REMUNERATION: 35 paisa per word

CITATION: Bluebook 20th edn. rules of footnoting

WORD COUNT: 2145-2155 words including footnotes

TOPIC: EBRD: Purpose and Role an overview

Prepare it like a short critical research paper.

Should contain following headings:

1. Introduction and explanation of the topic

2. Literature review (prepare an engaging review comprising articles, writeups, journals, books,
credible websites etc)

3. Conclusion

What are the main functions of the EBRD? Recently India has become member of EBRD,
what benefits will India derive from its membership? (10 M)

Mentor’s Comment:

India has become the 69th shareholder of the European Bank for Reconstruction and
Development (EBRD). This has a lot of potential for Indian companies as it will open up
opportunities for them in places such as Central Asia, Turkey and Georgia.

Introduction should discuss about the EBRD and its main function.

Further, mention about India’s desire for membership in Global Banks. This is to have increased
participation in global trade as well as global development participation.

Further, mention the benefits that India will derive from its membership. Like enhancing
international profile, promoting economic interests, investment opportunities and co-financing
in manufacturing, services, IT and energy etc.

Conclude with more enhanced positive note base on the contents of main part.

Model Answer:
India has become the 69th shareholder of the European Bank for Reconstruction and
Development (EBRD). This has a lot of potential for Indian companies as it will open up
opportunities for them in places such as Central Asia, Turkey and Georgia.

What is the ‘European Bank for Reconstruction and Development – ‘EBRD’

 The European Bank for Reconstruction and Development (EBRD) is a bank that was
established in 1991 to aide ex-Soviet and Eastern European countries transitioning into
democracies by developing free market economies.

 The EBRD is publicly-owned by shareholders in 61 countries and only supports countries

committed to democratic principles.

Main functions of EBRD?

 EBRD promotes environmentally sustainable development. It will not finance activities

or projects related to the tobacco industry, defence, certain alcoholic products, stand-
alone gambling facilities or substances banned by international law.

 The EBRD also helps facilitate the transition of public companies to becoming privately-
held entities as well as restructuring state-owned firms and helping to improve municipal
services.

 The EBRD offers financing in the form of equity financing and loans, leasing facilities,
trade financing, professional development, guarantees and other support programs.

 It finances both large and small projects, with smaller projects typically being financed
indirectly through intermediaries.

 Some of these smaller projects include micro-business banks, commercial banks, leasing
facilities and equity funds.

 The EBRD offers financing intended to support the establishment and development of the
private sectors of formerly communist and Eastern Bloc countries, including working to
help privatize companies that were previously public-owned.

India’s desire for Membership in Global Banks:

  The issue relating to acquiring the membership of the “European Bank for Reconstruction
& Development (EBRD)” had been under consideration of the Government.

 With the country’s impressive economic growth over the years and enhanced
international political profile, it was considered appropriate that India should expand its
presence on the global developmental landscape beyond its association with the Multi-
lateral Development Banks (MDBs) such as the World Bank, Asian Development Bank
and African Development Bank.

 The decision to join the Asian Infrastructure Investment Bank (AIIB) and the New
Development Bank (NDB) was taken earlier in this backdrop.

Benefits that India will drive from its Membership:

The Indian government on its part is looking for the following benefits:

 Membership of EBRD would enhance India’s international profile and promote its
economic interests. Access to EBRD’s Countries of Operation and sector knowledge.

 India’s investment opportunities would get a boost.

 It would increase the scope of cooperation between India and EBRD through co-
financing opportunities in manufacturing, services, Information Technology, and Energy.

 EBRD’s core operations pertain to private sector development in their countries of

operation. The membership would help India leverage the technical assistance and
sectoral knowledge of the bank for the benefit of development of private sector.

 This would contribute to an improved investment climate in the country.

 The membership of EBRD would enhance the competitive strength of the Indian firms,
and provide an enhanced access to international markets in terms of business
opportunities, procurement activities, consultancy assignments etc.

 This would open up new vistas for Indian professionals on the one hand, and give a fillip
to Indian exports on the other.

 Increased economic activities would have the employment generating potential.

  It would also enable Indian nationals to get the employment opportunity in the Bank.

 The EBRD also works closely with leading Indian chambers such as the Confederation of
Indian Industry, and the Associated Chambers of Commerce and Industry of India.

 It recently signed a Memorandum of Understanding with the Federation of Indian

Chambers of Commerce and Industry.

 In 2017, the EBRD signed an accord to strengthen ties with the International Solar
Alliance, which was launched during the 2015 UN Climate Change Conference in Paris
at the initiative of Indian Prime Minister Narendra Modi and former French President
François Hollande as a platform for cooperation among solar resource-rich economies.

UAE membership raises human rights concerns around EBRD1

The United Arab Emirates is set to become the newest member of the European Bank for
Reconstruction and Development, alarming rights activists who say the multilateral lender has
strayed from its mandate to champion “multiparty democracy” and “pluralism.”

The move, first reported by Devex in October, was confirmed in a press release Tuesday
explaining that the bank’s board of governors had approved the Persian Gulf state’s application.
“The UAE can now complete the Bank’s membership process,” the release stated. “Once that has
been finalised and all formalities have been met, the membership will become effective.”

An EBRD spokesperson confirmed that the UAE has asked to buy 37 paid-in and 166 callable
shares at €10,000 ($12,000) each.

That would place it among the bank’s smaller shareholders, though the move remains troubling
for NGOs that say the marriage contradicts the 1990 agreement establishing the bank. Article 1
states that EBRD’s purpose is “to foster the transition towards open market‐oriented economies
and to promote private and entrepreneurial initiative in the Central and Eastern European
countries committed to and applying the principles of multiparty democracy, pluralism and
market economics.”

