Introduction

The European
Bank for
Reconstruction
and Development
was established in
1991 when
communism was crumbling in central and Eastern Europe and ex-soviet countries needed
support to nurture a new private sector in a democratic environment. Today the EBRD uses the
tools of investment to help build market economies and democracies in countries from central
Europe to central Asia. The mandate of the EBRD stipulates that it must only work in countries
that are committed to democratic principles. Respect for the environment is part of the strong
corporate governance attached to all EBRD investments.

 Largest single investor in the region

 Owned by 61 countries and two intergovernmental institutions.

 Mobilizes significant foreign direct investment beyond its own financing.

 Despite public sector shareholders, invests mainly in private enterprises, usually

together with commercial partners.

 Provides project financing for banks, industries and businesses, both new ventures and
investments in existing companies.

 Works with publicly owned companies, to support privatization, restructuring state-

owned firms and improvement of municipal services.

 Uses its close relationship with governments in the region to promote policies that will
bolster the business environment.

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 Some Basic Facts

Every EBRD investment must

 Help move a country closer to a full market economy: the transition impact
 Take risk that supports private investors and does not crowd them out

 Apply sound banking principles

 Through its investments, the EBRD promotes

 Structural and sectoral reforms

 Competition, privatization and entrepreneurship

 Stronger financial institutions and legal systems

 Infrastructure development needed to support the private sector

 Adoption of strong corporate governance, including environmental sensitivity

 Functioning as a catalyst of change, the EBRD

 Promotes co-financing and foreign direct investment

 Mobilizes domestic capital

 Provides technical assistance

Governance and Management of EBRD

The powers of the EBRD are vested in the Board of Governors to which each member
appoints a governor, generally the minister of finance. The Board of Governors
delegates most powers to the Board of Directors, which is responsible for the EBRD's
strategic direction. The President is elected by the Board of Governors and is the legal
representative of the EBRD. Under the guidance of the Board of Directors, the President
manages the work of the Bank.

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 About the EBRD
I. Countries of operations: EBRD uses the tools of investment to help build market
economies and democracies in countries from central Europe to central Asia. Following
are the countries in which EBRD operates(in alphabetical order):

 Albania

 Armenia

 Azerbaijan

 Belarus

 Bosnia and Herzegovina

 Bulgaria

 Croatia

 Czech Republic

 Estonia

 Georgia

 Hungary

 Kazakhstan

 Kyrgyz Republic

 Latvia

 Lithuania

 FYR Macedonia

 Moldova

 Mongolia

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  Montenegro

 Poland

 Romania

 Russia

 Serbia

 Slovak Republic

 Slovenia

 Tajikistan

 Turkey

 Turkmenistan

 Ukraine

 Uzbekistan

II. Financing Countries: The following countries are the financing countries only

 Australia

 Austria

 Belgium

 Canada

 Cyprus

 Czech Republic (receiving member until 2007-12-31)

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 Denmark

 Egypt, Finland

 France

 Germany

 Greece

 Iceland

 Ireland

 Israel

 Italy

 Japan

 Luxembourg

 Malta

 Mexico

 Morocco

 Netherlands

 New Zealand

 Norway

 Portugal

 South Korea

 Spain

 Sweden

 Switzerland

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  Turkey

 United States of America.

 The United Kingdom

(Source: en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Development)

III. Ownership and Funding:

 Ownership- The EBRD is owned by its member/shareholder countries, the

European Community and the European Investment Bank. The Bank's share capital is
provided by its members. Voting power is in proportion to the number of shares.
 Funding- With a subscribed capital totaling EUR 20 billion (EUR 5 billion paid-in
and EUR 15 billion callable), the EBRD has a solid capital base. The strength of the
Bank's capital and its prudent operational and financial policies are reflected in the
EBRD's credit rating of AAA from Standard & Poor's, Aaa from Moody's and AAA
from Fitch.

IV. Financing its Loans:

 The EBRD finances project lending and operational needs by borrowing funds on the
international capital markets.

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  The Bank does not directly utilize shareholders' capital to finance its loans. Instead,
the AAA/Aaa/AAA ratings enable the Bank to borrow funds in the international
markets by issuing bonds and other debt instruments at highly cost-effective market
rates. By raising funds on competitive terms, EBRD can structure loans which best
match the requirements of its clients in its countries of operations.

 The Bank manages its liabilities such that it does not incur significant foreign
exchange or interest rate risk in its funding operations. It interacts with major capital
market participants on a daily basis in order to ascertain which market, currency or
structure of debt can provide the EBRD with the most efficient cost of financing.

 EBRD's securities are sold to investors, such as central banks, pension funds,
insurance companies and asset managers around the world.

V. Financing by EBRD:

 The EBRD is flexible by using a broad range of financing instruments, tailored to

specific projects. The main forms of finance are loans, equity investments and
guarantees. The Bank applies sound banking and investment principles in all of its
operations.

 The EBRD has signed investments in each of its countries of operations. By 31

December 2007, the Bank had signed 2,636 projects with a total net value of €36.9
billion, making the Bank the largest single foreign investor in the region.

 Approximately three-quarters of EBRD commitments have been in support of private

sector projects. The EBRD’s investments have mobilized an additional €78.6 billion
from other sources.

 The strong support that the EBRD receives from donors has enabled the Bank to
provide over €1.2 billion for technical cooperation projects.

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 *DATA PRIOR TO ABOVE INFORMATION (Source: www.ebrd.com)

VI. Requirements for EBRD Financing: EBRD financing for private sector projects
generally ranges from 5 million to 250 million euros, in the form of loans or equity. The
average EBRD investment is €25 million. Smaller projects may be financed through
financial intermediaries or through special programmes for smaller direct investments in
the less advanced countries.

To be eligible for EBRD funding, the project must:

 be located in an EBRD country of operations

 have strong commercial prospects

 involve significant equity contributions in-cash or in-kind from the project sponsor

 benefit the local economy and help develop the private sector

 Satisfy banking and environmental standards.

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VII. Project Structure:

 The EBRD tailors each project to the needs of the client and to the specific situation
of the country, region and sector.

 The EBRD typically funds up to 35 per cent of the total project cost for a Greenfield
project or 35 per cent of the long-term capitalization of the project company.

 The Bank requires significant equity contributions from the sponsors, which must
equal or be greater than the EBRD’s investment.

 There must be additional funding from the sponsors, other co-financiers or

generated through the EBRD’s syndications programme.

Business Sectors supported by ERBD

The EBRD finances projects in most sectors. These include:

i. Agribusiness
ii. Energy efficiency and climate change
iii. Financial institutions
iv. Micro, small and medium businesses
v. Municipal and environmental infrastructure

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 vi. Natural resources
vii. Power and energy
viii. Property and tourism
ix. Telecommunications, informatics and media

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 I. EBRD and Agribusiness:
The sector

The EBRD is the single biggest investor in the agribusiness sector in the EBRD region and its
involvement spans all activities throughout the production chain, from farming, processing and
trading to food distribution, packaging and retail. The EBRD countries of operations have many
competitive advantages in the agribusiness sector.

