EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT

ANNUAL MEETING, LONDON, 2012

EBRD President’s Press Conference

Saturday 20 May 2012

MR CHARLES: Ladies and gentlemen, good afternoon and welcome to our news conference as the Annual Meeting draws to a close. My name is Jonathan Charles. I am the Director of Communications at EBRD and here with me is the President of EBRD, Thomas Mirow, the President Elect, Sir Suma Chakrabarti, the Secretary General, Enzo Quattrociocche, and the Head of Media Relations Anthony Williams.

I would like to start by asking the Secretary General perhaps to say a few words about some of the decisions that were taken at this 2012 Annual Meeting.

MR QUATTROCIOCCHE: Good afternoon. We have had a particularly busy Annual Meeting in many respects. Let me remind you that we have a very well attended Business Forum still going on as we speak but it was especially busy in terms of institutional matters to be dealt with, and I shall mention two. First, Governors were asked to approve and did approve a net income allocation of €1 billion to the EBRD SEMED Investment Special Fund to enable the financing of investment operations in the southern and eastern Mediterranean. This will be possible as soon as the process of ratification of the amendment to Article 18 of our Articles of Agreement is completed by our shareholders.

In this connection, I should like to mention that we also welcome two new members of the Bank, namely Tunisia and Jordan. At the same time, as you know, we had an election for the President of the Bank with more than one candidate, for the first time in the history of the Bank. Our Articles of Agreement say basically three things about the President. The first is that we have to have a President; the second that the President is elected for a term of four years; and the third that, to be elected, he has to be supported by a vote of a majority of the total number of Governors representing not less than the majority of the total voting power of the members.

We had to provide rules for the election and Governors devoted the second session of the Annual Meeting to the election. It took place according to the rules recommended by the

1067 President’s Press Conference 1 Board of Directors and approved by the Board of Governors. The election was preceded by a session of informal interviews with all the candidates last Thursday.

Finally, briefly, the Board of Governors also elected its Chair for the period 2012-2013, i.e. until our next Annual Meeting, which will take place in Istanbul. The Governor for was elected Chair of the Board of Governors and the Governors for Georgia and Turkey were elected Vice Chairs.

Finally, the Board of Governors also approved the resolution on the date and place of the Annual Meeting 2014, which will take place in Warsaw in May.

MR CHARLES: Enzo, thank you very much indeed.

President Mirow, perhaps I could ask you to say a few words.

THE PRESIDENT: Enzo has just provided you with the information that EBRD should have a President. To some degree it now has even two, with an outgoing one and an incoming one. On a slightly more serious note, I think it is indeed extremely important that there has been no situation and period of uncertainty. This must not happen in times like these when financial markets, as you all know, are extremely volatile, when rating agencies look at international financial institutions in the way they do. I think the stability and the robustness of the governance which has been demonstrated by Governors is extremely important in terms of the efficiency and effectiveness of EBRD.

I have of course already conveyed to Sir Suma my heartfelt congratulations. I really wish him well, both personally and also with regard to the future of the Bank. It is no secret that because of these difficult times the EBRD will face very serious challenges, especially since it will very soon enter into new territory and start to invest in the southern and eastern Mediterranean and to translate and at the same time adapt the experience we have gained from our commitment to central and eastern Europe to this new region, a new region which is now also in transition.

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I think it is fair to say that the EBRD is in good shape, that we have managed to retain an AAA rating with a stable outlook, which is probably not self-evident in these times, and that again this year we are well on the way to delivering the €9 billion of annual business volume which we are committed to deliver. I think we are now at around €2.6 billion. Therefore, even though it will of course be challenging, I believe Sir Suma can take over the EBRD first on the basis of strong support from its shareholders, and secondly in good and robust shape. Thank you very much.

MR CHARLES: President, thank you very much indeed. I will now ask the President Elect, Sir Suma Chakrabarti, to say a few words.

