Opening Statement by the Chair of the Board of Governors
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OPENING STATEMENT BY THE CHAIR OF THE BOARD OF GOVERNORS AM101e-Y 1 Mr Harris Georgiades Chair of the Board of Governors of the EBRD Annual Meeting, Tbilisi 15-16 May 2015 Chair’s Opening Speech Your Excellences, Distinguished Governors, President, Ladies and Gentlemen: It is with pleasure that I welcome you to the Bank’s 24th Annual Meeting in Tbilisi. We are grateful to the Georgian authorities for hosting us in this wonderful city – the first time that an Annual Meeting has taken place in the South Caucasus. Our meeting opens here in the Rustaveli Theatre, which is named after Georgia’s great national poet of the 12th and 13th centuries, Shota Rustaveli. Tbilisi has always been a melting pot of different cultures, and it is known for its traditions of religious tolerance and openness. I am delighted, therefore, that the EBRD Board of Governors is meeting here, as it reflects the importance that we all attach to the Bank’s work in this region and this country. AM101e-Y 2 2014 was a year of strong delivery for the Bank in Georgia, with investments reaching EUR 215 million. The EBRD has helped strengthen Georgia’s capacity as an electricity exporting country, and has helped finance important projects such as the Black Sea Transmission Line and the construction of the award winning Dariali Hydropower Plant. Other achievements include the first corporate sector syndication in Georgia, and the issuance of the first IFI Bond in Georgian Lari, which enabled the EBRD to diversify its offering of local capital products. But as we look across our region of operations, it is clear that the picture has not been as positive as it has been here. Many of our countries have faced major geopolitical and financial challenges, and the past year has been marked by international tensions, slowing growth, high market and currency volatility, and the guidance provided to the Bank that a majority of shareholders would not – for the time being – approve new projects in Russia. What has been remarkable is the way in which the EBRD has responded flexibly and rapidly to these challenges. It has delivered significant transition impact across the region, and has achieved an overall annual investment level of EUR 8.9 billion, which was both on target as well as higher than for 2013. AM101e-Y 3 The Bank has responded rapidly to the worsening economic situation in Ukraine by stepping-up its investment there to over EUR 1 billion. This has supported sectors such as gas transport, road, municipal, agribusiness and trade finance, and has helped with the renewed reform efforts in Ukraine. The EBRD also made significant and exceptional contributions to the completion of the Chernobyl Safe Confinement project, and I would like to thank the EBRD for their effective management of the Chernobyl Shelter Fund and for their engagement with the contracting parties and authorities in Ukraine. The Bank has performed strongly in central and eastern Europe, in Turkey and in south-eastern Europe. In the Southern and Eastern Mediterranean region, our total portfolio has already hit EUR 1.7 billion, just two years after starting operations there. Landmark transactions in 2014 have included major modernisation investments in Egypt’s power and rail sectors; solar power deals in Jordan; support for drinking water services in rural Morocco; and credit lines for SME access to finance across the region. AM101e-Y 4 The positive impact of EBRD activity in the SEMED countries shows that the Bank’s business model is relevant not just to those countries that have a history of central planning, but also those who are working towards building more efficient market economies. These aspects of the EBRD’s “value added” are recognised and appreciated by many, including by my own country Cyprus, and more recently Greece, as both countries first requested, and have since been granted recipient status for a time-limited period. I would like to take this opportunity to add a note of personal thanks to you, my fellow Governors, for your support for Cyprus during this difficult period. The EBRD’s capacity to move swiftly has meant that it is already making investments that are helping in the stabilisation of the financial sector , and the recovery of the Cypriot economy. [Continues…] AM101e-Y 5 This expansion of EBRD countries of operations is a sign of the difficult and uncertain economic environment in which the Bank is operating. And the Bank itself has not been immune. Despite the operational success I have mentioned, and an overall profit before provisions of EUR 900 million, the net financial result was a loss of EUR 600 million. This was primarily due to the decline in the value of the Bank’s equity investment portfolio, weakening of the Russian rouble, and increased levels of provisions. It is a sign of strength, though, that all three major credit agencies continue to reaffirm the Bank’s “Triple-A” rating. The commitment that we, the shareholders, maintain in favour of the EBRD is playing a large role in underpinning this financial stability. Looking ahead, the forecast for much of our region remains troubled. For the EBRD to continue delivering on its Transition mandate, both in the short and long term, we must ensure that it continues to maintain its strong capital base. The Bank has proven that it can be flexible and innovative in addressing the challenges in our region: that it can continue to do so is crucial. AM101e-Y 6 This leads me to the important institutional decisions that we Governors are being asked to take at our meetings today. These decisions include, of course, the more standard approvals for the Bank’s Financial Statements, the 2015 Budget, the 2014 Annual Report and a net income reallocation to the EBRD Shareholders Special Fund. There are also two key strategic decisions to be made: one is on the Redemption of Callable Capital; and the other on the Strategic and Capital Framework for 2016-20, which will set the parameters for the EBRD’s overall approach for the next five years. I am therefore looking forward to hearing your views at our Roundtable discussion on what you see as the relative importance of the different priorities, and on how the Bank should manage the geographic and product mix. Whilst on the topic of Governor’s decisions, you will know that the resolution on the review of the Composition of the Board of Directors was not adopted yesterday evening, which means that the current governance arrangements continue. I would like to thank Board Directors and management for their hard work and patience in having taken forward this matter. AM101e-Y 7 Your Excellences, distinguished Governors, Ladies and Gentlemen; We are all aware of our Bank’s strengths, which are based on the principles of Transition Impact, Additionality and Sound Banking. We recognise that the EBRD is an institution that actively supports economic freedom and economic prosperity. And we value its unique character; its cooperation with other institutions; its focus on the private sector; and its flexibility. On behalf of us all, I would like to thank President Chakrabarti and the staff in the Bank, as well as our Board of Directors, for all their hard work over the last year, and for their continued commitment to the EBRD. Finally, I encourage you to engage with the many different aspects of this Annual Meeting and Business Forum. Over the coming two days the Bank will be hosting nine individual discussion panels, 10 country investment outlook sessions, two networking lunches, a reception for all participants, an alumni event, and the high-profile Host Country Event. This will no doubt provide a strong insight into the incredible breadth and depth of the activities of our Bank, and also how the EBRD is delivering on the theme of this Annual Meeting by “Investing for Change”. Thank you. AM101e-Y 8 .