 They account for more than 20% of the world’s potentially arable land, with top-
quality soils and an abundance of skilled labour.
 Their productivity could be increased vis-à-vis more developed economies.

 They are home to 400 million consumers with increasing average incomes, driving
an ever-growing demand for high quality products and improvements in distribution
and retail.

The team

The EBRD’s agribusiness team has a unique mix of expertise and experience:

 Experience of over 300 projects worth around €4.5 billion spanning the whole of
the agribusiness production chain.
 Market knowledge and appetite for projects across the region with the ability to
support projects in challenging environments.

 Flexible and innovative products and solutions, both debt- and equity based.

 Track record with satisfied major multinationals - in many cases with multiple
transactions - and a strong track record with local companies.

 27 agribusiness banking specialists of 18 nationalities who are able to draw on the

local expertise of other staff in the Bank’s dozens of offices across the region.

The team has a wide variety of clients, from multinationals wanting to expand their retail
business in the region, to local entrepreneurs requiring working capital or finance for
modernizing a production line. If projects are commercially viable and complement- rather than
compete with - private sources, the EBRD can be a partner providing funds and sector know-
how.

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Products

Financing ranges from long-term loans and equity investments in the retail sector to asset-
backed, short-term facilities to support the seasonal activities of food producers, processors
and traders:

 Long-term loans: Tailored to meet the individual needs in terms of maturity, currency
(including local), security and repayment schedule.
 Working capital loans: A particularly successful instrument to provide liquidity to the
seasonal farming business. These loans are often secured by grain deposits or other
produce.

 Commodity finance: This financing against commodities has expanded rapidly and is
offered directly to food processors and traders or channelled through local banks.

 Equity: Up to 35% of the total equity in a project company can be taken in many forms,
such as straight equity, preferred shares and convertible debt.

 Guarantees: EBRD’s preferred creditor status, via guarantees, is a considerable benefit

both for commercial banks and strategic investors in mobilizing private sector financing
for agribusiness projects.

 Multi-project facilities: These allow financing to be provided to international food

companies for several projects under a single agreement.

International cooperation

 The EBRD Technical Cooperation Funds Programme provides funding to improve the
preparation and implementation of the EBRD’s investment projects and to provide
advisory services to clients.
 It is funded by governments and international institutions and managed by the EBRD.
Each year the programme provides about €80 million to finance a wide range of
activities of consultants and other experts.

 The team works in close co-operation with the United Nations’ Food and Agriculture
Organization (FAO) to support clients and sector via a joint Fund for Special Assistance
to finance consultants for anything from a sub-sector study to hands-on consultancy for
a specific project.

 EBRD’s close cooperation with FAO and the World Bank helped found East Agri. East
Agri members strive to build relationships, share experiences and strengthen
communication in the sector and region. Outcomes are more innovative approaches

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 towards agricultural/agribusiness investments among international financial institutions
and private banks operating in the region.

II. Energy Efficiency and Climate Change:

 Energy efficiency is a key issue in the Bank’s countries of operation as they are much
more energy intensive than in the EU.

 All the countries exceed the EU average energy intensity and some need around five
times as much energy. One reason for this is that companies and institutions are facing
increasing and unsustainable energy costs as energy prices increase towards
international levels.

High energy intensity can:

 drain public and private sector finances

 create social hardship

 weaken the competitive advantage of private companies

 increase the environmental cost through high levels of greenhouse gas emissions

The Energy efficiency team

The EBRD is the only IFI with a specialized Energy efficiency team.  

The role of the team is to:

 Develop specialized energy efficiency investment mechanisms such as ESCOs and energy
efficiency credit lines.
 Identify and implement industrial energy efficiency opportunities with other Bank
clients.

 Develop opportunities to sell carbon credits from EBRD funded projects, including the
Netherlands EBRD Carbon Fund.

 Promote and develop renewable energy products, in collaboration with the Power and
energy team.

The team comprises nine professionals, including two funded with assistance from the
Government of the Netherlands, one funded by the Government of Sweden and one funded by

13
the Government of Italy.  Members of the team have backgrounds in public finance, investment
banking, accountancy, carbon financing and energy efficiency engineering.

Strategy

The Bank’s strategy in the Energy efficiency sector is to support mechanisms that develop and
finance energy efficiency projects. In addition, it aims to assist its clients to identify and develop
energy efficiency opportunities within their operations.

Specifically, the Bank aims to

- Provide direct finance to projects of a significant scale which save energy. The projects can be
located in the public or private sector and concern generation, transmission/distribution or
end-use.  In particular:

 Industrial projects in energy-intensive industries

 Cogeneration projects, including on-site industrial cogeneration projects

 Existing or new ESCOs.  In particular, the Bank supports ESCO projects which target
social facilities, such as schools or hospitals.

- Support the development of sustainable mechanisms using local banks to provide financing to
smaller projects. This can be in the form of dedicated credit lines or risk sharing.

- Support innovative financing vehicles e.g. finance companies or equity funds targeting energy
efficiency and/or renewable energy.

- Help monetize carbon credits arising from emission-reduction projects. This improves the
bankability of emission-cutting projects such as energy efficiency; renewable energy; fuel
switching; methane capture; etc.

Energy operations Policy

For EBRD energy efficiency is fundamental to increasing energy security, reducing energy
investment needs, addressing environmental concerns, alleviating affordability constraints and
promoting the economic competitiveness.

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The Bank’s countries of operations are not insulated from global energy developments and
could play a pivotal role in shaping the energy markets of the future. The region faces the
following medium-term challenges:

 Competitiveness and efficiency

 Investment and growth

 Energy security

 Climate change

 Natural resource development

The goal of the policy is to address these challenges and help the region to achieve secure,
affordable and efficient energy supplies, which are fundamental to the emergence of open
market-based economies and sustainable development. To meet this objective, the Bank is
setting the following priorities:

 Promoting energy efficiency

 Advancing the unfinished reform agenda

 Promoting renewable energy technologies

 Promoting carbon trading

 Unlocking the region’s energy potential

 Supporting sound natural resource management

 Promoting energy trade and competition

 Increasing nuclear safety

 Promoting environmentally sustainable

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III. Financial institutions:
Role of financial institutions

 Promote continued development of market-based financial institutions and contribute to

institution building
 Support private and entrepreneurial initiatives, working with local and international
investors

 Engage in policy dialogue to strengthen regulatory/legislative frameworks

 Focus on corporate governance and institution building.

