2008 ORDINARY SESSION

________________________

(Third part)

REPORT

Twenty-second Sitting

Tuesday 24 June 2008 at 3 p.m.

Link to the voting results

In this report:

1.       Speeches in English are reported in full.

2.       Speeches in other languages are summarised.

3.       Speeches in German and Italian are reproduced in full in a separate document.

4.       Corrections should be handed in at Room 1059A not later than 24 hours after the report has been circulated.

The contents page for this sitting is given at the end of the verbatim report.

Mr Wille, Vice-President of the Assembly, took the Chair at 3.10 p.m.

      THE PRESIDENT (Translation). – The sitting is open.

1. Minutes of proceedings

      THE PRESIDENT (Translation). – The minutes of proceedings of the Twentieth Sitting have been distributed. If there are no objections the minutes are agreed to.

They are agreed to.

2. The European Bank for Reconstruction and Development:

a focal partner for change in transition countries

      THE PRESIDENT (Translation). – The first item of business this afternoon is the debate on the report on the European Bank for Reconstruction and Development presented by Mr Martins on behalf of the Economic Affairs and Development Committee, Document 11630.

Mr Jean Lemierre, President of the European Bank for Reconstruction and Development, will make a statement to the Assembly after the rapporteur has introduced the debate.

The list of speakers, which has been distributed, closed at 12 noon. No amendments have been tabled.

      I call Mr Martins, rapporteur. You have 13 minutes in total, which you may divide between presentation of the report and reply to the debate.

      Mr MARTINS (Portugal) said that the committee had been entrusted with preparing the draft report on the EBRD’s activities in 2007-08. He underlined that it was not an international audit, nor a micro or macro analysis. It was undertaken in the interests of the shareholders, not the individual countries but in a parliamentary sense. The principles and criteria had been enshrined in 1992, when Europe was politically challenged. There were crises and opportunities which were two sides of the same coin, as shown by experience over 20 years. It was important that chaos and destruction became creative. These were the challenges for transition countries. The democratic performance in those countries affected millions of citizens. In neighbouring countries such as Belarus, problems continued. The impetus of taking on particular or social factors of countries was needed to create a chemistry that was positive for reform and progress.

Progress had been made. This showed that the Council should continue dialogue with the European Bank for Reconstruction and Development. What was needed was to consider the EBRD as more than a bank but an institution with a mission for building trust – with values such as integrity – and building social bridges. The values of transparency and accountability must be disseminated. The EBRD was a catalyst. He had seen in Kiev last May that its presence gave credibility to this Organisation. As rapporteur, he welcomed the EBRD’s decision to reinvest 80% of its 2007 results in poorer countries. It was true that this was a risk, but it was what these countries needed. Institutions should work together, and if there were overlaps, they should be done away with. Measures had been taken for small and medium-sized businesses, 3 million of which, 32 %, had already resorted to funding from the EBRD.

With respect to integrity and transparency, he particularly appreciated that measures to fight corruption and fraud had recently been reinforced. Most countries where the EBRD operated had a high ranking on the transaction impact list. He also underlined that investment had been made in Chernobyl and the surrounding region to improve the environment for the local people. Also, reforms in countries such as Belarus had been stimulated by the Bank. It was imperative for the Parliamentary Assembly of the Council of Europe to enter into a high level of co-operation with the European Bank for Reconstruction and Development over the coming years. It was particularly important now that the EBRD had to consider making Turkey an area of activity.

      Mr Lemierre had been instrumental, to a great degree, in the success of the EBRD, which had gone from strength to strength under his distinguished leadership. But it was also important to realise that new strategic challenges lay ahead.

THE PRESIDENT (Translation). – Thank you, Mr Martins.

Before we move on to the main debate, we shall hear from Mr Jean Lemierre, President of the European Bank for Reconstruction and Development.

      It is a great pleasure for me to welcome you again in our midst as an old, good friend of this Assembly. Sadly, however, it is for the last time in your capacity as President of the EBRD, as you have announced that you are leaving at the end of this month after completing two four-year terms at the Bank.

      When you took over the leadership of the EBRD in 2000, many of the transition countries were at the crossroads in their quest for a more prosperous society. The fastest reformers have since been “rewarded” for their efforts with EU membership and will increasingly act themselves as contributors to the EBRD’s action further east and south. This is a remarkable achievement by these countries and a source of pride for the EBRD.

      However, there is still a tremendous job to do in the regions of Russia, Ukraine and south-eastern Europe, but especially also in Belarus, the Caucasus and central Asia. The Council of Europe and the EBRD have a shared responsibility – and a moral obligation – to stimulate democratic changes and promote progress in development there. The task is particularly daunting as these transition countries face complex challenges in transforming their past legacy, modernising their institutions and embracing globalisation.

      The EBRD has grown into a mature, experienced and authoritative institution. Your resources are substantial, enabling you to take risks and yield much value in countries where you work. But it is not only money that the EBRD lends: your role as a central partner for change through policy advice, confidence-building, transfer of know-how, and the fostering of greater understanding between East and West is just as vital in assisting both transition countries and foreign investors. This is crucial in times when inflation is hitting all countries in Europe hard and new solutions are required for greater Europe to advance economically and politically.

      We know, Mr President, that you received long and loud applause from participants at the EBRD annual meeting in Kiev a month ago in recognition of your talent as a creative, open-minded and forward-looking leader of the EBRD. We pay tribute to your skills and look forward to a continued dialogue with the EBRD in future, as well as a mutually enriching debate this afternoon.

      Mr President, you have the floor.

