11 Apr 2016
Speech delivered by EBRD President Sir Suma Chakrabarti at the Bank’s 25th anniversary event in London.
In the great sweep of history, a quarter of a century can pass in the twinkling of an eye.
But the same period can bring momentous change across many continents.
And so it has proved in our countries of operation.
And such a period is also long enough to have seen the EBRD grow into the powerful force for good it is today.
The EBRD was born 25 years ago this week, the child of an era of revolution and decisive change.
As we celebrate, we should recall the story so far, assess the progress made and reflect on how the Bank can do even more in the future.
The sudden breaching of the Berlin Wall led to the collapse of Communism in many countries of the then Soviet bloc – and, some two years later, the fall of the Soviet Union.
Most of us alive at the end of 1989 will never forget the scenes of East Germans standing in triumph on top of the Berlin wall, which was symbolic of the tearing up of the very Iron Curtain that divided Europe down its very heart.
Within weeks, Western European leaders and others in the international community were responding to the new challenge.
One of the most pressing dilemmas they faced was: how to build a market economy out of the ruins of central planning?
The Polish intellectual, Adam Michnik, summed up eloquently the daunting challenge of post-socialist transition when he said: “We know very well how to make fish soup from an aquarium. But we don’t know how to make an aquarium out of fish soup.”
The job of helping to turn societies traumatised by years of totalitarianism into functional market economies fell, in no small way, to us at the EBRD.
25 Years of Change
The EBRD was established to build a new post-Cold War era in Central and Eastern Europe and beyond.
Our founding documents expressed that vision in rather legal terms. But the goal was clear.
The Bank’s purpose is ‘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’.
As such, our primary focus is working with the private sector.
There was certainly no shortage of work to do on that score back in the early 90s.
Anyone who visited the region at that time, as I did, would have been confronted by a rust belt landscape of dilapidated or even abandoned factories.
Even those still in business were in poor shape, uncompetitive and handicapped by decades of underinvestment.
The EBRD soon swung into action, investing in its first project at the Bank of Poznan in Poland.
Since then, the Bank has invested more than 100 billion Euros in thousands of projects.
Each of those Euros unlocked an average of two more from other sources.
Our mission is not just about money, though.
This Bank has always believed strongly in the demonstration effect – encouraging others to follow the example that we set.
Over the past twenty five years, many of the economies in which we have been active have undergone major changes.
We have seen the role of the private sector enhanced, entrepreneurship encouraged, market competition boosted and emerging market economies better integrated into global supply chains.
But there remains much to do.
It was fashionable, immediately after 1989, to suggest that the shift from Communism to a fully free market would be over within a decade.
We all know now that that was hopelessly optimistic.
Such a shift will be the work of generations.
In a few minutes, our economists will be unveiling insights into the latest survey of households and values in the countries where we invest.
We conduct the Life in Transition Survey with the World Bank and it consistently shows that change does not happen without pain.
The previous survey revealed that only around 40 per cent of respondents were reasonably satisfied with their lives, compared with a figure of more than 70 per cent in advanced European economies.
As a result, support for reforms has been weakening.
We documented this malaise – a marked deceleration in structural reforms – in our 2013 Transition Report, titled “Stuck in Transition”.
In part, this trend reflected something quite simple: reform fatigue.
Despite that, though, the bigger picture is that many of our countries have been transformed over the last 25 years.
In Emerging Europe and Central Asia, income per capita measured at purchasing power parity was around a quarter of that of the G7 economies in the early ‘90s.
Today that figure is in the region of 45 per cent.
The EBRD focus now must be on remedying that reform fatigue to ensure that the next 25 years bring about the further changes that are required.
We are more than capable of doing that.
We have shown how adept we are at responding to new challenges time and time again.
As our countries have changed, so has our Bank.
Since 1991 our reach has expanded from Central and Eastern Europe to stretch across three continents – from Mongolia in Central Asia to Morocco on the shores of the Atlantic Ocean, from Estonia on the Baltic to Egypt on the Mediterranean. To economies that were centrally planned and economies that never were, showing how our business model, focused on private sector development, has wide application.
Geography isn’t the only way we have adapted over the years.
The scope of what we deliver has also expanded.
We have scaled up investment to mitigate the effects of climate change – targeting energy efficiency and renewable energy.
We have financed environmentally and commercially viable municipal services.
And we played a crucial role in heading off the collapse of our regions’ banking sectors, through the Vienna Initiative, after the 2008 crisis.
We have proved ourselves capable of responding quickly to changing circumstances – as we did after the events in the Arab world in 2011.
In just over three years, from a standing start, we have invested more than three and a half billion Euros in almost hundred projects in Egypt, Jordan, Morocco and Tunisia.
And more recently we have been asked by our shareholders to work temporarily in Greece and Cyprus to assist in their economic recovery.
We have honed our skills and enhanced our reputation for 25 years.
And today we are transforming that accumulated experience into a programme for the future – a programme for a world that is growing ever more complex.
As we start on the next chapter of the EBRD’s history, our aim is to help re-energise transition – and that means having even more impact in our countries of operations.
We need to engage differently.
We need to engage more effectively.
Between now and 2020, we will be focussing on three themes in our countries of operations:
building economic resilience and sound institutions;
helping them to integrate better into regional and global economies;
and enabling them to combat common global challenges such as climate change.
If we are to succeed, we will need to ensure that investment and policy advice go hand in hand.
Each of our projects brings about change.
But just as important will be the systemic transformation that can only be secured through broader engagement with governments.
For example, our new Green Economy Transition approach will deliver more climate financing – targeting 40 per cent of EBRD investment each year by 2020 – coupled with policy dialogue.
We will also be building a new gender equality approach into our projects.
Our goal is to boost reforms and our countries’ competitiveness, reinvigorating transition and growth.
To do that, we should lead by example.
Our own institution must retain its youthful vigour.
We should continue to be brimming with the energy of a 25 year old.
Not wallowing in nostalgia or ambling down the road which leads to comfortable middle age.
That makes our initiative to ensure that we are more efficient internally so as to deliver more effectively externally that much more of a priority.
As we celebrate our birthday this week, we can take great pride in our achievements.
But this is not a time to rest on our laurels.
If we were ever tempted to do so, the long list of challenges confronting our regions should quickly cure us of any complacency.
Indeed that list can sometimes seem rather overwhelming.
Sluggish or non-existent growth.
Shortfalls in investment.
Unemployment – especially of the young.
Migration from conflict zones on an epic scale.
Tackling corruption and improving the investment climate.
The threat of climate change.
But we are not daunted by the scale of those challenges.
We relish them. We have the skills, creativity and experience to help find a way through.
Friends, our first 25 years have been eventful enough.
The next promise to be just as exciting – and rewarding.
Thank you very much.