Strategy

One of the EBRD's key policy objectives is to support the development and creation of a financial
sector which is based on sound banking principles, provides high quality services to the corporate
and retail sectors of the economy and operates on principles of transparency and good corporate
governance. The key goals are to:

 Support development of financial systems in all countries of operations

 Increase diversity of institutions and promote healthy competition

 Strengthen corporate governance

 Increase the diversity of financial products and services

 Support privatization and restructuring

 Promote lending to small and medium sized enterprises

 Strengthen commercial orientation of state owned financial institutions

The EBRD seeks to achieve these goals mainly through project focused work with financial
institutions using a variety of financing instruments. 

Small and medium enterprises(SMEs)

The EBRD is committed to the promotion of SMEs. Through local banks, the EBRD mobilizes funding
for projects that are too small for it to handle directly. Providing access to finance for SMEs is a
crucial part of the Bank’s efforts to strengthen private sector development and to stimulate
competition in the enterprise sector. These facilities also support the development of the banking
sector by helping to improve banks’ credit appraisal procedures of new projects.

A variety of financing instruments are used, from supporting SME orientated banks with equity

16
investments to providing financing through SME and micro credit focused programmes.

The approach is country specific depending upon the needs of the financial sector. In countries
with less advanced economies or dominant state banks, the Bank’s micro-lending programmes
have been a successful tool for reaching small businesses. SME credit lines targeted at a wider
range of borrowers have been successful in countries with more developed private sectors. The
Bank’s participation in leasing companies is another approach to reach SMEs. Innovative products
are being developed and implemented such as the co-financing risk participation agreement with
IKB, a leading German Bank, allowing IKB to further expand its financing activities in the region in
support of small business.

Private equity funds are also a significant source of equity financing for SMEs. Private equity funds
have been effective at mobilizing additional sources of financing from investors. The second stage
of mobilization takes place at the investee company level as the EBRD sponsored equity investment
enables investee companies to obtain additional local debt and/or equity financing.

Products :

 Bank debts
 Bank equity

 Equity funds

 Micro and small funds

 Non-bank financial institutions

i. Bank Debt

Strategic priorities

 Support institution building

 Promote bank lending to private enterprises

 Assist and promote inter and intra regional trade

 Support lending for small and medium companies (SMEs)

 Provide a broad range of debt and guarantee products

Key products

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The EBRD responds to changing market conditions and client needs by revising existing debt
products and offering new and innovative ones. The Bank can specifically tailor transactions to
meet client needs.

 Senior loans: multi-currency, straight or with convertibility option, floating and fixed
interest rates, caps and collar.

 Mortgage facilities: long term funds for on-lending, foreign or local currency on a select
basis, standard pricing or with step-up, secured on a pool of mortgages or unsecured,
standardized features for potential securitization.

 Subordinated debt: can be eligible for inclusion in tier two capital.

 SME Finance: credit lines through local banks for financing SMEs. Technical assistance for
training bank staff often available.

 Trade Facilitation Programme: goal is to foster international and intra-regional trade and
to assist participating banks in building track records with their correspondent banks.

 EU/EBRD SME facilities: targeted at EU new member states and accession countries.
Provides credit lines through local banks and leasing companies, for sub-loans up to
€125,000, supported by EU grants for incentives including technical assistance.

 EU/EBRD Municipal finance: credit lines and/or risk sharing facilities with local banks to
fund investments by small municipalities in EU new member states and accession
countries. Priority given to infrastructure projects, 10-15 years maturity. EU grants
provide technical assistance and financial incentives to participating banks and
municipalities.

 Global Environmental Credit Facility: credit lines through local banks to fund
environmental investments combined with GEF grants and technical assistance.

 Securitization: support the structuring of securitization transactions for CEE banks and
non-bank FI such as leasing companies, consumer, mortgage financing companies. Two
products: (1) Credit enhancement instruments including guarantees, equity, sub-debt to
facilitate structuring. (2) Underwriting of commercial paper/bonds issues in the context of
securitization transactions.

 Risk sharing: main advantage for participating banks is to reduce risk weighted assets for
capital adequacy purposes and reduce country and sector exposure. Two products: (1)
EBRD and CEE banks share risk of a defined loan portfolio with certain characteristics:
SME senior/mezzanine loans, mortgage loans, grain receipt loans, general corporate
loans. (2) Risk sharing for pool of loans to CEE companies but booked by strategic investor
outside CEE.

 Energy Efficiency & Renewable Energy Facilities: provides credit lines to private sector

18
 through local banks for applicable projects. Technical assistance for the development of
Rational Energy Utilization Plans and training of bank staff.

ii. Bank Equity

The EBRD has invested equity in 98 banks in 27 countries. It has a track record of successful exits
leaving strong well functioning banks. The Bank invests in institutions committed to providing
financial services to a diverse range of local companies.

Strategic priorities

 Sector reform: facilitate bank restructuring and privatization by sharing equity risk
and through restructuring effort; Support consolidation in countries with
fragmented banking sectors.
 Institution building: enhance corporate governance by actively participating in
supervisory boards, promoting management accountability, sound banking
principles and practices and proper environmental practices to instill high quality
business attitudes and practices; Increase standards of transparency; Support intra-
regional bank consolidations and mergers within the countries of operation;
Facilitate the transfer of modern financial skills and technology.

 Work with key strategic investors who are committed to local banking markets.

 Support banks with strong local partners, shareholders and management: in the
absence of a strategic investor, the Bank will often develop a targeted technical
assistance programme to facilitate a transfer of skills to the institution’s local
management.

Products

 Purchase/subscription of ordinary/preference shares (5-35% of capital).

 Provision of convertible senior or subordinated debt.

 Multi Project Facility: EBRD and strategic partner agree to invest alongside in a
number of banks/non bank FI subject to satisfactory business plan, terms and
conditions.

 New products can be introduced to accommodate existing investee banks' needs.

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 iii. Equity Funds

The EBRD is the largest private equity funds investor in the region with commitments of over €2
billion. Third parties manage the funds, enabling the EBRD to raise corporate governance
standards and to promote an entrepreneurial culture.

EBRD’s significant support to its private equity fund managers accelerates the development and
institutionalization of the private equity industry in the region.

Strategic priorities

 Work with successful fund managers with demonstrable track record

 Highly selective approach for new funds

 Leading role in identifying private equity opportunities

 Close partnerships with premiere institutional investors

 Enhance transition impact and returns by providing co-investment facilities

 Promote high value added investment strategies

 Share extensive in-house experience of equity sector and country issues with
management and institutional investors.

Products

a. Private Equity Funds

 All spectrum of investment strategies: venture capital, buyouts, mezzanine

finance

 Both regional and country-specific funds

b. Donor Supported Funds

 Established by the EBRD and supported by donors when private equity is not
available

 Average fund capital €35 million

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  More typically found in earlier transition stage countries where private
equity investment is more difficult to attract and the business environment
and exit strategies are more uncertain.

 New developments

The Bank is introducing new products in the developed equity markets. For example, Accession
Mezzanine Fund is the first dedicated mezzanine finance fund for central and Eastern Europe.
Mezzanine finance is a form of risk capital that combines the characteristics of conventional
bank lending with the potential of equity type returns. This financial instrument is expected to
transfer substantial product knowledge not only at investee company level, but also more
widely in the financial and legal community in the investee countries. By investing in this
facility, the Bank will increase the possibilities of investments by providers of other forms of
capital, which ultimately increases flexibility in financing available to local companies.