      Mr LEMIERRE (President of the European Bank for Reconstruction and Development) said that it was with the greatest pleasure that he was appearing before the Assembly this one last time. If members detected nostalgia in his speech and his answers, that would be entirely accurate. The rapporteur of the committee had spoken impressive words and produced both a thorough and comprehensive report on the work of the EBRD. The regional activity of the EBRD was in rude health, although of course some issues remained to be resolved. Among those important issues were growth, investment and the development of small and medium-sized enterprises. The economies of the region benefited from their proximity to the European Union, this being one of the reasons why the region was so much better off than a few years ago. The problems that remained to be resolved could be grouped together under a small number of headings.

The first was serious political instability in the west Balkans, which could hopefully be resolved over the next weeks and months. It was crucial that the European Union played a role in the stabilisation of the region. A second issue was the resurgence of inflation – it was high in the Ukraine and also pretty high in Russia and other countries in the region. The rise of food prices was particularly problematic in the region because it affected the poorest segments of society disproportionately. Food could often account for as much as 50% of the income of low income families in the region of activity for the Bank.

A third issue was international funding. At the beginning of the Bank’s work, capital flows and financial stability had been much greater. Now there were tensions in the financial and banking systems in the region, something that was not of their own making. In addition to the credit crunch, the stagnation of economic growth in the West made it harder for eastern European countries to increase their exports to the West. This was a source of tension.

Furthermore, the level of indebtedness was high and this caused problems, particularly because debts in foreign currencies exposed countries to exchange rate fluctuations—a problem that was only compounded by increasing levels of inflation. The solution was to take structural measures to create a climate that would foster growth in local production and thereby create new jobs. It was an important milestone that the Ukraine had now joined the World Trade Organization.

      In response to these challenges, eastern Europe had a great deal of potential that could be exploited. The region was unique in the world in having more than 20 million hectares of fallow arable land. This land could be used easily to grow food; in fact it had been used to grow food in the past. There were no environmental issues, no deforestation or irrigation issues in doing so. The EBRD was seeking to contribute to this process of development by bringing together private investors and parties from the region itself.

      The rise in energy prices had also affected eastern Europe, and the EBRD was supporting energy efficiency measures. In fact, the response from governments in the region had been impressive because they had achieved, through co-operation with the EBRD, three separate objectives which were rarely addressed as part of one policy measure: the environment, energy security, and business competitiveness. The lessons to be learned were that developing national facilities and mobilising domestic resources were key to good development policy. Doing so also helped to decrease dependency on international finance and vulnerability to exchange rate fluctuations.

      The EBRD had now started to move out of central eastern Europe. By 2010, this would be complete and its work would be entirely refocused on the south eastern part of the region.

      The EBRD had returned a very healthy €1.2 billion, 80% of which was put into reserve funds to safeguard its future work. Approximately 10% of the profit was going into a special fund for investment in the poorest countries in the region, while about another 10% was going towards special operations to assist with the Chernobyl clean-up. Of course, the objective was not to make money, but it was clearly impressive to be able to produce such profits, and the Bank was committed to putting this money to the best possible use for the region in which it worked. The future of the Bank was, of course, a matter for the board and for his successor as well as the many shareholders inside and outside Europe. He was grateful to all the governments which had contributed so strongly to the work of the EBRD and special thanks were due to the non-European shareholders such as Mexico and Canada, who helped to ensure that it was a truly multilateral organisation. A key characteristic of the work of the Bank was the way in which it brought the private and public sectors together in a focus on transforming democracies and installing the rule of law in eastern Europe. It was important that the Bank did not lose focus but that it drew on its collaboration with other institutions such as the European Bank, which had itself developed an entirely new way of working.

      Turkey, which was itself a shareholder in the EBRD, had now also requested to be a recipient of assistance from the Bank. A clear and swift response to Turkey’s request would be finalised by October. Many other countries were also keen to have EBRD assistance.

      Successive Presidents, many rapporteurs and staff had all acted as great partners in the dialogue with the EBRD. He wished to thank them all, especially all those who went to London at the beginning of each year to ask questions and challenge the EBRD about its work. This had been a constructive process. The founding fathers of both organisations had the same aims and, on behalf of all of the staff, he would like to express gratitude for the valuable advice and constructive criticism that the EBRD had always received from the Council’s Assembly. He would do his level best to respond to any questions which members might have this afternoon.

THE PRESIDENT (Translation). – Thank you, Mr Lemierre, for your address, which, as you can see, has been received with great interest by the members of the Assembly.

      In the debate, I now call Mr Petrenco. He is not here, so I call Mrs Doris Barnett, who will speak on behalf of the Socialist Group. You have four minutes, which can be extended to five minutes if necessary.

      Mrs BARNETT (Germany) thanked Mr Lemierre for his speech, and noted that many felt that the work of the European Bank for Reconstruction and Development was now nearing its end. However, in her opinion this was not the case. The fact that Turkey was now seeking inclusion highlighted the fact that the work of the EBRD had been very successful. The countries served by the Bank had made progress and it was now a time to consider what further assistance the Bank could provide.

      She noted that the price of oil was now in excess of $130 per barrel, so many economies now needed help to survive in the current economic climate. Transition countries, in particular, needed such assistance. Therefore, all efforts had to be focused towards implementing measures which saved money, even though such measures initially cost substantial amounts of money. Transition countries had a unique chance to install energy efficiency measures from the outset of economic development and the EBRD should play a role in co-financing these, thereby playing a role in a broader range of areas than it currently did. At this time of exorbitant prices, securing energy supplies at reasonable costs would take the strain off countries’ economies and provide long-term stability.