SIR SUMA CHAKRABARTI: Thank you. I want to start by saying something about Thomas. We have been very lucky in having Thomas Mirow as President of EBRD for the last four years. He is an outstanding professional, firstly. What he has done here to deliver results in terms of operational and financial efficiency, the AAA rating, the response to the financial crisis and also the expansion now into the southern and eastern Mediterranean shows great strategic vision as well as great professional integrity.

The second thing I would like to say about Thomas is about the man himself. Thomas is an unassuming individual. He will not like me saying this because he does not thrust himself forward in the way some people do, and that is the nicest thing about him. He cares deeply about the institution, about his staff, and he wants them to take the credit; of course, it is a team effort, but this team would not have done so well without Thomas as its leader. We are very lucky to have had him at the helm of this institution for the last four years. He leaves a great legacy for me and the team to take forward. We will try to protect his important legacy and we will take it forward.

My second point is about EBRD staff. I was involved in the creation of this institution and I have been involved with it over the years – with a short sabbatical for the last four and a half years when I was running the Ministry of Justice, but I have enormous pride in

1067 President’s Press Conference 3 this organisation and passion for its mission. The staff and the management here have done a cracking job over these 21 years. It is something of a model institution internationally, in my view.

I am pleased that the competition took place on fair and open terms. I think it reflects very well on the institution and on the shareholders. I think each of the candidates offered very different things and are very great candidates, and they ran great campaigns too. I am glad the process was followed in the way it was. I am pleased, in the end, to have had very broad support from a wide range of shareholders within the , both the eurozone and outside the eurozone, and also from the rest of the world as well. I think that is a good thing for the Bank to have had.

We are at an exciting point. Thomas says there are really exciting challenges ahead. The Bank now faces huge challenges. I see the number one challenge as maintaining the AAA rating and maintaining sound banking principles as we go forward. The Bank has done that superbly over the last 21 years and we must maintain that.

Another thing I see as very important – at all times but particularly after a leadership competition – is for the President and the team to reach out to all shareholders to make sure they are all united in facing the challenges ahead. That is what you will have from me. Thank you very much.

MR CHARLES: Sir Suma, thank you very much indeed.

If you would like to ask questions, please come forward. It would be great if you could say from which news organisation you come.

MR HANNO MUSSLER (FAZ) : I have three questions. The first is to President Mirow. How disappointed are you that you have to leave? Maybe I could add two more questions for Sir Suma. Which countries do you expect will ratify next in the

1067 President’s Press Conference 4 Mediterranean enlargement process and how will you speed up the whole ratification process?

The third question: you said yesterday that in your view this open election process strengthened the institution of the EBRD, but did it not also harm it? You, for example, criticised the Franco-German culture that might be dominant in this institution. How will you proceed now that you have been elected?

PRESIDENT MIROW: I hope, Suma, you will not regard this as impolite but if I may the second question is not really to you because when you take the helm of the institution we very much hope we will be there in terms of ratification, at least in terms of the threshold we need to start operations, and then of course the process needs to be completed. That will probably take another six months or so. I think every President and every team at the Bank will work closely with the international community to get all shareholders on this path. By the way, the very fact that some shareholders take longer than others is not for substantive reasons; rather in some countries ratification processes are more complicated than in others. If we take the European Union, you will understand that ratification by the European Parliament is not the quickest one; it is not as quick as in Lichtenstein, for instance.

With regard to the first question, that is always something you look at with a bit of ambiguity. I have been privileged to lead this institution for four years. For me it was very important to know and to see that governance, the institutional support, is secured by shareholders through the clear election of a President. This has happened and that is important to me. I am also gratified by the fact that many people say nice things to me these days. As I have been in many public offices already in my life, I can tell you that there is always a bit of a risk if you take public office; you can also easily be in a situation where people do not tell you such nice things. I am gratified by this. This has been a highly valuable experience in my life and with regard to the substance, i.e. looking at financial markets and being engaged with central and eastern Europe, these are themes

1067 President’s Press Conference 5 of my life and they will continue to be so until the very end. I may change a function or a responsibility, but certainly not commitment and dedication.