EBRD private equity funds represent, by different estimates, between one third and one half of
all private equity activity in the region. The performance by the Bank’s funds thus represents a
significant sample of the area’s asset class. 

The Bank collects aggregate statistics on:

 “net” fund performance of its portfolio of funds investments

 “gross” performance of the 800+ investments by its funds

 Investor characteristics.

iv. Medium and Small Funds

The Group for Small Business supports Microand Small Enterprise (MSE) programmes through
financial intermediaries. These programmes enable small businesses to access formal finance,
which is often an obstacle in the Bank's countries of operations. In addition to working with
existing banks, the EBRD helps establish microfinance banks and non-bank micro finance
institutions.

Long term sustainability of MSE activities is ensured through institution building and training on
appropriate lending procedures. Hence, the programmes support economic development as
well as social stability.

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The EBRD provides lending partners with innovative products by responding to changing market
conditions and client needs. The strong portfolio of micro and small enterprises (MSE) finance
products helps the EBRD retain its position as one of the most successful MSE investors in the
region. To maximize the leverage of its funding, the Bank also provides technical assistance
which focuses in institution building and creating MSE lending expertise. 

Strategic priorities

 Provide sustainable finance to micro and small businesses

 Support institution building in commercial banks and non-bank micro finance
institutions

 Encourage competition within the financial sector catering to micro and small
enterprises

 Regional focus and emphasis on previously underserved markets

Products

a. Debt

The Bank grants senior and subordinated debt to commercial banks and non-bank micro
finance institutions for on-lending to MSEs. Amounts range from €20 to €200,000. 

b. Equity

The Bank purchases ordinary or preference shares in microfinance banks and institutions, or
existing commercial banks with a strategic focus on MSE finance.

c. Technical assistance

Technical assistance focuses on institution building and creating MSE lending expertise. 

Such measures are important to ensure that EBRD's partners have the necessary capacity to
enter the MSE finance market and to continue providing loans long after Bank assistance and
investment have ceased.

This assistance, which is generously supported by EBRD's donor programmes, focuses on:

 Staff training
 Streamlining of processes and procedures

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  Implementation of best practice borrower analysis

 Integration of MSE lending into the partner banks' mainstream operations

d. Non-bank micro finance institutions

Non-bank micro finance institutions (MFIs) is a new and important delivery mechanism for the
EBRD. The Bank provides leading regulated non-bank MFIs with senior debt for on-lending to
micro borrowers. The Bank aims to support these financial intermediaries, particularly in their
transformation to deposit-taking entities, and will consider future equity investments.

e. MSE focused equity funds

EBRD can invest in or alongside the increasing number of funds which have been created to
invest in financial institutions with a strategic commitment to the MSEs in the Bank’s countries
of operation. 

 New initiatives

 Local currency financing: The Bank is exploring ways to meet the high demand for
microfinance in local currency by using standby credit lines and issuing securities, the
proceeds of which would be provided to partner institutions for on-lending to MSEs. The
Bank has already engaged in local currency financing through programmes in Hungary,
Kazakhstan and Russia.
 Microleasing : It can be difficult for MSE entrepreneurs to obtain asset finance. Products
available from MFIs are often short-maturity and those available from leasing
companies are often too expensive. Leasing can provide a solution to the problem of
lack of collateral faced by smaller businesses in the production sector. The EBRD is
looking at how to downscale existing leasing operations to amounts that could benefit
MSE clients. Another approach is to help financial intermediaries develop this product. 

 Risk sharing and securitization: The Bank is exploring risk-sharing products to share the
risk of the MSE portfolios of its partners. It is also considering securitizing loan
portfolios. 

 Credit scoring: Credit scoring mechanisms help partners enhance the profitability and
sustainability of their lending programmes. New initiatives in this domain would build on
the experience gained by EBRD in Central and Eastern Europe.

v. Non Bank Financial Institutions

Equity and debt financing to insurance, pension, leasing, asset management, consumer finance and
non-bank mortgage institutions mobilizes savings and promotes a competitive financial services

23
environment. This is a growing area for the EBRD and reflects demand for more sophisticated
financial services, better legislation, pension reforms and the introduction of mandatory insurance
in some countries. The EBRD has over 100 equity and debt NBFI projects in 20 countries and is the
largest financial investor in the insurance and pensions sector in the region.

Strategic priorities

 Broaden range of investments across countries and directly related companies - e.g.
insurance brokers and asset management companies
 Continue to transfer knowledge by working with key western investors and support
local shareholders and entrepreneurs

 Promote enhanced legislation and regulation and in particular the introduction of

pension reforms

 Support the enhancement of local capital markets infrastructure required to service

an ever increasing local institutional investor base

 Further support the development of these key sectors:

 Leasing

 Asset management: a professional asset management discipline needed

to manage the growing local institutional investor base (pension funds
and insurance companies) as well as retail investors through mutual
funds

 Specialist mortgage institutions: focus on securitization, in turn

broadening the available securities for investors

 Consumer finance: focus on experienced companies to develop activities

in the region and promote development of legislation and consumer
protection.

Products

 Insurance: life, non-life and re-insurance, equity participation between 10 and 35%,
7 – 10 years exit horizon
 Pension Fund Management Companies: equity participation between 10 and 35%, 7
– 10 years exit horizon, investments in defined contribution pension scheme – both
mandatory and voluntary

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  Specialist mortgage institutions: term funding for primary mortgage origination,
support of secondary market development (e.g. underwriting of mortgage bonds,
local and foreign currencies), equity participation

 Consumer finance: equity participation and loans to fund retail consumer finance
products. These include: low risk secured loans (e.g. charge and credit cards),
secured loans to purchase specific goods by installment credit or hire purchase and
store credit

 Asset management: equity in local asset management companies, both institutional

and mutual funds, and seed capital for new established funds

 Leasing: mainly to finance equipment. Four areas of operation:

1. Debt: financing facilities to leasing companies in foreign or local currencies,

fixed or floating rate, large debt syndication

2. Equity finance

3. SME: Credit lines through leasing companies for sub-loans up to €125,000.

4. Vendor finance: lease type schemes with western vendors of equipment.

IV. Micro ,Small and Medium businesses

The EBRD provides strong support for small, medium and micro sized enterprises. The EBRD’s
lending programmes provide individual entrepreneurs and firms with access to otherwise
scarce finance. It also provides complementary schemes that aim to help individual enterprises
adapt to the demands of a market economy.

These include all the products which have been discussed earlier under the above heading:

25
  Bank debts
 Bank equity

 Equity funds

 Micro and small funds

 Non-bank financial institutions

V. Municipal and Environmental Infrastructure

The EBRD is committed to improving municipal and environmental services in its countries of
operations, in line with its mandate to promote environmentally sound projects.