      There was also a need to support small and medium-sized enterprises. Such businesses often provided the flexibility required by economies to drive transition but they required advice in transitional countries. In the face of the current brain drain, there was a need to consider whether the European Bank for Reconstruction and Development should co-finance small and medium-sized enterprises in transitional countries. Transitional countries did not have the capability to provide micro-loans and credit in the same way as more economically developed countries could. So the Bank could provide advice and help to establish such loans in transitional countries especially in south-east Europe.

      The EBRD still had much work to do. Therefore she hoped that the Assembly would support the resolution and thus support the further work of the Bank.

      THE PRESIDENT (Translation). – Thank you, Mrs Barnett. I call Mr Sasi, who will speak on behalf of the Group of the European People’s Party.

      Mr SASI (Finland). – Madame President, I want to say that the EBRD is doing very good work. Without economic development, there is no democracy or human rights, and economic development strengthens those rights. If there is no food, it is very difficult to envisage democracy. That is why economic development is very important. In that respect, the EBRD is doing very valuable work for us.

      It has been very helpful and very good that the Assembly and the EBRD have had a dialogue. It is very important that we can assist the situation in new democracies and that we can see what the stage of development is at the moment. I therefore think that it is very important that we have an annual debate in the Assembly on the Bank’s activities, so that we can express our views about what we would like the Bank to do.

      I would like to emphasise six points. First, there is a lack of knowledge about the banking business in the emerging states of Europe. It is very important to transfer banking and business knowledge in co-operation projects. When that information is transferred, banks and companies know how to do things more properly.

      On the second point, I would like to say that corruption is a big problem in many new democracies, and a bank that acts with clean hands is very important. Entrepreneurs can see that, if they act in co-operation with the EBRD, they can work without corruption and with clean hands. That is very important because it can provide a breakthrough and people can ensure that there is no corruption in those countries.

      The third point is that very heavy industries were built in those countries, and there were no small enterprises. It is very important that one establishes small enterprises with a spirit of entrepreneurship. When you create that spirit, you can show that small enterprises can be successful. That produces economic growth in those countries. That is very good. The Bank could also tell us what best practice in creating new companies is. That would be helpful for entrepreneurs.

It is important that the experience that we have is used to help others. For example, in Finland, we use senior partners with huge experience from entrepreneurial life in small, established companies. The Bank could be active in that sector. In western Europe, it could say that it had people who would like to help and could sit on your board and give information on what does not make sense and what is a good idea. They could check what is done so that the worst mistakes are avoided in those companies.

      As Mrs Barnett said, because of oil prices, there is a lot of instability in Europe in the economic market and to have a Bank that is trusted throughout the area and can stabilise the situation is valuable, especially in countries where there is a lot of distrust, so the Bank can play an important role.

      Finally, a lot of money should be invested in energy efficiency. We must reduce CO2 emissions and we should use less oil and other resources. If energy is used more efficiently, it will help all countries, but it will help economically those countries where those energy systems are used. We should invest a lot in that in future.

      The Bank’s board has adopted good policies: 80% of profits will be invested in the poorest countries. When you use such profits, you can take big risks. In those countries, the Bank should take big risks because, if it does not, who will lend money to those who need it? Of course you should not endanger capital, but the Bank’s policies on profit are appropriate.

I again thank President Lemierre. He has been co-operative and always willing to discuss issues with us, and he has conducted his work with the Bank in an appropriate way.

      THE PRESIDENT (Translation). – Thank you. I call Mr Reimann, on behalf of the Alliance of Liberals and Democrats for Europe.

Mr REIMANN (Switzerland) noted that, since the European Bank for Reconstruction and Development had been established in 1991, it had done great work, particularly under its current chairmanship. The EBRD had already assisted the achievement of economic stability in several countries, particularly from former Soviet states in central and eastern Europe, and the Council of Europe, as one of its partners, should share in some of its praise. But he was interested in what should happen next.

      In a good report, Mr Martins called for an ongoing commitment on behalf of the Bank. But Mr Reimann himself had reservations. Although he acknowledged that good work had been done, serious consideration should be given to what the Bank did next. The EBRD was considering shifting its focus to Central Asia. But there were several questions to be answered: first, should it do this at all; secondly, should it do this alone; and thirdly, should it do it with partners?

It was important that these questions were considered with an open mind. He had already suggested to the Economic Affairs and Development Committee that, when the Bank had finished, it should not go it alone or extend its work. Instead, the Bank should look for co-operation and synergies with other partners. This could lead to savings in costs: it should not be forgotten that some of the resources entrusted to the Bank had been squandered in the past. Possible partners for the European Bank for Reconstruction and Development in the future could include the European Investment Bank – especially if it decided to work with Turkey – the Development Bank of the Council of Europe or the International Financial Co-operation Programme. These questions should be approached with an open mind and would require close examination and detailed discussions.

THE PRESIDENT (Translation). – Thank you. I call Baroness Hooper, on behalf of the European Democrat Group.

Baroness HOOPER (United Kingdom). – The role of the EBRD continues to be of great importance in providing the necessary follow-up to the political changes that have united Europe – and by that I mean the wider Europe of the Council of Europe – over the past 15 to 20 years. The standing mandate that gives rise to this annual debate represents an excellent example of one of the core tasks of the Assembly. The fact that the Committee on Economic Affairs and Development is able to choose a different aspect of the Bank’s work each year on which to focus allows for variety. I congratulate the rapporteur on the way that he has tackled this year’s topic, “Change in transition countries”, and in particular on his fresh and positive approach and the modest way in which he introduced his report.

The report is extremely well researched and accurately describes the policies set by the Bank’s board of directors and board of governors. I thank Mr Lemierre for being present to listen to us and update us and for again underlining the values and policies of the Bank, which go hand in hand with those of the Council of Europe.