SIR SUMA CHAKRABARTI: Shall I try the third question? I think it would be pretty odd for a Bank that believes in competition then not to have competition because suddenly it thinks it is harmful for a particular purpose. I think this competition has been extremely useful because five candidates had very different experiences to bring to the Bank and to the challenges ahead and so Governors could choose on that basis. That is a good and healthy thing for the Bank to have done and it sets something of a benchmark for the international system, as various newspapers have reported today.

The issue about culture is an interesting one. I do not think it is about Franco-German culture or Anglo-Saxon culture or any other culture. I was rather interested in the Le Monde piece today about Anglo-Saxon culture and so on. Would anyone looking at me think I am Anglo-Saxon? It is an interesting idea!

If you look at my track record, you will see a very diverse top team. When I ran the International Development Department (DfID), who were my three deputies? They were a Pakistani, an Egyptian and an Anglo-Saxon, led by a Bengali Englishman. I think whoever is president will bring some of their own experiences as to how they run an organisation and how they want to do it. Thomas has done that; before him Jean Lemierre did that, and Jacques de Larosière. Each of them brought something different. Some things will change, but I think you will find a lot of continuity as well because I am very respectful of what Thomas has achieved. I do not think there will be sudden changes. I was asked in the interviews, “What would you change in the first hundred days?” I said: “You know, that is a question for American presidents; what the president of a bank needs to do for the first hundred days is listen and learn from all colleagues”, and that is what I plan to do.

MS CAROLYN COHN (): I have one question for Mr Mirow and one question for Suma. Mr Mirow, did Governors and shareholders today discuss the situation with

1067 President’s Press Conference 6 the eurozone and what can be done to mitigate the effects on emerging Europe? Suma, when you take on the job are you going to look again at how the EBRD deals with democracy or lack of democracy in some areas of its region of operation?

THE PRESIDENT: On your first question, some shareholders voiced their concerns with regard to the fall-out and impacts that the eurozone crisis has had so far and may have, should it become worse than it is. The debate was not about how to remedy the problems of the eurozone but rather about what can be done to make the economies in central and eastern Europe less dependent on these events and on further potential events.

MR CHARABARTI: The issue of democracy and so on is embedded in Article 1 of the Bank and it is a really important part of why I applied because, like Thomas, I believe in the open societies and open economies approach, which makes the Bank distinctive. I know that the Bank is always looking at these issues and there is currently a review going on with regard to Article 1, in terms of its application; but that is work still in progress. Not having arrived yet, it would be premature of me to pre-empt that work. I have not even seen the papers, so I will need to grapple with that when I get here. It is clearly an issue that always needs refreshing in this kind of bank, because of its special mandate.

MR NEIL BUCKLEY (Financial Times) : I would like to put the same question to both Presidents, outgoing and incoming. George Osborne, the UK Chancellor, yesterday issued a warning that if international aid to the Arab Spring countries was not speeded up, there was a danger that efforts to promote democracy could fail. Do you share those concerns? Do you think they are justified? What will you be doing to ensure that money flows quickly, and how quickly?

THE PRESIDENT: My answer is clearly that I do share this concern. It is very easy to grasp if you speak to people in the region: the feeling of disappointment and sometimes even of deception is widening. It has to do with the fact that too many expectations have been created. I have said on some occasions that I am very critical of the fashion of trying to pull together big numbers in an artificial way. This time it was €40 billion, and

1067 President’s Press Conference 7 this creates expectations of fresh money, which simply cannot be delivered. At the same time, at least our shareholders, the Tunisians, Moroccans, Jordanians and Egyptians, have all conveyed to us that their criticism of lack of delivery expressly does not include the EBRD. There is a feeling that teams on the ground have started working, that the EBRD is meeting the expectation of being a hands-on institution. There was right from the outset an understanding that there needed to be legal changes that we could not just overlook, but that we would take every opportunity to act, if legally possible. We have started with forty technical cooperation projects, and in the course of the summer we will begin our first concrete investment activities, subject to the approval of the Board of Directors.

This is a general sentiment that has been rightly mirrored by what the Chancellor said. We need to speed up, but I do not think he was hinting specifically at the EBRD, rather at a broader environment. Indeed, we try to counteract that kind of sentiment.

