Columnists
Banking on the eastern front
> BY ROMAN ROLLNICK
Copyright © 2002 by The Earth Times. All rights reserved

"The EBRD welcomes the reform strategy being pursued by the Russia," Lemierre said. "This is because of the clear strategy President Putin has set for the country and its decision to pay its international debt without going to the IMF. Setting priorities on investments in infrastructure and concentrating on how to make Russia more competitive and how to integrate it better in the world economy is the right course. However, the bank recognizes that implementation of the reform program, which is so important for building international confidence in Russia, will not be easy. The bank is willing to take part in this process by providing risk-finance for sound investment projects."

Founded in 1991, the EBRD is helping Russia and its former communist allies in Eastern Europe and Central Asia transform their once rigidly controlled, centrally planned systems into open, market-oriented societies. He is quick to admit that it has not been an easy task, but the transformation that has taken place over the past decade is due in no small measure to the bank's philosophy of investing in projects with a private-sector focus. Lemierre is also quick to point out that the bank is not altogether happy with some of its client nations, especially on issues of poor governance, weak judiciaries, corruption and lack of democracy. He cited Belarus and Turkmenistan in particular. It is Lemierre's conviction that wise trade policies, good political and corporate governance, properly functioning judiciaries, respect for human rights, the rule of law and a hard fight against corruption will eventually enable these nations of the dark era of communist dictatorship EBRD.

"The countries that have been doing especially well in the past decade are Hungary, Estonia and Slovenia, probably because the starting point for them was quite good. If one measures the success from a starting point of greater difficulties, where the track record is quite good now and investments are quite significant, then I would say Poland. But the most impressive track record of all, has been Russia's," Lemierre said. "If you look back just to 1999, there was a loss of confidence among investors. In the last two years it has improved dramatically. And look at Serbia and the former Yugoslavia, and where they were at the end of the year 2000 after the war. In just one year they have done remarkably well and shown a good track record."

The bank's biggest stakeholder is the US government, with a 10 percent share. Other members of the group of seven industrial nations hold shares ranging as high as eight percent. A decade ago, Lamierre said, the world viewed the EBRD's target region simply as the former Soviet bloc. Nowadays, he said, the region "is quite different, and perceived quite differently." Born in France on June 6, 1950, Lemierre an "Enarque," a graduate of France's prestigious Ecole Nationale d'Administration. He also holds a law degree. Two years before the EBRD was established in London, he became the head of France's internal revenue service, after rising through the ranks of the country's treasury department. This placed him in a position that made him responsible for the French franc zone around the world, and most notably the nations in West and Central Africa, whose currencies are supported by France. It was during his six-year tenure in that post that he came to know many of these developing nations, their leaders and finance ministers. Later he served as head of the French treasury and was a member of the European Union's Monetary Committee (1995-1998). He then became Chairman of the European Economic and Financial Committee (1999 2000) and served concurrently as Chairman of the Paris Club (1999-2000). As much as his love for hiking in remote parts would like these days for the international development finance world.