      It is good to know that the EBRD has had another successful year, in spite of market turbulence, fluctuating exchange rates and the fact that it is carrying out ever more of its work in high-risk countries.

      The report draws attention to the needs of those countries, or parts of member countries, which are the poorest of the 29 countries in which the Bank operates and the least advanced in the transition process, and which have the greatest social as well as economic needs. Paragraph 4 of the resolution is to be warmly welcomed in that respect. The Bank’s focus on those countries, which was explained by Mr Lemierre, as well as its growing support for small businesses and the ongoing emphasis on tackling climate change through energy efficiency and renewable energy projects, are also to be welcomed, and give me the opportunity to point out the United Kingdom’s commitment to the EBRD’s sustainable energy initiative.

      That brings me to the single mildly controversial part of the report – or at least, so I thought until the preceding speaker, Mr Reimann, commented on the Bank’s extended operations – in paragraph 17, which deals with Turkey’s application to become a “country of operations” for the Bank. Mr Lemierre’s explanation on that, too, was helpful. Turkey’s request should be dealt with sympathetically and carefully. Although it is clear that its application should not compromise the Bank’s activities in countries where transition is less advanced, it should, from what we have heard today, be possible to accommodate that within the Bank’s cap on annual business volume.

      On behalf of the European Democrat Group, I welcome the report and support it. On a personal note, like Mr Lemierre, I am probably participating in this debate for the last time, so I wish him, the EBRD and the Committee on Economic Affairs and Development every success for the future.

      THE PRESIDENT (Translation). – Thank you, Baroness Hooper. I call Mr Kallio.

      Mr KALLIO (Finland). – First, I thank the rapporteur, Mr Martins, for his excellent work. I also thank Mr Lemierre for his splendid work as President of the European Bank for Reconstruction and Development. In the past eight years, the EBRD has taken great steps forward. Progress in transition countries has been rapid, and today the Bank is a strong and committed partner. As we think about the future, the Bank will face a lot of challenges: changing financial markets; rising prices for crude oil, gas and other raw materials; food scarcity and inflation rises, to mention but a few examples. That is why it is important that the Bank looks at what is happening and responds to new demands.

      I want to raise a couple of issues, which are important to the funding of transition countries. First, energy efficiency was mentioned by Mrs Barnett and Mr Sasi. Improvements in energy efficiency are essential if countries in transition are to improve their competitiveness. Compared with western Europe, the transition countries use much more energy for each unit of gross domestic product, which is why we have to encourage energy efficiency, renewable energy and climate change mitigation. Progress on those issues in the transition countries will not only support long-term economic growth but contribute to enhanced energy security.

      Most transition countries depend on oil and gas imports. The inefficient use of energy further increases dependence on imports and increases vulnerability to energy price fluctuations. Energy importers can improve energy security by reducing waste, diversifying their sources of energy and increasing renewable energy. High energy prices provide a powerful incentive to cut waste, review fuel-mix options and improve the security of supply. In fact, the incentives to invest in energy efficiency and energy savings across the region have never been as high as they are today. In my opinion, it is important that the EBRD and its client countries persevere on that route.

      Secondly, climate change has led to a renewed interest in nuclear energy, but for transition countries, the main challenge in the nuclear sector remains safety. It is important that the Bank continue its existing policy and provide financing to an operating facility for nuclear safety improvements, for the safe and secure management of radioactive waste and spent nuclear fuel, and for decommissioning. I totally support the Bank’s fresh decision to donate €135 million to the Chernobyl clean-up, and to grant €70 million to boost nuclear safety in naval bases in north-west Russia. It is worth mentioning, too, that the nuclear safety account is a useful tool in financing nuclear safety projects in central and eastern Europe. In conclusion, I want to emphasise that, in future, energy efficiency and nuclear safety should be on the EBRD’s agenda.

      THE PRESIDENT (Translation). – Thank you. The next speaker is Mr Vrettos.

      Mr VRETTOS (Greece). – We must congratulate Mr Martins on his excellent report. Since its creation in 1991, the EBRD has accomplished a great deal.

      As stated in the report, the EBRD is much more than a bank; it is an institution with a unique mission and experience in the service of people and countries in search of a democratic identity and a greater role on the global scene. Confidence building, integrity values, strategic advice, transfer of know-how and the bonding of mentalities between east and west are essential aspects of the EBRD’s mandate that make it a focal partner for development and modernisation in the Eurasian region. As soon to be ex-President Jean Lemierre wrote recently in an article, “The EBRD has gone from strength to strength while gaining momentum from precisely those inherited contradictions: it is a public sector institution that deals mainly with the private sector, a development bank that costs more than the commercial market and it is a European bank that is not only active in countries outside Europe, but is also partly owned by them”.

      The Bank can be proud of its contribution in helping eight former communist states to join the EU in 2004. They are now reaping the benefits of reform. Furthermore, in 2007, the bank increased its share of operations in the early and intermediate transition countries with much higher risk profiles by reinvesting 80% of its profits. The EBRD’s Life in Transition survey, carried out with the World Bank, showed improvement in absolute living standards, a growing middle class, a robust private sector and fairly strong support for democracy in those countries.

      However, such developments raise questions – usually awkward ones – about the future. As the EBRD was never meant to be a permanent institution, many people ask: when should the EBRD declare its job in a country done and withdraw? How far and fast should it shift its operations? What is its future strategy?

      The Austrian Government recently announced its intention to leave the EBRD in 2010 on the ground that the Bank has nearly reached its mission. The year 2010 will also mark the “graduation” of seven eastern European countries from the EBRD lending programmes, following the path taken last year by the Czech Republic. Of course, the gradual withdrawal of more advanced client countries in central Europe will enable the EBRD to concentrate on countries with huge untapped development potential.