1
https://www.devex.com/news/uae-membership-raises-human-rights-concerns-around-ebrd-98987
Claudio Francavilla, EU advocacy officer at Human Rights Watch, told Devex by email that
EBRD “appears to be completely disregarding its mandate by ignoring the UAE’s appalling
human rights record.”

“The bank claims that UAE's membership will bring many opportunities, but it is silent about the
risks.” — Fidanka Bacheva-McGrath, EBRD policy officer, Bankwatch

Francavilla highlighted the case of Ahmed Mansoor, a human rights advocate in the UAE who
was arrested in March 2017 and sentenced to 10 years in prison for “insulting the status and
prestige of the UAE and its symbols, including its leaders” and “publishing false reports and
information on social media.”

Amnesty International has also decried “arbitrary arrest and detention, torture and enforced
disappearance,” as well as restrictions on freedom of expression, in the country of roughly 10
million people. The UAE did not respond to a request for comment.

The EBRD spokesperson told Devex that Article 1 covers the requirements for nations wishing
to become “countries of operations” for EBRD — eligible to receive sovereign or private sector
loans within their borders — whereas membership requirements are different. Article 3 of the
bank’s founding agreement opens membership to non-European countries that are members of
the International Monetary Fund, as is the case for the UAE.

“Members have to support the aims of the Bank as set out in our Article 1,” the spokesperson
wrote. “By joining the Bank, UAE has affirmed that it does support the aims.”

EBRD has come under fire in the past for lending in countries with autocratic governments. And
states with alarming human rights records, such as China, Egypt, and Russia, are already
shareholders.

“Economically and businesswise, it’s a very justified move,” said a bank source who spoke to
Devex on condition of anonymity, citing the potential for EBRD to partner with the UAE as the
former expands its investments into Iraq and Algeria. “But it creates even more questions around
our political mandate towards democratic systems.”

A second bank source, also speaking on condition of anonymity, told Devex that the UAE
application had led some shareholders to suggest the bank needed a more detailed membership
policy. The EBRD spokesperson did not respond to a request for comment on whether the bank
would now work on more detailed membership criteria.

EBRD President Odile Renaud-Basso welcomed the move, calling the UAE “an important
business and knowledge hub” and saying that “its membership will benefit many of the
economies where the EBRD invests and will open up further opportunities across our regions.”

“The bank claims that UAE's membership will bring many opportunities, but it is silent about the
risks,” Fidanka Bacheva-McGrath, EBRD policy officer at the NGO network Bankwatch, told
Devex by email, questioning the bank’s systems for “human rights due diligence.”

UAE applies to join European Bank for Reconstruction and Development

A new strategy, new president, and potentially new members made for a big week for EBRD.

The move could also raise eyebrows in Brussels, where the European Commission counts EBRD
among the contributors to its “Team Europe” exercise to foster greater coordination between EU
institutions, member states, and financial institutions — notably, EBRD and the European
Investment Bank, which declined to comment on the current situation.

At the same time, EBRD and EIB are tussling over which bank should take a greater role in
steering EU development money abroad. EIB often vaunts the fact that it is wholly EU-owned,
while EBRD argues that its 71 shareholders make it a “global bank with a European heart.”

Asked by Devex whether it supported the UAE joining EBRD, the European Commission
ignored the question. Instead, a spokesperson from the international partnerships department
gave a general response about the virtues of “Team Europe,” while a spokesperson from the
European External Action Service wrote that, “The EU has regular Human Rights dialogue with
our partners around the world, including the United Arab Emirates.”

A spokesperson for the ministry of foreign affairs of Spain, whose economy minister chairs
EBRD’s board of governors, emailed Devex that, “Human Rights are always a concern for
Spain,” but added that, “Other international organizations or institutions, having specific
mandates on Human Rights, are more suited to work on this issue than the EBRD.”

The European Bank for Reconstruction and Development (EBRD) is a multilateral bank
committed to the development of market-oriented economies and the promotion of private
and entrepreneurial initiatives in over 30 countries. The EBRD is owned by 65 countries,
the European Union and the European Investment Bank. In its last reported year, 2015, it
achieved a record €9.4 billion in annual investment.

The initiative

The Agreement to establish the EBRD was signed by representatives of 40 nations, the European
Community , and the European Investment Bank (EIB) in May 1990, and came into effect in
1991. At the time of its inception, the EBRD was a swift response to the collapse of Eastern bloc
communism. "Urgency and the ability to respond to momentous events swiftly and decisively,
whether it be the end of the Soviet Union, financial crises or the ‘Arab Spring,' have been
among the EBRD's hallmarks from the start."[2]

During the early 1990s the EBRD's emphasis on the private sector as the main driver for change
in Central and Eastern Europe was very well received, establishing its reputation as an expert on
transition to the open market. At the time, it was closely involved in areas such as "banking
systems reform, the liberalisation of prices, privatisation (legalisation and policy dialogue) and
the creation of proper legal frameworks for property rights, all vital ingredients for change".[3]

Over time, it has supported countries going through economic and political crises and helped
countries transition to new technologies such as clean energy. From a financial and commercial
perspective, there are still significant capital shortfalls that Central and Eastern European
countries have experienced during their transition from totalitarianism to democracy. There is a
critical need for capital to support the private sectors of these countries as they are still in a
vulnerable stage in their growth. "The confidence of commercial banks in the creditworthiness of
the Central and Eastern European governments and their privatising or newly-privatised
enterprises is a prerequisite to purely commercial lending by purely commercial banks. Such
confidence depends heavily on legal and economic reform in the countries in question. The
EBRD was in part created to alleviate these problems."[4]

The main characteristics of the Bank, as agreed by its members are:

 "Political conditionality. The EBRD is the first multilateral development institution to

have as its express purpose the fostering of multiparty democracy, pluralism, market-
oriented economics, rule of law and human rights;
  "Environmental protection. The EBRD is required by its Articles of Agreement to
promote and take into account environmental concerns and the concept of sustainable
development in an environmental context;

 "Emphasis on the private sector. After hard bargaining in the short period in which the
EBRD's Articles of Agreement were prepared, the American view that the Bank should
focus on private sector development prevailed. The EBRD is required to invest at least
60 percent of its funds in the private sector and in privatisation. The Bank combines the
concept of a merchant or investment bank with that of a development bank; and

 "European majority. Although the US is the single largest shareholder and exerted some
influence in the creation of the Bank, the EBRD is essentially a European institution."[5]

The challenge

In 1989, the communist regimes in Eastern Europe began their collapse. There was a clear need
for Western nations, particularly those in the EU, to support the existing or newly-created (or
recreated) nations in their transition to democracy and a market economy. The Western nations
needed to react quickly to these dramatic events. "In fact, a mere 18 months elapsed between the
first mooting of the idea of a European bank, by President François Mitterrand of France, in
October 1989, and its opening for business with headquarters in London in April 1991."[1]

The public impact

Since 1991, the Bank has invested over €100 billion in thousands of projects in broad sections of
its client nations' economies. "It has helped to narrow infrastructure gaps and improve the quality
of services delivered by local authorities. It has promoted the development of environmentally-
friendly energy to fuel expanding economies and worked to reduce energy waste and pollution. It
has played a key role in supporting the growth of small- and medium-sized firms that are so
crucial to job creation and helped ensure more equality of opportunity across societies."[6]

The EBRD is currently active in more than 30 countries from Central Europe to Central Asia and
the southern and eastern Mediterranean. The Czech Republic is the only member to have
"graduated" and no longer receives investment from the Bank.[7]
In 2015 alone, the EBRD has invested in projects in 35 countries, with commitments to 381
different projects. During this year there was a record of €9.4 billion in annual investment; from
these efforts, 35 million people are expected to benefit from investments in municipal and
environmental infrastructure projects.[8]

In municipal and environmental infrastructure, specifically, projects financed in 2015 were

expected to enable:

 1.8 million people to benefit from improved access to wastewater services

 1.4 million people to benefit from improved public transport

 6.3 million people to benefit from improved solid waste management

 244,000 people to benefit from improved district heating

 over 24 million people to benefit from improved infrastructure.[9]

Stakeholder engagement

The Bank's shareholders include the states that comprise the EU, the EIB, and the US - which is
the largest single shareholder in the Bank, and played an influential role in crafting key
provisions of its Articles of Agreement.[10]

The EBRD develops partnerships with multiple stakeholders in local and international (business,
investment and development communities) that facilitate its work:

 "We engage with Civil Society organisations in the countries where we work

 "Donor countries work with us to fund specific projects and initiatives

 "We team up with financial services providers to develop the financial sector and foster
entrepreneurship

 "The EBRD partners with other international financial institutions such as the World
Bank, joining forces in investments, initiatives and policy dialogue."[11]

Political commitment
The bank's political commitment is unique for a development bank, and is evidence of the
promotion of the principles of its members. "The EBRD has a political mandate in that it assists
only those countries ‘committed to and applying the principles of multi-party democracy
[and]pluralism' (...)The EBRD serves the interests of all its shareholders - 65 countries from five
continents plus the EU and the EIB - not just those countries which receive its investments (€9.4
billion in 2016). We all stand to gain from the EBRD region's closer and deeper integration into
the global economy."[12]

The US and the European institutions are the main stakeholders that are politically committed to
the Bank's mission. This is evidenced by their significant financial contributions. "The EU, the
EIB and the EU member states combined own 62.8 per cent of the EBRD's capital. As the largest
single donor to the EBRD, the EU has accounted for 36 per cent of total grants channelled
through the EBRD since the Bank's inception. In 2015 the Bank received over €179 million in
contributions from the EU, which represents half of the total donor funding provided to the
EBRD that year."[13]

The US, in turn, has contributed €120 million to the EBRD's technical cooperation and
investment programmes since inception, and is one of the main sources of foreign direct
investment in the EBRD's countries of operations. The value of joint US-EBRD investment
stood at €18.8 billion as of January 2016.[14]

Public confidence

There is strong donor support for the Bank's activities: in 2016, the EBRD attracted a record
level of donor funds amounting to €445 million, a more than 40% increase on the previous year.
[15] There is also public evidence of appreciation of the EBRD's contribution from the
benefiting countries themselves:

  Relu Fenechiu, a Romanian politician has previously expressed (his) "gratitude to the
President of the EBRD, Mr Jean Lemierre, for his activity and good management results
ahead of an institution of such international importance". At the time, the EBRD was the
largest investor in Romania, with commitments over €2.5 billion.[16]

 The Republic of Croatia has expressed the view (in 2000) that it looked forward to
"close, mutually beneficial cooperation, and wishes to express its gratitude to the
 management and the entire staff of the EBRD for their valuable assistance and
unselfishly shared expertise and knowledge".[17]

 The Cypriot Minister of Finance, Harris Georgiades has also recently referred to the
EBRD's Annual Meeting for 2017 as "an opportunity for us to express our appreciation
and gratitude to the EBRD for its significant contribution in the reform and recovery of
our economy". The Minister also expressed his gratitude for the organisation's
willingness to offer continued support in the case of future economic need.[18]

Clarity of objectives

In its core agreement, in Article 1, the contracting parties ratified their commitment to contribute
to economic progress and reconstruction. “In contributing to economic progress and
reconstruction, the purpose of the Bank shall be to foster the transition towards open market-
oriented economies and to promote private and entrepreneurial initiative in the Central and
Eastern European countries committed to and applying the principles of multiparty democracy,
pluralism and market economics.”[19]