At the EBRD, the MEI sector covers direct revenue earning services, such as water supply,
waste-water collection and treatment, solid waste management, district heating, natural gas

26
distribution and urban public transport. Infrastructure, such as urban roads, and environmental
clean-up operations, which are not directly revenue-earning, are also included. Generally, the
provision, financing and management of these municipal and environmental services are the
responsibility of local or regional governments. The MEI sector also covers environmental
services, such as industrial and hazardous waste management, that may be organized nationally
or outside local government responsibility.

Municipal and Environmental Infrastructure Policy

A country's ability to provide efficient infrastructure and services at local level is an important
contributor to private sector development. Environmental improvements and remediation at
local level make industrial and commercial growth sustainable. Local infrastructure and service
improvements enhance the quality of life for residents and makes them more willing
participants in a democratic society and support a workforce that is better equipped to dealing
with the challenges of economic transition. Finally, the linkage between local fiscal and political
accountability promotes and deepens democratic principles and promotes a sense of
ownership within civil society.

Within this context, the core objective of the Bank's MEI operations is to promote greater
efficiency and higher quality in the provision of local authority services through investment and
the promotion of independent, well-managed and financially sustainable operations provided
on commercial principles and in a market-oriented institutional and regulatory framework.

The EBRD's approach is strongly supportive of transition towards-

 Decentralization of service responsibilities to local or regional levels

 Commercialization of the operating companies providing local services

 Environmental improvement as a consequence of investments that conserve

environmental resources and reduce pollution

Decentralization

Decentralization is a key element in improving the quality and cost efficiency of local
infrastructure and services. Experience has shown that, by placing responsibility closer to the

27
point of delivery in the context of a democratic system, decentralization provides a motivation
for the public sector to be responsive to the needs of their constituents. At the same time, to
the degree that decentralization leads to costs being borne at the local level, the public sector is
encouraged to be rational in its choice of investments and to implement efficiencies in their
operations. In this context, economies of scale in service delivery and managerial
responsibilities may occasionally lead to regional concentration in the provision of local
services.

Effective decentralization is associated with:

 Clear and predictable sources of local government revenue and clear rules governing
tax sharing and transfer payment arrangements between national governments and
local authorities;
 Control of local government borrowing through disclosure, reporting and statutory
limits rather than ad hoc political decisions;

 Improved corporate governance of local operating companies allowing

commercialization of the provision of local services;

 Independent regulatory arrangements governing the setting of tariffs and

commensurate quality of service standards.

Commercialization

Commercialization means that local government focuses on ensuring good quality services as
cost effectively as possible through the use of more effective public sector management,
competitive or regulatory pressure and the use of private sector participation (PSP) where
appropriate and feasible, subjecting the affected entities (whether local government or service
utilities) to the incentives and disciplines of the market. This involves changes to internal
organizations and management approaches to enable the entities to respond to these new
conditions.

Commercialization is associated with:

 Making rational investment choices where resources are limited by hard budget
constraints
 Employing cost recovery approaches to maximize user based revenues to the extent
possible and within affordability constraints

 Ensuring managerial independence while holding utility managers accountable for

delivering an acceptable quality of service

 Transparency and competition in the procurement of goods and services to ensure

good value for money and to avoid opaque practices and corruption

28
  Promoting appropriate regulatory supervision by contract or otherwise whenever
business activities are not subject to competitive pressure, in order to protect
consumer interest and stimulate efficient provision of services

 Facilitating efficient PSP through an adequate range of options, including

management contracts, concessions, outsourcing, “Build, Operate, Transfer” (BOT)
contracts and privatization.

Environmental Improvement

The Bank’s projects in the MEI sector have a direct positive impact on the environment by:

 Achievement of environmental standards that are in line with best international

practice, in compliance with European Union (EU) directives
 Appropriate pricing of environmental goods encouraging conservation

 Higher quality infrastructure and technology which reduce losses, energy use and
pollutants together with sustainable institutional structures for meeting, maintaining
and enforcing higher environmental standards.

Water Tariffs Toolkits

Toolkit: social and political acceptability of water tariffs

The Municipal and Environmental Infrastructure team and the Danish Environmental Protection
Agency have commissioned the preparation of a toolkit comprising best-practice techniques for
assessing the social and political acceptability of urban water and wastewater tariffs.

These practical tools should help in assessing the risks of non-payment, social dissatisfaction
and political resistance associated with increasing water and wastewater tariffs.

The toolkit should serve as a useful resource to decision-makers and practitioners for the
following purposes:

 setting appropriate performance standards (levels of service) that reflect consumer

preferences, and realistic timetables for increasing these standards;
 providing better information to city officials, banks and private investors about the
sustainability of tariffs and the financial feasibility of projects;

 encouraging the use of transparent competitive bidding procedures and public

participation in the planning of concessions as a way to increase the perceived
fairness of prices and hence to reduce the risk of consumer resistance;

29
 providing better ways of assessing whether the criteria for grants accorded by
bilateral and multilateral agencies (e.g. the EU ISPA programme) are met;

 providing information for the design of tariff structures and, if desired, targeted
subsidies;

 Helping the water company plan a customer information campaign to reduce

misperceptions and create trust.

30
VI. Natural resources
Natural resources is one of the most important business sectors for many transition economies.
The EBRD has provided financing for a wide variety of projects in this crucial sector,
contributing to an increase in oil and gas activity and the development of a competitive gold
mining industry.

Natural Resources Policy

The natural resources policy was approved by the EBRD board on 23 March 1999.

Natural resources in this context include oil (covering all the product cycle), gas, coal mining
and mining of precious and non-precious metals.

Natural resources are an important endowment of several transition economies, particularly in

the Former Soviet Union (Azerbaijan, Kazakhstan, Russia, and Turkmenistan, Ukraine etc). In
Eastern Europe, Romania produces significant amounts of crude oil, while several other
countries have important refining capacity. Mining of precious metals is a major foreign
exchange earner in countries such as Georgia, Kazakhstan, the Kyrgyz Republic, Russia and
Uzbekistan.

The prospects for natural resource development in the countries of the region are generally
considered favourably. Russia and Turkmenistan harbour the world's estimated largest and
third largest reserves of natural gas respectively. Russia also ranks among the world's five
largest oil producers and significant unexplored structures remain in the northern and eastern
Siberian territories. Caspian oil reserves are estimated by several observers to be approximately
equal to those in the North Sea, giving the region significant importance as a global producer.

However, reserve estimates provide only an imperfect indication of the economic potential of a
country's natural resource endowments. In order to be of economic value, natural resources
need to be marketed. The commercial viability of natural resource extraction is thus a function
of the availability of competitive technology, transportation routes to major consumption
centres, and production costs determined by the geological structure of natural resource
reservoirs. In the case of oil and precious metals, prices fluctuate widely on international
commodity markets, and substantial financial muscle as well as high flexibility are required to
remain competitive on international markets. The natural gas market is less volatile and given
the need for extensive investments into pipeline transportation entry costs are high.
Nonetheless, given substitution possibilities between various types of fuel and sources of
supply, competition in the market for natural gas is also high.

