and OECD, as a reference point of the highest category. Our new sub-committee looks forward to the increased cooperation that you offered in your response to the report.
Ms Fiala, I thank you for your warm support for the report, and I thank Ms Fataliyeva, Mr Braun, all other speakers and the political groups for their support too. Mr Dragasakis, I have no ready answers for you: I also asked Mr Lankes what the EBRD could do for Greece and other troubled countries in the south of Europe. I thank Mr Lankes for his extensive reply on this subject, which can perhaps be further investigated and debated by the sub-committee and the staff and management of the Bank.
Mr van der Maelen, you addressed two interesting and critical issues, and I thank Mr Lankes for his extensive and helpful answers on those subjects as well. I hope that they satisfied Mr van der Maelen. Such matters could be discussed further in the future. I hope that Mr van der Maelen will join the new sub-committee. Mr Sasi asked why the EBRD should be active in Egypt and other new countries of operation. In the same way that we want to help countries in the region with partnerships for democracy, I think that the EBRD can help to advance democracy and prosperity in these countries. That alone is reason enough.
I fully agree with Mr Sheridan, who has unfortunately left, that we should support shifting the EBRD’s attention to small and medium-sized enterprises. We would welcome further steps along those lines. I thank Ms Allain for addressing the food crisis that I also mentioned in my report. I welcome her question about Monsanto. As I said to Mr van der Maelen, I hope that she was satisfied with Mr Lankes’s answers.
We have had a good discussion. I thank Mr Lankes for the effort he made to address all the questions and I look forward to continuing this debate when the new sub-committee visits your headquarters.
THE PRESIDENT* – Thank you, Mr Elzinga. I now give the floor to the Chairman of the Committee on Political Affairs and Democracy, Mr Marcenaro.
Mr MARCENARO (Italy)* – I thank Mr Lankes for making such an important contribution to our debate, both in his initial presentation and in his precise replies to the questions that he was asked. We appreciate the seriousness with which he has gone about this. I also thank the rapporteur, Mr Elzinga, who has done a good job. He managed to strike a balance when weighing up the complicated issues involved, and the report was adopted unanimously by the committee.
Yesterday, the Committee on Political Affairs and Democracy decided to set up a new sub-committee, which will be responsible for monitoring issues connected to OECD and the EBRD. That is an innovation. We decided to set it up because such issues are at the top of our committee’s agenda. As we discussed briefly in a colloquy today, development and democracy matters are the major issues of the day, and they bear on foreign relations in Europe, which is why they are so important. I congratulate Mr Elzinga on his sterling work.