The EBRD has defined its mission as  being "to develop open and sustainable market economies
in countries committed to, and applying, democratic principles"[20] as well as maintaining its
core values of leadership, teamwork, diversity, integrity, innovation and professionalism. It aims
to achieve its function through the following objectives:

 "To promote, through private and other interested investors, the establishment,
improvement and expansion of productive, competitive and private sector activity, in
particular SMEs;

 "To mobilise domestic and foreign capital and experienced management to promote
private investment;

 "To foster productive investment, including in the service and financial sectors, and in
related infrastructure...;

 "To provide technical assistance for the preparation, financing and implementation of
relevant projects...;

 "To stimulate and encourage the development of capital markets;

  "To give support to sound and economically viable projects involving more than one
recipient member country;

 "To promote in the full range of its activities environmentally sound and sustainable
development; and

 "To undertake such other activities and provide such other services as may further these
functions."[21]

Strength of evidence

There is no previous evidence of the EBRD's model, and it continues to be a rare example of a
development organisation with a mandate based on political conditionality.

In terms of evaluation and measurement, its methodology - managed by a dedicated department

- is designed around the OECD Development Assistance Committee's Criteria for Evaluating
Development Assistance: relevance, effectiveness, efficiency, impact and sustainability.[21] For
special studies, evaluation questions may relate to the fulfilment of objectives, sector or country
strategies, additionality and transition impact.[22]

Feasibility

The EBRD is owned by 67 shareholders, 65 countries and two international organisations. When
each becomes a shareholder, it makes a contribution to the common capital base. Similarly,
"additional contributions as well as commitments - in the form of callable credit guarantees -
have also been made in the period since the EBRD's founding, contributing to its very strong
capital base, which in turn has led to its robust credit ratings".[23] The EBRD's authorised capital
stock was originally €10.0 billion, and the Board of Governors approved a doubling to €20.0
billion in 1996; total assets stood at €4 billion at the end of 2015. Such a capital base allows the
bank to raise the funds that are eventually used for investment in projects.[24]

The Articles of Agreement of the EBRD establish the guidelines by which the London-based
organisation must operate in terms of functions, management obligations and legal restrictions. It
suggests a two-part framework for the analysis of policies. "First, there are collateral policies that
the Bank must adhere to - policies that do not relate directly to the commercial or financial
aspects of a Bank project. These collateral policies are the requirement of political conditionality
in Bank operations and the environmental protection mandate of the Bank. Second, there are
direct policies that the Bank applies in its day-to-day financing operations - policies that relate
directly to the soundness of investments and loans."[25]

In terms of lending, the bank's Articles of Agreement also establish that it may commit a
maximum of 40% of its financing to the public sector of its borrowing countries. This financing
is also limited exclusively to the development of infrastructure needed for market-oriented
economies.[26]

Management

The EBRD's Agreement requires it to have a board of governors, a board of directors, a

president, and one or more vice-presidents. Each of its shareholders is represented on the
board of governors, which has overall authority over the Bank.  The board of governors
delegates most of its powers to the board of directors. However, it remains responsible for
determining membership to the Bank, changes in capital stock, appointment of directors and
president of the Bank and decisions around financial statements and determining reserves and
allocation of profits. The board of directors is responsible for the EBRD's strategic direction, and
also guides the president in his managerial functions. The executive committee and the
senior leadership group also advise the president and oversee EBRD activities.[27]

The Bank's approach to management is based on three pillars:

 "Measurement and monitoring of the transition impact of its projects;

 "Measurement and monitoring of the project financial results; and

 "Establishment of operational priorities through country and sectors agreed with

countries of operations and approved by the Bank's board of directors."[28]

The measurement and monitoring procedures have been in place since the bank was established,
while transition results initiatives have been recently increased.

The EBRD's standards of corporate governance ensure that responsibilities and controls are
defined and delineated throughout the Bank. "This structure is further supported by a system of
reporting, with information appropriately tailored for and disseminated to each level of
responsibility within the Bank to enable the system of checks and balances on activities to
function effectively."[29] The Bank also engages in promoting better standards of corporate
governance as an investor, and as a law reformer at the country level.

Measurement

The EBRD has an independent Evaluation Department, which evaluates the performance of

completed projects and wider programmes in terms of the Bank's established objectives. The
Evaluation Department fulfils two primary functions:

 "It provides a critical instrument of accountability through objective, evidence-based

performance assessment of outputs and outcomes relative to targets; and

 "It contributes to institutional learning for future operations by presenting operationally

useful findings."[30]

An evaluation policy was established in 2013, which specifically outlines the activities and
responsibilities of the Evaluation Department, management, and the board of directors and any
subordinate bodies. "The policy sets out specific roles, methods, and response by management to
evaluation findings, access to information, utilisation of findings, internal circulation and
external disclosure." [31] Every evaluation produced by the Evaluation Department looks to
identify objectives and results at three levels:

 "Outputs - the products, capital goods and services which result from an operation

 "Outcomes - the short- and medium-term effects directly attributable to outputs

 "Impacts - the positive or negative long-term effects to which an operation contributes,

directly or indirectly, intended or unintended."[32]

Alignment

The Bank's mandate requires it to work in close cooperation with all its members and other
organisations. These partners include the IMF, the International Bank for Reconstruction and
Development, the International Finance Corporation, the Multilateral Investment Guarantee
Agency, and the OECD. "It also needs to cooperate with the UN and its Specialised Agencies
and other related bodies, and any entity, whether public or private, concerned with the economic
development of, and investment in the countries of scope in the Bank's activities."[33] It has a
particularly close relationship with the EIB, and it often collaborates on the EIB on funding, as it
has in one of many such projects: "teaming up to support further expansion of Grupa Azoty,
Poland's leading chemical and fertiliser company".[34]