31
Marginal production costs for oil in Russia are very high by international standards, a reflection
of geological factors but also of the relative organizational and technological backwardness of
its oil industry. More favourable geological factors, higher levels of foreign investment and
more recent development of the major fields lie behind lower production costs in the Caspian,
but here transport bottlenecks continue to constrain the development of production. Against
this background, the recent fall in oil prices imposes severe adjustment pressures on the oil
industry throughout the region and could slow its development at least temporarily. It also
highlights the need to attract high calibre international players to the region to make it globally
competitive.

In the Balkans region, the Bank is called on to participate mainly in downstream projects
(refining and petrochemicals), as well as corporate restructuring and privatization. In Romania,
the privatization of Petrol is an opportunity for the Bank to participate in the restructuring and
privatization of the oil and gas sector, so vital in this "oil and gas transit" country.

Central European countries like Poland and Hungary have already successfully restructured (or
are restructuring) their operations. The main areas of interest for the Bank are in direct equity
investments and other "advanced products" such as quasi-equity or mezzanine financing.

32
VII. Power and Energy Utilities
Power and energy projects comprise a significant portion of the EBRD’s overall portfolio. Within
the EBRD’s countries of operations, power and energy infrastructure is often obsolete or old
and in need of refurbishment. This challenge has made the EBRD the most active bank in the
power sector in central and Eastern Europe and the CIS.

The EBRD’s main objectives in the power sector are to:

 improve the investment climate and allow the development of energy systems
functioning on market principles
 improve efficiency in conversion, transportation, distribution and consumption of
energy as well as the quality of energy services

 improve environmental performance, including supporting actions to address the

climate change issue

 improve the safety of nuclear power production

The Bank’s Power and Energy Utilities Team is the largest sector team operating within the
region.  The team comprises 22 professionals, including experts working in Warsaw, Bucharest
and Almaty.  The members of the Power and Energy Utilities Team have extensive experience in
the sector, having worked in investment, commercial and development banks, political risk
insurers and power companies.

Energy Policy

The new Policy replaces and updates the Natural Resources Operations Policy and the Energy
Operations Policy approved by the Board of Directors in 1999 and 2000, respectively, combining
the two spheres of activity into one comprehensive policy.

Specifically, this Policy builds on past policies and complements more closely new regional
and global energy initiatives now being implemented by national and international
bodies. The Policy particularly mandates the Bank to increase its support for energy
efficiency and renewable energy, corporate governance and transparency, and to refine its
activities in other areas based on lessons learned and evolving best international practices.

The Policy encompasses all activities in energy conversion including: demand side
performance, power generation, transmission, distribution and supply, the entire oil and
gas cycle from production to transportation, refining, and distribution and coal mining. The
Policy will guide the Bank in its direct investment operations and, as expressly provided, in
its investments through financial intermediaries.

33
 EBRD is making energy efficiency the cornerstone of its 2006 Energy Operations
Policy. Energy efficiency is fundamental to increasing energy security, reducing energy
investment needs, addressing environmental concerns, alleviating affordability constraints
and promoting the region’s economic competitiveness.

The Bank’s countries of operations are not insulated from global energy developments and
in fact could play a pivotal role in shaping the energy markets of the future. In particular,
the region faces the following medium-term challenges:

 Competitiveness and efficiency

 Investment and growth

 Energy security

 Climate change

 Natural resource development.

The goal of the policy is to address these challenges and help the region to achieve secure,
affordable and efficient energy supplies, which are fundamental to the emergence of open
market-based economies and sustainable development. To meet this objective, the Bank is
setting the following priorities:

 Promoting energy efficiency

 Advancing the unfinished reform agenda

 Promoting renewable energy technologies

 Promoting carbon trading

 Unlocking the region’s energy potential

 Supporting sound natural resource management

 Promoting energy trade and competition

 Increasing nuclear safety

 Promoting environmentally sustainable development

Renewable Energy

34
The EBRD aims to promote environmentally sound and sustainable development in the full
range of its activities. One of the Bank's objectives is to improve the environmental
performance and long term stability of the power sector, including supporting actions to
address issues of climate change, energy security and diversification of supply. As part of this
objective, the EBRD is actively supporting the development of the renewable energy sector
within its countries of operation.

The EBRD is pursuing opportunities to invest through equity, project finance and corporate debt
to fund renewable energy development, construction and operation activities. The Bank is also
open to opportunities to invest in renewable energy focused funds dedicated to the Bank’s
countries of operation where these funds are filling a clear gap in the market or have well
defined value-add propositions.

Challenges of renewable energy projects

The founding agreement of the EBRD requires that all of the projects it finances meet sound
banking principles. Considering the generally low level of power tariffs in the countries of
operation and the lack of developed legislation to support renewable energy projects, the EBRD
and project developers have faced significant challenges in identifying those projects with
sufficiently robust economics to make financing possible.

However, the climate for renewable energy projects in the EBRD countries of operation is
improving.

As part of the accession of the first group of Eastern European countries to the EU, new
members have set targets to generate a certain percentage of power from renewable sources
and have put in place new legislation to support the sector to meet these goals. This new
supportive environment is enabling this new sector to emerge with the inflow of capital and
expertise to these markets combining with the entrepreneurship of local companies and
individuals. Nevertheless, many hurdles in testing, implementing and refining the support
structures for this new market still remain, and transparency and consistency is key to its
successful long term development. Beyond the EU, legislation and support for renewable
energy is also beginning to be put in place and EBRD is playing an active role to promote this
development.

How the EBRD is increasing its portfolio of renewable energy projects

The EBRD is taking active measures to expand the number of renewable energy projects which
would be eligible for Bank financing and to play a proactive role in the development of the
sector:

 Technical Assistance to support sector development

35
  Risk Capital for Project Development

 Carbon finance

 Renewable Energy Funds

VIII. Property and Tourism

The EBRD plays an important role in attracting foreign investment to the property markets of its
countries of operations. The EBRD has financed over 30 projects in all major property sub-
sectors, such as offices, shopping centres, warehousing, residential developments and hotels.

Property Policy

At the end of 2000, the Bank’s cumulative commitments to the Property Sector in the Bank’s
countries of operation totalled Euro 450 million, supporting investments of Euro 1.5bn. Through
its activities in these sectors, the Bank contributes to the development of markets which form
part of the basic business infrastructure expected by foreign investors as a prerequisite to their
investment in a particular country and for the sustained expansion of their business overtime

Further, the Bank’s engagement in policy dialogue especially with regard to property rights and
mortgages contributes to the advancement of the institutional framework that is a prerequisite
to a proper development of the property markets. Additionally, through its investments and the
backwards and forward linkages they create to related economic sectors, the Bank also helps in
the development of the local construction markets and relevant property and tourism service
sectors thus contributing to the shift of local economies from industry to services over time.