      The EBRD needs to meet the challenges of the future. There are many changing conditions around us. There is a changing financial market in the world and many political developments are occurring in some of the countries where the Bank is engaged or that it is considering. Scarcity of food and rising prices in the food sector and for crude oil, gas and other raw materials are substantial new factors that need to be taken into consideration. The Bank has to examine and assess thoroughly those changing conditions and to respond to the new demands by retaining its independence and the multilateral structure that has guaranteed its success over the past 17 years.

      We trust that the Bank will remain focused, creative and capable of adapting to the varying needs of its clients by diversifying the services and products it offers. The new EBRD President, speaking about the EBRD’s future, pointed out: “In a situation of turmoil, a bank like the EBRD adds value because it is very solid, it has a high level of political trust, it can furnish what markets need most, which is confidence and trust”. We agree, and we wish the new president as much success as his predecessor.

      THE PRESIDENT (Translation).– Thank you. I call Mr Korobeynikov.

      Mr KOROBEYNIKOV (Russian Federation) said that the paramount issue for the EBRD was the focus on eastern Europe. Two thirds of Russia’s economic ties were in the West. The Bank might shift to the eastern part of Europe, to concentrate on the far reaches and Siberia, not just re-organising the manufacturing base, but making it possible to strike an economic balance. The EBRD generated significant resources in large projects in Russia. Generating money for the Bank was not a sin. Concessions such as piping water could be one of the most ambitious initiatives. There was a crying need for water pipe infrastructure and aqueducts in the region. The Bank could be the arbiter in the co-ordination of Russian legislation with European norms. He hoped that the President could get his successor to set up an international reporting mechanism. Russia could become a major test-bed in relation to EBRD initiatives, not only for itself but for the wider European economy. He wished the President personal happiness for the future.

      THE PRESIDENT (Translation). – Thank you.

      Mrs Curtis-Thomas is not here so I call Mr Matušić.

      Mr MATUŠIĆ (Croatia). – I express my appreciation for the work of our rapporteur in preparing such a comprehensive report, which gives us very detailed information on the broad range of EBRD activities in its 29 countries of operation, from Central Europe to Central Asia. Among them is my country, Croatia, which has benefited from the activities of the EBRD. The Bank is, and should remain, a major actor in supporting privatisation, foreign direct investment, financial sector restructuring and infrastructure development.

      On relations between the EBRD and Croatia, I hope that in the forthcoming period my country will soon start to reap the benefits of the reforms that have been undertaken. We should bear in mind the fact that Croatia, on its path to EU membership, is acknowledged by the main financial institutions, including the EBRD, as a leading country in the region. The Bank has an opportunity to work closely with the Croatian authorities to support the country’s preparations for EU accession. For that reason, the Government of the Republic of Croatia has adopted a new strategy with the board of directors of the EBRD. For the first time, it ensures co-operation and a focus on the wider activity of the EBRD in the sectors.

      One of the projects is in my home town, Dubrovnik, and involves the extension of the cruise berth area, including rehabilitation of the sea wall and paving in the port. The Bank’s loan is guaranteed by the private sector, as well as financing local authority projects, mainly in the infrastructure and environment sectors, but it is expected that it will be fully repaid by the port authority from fees paid for berthing in the port.

      We hope that the Bank’s involvement in the project will further boost tourism and result in private sector development of the port area in Dubrovnik, because all this investment is a prerequisite for creating additional mooring space for cruise vessels, which is a big problem for Dubrovnik, especially in the summer.

      Another important project is the waste water treatment project in our capital Zagreb. As a result of EBRD support and the €65 million loan for the city’s first-ever water treatment plant, Zagreb’s population will soon be able to appreciate cleaner surroundings. That will also help the city to tackle the environmental problem and to comply with EU environmental standards.

Of course, the EBRD is also lending €11.2 million to the Port of Ploče Authority, a key cargo port in southern Croatia, as a contribution towards financing the construction of a new bulk cargo terminal. The amount of loans granted to Croatia that are provided for technical support make the Bank one of the most significant foreign sources of financial aid after the World Bank. The total value of grants provided from loans to, and investment in, Croatia amounts to €1.8 billion for about 80 projects, the total value of which is nearly €4.5 billion. The average yearly value of this finance is around €150 million. All these loans will focus on investing in those projects that give the highest priority to infrastructure, small and medium-sized enterprises and tourism.

      As opportunities arise from Croatia’s accelerated drive for Euro-Atlantic integration, it has become a much better place to do business and was a top reformer according to the World Bank’s “Doing Business” survey for the second year in a row. Improvements were made in starting a business, registering property, obtaining credit and closing a business. That is the main reason for believing that the EBRD’s activities in Croatia will continue to be integrated within the international community’s efforts to promote growth and stability in this region, and that the activities of the EBRD will be of great importance in the transition to democracy and market-oriented economies in all countries where it operates.

      Finally, on behalf of the Croatian delegation, I congratulate Mr Lemierre on his excellent work.

      THE PRESIDENT (Translation). – Thank you. I call Mrs Hadžiahmetović.

      Mrs HADŽIAHMETOVIĆ (Bosnia and Herzegovina). – I welcome the discussion on this very important issue and the report by the Committee on Economic Affairs and Development. Of course, we must praise its rapporteur, Mr Martins, for his work. This is also the time to thank Mr Jean Lemierre for successfully managing the EBRD in the key period of transition. At the same time, I want to welcome the nomination of Mr Thomas Mirow and wish him every success in his work.

      It is particularly important for this Parliamentary Assembly to discuss the subject because one of the main human rights, in the wide range of human rights, is the right to development, which directly corresponds to the EBRD’s activities. It is also important because the main actions of this institution concern all Council of Europe member states.