MR CHAKRABARTI: I do not have much to add to that because I agree with what Thomas has said. During the campaign I visited the region and I heard enormous praise for the way that the EBRD had responded so rapidly, getting through its procedures and processes very quickly to be in a position to get on with the task at hand.

While the expectation is clearly high, George Osborne’s concerns are shared by many other finance ministers that I met; but the EBRD, if anything, is seen as a bit of a benchmark for how you can engage very fast. When I was in Washington, the IFC praised Thomas and his team for being more flexible than other institutions and how quickly it can respond, as part of the Deauville Partnership; so the EBRD is doing quite a good job on that.

MR NEIL BUCKLEY: How quickly do you expect the €1 billion from the Special Fund to start going into the region?

1067 President’s Press Conference 8 MR MIROW: As we said, we will start with investments, subject to approval of the Board and through the Board the shareholders, throughout the summer. Whether this will mean the first part of August or the second part of August, or very early September, it is premature to say, but that is what we are aiming at. As we are now in the second half of May it is probably fair to say that in three months time we should be there.

MR MELVUT KATIK (London Perspectives) : I wondered whether both Presidents think that this new voting system could lead to some significant changes in the way the European and other international financial institutions and organisations are managed; and whether it will lead to a new trend in international relations, since one of the actors is said to be run differently.

THE PRESIDENT: To be frank, this is easier to comment upon if one is not President. My sense is that there is indeed a higher sensitivity to what could be perceived as backroom deals. Whether the commitment to transparency, openness and merit-based approaches can be taken for granted in each and every respect may be looked at twice.

MR CHAKRABARTI: Even though I am President Elect, I have a very similar view. It is likely to be a benchmark that other institutions will look at. You, as journalists, and others will ask yourselves why something like this could not at least be approximated. It is quite interesting because I do not think it is just the EBRD, to be fair; in the and the IMF contests, there was some process of hearings. The World Bank contest took place very recently. Some of that is beginning to be understood by shareholders, as a part of the process. I was obviously only involved in my own hearing, but from what other people said, they were a very important part of the process because people were able to lay out their own different approaches to the job. I think that is quite a good thing. Again, shareholders and other institutions are getting more experience of that. The price of not doing those backroom deals that have existed for the last fifty years has risen because of all that. It is not going to be a linear process of change.

1067 President’s Press Conference 9 A SPEAKER (Egypt) : The countries you are entering into are still in the middle of the transition process. Egypt, for example, has elections in the coming days. Are you concerned about the legitimacy of the current parliament or cabinet ministers, and whether any new incoming authority could turn round and say, “We are not very interested in having the EBRD present after all”? That is one reason why the IMF has delayed assistance to Egypt, because they are not sure that the authority in place now will be legitimate in five to six months’ time. Is that a concern of yours?

The argument has been made that the EBRD is stretched too thin with the eurozone crisis and its foray into the SEMED region. How would you respond to that argument?

THE PRESIDENT: On the first question my answer is that you will probably never ever find the perfect solution. There is a demand for speed and we discussed ten minutes ago the growing sentiment of the international community having promised help and not delivering. Waiting until after a revolution, for a new constitution to be worked out and agreed upon, for elections to take place, for a first round of debates on whether one wants to work with international institutions, and then starting to engage, would mean that for years nothing of substance would happen. I think you have to take a balanced view, knowing that there is indeed a lack of legitimacy at the start but putting some trust that this will be remedied. I took the opportunity of the discussion this morning to say that in my experience transition to democracy, multi-party systems and market economies is not a short trajectory; it is a long, winding and bumpy road, with setbacks. I have encouraged shareholders to continue to stay engaged and not to hesitate or to withdraw support because here and there things are not perfect. If I look at central and eastern Europe today, there are very many places where things are still very far from perfect; but would it have been better without the EBRD engaging? My answer is, very clearly, no.