In Advanced countries, significant developments have already taken place in capital cities, many
with the Bank playing a leading role as a catalyst for cofinancing. For the real estate markets in
these countries to develop further and the developers and financiers to be incentivized to move
into the provinces (and to Early/Intermediate countries as well as Russia), the entirety of the
property markets in the Advanced Countries need to function properly. The Bank therefore has
a leading role to play in developing the depth of the secondary property markets in the
Advanced Countries mainly through the introduction of new instruments which will target both
domestic and international investors.

Finally, in the regional centres the Bank has a key role to play as a risk taker in the development
of the primary property and hotel markets by being a catalyst for the development of
institutional quality real estate of local proportions. By being flexible and innovative the Bank is
in a position to promote transition effectively in the property and hotel markets of its Countries

36
of Operation and in parallel remain highly additional by introducing new types of investors,
both local and domestic, which contribute to the increase in scope of financial sources available
for the development of the sector and thus promoting transition further.

In the financing of operations in these sectors the Bank has the following objectives:

 Promoting private sector investment through equity and debt financing and creating
long term investment vehicles and new products for local and foreign investors in
order to promote both the primary hotel and property markets as well as the
secondary markets.
 Participating in smaller projects through direct sector specific investment funds and
credit lines aimed at supporting SMEs.

 Supporting projects that transfer technology, knowledge and management skills to

the property and tourism markets.

 Developing the local construction and building materials sectors.

 Supporting environmentally sustainable development projects including projects

that support urban regeneration.

The policy proposes a flexible approach to financing the Property sector depending on the
transition stage of the relevant countries and the Bank’s ability to be a catalyst in moving the
transition of the property markets further.

37
IX. Telecom, Informatics and Media
As the region undertakes major development programmes to respond to new market pressures
in the sector, the telecoms team supports projects encompassing information technology,
media, and traditional fixed and mobile telecoms. Although there has been significant progress
in the last decade, there is still an acute shortage of facilities in many countries.

About Telecom

The countries of central and Eastern Europe and the Commonwealth of Independent States
(CIS) are currently undertaking major development programmes to respond to new market
pressures. Over the past decade there has been significant progress in the sector, however an
acute shortage of facilities in many of the EBRD's countries of operations still remain - as
evidenced by low network densities, long waiting times for lines and paucity of modern
services.

Demand for access and for improved service quality continues to outstrip current supply. The
need for value-added services, computer networks, and media and broadcasting services is
growing rapidly.

The magnitude of the investment necessary to satisfy this demand requires the effective
mobilization of substantial amounts of private capital. The EBRD's main aims in the sector are
to:

 promote network expansion, thereby increasing access to telephone services and

improve the quality of service;
 encourage the emergence of innovative and advanced communication services;

 accelerate the privatization process;

 develop appropriate regulatory and legal frameworks; and

 Extend the development of the sector beyond basic telephone services.

38
The Bank's overall strategy is to promote modernization and expansion by:

 Assisting in the transformation of the incumbent national telecommunications

operators into commercially oriented privatized companies
 Mobilizing private sector financing. Since 1997, the vast majority of the Bank's
commitments in the sector have been made in private enterprises or in connection
with the privatization of state-owned companies.

 Maintaining a flexible and innovative approach. The Bank intends to continue to

expand its repertoire of financial instruments and to supply innovative solutions to
accommodate the increasingly sophisticated needs of both its public and private
sector clients. This includes equity warehousing, hedging facilities, guarantees and
local currency financing, along with its traditional role as a provider of both hard
currency debt and equity financing.
 Continuing to benefit from its relationships with commercial lenders, other
multilateral and bilateral institutions, telecommunications operators and service
providers.

Telecommunications, Informatics and Media Policy

Through its activities and investments in the telecommunications, informatics and media sector
(the “Sector"), the EBRD makes an important contribution to the transition process with the
objective of establishing a fully liberalized, market-led, financially self-sufficient Sector.  In its
financing of operations in the Sector, the Bank pursues the following transition-related
objectives:

 Promoting sustainable network expansion, increasing the density of telephones and

improvement in quality of service
 Fostering emergence of innovative and advanced communications services crucial
for overall competitiveness of businesses within the country

 Assisting the incumbent operator and the government to accelerate privatization

 Developing appropriate regulatory and legal frameworks

 Extending development of the Sector beyond basic telephone services, including

media, which promotes access to communications and information.

The relative focus on these objectives will depend on the transition stage of any particular
country. The Bank's unique capability to cover the full private-public spectrum of operations
allows it to help the Sector throughout all stages of the transition from state-owned
monopolistic operator to liberalized competitive market-led environment. This evolution has
led to a move from sovereign guaranteed to corporate financing, thereby giving the EBRD the

39
operational flexibility needed to assist the public sector whilst maintaining its priority for
private sector participation.

The proposed strategy provides a flexible approach, tailored to the transition stage of the host
country, that responds to the highly complex, varied, technology driven and ever-changing
needs of the Sector, promotes required reforms in the provision and financing of
telecommunications, informatics and media infrastructure and services, furthers good
governance and reflects the comparative advantage of the Bank.  

X. Transport
The EBRD fosters transition of the transport sector by financing economically viable
infrastructure and transport projects. The EBRD’s policy aims to build efficient, reliable and
secure transport systems in six lines of transport business: aviation, ports, railways, road
transport, shipping, and logistics.

Transport Policy

The Transport Operations Policy sets out the general strategic and operational role of the Bank
in this sector and establishes the overall framework for the Bank’s activities. Approved by the
Board of Directors on 19 April 2005, this is be the third such policy, and replaces the document
approved in February 1997.

The Transport sector is crucial for the development of the economies and markets of our
countries of operation and is therefore an important sector for the Bank. 

The policy notes the continuing likelihood of a higher volume of transport commitments in the
state sector than in the private sector, owing to the difficulty of monetizing the benefits of
transport infrastructure and the capacity of the state to finance large transport projects.  It is
expected, however, that in terms of annual business volume the volume of non-sovereign
transactions will grow faster than the sovereign one. In addition, there will, however, be an
increase in the number of public sector non-sovereign and private sector transactions, as our
countries of operation adopt public private partnership structures and commercial interest
increases in the Advanced Transition Countries.

The policy re-affirms the key role of an efficient transport sector in the operation of regional
markets, as the drive to integration of national economies continues. The Bank will continue to
cooperate with the EU on the development of the Trans-European Network corridors and
implementation of regional initiativesContinuing co-operation with other IFIs, such as the EIB,
International Monetary Fund, World Bank Group and the regional development banks is also a

40
feature of our strategic approach. Environmental issues arising from developments in transport
have been highlighted and the Bank will continue to cooperate also with other IFIs in seeking to
address these issues in the most appropriate manner.