      The report gives an excellent review of the EBRD’s activities and, at the same time, gives an economic overview of the situation and challenges in transitional economies. It is very important to mention the new orientation of the EBRD in the sense of bigger economic and social cohesion, as well as its remarkable sense of setting priorities in selected areas.

      With regard to the high sensibility of transitional countries towards changes to their environment, it is good that subjects relating to energy and food are a constituent part of the EBRD’s work. As it is expected that global trends in these domains will continue, it is important to mention the need for more co-ordination between the EBRD and other institutions in order to find alternative solutions. Common problems need common engagement, and subjects relating to energy and food, especially for transitional economies, can be the problem as well as the solution.

      Bearing in mind the fact that one aspect of transitional countries is to get involved in the process of association with the EU; EBRD activities should be put in the context of the competitiveness of the European economy and of achieving the goals mentioned in the Lisbon agenda. Together with the European Investment Bank, the Development Bank of the Council of Europe and other institutions, the EBRD can play a key role in determining the future position of the European economy in the global economy.

      Three regional groups of country, classified according to EBRD activity, can form the basis of a regional approach to projects and the future engagement of the EBRD. In particular, I wish to emphasise that in the context of south-eastern Europe and the need for engagement on projects that have regional importance.

      I remind the Assembly about three economic initiatives in the Stability Pact in this region: the liberalisation of trade, which is now the Central European Free Trade Agreement; the single electricity market through the Athens memorandum; and the investment compact. As all countries in the region are now connected by treaties with the EU, it is important to mention the need for it to become more attractive for investment. With its engagement, the EBRD can make a considerable contribution to realising this initiative for two reasons: first, these are small countries with similar economic performances which are already integrated in the regional arrangement; and, secondly, the individual activities of the EBRD in the countries of the region are directed to the same things – infrastructure, the financial sector, SMEs and so on.

      Bosnia and Herzegovina particularly appreciates EBRD engagement, which, since the signing of the Dayton Agreement, has until today focused on the urgent reconstruction of infrastructure, the development of the financial sector and wider activities in the business sector. In addition, the EBRD has played an important role in mobilising the means necessary for co-financing and grants. As a result, the total value of projects in Bosnia and Herzegovina relating to EBRD investments is €938 million.

      Since Bosnia and Herzegovina entered a more sensitive phase of transition, the continuous economic progress depends on the ways chosen to face the three key challenges of constitutional reform, a speeded-up process of privatisation and providing long-term economic stability. In that sense, it is very important that the EBRD strategy for Bosnia and Herzegovina until 2011 is realised. We count on the fact that the Bank will focus on infrastructure, by which I mean traffic and energy, the financial sector – support to SMEs – and the business sector.

      Finally, let me emphasise once again the importance of EBRD engagement and the expectation that it will play a particular role in the successful completion of transition and in improving economic performances in countries on the way to EU membership. Bosnia and Herzegovina counts on the EBRD as an important institution in that process.

      THE PRESIDENT (Translation). – Thank you. I call Mr Le Grand.

      Mr LE GRAND (France) said that it was a matter of satisfaction to him to hear his fellow countryman in the hemicycle today. Mr Lemierre was to be congratulated on the dignity and efficiency with which he had carried out his functions over the past eight years. Congratulations were also due to the rapporteur of the committee for this thorough and wide-ranging report.

      It was essential to contribute to the development of the market economy in eastern Europe, and in doing so the European Bank for Reconstruction and Development had adopted a pragmatic approach, unlike so many other international institutions. Other organisations had taken a dogmatic approach which often had little regard to the social consequences of hot-housing market economies. The EBRD, on the contrary, had accomplished a great deal through its sensitive and practical approach. It was an indication of the effectiveness of the work of the Bank that many eastern European countries had joined the European Union just 15 years after the fall of the communist regimes. The Bank intervened only in countries which had signed up to democracy, fundamental rights and freedoms as well as to a market economy; but it was true that in some countries where the EBRD operated, there was a certain optimism about the political regimes’ adherence to fundamental Council of Europe principles

      The report had posed a very interesting, but rarely answered, question, which concerned the nature of the interaction between economic development and democracy. The rapporteur had taken the first step towards an answer to this very important question. It was clear that fighting corruption, promoting good governance and encouraging transparency were all essential pre-conditions for successful economic development.

      Nearly 20 years after the fall of the Berlin Wall, the picture in eastern Europe was a very mixed one. Two quite different conclusions could effectively be reached – one was pessimistic, focusing on those states where little progress had been made, but another was optimistic, focusing on the benefits of peace and co-operation.

      THE PRESIDENT (Translation). – Thank you. I now give the floor to Mr Tilson.

      Mr TILSON (Observer from Canada). – Thank you, Mr President. I join previous speakers in congratulating Mr Martins on a good report. It rightly calls for the European Bank for Reconstruction and Development’s continued ambitious engagement in transition countries in the light of persistent problems and changes, both economic and political. The bank’s strong transition focus and operational priorities have Canada’s full support.

      However, I believe that the Assembly’s work with the EBRD should focus more on the bank’s explicit political mandate, because that mandate relates directly to the core purpose of the Council of Europe, which is to protect and promote human rights, pluralist democracy and the rule of law. As stated in Article 1 of the agreement establishing the EBRD, “the purpose of the Bank shall be to foster the transition towards open market-oriented economies and to promote private and entrepreneurial initiative in…countries committed to and applying the principles of multiparty democracy, pluralism and market economics.” Ensuring that Article 1 forms a central element of EBRD policy and investment decisions is also one of the priorities for Canada’s involvement in the bank. We strongly support its ongoing “efforts to improve and strengthen governance and accountability in its countries of operations…to promote increased transparency, optimal use of investment funds, the rule of law, human rights, safety and equality; and to encourage mechanisms of multilateral, cooperation on democratic issues.”