In terms of human resources, we are hiring people and are very pleased to have on board very able, engaged and committed new bankers. In terms of capital we have made very prudent calculations, and are very confident that with the activities being built up after two, three or four years, so in the second half of Suma’s term the EBRD will be able to

1067 President’s Press Conference 10 deliver something like 2.5 billion in annual investments, on top of the 8.5 billion committed to central and eastern Europe.

MR RAYMOND LLOYD (The Parity Democrat) : I have three questions, but first I would like to express my admiration, as someone who has been writing about the Bank for 21 years, at the way Thomas Mirow has led the EBRD over the past four years. As someone who has worked with the international community for 55 years, since helping the International Red Cross re-settle 200,000 Hungarians fleeing communism in 1956/1957, can I say how unusual it is for an international body to be headed in succession by three presidents of the quality of Jacques de Larosière, Jean Lemierre and Thomas Mirow.

Question one in shortened form is to Suma. Yesterday the Independent had a photograph of the parity Government of France, a government with an equal number of able woman and men. France thus joins four other European countries with parity cabinets. There have also been two international bodies with parity directorates, the World Food Programme and UNESCO, both appointed by women heads. Some 12 EBRD operational countries have or have had women heads of state in government. The EBRD has been given a good start by Thomas Mirow, with five of thirty senior staff being women. May we expect, Suma, that well before your four-year term ends in 2016, if not in the first hundred days, you will be the first male head of a European body to appoint a parity directorate of able women and able men?

MR CHAKRABARTI: I agree with your comment at the beginning about Thomas and his predecessors. We have been really well served by leadership here.

I made a theme of diversity in my vision for the Bank, and you will have to judge me on my track record and ask yourself if I am likely to do the same here. I point out that both DFID and MoJ, the boards of both, i.e., the two top tiers of parliamentary secretaries and director generals, are half female and half male. They were not when I started. I did not inherit that position. In the Ministry of Justice, 40 per cent of the senior civil service is

1067 President’s Press Conference 11 female; so something does happen when you believe in these things, as Thomas has. I will take that work forward. I believe in diversity very, very strongly. I think there is a good business case as well as a good ethical case. It is shown if you look at the staff survey results of those two organisations and the capability review results. DFID still comes top in Whitehall in regard to all those parameters, and it is a lot to do with the leadership shown by the men and women there, but it is to do with diversity as well.

MR CHARLES: Perhaps I could limit you to one other of your questions, Raymond, for reasons of time.

MR RAYMOND LLOYD: The EBRD does excellent publications on the hopes and fears of young persons born into a non-communist world. At the other end of life there are still eighty and ninety-year old survivors from the Kazakh famine of 1930, the Ukrainian genocidal famine of 1932 and the great purge of Russian dissidents peaking in 1937. Could the EBRD collect an anthology of some of their reminiscences as a warning even to our democratic age that we must always be on our guard against such future atrocities?

MR CHARLES: As Director of Communications, perhaps I might answer that, Raymond. We generally do not do historical documents. We try very hard to do things that are currently happening in our region, but I note your question.

THE PRESIDENT: Perhaps I can add one comment. It is very important that you remind us of these facts. There is now a history book about the killing fields in central and eastern Europe, and it is necessary to recall the atrocities in this very region that the EBRD is dedicated to, because it reminds us all of our responsibilities.

A SPEAKER (AFP News Agency) : I have a question for Suma and Thomas. Suma, why do you believe you won the election; and what are your objectives over the next four years aside from maintaining the Bank's AAA rating? A question for Thomas: why do

1067 President’s Press Conference 12 you believe you were not re-elected despite it being widely acknowledged that you have done a fantastic job over the last four years?

MR CHAKRABARTI: Well, because I like to think I ran a really good campaign. I put forward certain challenges. This links to the second part of your question. I thought that I had the experience to pit against those challenges, which I saw essentially as the expansion to SEMED. I had a background in dealing with many economies and societies like those that the Bank is moving into. Secondly, in the innovation and value-added area, I have had management experience of ten and a half years of running two huge organisations, which was part of my pitch. Thirdly, I guess in regard to the results focus, which Thomas and the Bank have been working on, I pitched very strongly in terms of the need for creating a narrative, aggregating all the great work that the EBRD does on the ground and being able to show how it is transforming societies and economies. That is quite important in any case for an organisation and its self-confidence, but it can show shareholders that we can make a big macro difference as well as a micro difference. Those are the themes I put forward. Those are the objectives, apart from the AAA credit rating, and they garnered support across quite an interesting range of shareholders. There were no groupings. That was one of the nicest things about this election; that was broken for all the candidates, and it was very helpful.

