Development bank looks east to aid poor nations

International Herald Tribune

Development bank looks east to aid poor nations

Eric Pfanner IHT Tuesday, April 20, 2004

LONDON With the most advanced economies in the former Communist bloc set to
join the European Union next month, the multinational bank that was set up
to aid the transition to capitalism said Monday that it would pay greater
attention to poorer countries farther to the east.

The agency, the European Bank for Reconstruction and Development, will not
immediately cease operations in the eight Central and Eastern European
countries that, along with Malta and Cyprus, are set to join the EU on May
1. But in those countries, the bank’s “role should naturally fall away over
the years to come,” said Prime Minister Tony Blair of Britain, who addressed
the agency’s annual meeting in London on Monday.

The development bank, which operates in 27 countries, said Monday that it
had created a new program aimed at increasing its lending in seven of the
poorest ones – Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova,
Tajikistan and Uzbekistan – where more than 50 percent of the population
lives below the poverty line.

In those countries, governments are too indebted to raise new financing, and
foreign investors are often unwilling to enter, given the myriad risks – not
least, in countries such as Uzbekistan, where George Soros and other
investors have complained of a woeful human rights record. Meanwhile, the
terrorist attacks of Sept. 11, and the subsequent ouster of the Taliban
regime in Afghanistan – which borders on two of the seven countries,
Tajikistan and Uzbekistan – heightened the awareness in some Western
capitals of the strategic importance of former Soviet Central Asia, in
particular.

Jean Lemierre, the bank’s president, who was elected to a second four-year
term on Monday by the bank’s board, said the bank would step up its efforts
to finance small businesses, cross-border trade and small-scale
infrastructure projects, among other things.

“The bank is ready to take on the financial as well as reputational risk as
we seek to invest more in countries at the earlier stages of transition,”
Lemierre said.

The bank said it aimed to increase its combined investment in the seven
countries to about E150 million, or $181 million, a year from the current
E90 million. Because its investments typically result in additional
private-sector activity, the bank said it expected the overall effect to be
greater than that.

The bank will take on added risk in part by adhering to local law, rather
than international law, in some of its investments in the seven countries.
Bankers said that should not pose a threat to the bank’s financial health
because the activities in the seven poorest countries account for only a
fraction of the its overall investments; the bank made E3.7 billion worth of
new investments last year.

Yet new lending in the seven poorest countries had actually been dwindling.
By 2002, said Michael McCulloch, a consultant to the bank on its new
initiative, these countries were actually paying more to service previous
commitments to the bank than they were receiving in new investment flows.

In the relatively well-to-do Eastern and Central European countries that are
joining the EU, the agency has typically invested in large projects, often
in cooperation with private-sector lenders. With their financial markets
gained in depth and breadth, domestic and regional banks lend to smaller
borrowers. But the seven poorest countries have few lenders willing to
finance projects in the E500,000 to E2 million range, the bank said, yet
these will be crucial to the development of their economies.

As the bank shifts its emphasis a bit to the east, its horizon is growing.
Jean-Claude Juncker, the chairman of its board of governors and prime
minister of Luxembourg, urged other governors to complete the process of
accepting Mongolia as a country of operation for the bank. The United
States, among others, has already approved Mongolia as a country of
operation.

International Herald Tribune

From: Emil Lazarian | Ararat NewsPress

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Emil Lazarian

“I should like to see any power of the world destroy this race, this small tribe of unimportant people, whose wars have all been fought and lost, whose structures have crumbled, literature is unread, music is unheard, and prayers are no more answered. Go ahead, destroy Armenia . See if you can do it. Send them into the desert without bread or water. Burn their homes and churches. Then see if they will not laugh, sing and pray again. For when two of them meet anywhere in the world, see if they will not create a New Armenia.” - WS