      Our government believes that the EBRD should set a good example and do more to make its own governance policies more transparent and accountable. In particular, it should continue to broaden its public disclosure policy and it should develop a transparent, open and merit-based process for selecting its presidents, in line with the standards developed by other international organisations.

      Finally, we should also note that the EBRD increasingly recognises that environmental and social issues are “fundamentally interconnected with long-term economic and political sustainability, as well as the quality of life for a region’s inhabitants.” As a result, the Bank’s new, overarching, environmental policy, which is currently being reviewed, is expected to be broadened to embrace more social aspects of financial transactions and address social issues more systematically. Canada welcomes and fully supports that. We also see the inclusion of gender equality in this new policy as “setting best practice for project finance”, and hope that that is an indication of the organisation’s commitment to mainstream gender equality in its programming.

      The political mandate of the EBRD continues to be of great importance to those in this Organisation and elsewhere who believe that economic transition to market economies must go hand in hand with the development of political democracy. The revised – and, I would hope, strengthened – environmental and social policy further suggests the benefits of the Assembly’s ongoing engagement with the EBRD. I encourage you to make those issues the focus of future reports. Thank you.

      THE PRESIDENT (Translation). – Thank you, Mr Tilson.

      The last speaker on the list is Ms Jovanović, who is not here, so does anyone who has not put their name on the speakers list want to speak?

      That is not the case, so I ask Mr Lemierre whether he would like to reply to the statements made by the speakers.

      Mr LEMIERRE – I shall say a few words. First, may I thank you for your strong and unanimous support for the actions of the bank and my colleagues? I appreciate the kind words that I have heard. I will not take up all the very thoughtful remarks that were made, although they are lessons and guidance for me. However, I fully agree with the remarks made about energy and energy efficiency, the need to improve the situation, the need to pay a lot of attention to small and medium-sized enterprises and the need to fight against corruption. All those remarks are absolutely welcome; we agree with them.

      Mrs Barnett, I welcome the remark that you made about training. You have stressed an important issue, and one that the Bank must consider more in the future.

      It is clear that some countries in the region have labour shortages, not so much because of a lack of people, but because there are not the skills that are needed by companies. I would like to add that, at the same time, we need to pay a lot of attention to training by the countries and companies. Another dimension is health and safety at work, especially in the mining sector, where there is a lack of investment, training and equipment. The Bank needs to pay a lot of attention to those new questions.

      On Siberia and eastern Russia, I agree that we should move into Russia. I say to Mr Reimann that we are already one of the largest investors in central Asia. The question is not whether or not to go there; we are already very present in central Asia, where we have very large investments in SMEs, infrastructure and general industry, including power. However, eastern Siberia is certainly a priority for us. You know that we are opening new offices in Russia, where we already have many, but we are moving more to the east. We are going to open offices in Siberia, to be closer to investors, the authorities and western investors. The purpose is not to open competition with Japanese or Korean investors but to provide support, create jobs and work with local authorities to diversify the whole of Russia.

      On the future of the Bank, Mr Reimann, I welcome your remarks of course. I am sure that my successor will manage a very open debate on this. I would like simply to insist on the fact that moving east has been a very strong strategy, which has been clearly endorsed by all the Bank’s shareholders, creating a strong incentive for the institution to move east and south-east. That is what we do; we develop important co-operation with the other institutions. For example, we work with the Council of Europe Development Bank. With the European Investment Bank, you know that the European Union has given the ERBD the mandate to prepare projects for the external mandate managed by the EIB in the eastern part of the region. So what you have wished for is to a large extent already accomplished and implemented. That is the best way to create a lot of value for the region. Public institutions should not compete; they should put skills together to create value for the people, and when the job is done, public institutions should withdraw. That is exactly what we do today in the Czech Republic, and what we will do tomorrow in the whole of central Europe. So the movement that you wish for is certainly implemented by the Bank in a very forceful way.

      On Croatia, I have nothing to add to what has been said. I share totally what has been said about Bosnia and Herzegovina, which is a very important country where a lot can be done in respect of energy, job creation and infrastructure.

      (The speaker continued in French.)

He said that Mr Le Grand had mentioned the importance of the political side of the EBRD and there was no denying the importance of the political process to the EBRD. The sustainable development of the economy and social development went hand in hand with the establishment of democracy. The market economy provided the best system for development, and this had been well illustrated within Europe. The social development of transitional countries required transparency within its authorities and the enforcement of people’s individual rights.

      Mr Tilson had mentioned the social principles that Canada held dear. The EBRD had recently reviewed its environmental and social policies, consulting with NGOs on its work on the role of women, and other social aspects. It was also important to consider the level of democratic maturity in different countries. Also, as populations were growing older, it was crucial to mobilise all the available skills within each country. It was also vital that the EBRD should be transparent in all its dealings, and it had been working with NGOs to release more information to the public. The EBRD had a unique mandate which combined both political and economic roles. It attached great importance to these principles and would continue to do so in the future.

      THE PRESIDENT (Translation). – Thank you, Mr Lemierre.

      I now call the rapporteur, Mr Martins, who will respond on behalf of the Committee on Economic Affairs and Development.