In 2013, leaders of the EBRD along with the African Development Bank, the Inter-American
Development Bank, the IMF and the World Bank Group pledged close collaboration to support
to support the achievement of the UN's Millennium Development Goals. They all pledged strong
support for and collaboration with the UN-led process of defining the Post-2015 Development
Framework, supporting the integration of concepts of economic, social and environmental
sustainability. "They called for a renewed focus on financing for development - with greater
leveraging of official development assistance and private sector investment, as well as better
domestic resource mobilisation and management and stronger institutions. They pledged
cooperation to build the statistical capacity of governments, to enable better policies, for example
by deploying the latest techniques for monitoring poverty and inequality, and factoring natural
wealth accounting into decision-making."[35]

Bibliography

2000 Ordinary Session (Third part) Report , 26-30 June 2000, Council of Europe
Parliamentary Assembly

2005 Ordinary Session (Third part) Report: Eighteenth sitting , 21 June 2005, Council of
Europe Parliamentary Assembly

Annual Report 2015, 11 May 2016, European Bank for Reconstruction and Development

Basic documents of the European Bank for Reconstruction and Development , September
2013 (revised), European Bank for Reconstruction and Development

History of the EBRD, European Bank for Reconstruction and Development

Progress Report on Managing for Development Results at the European Bank for
Reconstruction, February 2004, Second International Roundtable on Managing for
Development Results

Tajikistan/EBRD mobilizes record levels of donor funds in 2016, 26 January 2017, Asia-Plus
The European Bank for Reconstruction and Development: Legal and Policy Issues , John
Linarelli, 1 August 1995, Boston College International and Comparative Law Review, Volume
18, Issue 2 Article 3

Who We Are, European Bank for Reconstruction and Development

EBRD mobilizes record levels of donor funds in 2016

The European Bank for Reconstruction and Development (EBRD) in 2016 attracted a record
level of donor funds amounting to €445 million, a more than 40 per cent increase on the previous
year.

EBRD says donor grants are used to co-finance EBRD operations and related activities, such as
policy reform and technical cooperation projects, aimed at enhancing the private sector’s
sustainable growth in countries ranging from Morocco to Mongolia.

The European Union is the EBRD’s largest single donor, contributing around 50 per cent of
donor funding received over the last five years in support of Bank activities, confirming its
commitment as a crucial partner to the EBRD.  Individual governments and donor agencies –
including EBRD countries of operations such as Kazakhstan and Albania, as well as global funds
such as the Climate Investment Funds, the Global Environment Facility and other World Bank
managed financing facilities – also contributed significant grant support.

The EBRD and its donors share the commitments expressed in the United Nations’ Sustainable
Development Goals and the Paris Agreement on climate action.  Working together, donors and
the EBRD play a decisive role in promoting well-functioning market economies, transparency,
fair competition, modernization, inclusion and the sustainable use of resources.  On average,
around one-third of EBRD operations are supported by donor funds, with an emphasis on less-
advanced regions.

Donor grants finance both investments and technical cooperation.  This support has allowed the
Bank to confidently take ambitious steps such as initiating the Green Economy Transition
approach, the implementation of the first Gender Strategy, the involvement in the international
refugee crisis response and the launch of the Green Cities Framework.
The ultimate beneficiaries of EBRD donors’ generosity are the millions of citizens who are
enjoying better and greener municipal services, business owners and managers who have more
access to finance and advice, industries and infrastructure that are enabled to use clean
technology and regulators that are better equipped to push reforms for an improved business
climate.

In addition, in 2016 the EBRD secured from the Green Climate Fund (GCF) last October up to
US$ 378 million to support green investments – the Fund’s largest approval in 2016. As manager
of multi-donor funds supporting activities of international financial institutions (IFIs), such as the
Eastern Europe Energy Efficiency and Environment Partnership (E5P) Fund, the Western
Balkans Investment Framework's donor fund and the Northern Dimension Environmental
Partnership (NDEP), the EBRD helped raise the significant sum of €114 million in grant funding
for EBRD and other IFI operations.

Donor funding will continue to boost the Bank’s work in all sectors and across the entire region.
In particular, these funds will continue to be essential to invest in the green economy,
infrastructure, small businesses and other initiatives such as good governance, economic
inclusion and gender equality.

The EBRD is a multilateral bank committed to the development of market-oriented economies

and the promotion of private and entrepreneurial initiative in more than 30 countries from
Morocco to Mongolia and from Estonia to Egypt. The Bank is owned by 65 countries, the EU
and the EIB.  The EBRD’s strategic plan for the countries where it invests for the period 2016-18
has three priorities: strengthening economic resilience, addressing global challenges and
supporting regional integration. 

Tajikistan joined the EBRD on October 16, 1992.  In Tajikistan, the Bank focuses on stabilizing
and rebuilding trust in the banking sector, developing private enterprises and agribusiness,
improving the availability, reliability and quality of municipal services and improving the quality
of energy supply, regulation and energy efficiency.

Read more: https://www.asiaplustj.info/en/news/tajikistan/20170126/235972

https://www.rferl.org/a/1099717.html#:~:text=The%20bank%20was%20formed%20in,wasteful
%2C%20ineffective%2C%20and%20counterproductive.
The European Bank for Reconstruction and Development (EBRD) is the largest lender by far to
the transitional countries of Eastern Europe and the former Soviet Union. Yet the bank has been
dogged since its inception by criticism that it's wasteful, ineffective, and unnecessary. Officials at
the bank understandably see the matter differently and point to a string of successful deals in
which their role, they say, was crucial. Ahead of the bank's annual meeting this weekend in
Bucharest, RFE/RL correspondent Mark Baker filed this two-part series. The first part looks at
criticisms of the bank. The second part will look at some of the bank's accomplishments and at
its future.