The Paris Club started in the early 1960s when Argentina sought to renegotiate its debt, and has convened in Paris on an ad-hoc basis whenever a debtor country cannot meet its obligations and seeks to renegotiate terms and conditions with its creditors. Its membership includes Paris-based representatives from the IMF and World Bank. "The club' has always been traditionally chaired by France's Directeur du Trésor," said Thierry Naudin, a London-based French economist, writer and banking consultant who has followed Lemierre's career. "It effectively gives the Directeur du Trésor access to a unique network of finance ministers and senior treasury officials from around the world, with unique insights into developing-world finance and economics. Combined with the Trésor's role as the hub of the Franc Zone, this puts heads of the French treasury in a very good position to access top international positions such as EBRD or IMF." Lemierre's predecessors at the treasury and the Paris Club include Michel Camdessus, a former IMF chief; Jacques de Larosière, a former head of the EBRD; and Jacques Attali, EBRD's first president. Neither Naudin nor anyone else who knows Lamierre seems to have anything controversial or unpleasant to say about him. Lemierre himself does not talk much about himself, preferring he switches with easy fluency from French to English and back to French again the transition process of the former Soviet empire. He also had a message to deliver to the West, especially to corporate investors. "This region is looking good today, and they are working hard at reform," he said. "You should consider good opportunities in the region. It is growing into a more politically stable and inspiring region. Just look at that huge country, Ukraine. It started off really poor a decade ago, and now they have had good growth for the past eight years." The EBRD's investment for the region in the 2001 financial year is $3.6 billion, including $822 million currently allocated to Russia. Lemierre said that although Russia has yet to turn the corner on corruption and governance, the recent trend in EBRD investments in the world's biggest nation encouraging: In 1997, for example it stood at $700 million, then dropped to $200 million during the 1999 crisis. This figure rose to $530 million in 2000, and is now climbing well above the 1997 figure again. "It need not be said that Russia has been helped by the price for oil and gas. They are taking step-by-step reforms, such as seeking to balance the budget and refining the taxation system, and it is clear when we talk to investors that they are rebuilding confidence in Russia," he said. In Russia the bank has invested mainly in what it calls "SMEs" or small and medium-sized enterprises, and has allocated $100 million to the electricity sector. The EBRD is backing a General Motors investment in Russia to the tune of $140 million.

At the behest of the G-7 nations, EBRD is also helping finance the refurbishment or dismantling of many nuclear power stations across the region. Some, like the infamous Chernobyl reactors, have been shut down, and plans are under discussion to bring some Ukrainian K2R4 reactors up to Western standards. Lemierre also makes it his business to attend major international gatherings, and last month he addressed UN Secretary General Kofi A. Annan on Financing for Development, in Monterrey, Mexico. He was joined in Monterrey by the chiefs of the world's four other major development banks: African Development Bank President Omar Kabbaj, Asian Development Bank President Tadao Chino, Inter-American Development Bank President Enrique V. Iglesias, and World Bank Group President James D. Wolfensohn. In a joint statement they said: "A lesson we have learned from our work is that development cannot be achieved in isolation from the surrounding country conditions. Policies and institutions matter, and for the multilateral development banks it is our catalytic role in this regard that matters most. There is now a need for a major effort to review approaches, to learn and share lessons, and to adapt our policies and practices as needed."

For a man whose buzz phrase is "sharing the risk," Lemierre said he hoped that in years to come the EBRD would effectively do itself out of business and close down. It would not be needed any longer once the 27 nations have come up to world standards in every aspect of their lives, from aid and trade, to rights and democracy, with their peoples living in peace and security. "When we hire people, I tell them that it will therefore not be a job for life, and that is why, in a sense, the EBRD has such a dynamic staff of committed people," he said. The bank's staff number some 1,300, of whom 900 are based at the London headquarters.

Lemierre drew praise recently from Karen Shepherd, the former Democratic Congresswoman from Utah. Shepherd, who has served for five-and-a-half years as the US executive director on the EBRD's 23-member board, noted in her farewell speech that Lemierre was the first EBRD president to appoint women to top positions. Others include the former Polish presidential candidate and Central Bank governor, Hanna Gronkiewicz-Waltz, who was named as one of the EBRD's four vice presidents; and Noreen Doyle, who was promoted to the position of his deputy as first vice president. A financial expert of American-Irish descent, Doyle had previously headed up the bank's risk department.

For someone who has hiked across the Sahara, the Sinai Desert and climbed in the Himalayas as he rose to the heights of the world of international finance and development, Lemierre, himself seems unlikely to stay for long. "He is one of that breed of French Trésor chiefs who are much sought-after by developing nations to head up the world's big lending agencies," observed Naudin, adding that Lemierre had also been singled out for praise by O'Neill. "It would not surprise me if, after his four-year term at the EBRD, Lemierre will be in the running for the IMF," said Naudin.