After the Berlin Wall a History of the EBRD Volume 1 Andrew Kilpatrick
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After the Berlin Wall A History of the EBRD Volume 1 Andrew Kilpatrick After the Berlin Wall A History of the EBRD Volume 1 Andrew Kilpatrick Central European University Press Budapest–New York © European Bank for Reconstruction and Development One Exchange Square London EC2A 2JN United Kingdom Website: ebrd.com Published in 2020 by Central European University Press Nádor utca 9, H-1051 Budapest, Hungary Tel: +36-1-327-3138 or 327-3000 E-mail: [email protected] Website: www.ceupress.com 224 West 57th Street, New York NY 10019, USA This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. Terms and names used in this report to refer to geographical or other territories, political and economic groupings and units, do not constitute and should not be construed as constituting an express or implied position, endorsement, acceptance or expression of opinion by the European Bank for Reconstruction and Development or its members concerning the status of any country, territory, grouping and unit, or delimitation of its borders, or sovereignty. ISBN 978 963 386 394 7 (hardback) ISBN 978 963 386 384 8 (paperback) ISBN 978 963 386 385 5 (ebook) Library of Congress Control Number: 2020940681 Table of Contents List of Abbreviations VII Acknowledgments XI Personal Foreword by Suma Chakrabarti XV Preface 1 PART I Post-Cold War Pioneer 3 Chapter 1 A New International Development Institution 5 Chapter 2 Creating the EBRD’s DNA 43 Chapter 3 Difficult Early Years 73 Chapter 4 Restoring Credibility 109 PART II Transition Mode 131 Chapter 5 Scaling Up through Financial Institutions 133 Chapter 6 Supporting Privatisation and Restructuring 151 Chapter 7 Developing Local Services 185 Chapter 8 Environment Matters 221 Chapter 9 Nuclear Safety 249 Chapter 10 Embedding Impact in the Business Model 265 PART III Holding Course 291 Chapter 11 Russian Crisis 293 Chapter 12 Recovery, Growth and Graduation 311 Appendix 353 Photos 359 Index 375 List of Abbreviations ADB – Asian Development Bank AEB – Agreement Establishing the Bank ARCO – Agency for Restructuring Credit Organisations BCR – Banca Comercială Română BCV – Board Consultation Visit BOT – build-operate-transfer BTC – Baku-Tbilisi-Ceyhan Pipeline Project CBR – Central Bank of Russia CEB – Central Europe and the Baltics CFC – chlorofluorocarbon CIS – Commonwealth of Independent States Comecon – Council for Mutual Economic Assistance COO – country of operations CRR – Capital Resources Review CSFR – Czech and Slovak Federative Republic CSO – civil society organisation CSOB – Československá Obchodní Bank DABLAS – Danube Black Sea Task Force DBO – design build and operate DFI – Development Finance Institution DfID – UK Department for International Development DHEs – district-heating enterprises EAP – Environmental Action Plan EAU – Environmental Appraisal Unit EC – European Community EBRD – European Bank for Reconstruction and Development vii After the Berlin Wall ECB – European Central Bank ECOFIN – Economic and Financial Affairs Council, of the European Union EEC – European Economic Community EIB – European Investment Bank EMU – Economic and Monetary Union ERA – Environmental Remediation Account EMAS – Environmental Management and Audit Scheme ETC – early transition country ETCI – Early Transition Countries Initiative EU – European Union FDI – foreign direct investment FIDP – Financial Institutions Development Programme FOPC – Financial and Operations Policies Committee FOPIP – financial and operational improvement programmes FRY – Federal Republic of Yugoslavia FSU – former Soviet Union FVP – First Vice President GDP – gross domestic product GDR – German Democratic Republic GNP – gross national product H&S – health and safety HELCOM – Helsinki Commission IBCI – IntesaBCI IBRD – International Bank for Reconstruction and Development IEA – International Energy Agency IFC – International Finance Corporation IFI – international financial institution IGC – Intergovernmental Conference IMF – International Monetary Fund IPO – initial public offering ISB – international standard bank ISF-2 – Interim Spent Fuel Facility ISO – International Organisation for Standardisation ISPA – Instrument for Structural Policies for Pre-Accession KMB – Small Business Credit Bank LNG – liquified natural gas LRTP – Liquid Radioactive Waste Treatment Plant viii List of Abbreviations LSE – London School of Economics MDG – Millennium Development Goals MEI – municipal and environment infrastructure MELF – Municipal Environmental Loan Facility MIS – management information system MIT – Massachusetts Institute of Technology MPP – Mass Privatisation Programme MSA – municipal support agreement MSEs – micro and small enterprises MUDP – Municipal Utilities Development Programme NBS – National Bank of Slovakia NDEP – Northern Dimension Environmental Partnership NGO – non-governmental organisation NIB – Nordic Investment Bank NIF – National Investment Fund NPL – non-performing loan NSA – Nuclear Safety Account OCE – Office of the Chief Economist OECD – Organisation for Economic Cooperation and Development PED – Project Evaluation Department PHARE – Poland/Hungary Assistance for Reconstruction of Economies PBZ – Privredna Banka Zagreb PMPP – Polish Mass Privatisation Programme PPC – Project Preparation Committee PPF – Post-Privatisation Fund PPP – public-private partnership PSA – Production Sharing Agreement / Project Support Agreement PSC – public service contract RPFB – Russian Project Finance Bank RSBF – Russia Small Business Fund RVCA – Russian Venture Capital Association RVF – Regional Venture Fund RZB – Raiffeisen Zentralbank Österreich SBA – stand-by arrangement SBI – Small Business Initiative SSF – Shareholder Special Fund SFRY – Socialist Federal Republic of Yugoslavia ix After the Berlin Wall SIP – Shelter Implementation Plan SLA – subsidiary loan agreement SMEs – small and medium-sized enterprises SPF – State Property Fund (of Ukraine) SPV – special purpose vehicle SRP – Special Privatisation and Restructuring Programme TACIS – Technical Aid to the Commonwealth of Independent States TFP – Trade Facilitation Programme TIMS – transition impact monitoring system UK – United Kingdom USSR – Union of Soviet Socialist Republics UN – United Nations UNCED – UN Conference on Environment and Development WSE – Warsaw Stock Exchange ZBB – zero-base budgeting ZSNP – Zavod Slovenskeho Narodneho Povstania x Acknowledgements The idea of this book came from Suma Chakrabarti, the EBRD’s President, to whom I am immensely grateful for his encouragement and support. As I began to research the origins and development of the EBRD ear- ly last year, I realised there was a great deal more to the Bank’s history than I had imagined. That certainly made the project interesting, but also more daunting. To make the task manageable I decided to address the EBRD’s histo- ry in two volumes. This was not only convenient administratively, but also because the Bank’s evolution itself divides neatly into two halves: an ear- ly period in which the focus was heavily on transforming the former social- ist countries of central and eastern Europe into market-oriented economies, followed by a period of geographic expansion and promotion of broader needs to build sustainable markets and better-functioning economies. The plan was to launch Volume 1 at the EBRD’s Annual Meeting in London in May 2020. However, as with so many projects and events recent- ly, the Covid-19 crisis blocked that path. With the Annual Meeting can- celled the suggestion was made to release an electronic version of Volume 1 as soon as the publisher could make this possible. CEU Press’s forbearance and response to the difficult situation has been exemplary. I and others -in volved in the production of the book owe them, and especially Linda Kunos, a large debt of gratitude. I could not have written this volume without the benefit of many valu- able conversations and discussions—some brief, some long—with a wide range of distinguished and knowledgeable people and colleagues who have been involved with the EBRD, past and present. My warm thanks go to all those listed below and to many others not mentioned. The work of the Eval- xi After the Berlin Wall uation Department provided very useful insights in many areas. It was also a great help to consult the EBRD archives, nowadays a combination of pa- per and electronic records, where Joanna Conway and Emily Burningham provided excellent assistance. I am especially grateful to the small production team who supported this project throughout, primarily Jonathan Charles, Jane Ross, Svitlana Pyrkalo and Anthony Williams, and to several people included below who provided very helpful comments and suggestions on various chapters. Although this is a history of an institution, the EBRD, its experience re- flects the contributions of the people in its countries of operations. Without their efforts the world would be a poorer place. Finally, this volume has benefited enormously from the experienced edi- torial hand of Lucy Fitzgeorge-Parker of Euromoney, who kindly and pains- takingly went through the manuscript, improving the text immeasurably. What follows is nonetheless my own responsibility. Andrew Kilpatrick London, 7 May 2020 xii Acknowledgements The author would like to thank (in alphabetical order) the following for their help, insights and assistance: Alex Allan, Gavin Anderson, Mahir Babayev, Leszek Balcerowicz, Chris Beauman, Vanora Bennett, Maureen Brown, Kevin Bortz, Alba Bozo, Emily Burningham,