Prague, 16 May 2002 (RFE/RL) -- Few financial institutions ever had a rockier start than the
London-based European Bank for Reconstruction and Development (EBRD).

The bank was formed in 1991 with the laudable intention of helping countries in Eastern Europe
and the former Soviet Union rebuild from decades of communist mismanagement and neglect.
But since its inception, the bank been dogged by criticism that it's wasteful, ineffective, and
counterproductive.

The British newspaper "Financial Times" struck the first blow during the bank's annual meeting
in 1993. In a series of articles, the paper blasted the bank for spending lavishly on its London
headquarters instead of funding projects in Eastern Europe.

The "FT" focused on expensive Italian marble that the bank had ordered for its head office at a
cost of more than $1 million. At the time, the EBRD was spending twice as much on itself -- in
salaries and furnishings -- than it was in Eastern Europe.

The marble scandal prompted changes, and then-President Jacques Attali was ultimately forced
to step down. Yet the criticism continued.

To be sure, it was never going to be easy for the EBRD. The bank had to allocate resources
among 27 former communist countries while balancing the preferences and petty jealousies of its
more than 50 shareholders. These include the U.S., the European Union, and the transition
countries themselves.

To make matters worse, regional development banks like the EBRD had become unfashionable
by the early 1990s. There was concern that these types of banks -- which also exist in Asia,
Africa, and Latin America -- unfairly compete with and "crowd out" private lenders.
Development banks were seen as favoring projects that harmed the environment and served
political rather than economic interests.

To satisfy critics, the EBRD adopted strict guidelines on the environment and pledged to operate
according to what it called "sound banking principles."

The bank went a step further, pledging in its charter to refuse loans to regimes that were not
democratically elected or responsive to their populations. The EBRD thus became the world's
first development bank to make the promotion of democracy one of its aims.

In practice, though, the bank has found it difficult to reconcile these frequently conflicting
demands, providing ample ammunition to its detractors.

Sam Vaknin is an economic adviser to the Macedonian government in Skopje. He is unsparing in

his view that the EBRD has not worked. "The EBRD has failed on all counts. Instead of serving
as a regional development bank with emphasis on small and medium-sized enterprises,
entrepreneurship, corporate governance, property rights, and so on, instead of fostering a private
sector where there was none, the bank [has] actually cast itself as a competing investment bank
with subsidized financing."

Vaknin says the EBRD, by virtue of its size and access to governments, has pushed the private
sector out of the market and taken the best projects for itself. He adds that the EBRD has failed
in its mission to support small businesses by relying on local banks, which are often corrupt, to
distribute the loans. He says the situation in Macedonia is typical: "Most of the money [the
EBRD made available to small businesses in Macedonia] was channeled through five banks --
one of which went belly up, two of which are under criminal investigations. And the other two
are without proper capital adequacy."

Noreen Doyle, the EBRD's first vice president and its top banker, disagrees. She says she's aware
of concern that the EBRD may be "crowding out" private-sector lending but says the bank tries
to work with -- not in competition with -- private lenders. "I have always been conscious that our
role is not to crowd out private financial lenders or investors, and to complement what they will
do, either by helping them to do it or by taking more or longer or different risks than they take.
One of the early decisions that the EBRD took was not to provide financial advisory services for
a fee because the private sector could do that [better than we could]."

Doyle says that in many of the bank's target countries, there are no private-sector lenders to
crowd out. "If you take a country with both political and economic difficulties, like Georgia or
Armenia, we would be very hard-pressed to find private sector lenders to take [very long-] term
maturities."

Doyle also acknowledges the difficulties of working with local banks, but points to more than
200,000 loans the bank has made through its small-loans program since 1994.

That's not to say the bank has been perfect. Doyle admits the EBRD has made its share of
mistakes over the years. The worst, she says, occurred during the Russian financial crisis in
August 1998, when the country's banks went insolvent overnight. The EBRD lost millions of
dollars and much of its Russia portfolio. "We certainly have made mistakes. Probably our most
costly mistake was assuming in Russia, in the banking system, that we could determine which
were the best banks based on financial due diligence and by knowing the management of the
banks."

The Russian debacle and the steady stream of criticism have forced the bank to change its
outlook and scale down its ambitions. There are no plans to change the marble on the wall, and
bank officials no longer speak in terms of "reconstructing nations," as first bank president Attali
once famously remarked, but rather of making loans.

Even Vaknin concedes the EBRD has made changes. He dates the turnaround from two years
ago, when current President Jean Lemierre took office. "[The EBRD] has become much less
grandiloquent and grandiose in its aspirations. It's more down-to-earth. It works directly with the
private sector in a few countries. It has altered the internal composition of its portfolio by getting
rid of prime assets -- mainly in the Czech Republic and Russia. It has refrained from lending to
corrupt or to companies which are not properly governed -- which do not apply proper corporate
governance, such as Gazprom in Russia. It has withstood political pressures from its masters --
or actually, its shareholders -- regarding a few dubious financing schemes, mainly in Ukraine.
All in all, the bank has improved considerably over the last two years."

But he still wonders whether the bank was ever necessary in the first place.
EBRD: What's Next For The Bank's Second Decade? (Part 2)
https://www.rferl.org/a/1099718.html

The European Bank for Reconstruction and Development (EBRD) was formed in the aftermath
of the collapse of communism to help the countries of Eastern Europe and Central Asia build
market economies. That was more than 10 years ago, however, and many of those countries --
especially in Central Europe -- are firmly on the road to accomplishing that goal. Officials and
shareholders of the bank are meeting this weekend in the Romanian capital, Bucharest, and one
of the items on the agenda is the bank's future. RFE/RL correspondent Mark Baker files the
second in a two-part series on the EBRD.