THE PRESIDENT: From a historian’s perspective I would say that there was probably a slight lack of enthusiasm from my own government! (Applause)

A SPEAKER: I noticed in several of the meetings, and in this meeting, that when the four countries in the MENA region were mentioned, Egypt came fourth. I understand that Egypt was the first to apply to be included in the area of operation. Does this mean that Egypt’s file has been put back to fourth?

THE PRESIDENT: Not at all. It is just fair to say that the political developments in Egypt in formal terms in regard to the necessary agreements we have to have with authorities make it slightly more difficult than in those countries that have not

1067 President’s Press Conference 13 experienced any revolution or which were ahead of Egypt in terms of revolutionary developments, and the setting up of new administrations and new political authorities. I think everyone here at this time, at this part of the table and colleagues sitting around, is very, very aware of the fact that not only is Egypt a founding member of the Bank but that the fate of the region to a high degree will depend on whether the revolutionary development will lead to something good and stable, something that the people recognise as being a growing success story. If that were to fail, that would certainly radiate far beyond the borders of Egypt. Do not worry: nobody here will ever under-estimate the importance of Egypt in this context.

MR FELIX LILL (Die Presse) : I have a question for the President Elect. Yesterday the Tunisian Central Bank Governor said that the liberalisation and privatisation policies in post-Soviet times would not be suitable for the new members of the EBRD. What could be the new policy stance to deal with these countries?

MR CHAKRABARTI: I can only give a general answer because I do not know Tunisia well enough to give a considered answer, which the question needs.

First, you need to tailor the approach country by country. That is the great thing about the EBRD: it has had this client-focused, country-focused approach. That is one of the reasons I applied because it does not have a top-down view of how to do things.

Where liberalisation and privatisation, and the pace and sequencing with which you do those, may be appropriate in some places, they may not be appropriate in others and you have to take that into account. I do not have a set view that that is always the right thing to do. I will give you some examples from my past. Water is a classic example where different countries take quite different approaches. In my current job, in the justice sector in Britain, we are privatising prisons and we are privatising the probation service to a large extent. We are putting a lot of things in the private sector, and that is not the approach in many parts of Europe. Culture and different approaches to doing these things matter a great deal; and the EBRD has to be alive to that in every situation.

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A SPEAKER: I am here for the African Presidency. Throughout my attendance in the workshop and this press conference I have heard that your Bank’s operations have not gone beyond North Africa. We already have an African Development Bank. I do not know how close you are to understanding the level of needs on the ground in order to avoid a duplication of interventions.

THE PRESIDENT: The relationship with the African Development Bank is indeed very close, and not just at the top level. I met President Kabaruka, our counterpart at the African Development Bank, three or four weeks ago in Tunisia, and also staff. It is very important to understand that the African Development Bank would very strongly welcome the new engagement of the EBRD in an approach to say, “We are very experienced on the ground; we would want to help you but we have a shortage of capital resources, but we also have a way to go in order to put greater emphasis on the private sector.” In this we do look at the EBRD as being a very helpful partner, and this is a very strong fundament that Suma can build on, in regard to the partnership being rooted in the region, knowing the region very well, and, from our side, bringing in private-sector expertise.

MR CHAKRABARTI: I also went to Tunis as part of the campaign and talked to Donald Kabaruka and he said he really welcomed the EBRD coming into this area because the African Development Bank has many strengths but one area that it clearly does not pursue is private-sector development. The EBRD has such a great track record that he wanted its skills and expertise in the region as fast as possible. It was already obvious that they were welcoming the EBRD with open arms, and that is a really good start.

MR CHARLES: Are there any further questions? Thank you very much for attending this press release.

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