      Mr MARTINS (Portugal) said that he was speaking as a democrat, a parliamentarian and an economist. He believed that economic growth went hand in hand with the development of democratic institutions. The greater the income per capita, the more democratic a country was likely to be. This was an important correlation which he felt had proved to be true. Within transitional countries, it would be unthinkable for fully fledged democracies to develop without economic stability or sufficient resources to ensure the wellbeing of its people. The relationship between the Council of Europe and the EBRD was based on this positive correlation between democracy and economic development. Both organisations therefore needed to continue working along the same lines; the Council of Europe should work on a political level while the EBRD should work at a technical level. The transitional process for countries was of a very technical nature; the work of the EBRD and the committee’s report showed that it was therefore important to hold an annual debate on the work of the EBRD. He thanked the speakers for their comments, their praise of the EBRD and their praise for the committee’s report. He also thanked the Secretariat for their support in producing the report.

      During the conference in Kiev, he had learned an interesting statistic; he was unsure of its accuracy, but it appeared that in terms of percentage of GDP, the Ukraine used 22% more energy than Germany. This was an impressive figure and demonstrated that securing energy was paramount for transitional countries. There was also a need to consider the development of renewable energies.

      Another speaker had raised the issue of small and medium-sized enterprises and human capital. The EBRD had increased its small-scale operations by a third in 2007, which was a considerable rise, and the Bank’s turnaround management capital advisory instrument already provided technical advice and assistance to small and medium-sized enterprises. There was now a need to strengthen efforts to improve training, and the Council of Europe needed to examine this in more depth in its next report, to improve human development and slow down the brain drain.

      The issue of Turkey had also been raised, and selecting Turkey as a country of operations would have implications. Firstly, this should not be to the detriment of other countries in the region. Poorer countries in the region in transition would continue to need EBRD support. Secondly, the EBRD should not lose sight of its mandate. the EBRD’s mandate to develop a long-term strategic vision. Expansion of its work should be based upon its mandate for medium and long-term strategies. He was unable to expand on this topic within the report but, as a parliamentarian, he said that the Council of Europe needed to examine the EBRD’s mandate to develop a long-term strategic vision.

      THE PRESIDENT (Translation). – Thank you. Does the chairperson of the committee, Mr Braun, wish to speak?

      Mr BRAUN (Hungary). – I thank Mr Martins for his excellent work on the Bank and on eastern and south-eastern Europe. I remind the Assembly that, every year, the reports of the Committee on Economic Affairs and Development are about not only the Bank as a financial institution but the state of the economy and society in the transition countries.

      As chairman of the committee, I thank Mr Jean Lemierre for his commitment in the past eight years, and for his contribution and help to the committee. Under his leadership, the EBRD has performed beyond expectations and become a model for other regional banks.

      Jean Lemierre took over the leadership of the EBRD soon after the Russian financial crisis, which was a watershed in the process of transition and caused losses to the Bank. He is now handing over the Bank with profits exceeding €1 billion. When he took over the presidency, central Europe was still the main region of operations. In the past eight years, there has been a shift from central Europe to Russia and the south-east. The Bank decided to end its operations in eight EU member countries of central Europe. Mr Lemierre’s presidency was successful as new countries of operation were brought in. First it was Mongolia and more recently the requalification of Turkey as a country of operation was launched. That will make the Bank stronger and allow the international community to use an efficient instrument for the promotion and stabilisation of the market economy.

      The EBRD under Jean Lemierre has been ready to respond to the changing times and conditions and various new challenges. The Bank launched the early transition countries initiative to handle the special situation of the CIS periphery and some of the Balkan countries. The EBRD has been highly instrumental in promoting nuclear safety, climate protection and energy efficiency. Most recently, it responded actively to the food price explosion.

      With President Lemierre, we have had the privilege to work with a personality whose heart is in the job and who is prepared to assist the transition countries in different ways. In expressing our appreciation, we congratulate him on his eight years in office and wish him success in his future career. Thank you for your attention.

      THE PRESIDENT (Translation) . – Thank you.

      The debate is closed.

      The Committee on Economic Affairs and Development has presented a draft resolution, to which no amendments have been tabled.

      We will now proceed to vote on the whole of the draft resolution contained in Document 11630.

      The vote is open.

      The draft resolution in Document 11630 is adopted with 42 votes for, 0 against and 1 abstention.

      Dear colleagues, I would like to remind you that, at the end of this sitting, there will be a meeting bringing together the Political Affairs Committee and the Committee on Migration, Refugees and Population, which is open to all members of the Assembly. It will take place in Room 5 from 5 to 8 p.m. The purpose of the meeting is to prepare for tomorrow’s debate on the situation of democracy in Europe. I invite you to go there in strength.

3. Date, time and orders of the day of the next sitting

      THE PRESIDENT. – I propose that the Assembly hold its next public sitting tomorrow at 10 a.m. with the agenda which was approved yesterday.

      Are there any objections? That is not the case.

      The orders of the day of the next sitting are therefore agreed.

      The sitting is closed.

      (The sitting was closed at 4.57 p.m.)

CONTENTS

1.       Minutes of proceedings

2.       The European Bank for Reconstruction and Development: a focal partner for change in transition countries

      Presentation by Mr Martins of report of the Committee on Economic Affairs

      and Development

Statement by Mr Lemierre, President of the European Bank for Reconstruction and Development

Speakers:

Mrs Barnett (Germany)

Mr Sasi (Finland)

Mr Reiman (Switzerland)

Baroness Hooper (United Kingdom)

Mr Kallio (Finland)

Mr Vrettos (Greece)

Mr Korbeynikov (Russian Federation)

Mr Matušić (Croatia)

Mrs Hadžiahmetović (Bosnia and Herzegovina)

Mr Le Grand (France)

Mr Tilson (Canada)

Replies:

Mr Lemierre (President of the EBRD)

Mr Martins (Portugal)

Mr Braun (Hungary)

Draft resolution adopted

3.       Date, time and orders of the day of the next sitting