Prague, 16 May 2002 (RFE/RL) -- It's been more than 10 years since the European Bank for
Reconstruction and Development, the EBRD, set up shop to help the former communist
countries of Europe and Central Asia build market economies.

Since 1991, the EBRD has made thousands of loans and committed billions of dollars to the 27
countries in the region it was set up to help.

In many of those countries, the commitments -- along with the reforms and the addition of
private and other capital -- are paying off. While living standards in Central Europe remain well
below those in the West, a future can now be glimpsed when these differences will dramatically
narrow. Many EBRD target countries are actively negotiating entry into the European Union.

Despite this progress, however, bank officials say the EBRD has no plans to wind up its
activities anytime soon -- even in Central Europe.

Norbert Radermacher is the executive director for Germany, one of the bank's leading
shareholders, at the EBRD's main office in London. "In our view, the transition for all of the
countries is not over. Transition is an ongoing process in all of the 27 countries of our operations.
There's still a need to support that transition. In this transition, the bank is moving to the east,
[but] there are still remaining tasks in Eastern Europe."

The bank's mandate is open-ended. The EBRD's purpose is to assist the transition countries of
Eastern Europe and the former Soviet Union to build market economies and democratic political
systems. No time frame for completing these goals was ever envisioned.
But clearly the bank's future lies to the east -- to the former Soviet countries in the Caucasus and
Central Asia, as well as Moldova, Belarus, and Ukraine. The EBRD refers to these countries
euphemistically in its reports as being in the "early and intermediate" stage of transition.

Radermacher says that, in the medium term, the bank would like to apportion its investments so
that at least 40 percent goes to "early and intermediate" countries. The rest would be divided
equally between Russia and the more advanced countries of Central Europe and the Baltic states.
He says the EBRD is already making progress toward that target: "We have already reached -- in
the so-called early and intermediate countries of transition -- the objectives we wanted to reach
in volume in the year 2003, and also this year when it comes to commitments for lending and in
terms of equity investment. We can also prove that the bulk of it is now being done in those
countries that belong to the early and intermediate stage of transition."

But any serious transfer of EBRD resources to underdeveloped countries in Central Asia will run
into formidable constraints. The EBRD is mandated to work with private companies, and many
of these are still reluctant to invest in countries that lack transparent political and economic
structures.

Noreen Doyle, the bank's first vice president, explains the bind the bank finds itself in: "Because
we're oriented toward the private sector, we [at the EBRD] depend upon foreign direct
investment and that depends upon the environment, the institutional environment, being
appropriate. We would like and strive to move south and east, moving into the countries that
have not advanced as far as Central Europe, but we're constrained by the investment
atmosphere."

Many outside the bank would like to see the EBRD accelerate its transition away from Central
Europe in favor of needier regions. They argue that private and commercial banks stand ready to
provide all the capital that countries like the Czech Republic, Poland, and Hungary need, and that
the EBRD, by offering subsidized loans, only competes with private banks.

Sam Vaknin, an economic adviser to the Macedonian government, is an outspoken critic of the
EBRD. "No, in my view, [the EBRD does not] have a role to play. If there is place for capital,
then the private-sector investment banks would fill the vacuum. Nature does not tolerate a
vacuum." Vaknin says the notion of regional development banks, like the EBRD, is outdated. He
says research shows injecting capital through existing government and banking structures, as the
EBRD does, does not usually work.

Doyle defends the EBRD's continued presence in some of the fastest-growing and best-
performing countries in the world. She says countries like the Czech Republic and Hungary will
need huge amounts of capital in the years ahead, especially given their ambitions of joining the
European Union. "There has been very good progress, but even in the most advanced countries,
if you project forward their growth rates -- which you know are 3 and 4 percent, they're
reasonably good -- for the next 10 years, they will only be at GDPs (gross domestic products) per
capita in 10 years' time that the least well-off existing members of the European Union are at
today. So there is a significant amount of capital needed to grow these countries."

She says that in Central Europe, however, the EBRD will start shifting its focus away from
issuing loans to existing companies in favor of making higher-risk direct investments in start-up
companies where, she says, the capital shortage is most serious.

https://www.rferl.org/a/1103017.html: EBRD: Report Says Growth Robust In Postcommunist

Countries

https://www.rferl.org/a/1055780.html East: EBRD Report Finds Former Soviet Oil Economies

Booming

https://www.rferl.org/a/1099728.html East: EBRD Officials Gather In Bucharest To Mark 2001

Successes

https://www.rferl.org/a/1099754.html EBRD: Bank To Curtail Activity In Belarus

https://www.rferl.org/a/1099779.html Romania: EBRD Venue In Bucharest Symbolizes Folly Of

Excess

https://www.ebrd.com/who-we-are/history-of-the-ebrd.html history of EBRD

The European Bank for Reconstruction and Development at a crucial juncture2

The European Bank for Reconstruction and Development was created almost 30 years ago to
help build market economies in eastern Europe, later expanding its activities to central Europe

2
https://www.omfif.org/2020/03/future-of-the-ebrd/
and central Asia. In an increasingly polarised world and amid a changing environment within
the EBRD regions and beyond, Tadeusz Kościński and Pier Carlo Padoan offer up ways in
which the institution should move forward. 

How to build EBRD success

Market-driven, non-political approach is key

by Tadeusz Kościński in Warsaw

The European Bank for Reconstruction and Development and its mandate have remained valid
and important for nearly 30 years. Rising annual investment volumes demonstrate unfaltering
demand for EBRD support. There is room for further enhancement though, prioritising ‘early
transition countries’ in central Asia, the Caucasus, the western Balkans, and southern and eastern
Mediterranean regions. The most important aspects of the EBRD are to ensure that it is market-
driven, doesn’t crowd out private funding, and it achieves transition impacts and ‘additionality’
through stimulating fresh outside financing. The bank must also avoid being influenced by
politics or politicians.