As the Bank’s countries of operation make the transition towards fully functioning market
economies, the channels of achieving transition also change. In countries where the reform
process is most advanced, the strength of demonstration impact and enhancing access to
markets becomes greater. In such countries, the Bank will increasingly undertake projects
primarily on the basis of demonstration impact. The market will assess the success of these
innovative transactions and replicate those which show promise. 

In countries which have not reached an advanced stage in the reform process, institutional and
regulatory development will continue to be the principle focus of transition. For state-owned
clients undergoing commercialization and restructuring, the Bank recognizes an ongoing need to
reinforce transition over a series of transactions. This is because of the complexity of the reform
process, which takes time to achieve, and the consequent need to maintain momentum over time
in its reform dialogue with clients and governments.

41
 Focus Areas of EBRD
i. Integrity and Anti-corruption: The EBRD has developed mechanisms to ensure that
the highest level of integrity is respected in all of its activities. The reputation and the
future of the EBRD depend on the Bank’s integrity. The EBRD is committed to
promote integrity, good corporate governance and high ethical standards in all
business operations.

ii. Bonds: The EBRD is an established debt issuer in the capital markets. The Bank
continuously develops innovative products and has a broad investor base. This track
record enables the EBRD to access the markets at any time and in the borrowing
volumes needed to support the Bank’s development targets. As at 31 December 2008,
the Bank had issued EUR 33.4 billion in 36 currencies, of which 437 were private
placements totalling EUR 10.2 billion, and EUR 12.9 billion of which remained
outstanding. Many of the public issued bonds represented landmark deals. The
average maturity of the Bank's issuance was 10.8 years and the remaining average life
of the outstanding debt was 5.9 years.

iii. Capital Markets: With over 15 years of experience, the EBRD plays a significant role in
the international capital markets through a broad range of activities. The Bank's
Treasury department is involved in:

 Funding

 Investments - Credit

 Balance Sheet Management

42
  Client Risk Management

The Bank has established conservative operational and lending guidelines, which is
reflected in the EBRD’s AAA/Aaa/AAA credit rating. 

By maintaining prudent capital levels, a membership that is committed and a gearing

ratio of 1:1, the EBRD offers its investors reliable investments.

iv. Donors: Donor funds mobilize investment capital and expertise in the EBRD’s
countries of operations by giving local business access to consultant experts. The
consultants help prepare projects and strengthen local management know-how. They
also develop environmental strategies and work to improve the legal framework
which business operate in. Donor programmes are funded by governments and
international institutions, and are managed by the EBRD.

v. Early Transition Countries: The Early Transition Countries Initiative aims to

stimulate economic activity in the Bank's eight poorest countries of operations:
Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Mongolia, Tajikistan and
Uzbekistan. More than 50 per cent of the people in these countries live below the
national poverty line.

vi. Economics: The EBRD Office of the Chief Economist (OCE) works with banking teams
to strengthen the transition impact of projects. It also helps develop the Bank’s
country strategies and sectoral policies. Finally, the OCE conducts research aimed at
key strategic, policy and operational issues.

vii. Environment: The EBRD is unique among multilateral financial institutions in that it
has had an environmental mandate since its inception. The mandate commits the
Bank to finance projects that are environmentally sound and sustainable.
'Environment' is defined by the Bank in its broadest sense to encompass not only
ecological impacts but also worker, health, safety and community issues.

The EBRD will seek to ensure that the projects it finances:

 Are socially and environmentally sustainable.

i.

43
  Respect the rights of affected workers and communities.

 And are designed and operated in compliance with applicable regulatory

requirements and good international practice.

viii. Evaluation: By evaluating its operations, the EBRD is able to assess its performance
and account for its decisions. The Bank looks at the outcomes of policies and projects,
determines how successful they were and tries to use these lessons to improve
operations in the future

Although the Board of Directors is kept informed about the findings of Evaluation
Department Reports and discusses details in the Audit Committee, it is the
responsibility of the Evaluation Department to determine what is contained in the
reports it releases to the public. This is necessary to ensure that the Evaluation
Department is able to fulfill its important independent evaluation role in the Bank and
provide lessons learned.

ix. Legal Reform: As part of its mission, the EBRD provides technical assistance to help
develop commercial laws and institutions that build market-based economies, create
a sound investment climate, and promote economic growth. The EBRD does this
through the Legal Transition Programme.

x. NGO Dialogue: The EBRD's mission to foster market economies in a democratic

context is strengthened by the active participation of local interest groups. Civil
society stakeholders, including NGOs, opinion makers, business circles, academics,
think tanks, local authorities and other groups are encouraged to work with the EBRD,
as well as with their own governments, to bring about positive change.

The NGO Relations Unit facilitates dialogue between the EBRD, and civil
society organizations and communities.

xi. Nuclear Safety: The EBRD manages 6 nuclear safety and decommissioning funds.
The international community provides significant financial support to assist with the
decommissioning of soviet-designed nuclear power plants, the safe treatment and
storage of nuclear fuel and radioactive waste, and the transformation of the
destroyed reactor in Chernobyl into an environmentally safe state

44
xii. Stability Pact for SEE: The EBRD has been very proactive under the Stability Pact for
south-eastern Europe and leads the international community's efforts on regional
private sector development initiatives. The Bank has focused on enhancing trade
flows, on broadening support for small and medium businesses, on facilitating cross
border investments, as well as on financing several regional infrastructure projects.
The EBRD is also a full member of the Business Advisory Council under the Stability
Pact.

xiii. Technical Cooperation: Donor funds mobilize investment capital and expertise in the
EBRD’s countries of operations by giving local business access to consultant experts.
The consultants help prepare projects and strengthen local management know-how.
They also develop environmental strategies and work to improve the legal framework
which business operate in. Donor programmes are funded by governments and
international institutions, and are managed by the EBRD.

xiv. Trade: The EBRD has a range of products to facilitate intra-regional and international
trade in its countries of operations. The trade facilitation programme provides credit
facilities in the form of EBRD guarantees issued in favour of international commercial
banks, covering the risk of issuing banks in the region. In this way confirming banks
benefit from the EBRD's AAA credit rating. The EBRD also provides direct financing to
banks in the region for on-lending to local companies for trade-related activities.

45
Environment
The EBRD is unique among multilateral financial institutions in that it has had an environmental
mandate since its inception. The mandate commits the Bank to finance projects that are
environmentally sound and sustainable. 'Environment' is defined by the Bank in its broadest sense to
encompass not only ecological impacts but also worker, health, safety and community issues.

The EBRD will seek to ensure that the projects it finances:

 Are socially and environmentally sustainable.

 Respect the rights of affected workers and communities.

 And are designed and operated in compliance with applicable regulatory requirements
and good international practice.

46
Bibliography
i. www.ebrd.com
ii. en.wikipedia.org/wiki/European_Bank_for_Reconstruction_and_Developm
ent

47