Despite considerable success in strengthening various economic sectors, transition gaps persist.
Demand for EBRD financing will naturally diminish in some areas as new opportunities emerge
in fields such as developing capital markets and internationalising companies. It needs to
stimulate connectivity and cross-border investment, as well as facilitate regional linkages to
support economic integration. The EBRD should continue equity investments, part of its strong
comparative advantage. It is vital to expand private equity activities in less advanced countries.
This adds further value to EBRD operations catalysing co-investment and lessening companies’
dependence on debt.

The EBRD should follow the demand for financing of new priority areas, in particular climate-
related and green investments, including ‘smart cities’ solutions, electromobility and smart grids.
There is significant scope for assistance, not only through financing but also through advice, in
project preparation. This would play a role because some countries are institutionally
underdeveloped and have limited capacity to identify and design bankable projects.
One of the EBRD’s strengths lies in the diversity of its clients. The bank manages its portfolio to
strike a balance between different risk levels. Projects in advanced transition countries
complement those in less advanced economies. Altering this client base requires careful
consideration so that it avoids upsetting that balance.

Maintaining dialogue with clients and attending to their needs have always been at the heart of
the EBRD’s activity. Graduating countries beyond transition status is the ultimate objective. The
process should be country-driven and linked to the demand for EBRD financing, culminating in
a success story for the bank and the graduating country. Limiting access to profitable and well-
performing projects brings unnecessary disadvantages to recipient countries and the bank, since
these projects provide a good base for the bank to embark on more risky ones.

With a continued country-specific approach, combined with policy dialogue and supporting
structural reforms, it can gradually close transition gaps. Moving eastwards and southwards is
connected with introducing sophisticated products and solutions in early transition countries.
Maintaining the EBRD’s presence in advanced countries provides a sound testing ground for
more innovative solutions prior to broader implementation.

Meticulous preparation – including analysing potential beneficiaries, activities of other actors in

the field and the bank’s capacity – has been central to the success of past expansions. Such
analysis should be continued for the potential move into sub-Saharan Africa. The bank should be
prepared for limited and selective growth, based on broad shareholder consensus.

The European Union is expected to give guidance to the EBRD on its new financial architecture
for development conclusions. At the same time, the bank should remain one of the key
multilateral development banks, engaged in co-operation with other international financial
institutions and domestic development banks. In this international dialogue, the EBRD is best
suited to take the lead in its areas of expertise, focusing on support for the private sector,
fostering entrepreneurship and building capacity through policy dialogue.

The EBRD should increase the involvement of its shareholders in all its decision-making,
restoring a spirit of open co-operation and shared goals between management and directors. It
should continue to strengthen its international character, including making better use of
professionals from countries with first-hand transition experience. The EBRD must deliver
support close to target markets, with more staff deployed in regional offices. It will need to
review its presence in various countries following strategic decisions on its future mandate – all
part of extending its solid base for coming years.

EBRD’s strategic role in multilaterism

Critical partnership for Europe and its neighbours

By Pier Carlo Padoan in Rome

A reflection on the European Bank for Reconstruction and Development has to be viewed in the
context of the status quo and future of the international financial system. Faced with declining
trust in the benefits of multilateralism and with increasing global challenges, the international
community should strengthen its efforts to provide shared, system-wide solutions. The EBRD is
a crucial part of this endeavour.

The EBRD and the other multilateral institutions must use their respective comparative
advantages to contribute to the development agenda, in close collaboration with all relevant
stakeholders. In this respect, over the years the bank has proven effective and successful. This is
thanks to its unique mandate – to assist the transition to market economies and promote private
sector initiatives while leveraging democratic systems.

Its business model has been flexible enough to adapt to the evolving environment in its original
countries of operation, as well as to intervene in other regions after the 2008 financial crisis and
the Arab Spring. By focusing on private sector financing, the EBRD has led a significant cultural
change in how the private sector behaves and operates. It has raised standards and improved the
framework for doing business, becoming a benchmark for other multilateral development banks.

To be effective and keep pace with new challenges, the EBRD must continue to adapt and update
its business model and objectives. Its transition mandate was refined in 2017 to reflect the key
features of a sustainable market economy: competitive, well-governed, green, inclusive, resilient
and integrated. Given extensive transition gaps in the countries of operation, the bank should
widen its scope of activity.

This is a critical year for the EBRD, with shareholders set to adopt the new strategic capital
framework, which will shape the institution’s future. At the annual meetings in May, an
agreement needs to be found on two sensitive issues concerning the ‘graduation’ of countries of
operation (when they no longer receive EBRD funding) and further expansion in sub-Saharan
Africa.

When countries ‘graduate’, the EBRD needs to continue operating where there are transition
gaps. It must base its work on robust and rigorous analysis of these gaps and adopt selective
strategies. These can support countries throughout the design of a sensible pre- and post-
graduation package, to ensure balance, gradualism and possible re-engagement. Countries will
maintain full ownership of the graduation process, requiring a shared, participatory process.

Some countries in sub-Saharan Africa could present the case for selective, focused and gradual
intervention, as long as it is evident that EBRD expertise could contribute to developing and
mobilising the private sector. This should not happen in isolation. Rather, actors and institutions
should work together and in co-operation with other partners already active on the ground.

As multilateralism faces mounting challenges, it is crucial for the EBRD to preserve its
multilateral nature. At its inception, the bank was intended as a strategic political partnership
between Europeans and non-Europeans on the future of Europe and its neighbourhood. This
partnership remains of critical relevance.