Home
>
Political
>
The European Bank for the Retardation of Development

The European Bank for the Retardation of Development

In typical bureaucratese, the pensive EBRD analyst ventures with the appearance of compunction: "A number of projects have fallen short of acceptable standards (notice the passive, exculpating voice - SV) and have put the reputation of the bank at risk". If so, very little was risked. The outlandish lavishness of its City headquarters, the apotheosis of the inevitable narcissism of its first French Chairman (sliding marble slabs, motion sensitive lighting and designer furniture) - is, at this stage, its only tangible achievement. In the territories of its constituencies and shareholders it is known equally for its logy pomposity, the irrelevance of its projects, its lack of perspicacity and its Kafkaesque procedures. And where the IMF sometimes indulges in oblique malice and corrupt opaqueness, the EBRD wallows merely in avuncular inefficacy. Both are havens of insouciant third rate economists and bankers beyond rating.

Established in 1991, "it exists to foster the transition towards open market oriented economies and to promote private and entrepreneurial initiative in the countries of central and eastern Europe and the Commonwealth of Independent States (CIS) committed to and applying the principles of multiparty democracy, pluralism and market economics. The EBRD seeks to help its 26 countries of operations to implement structural and sectoral economic reforms, promoting competition, privatization and entrepreneurship, taking into account the particular needs of countries at different stages of transition. Through its investments it promotes private sector activity, the strengthening of financial institutions and legal systems, and the development of the infrastructure needed to support the private sector. The Bank applies sound banking and investment principles in all of its operations. In fulfilling its role as a catalyst of change, the Bank encourages co-financing and foreign direct investment from the private and public sectors, helps to mobilize domestic capital, and provides technical co-operation in relevant areas. It works in close co-operation with international financial institutions and other international and national organizations. In all of its activities, the Bank promotes environmentally sound and sustainable development."

Grandiloquence aside, the EBRD was supposed to foster the formation of the private sector in the revenant wreckage of Central and Eastern Europe, the Balkan, Russia and the New Independent States. This it was mandated to do by providing finance where there was none ("bridging the gaps in the post communist financial system" to quote "The Economist"). Put more intelligibly, it was NOT supposed to transform itself into a long-term investment portfolio with equity holdings in most blue-chips in the region. Yet, this is precisely what it ended up becoming. It avoided project financing like the plague and met the burgeoning capital needs of small and medium size enterprises (SMEs) grudgingly. And it refuses to divest itself of stakes in the best run and most efficiently managed firms from Russia to the Czech Republic. In a way, it competes head on with other investors and commercial banks - often crowding them out with its subsidized financing.

One of its main mistakes, in a depressingly impressive salmagundi, is that it channelled precious resources to this budding sector (SMEs), the dynamo of every economy, through the domestic, decrepit, venal and politically manhandled banking system. The inevitable result was a colossal waste of resources. The money was allocated to sycophantic cronies and sinecured relatives (often one and the same) and to gigantic, state-owned or state-favoured loss makers. Most of it lay idle and yielded to its hosts a hefty income in arbitrage and speculation. As banks went bankrupt, they wiped whole portfolios of EBRD SME funds, theoretically guaranteed by even more bankrupt states.

Thus, the only segments of the private sector to benefit handsomely from the EBRD were lawyers and accountants involved in the umpteen lawsuits the EBRD is mired in. It is a growth industry in "countries" such as Russia. This is the melancholy outcome of indiscriminate, politically-motivated lending and of a lackadaisical performance as both lenders and shareholders. In the spirit of its first chairman, the suave and titivated Attali, the bank is in a constant road show, mortified by the possibility of its dissolution by reason of irrelevance. It aims to impress the West with its grandiose projects, mega investments, fast returns and acquiescence. In thus behaving, it is engaged in a perditionable perfidy of its fiduciary obligations. It lends to criminal managers, winking at their off-shore shenanigans and turning a blind eye to the scapegrace slaughter of minority shareholders. It throws good money after bad, cosies up to oligarchs near and far and engages in creative accounting. Instead of Westernizing the Easterners - it has been Easternized by them. Its sedentary though peregrinating employees are more adept at wining and at dining the high and mighty and at haughtily maundering in the odd, tangential, seminar - than at managing a banking institution or looking after the interests of their nominal shareholders with the tutelary solicitude expected of a bank.

Consider two examples:

MACEDONIA

The nascent private sector is nowhere to be found in the list of projects the EBRD so sagely chose to falter into here. The Electricity and Telecoms monopolies are prime beneficiaries as is the airport. The EBRD is also a passive shareholder in both big universal banks - until recently, conduits of state mismanagement. The SME and Trade Facilitation credit lines were conveniently divvied up among five domestic banks (one went belly up, the managers of two are under criminal investigation and one was sold to a Greek state bank). Despite vigorous protestations to the contrary, none of this money reached its proclaimed entrepreneurial targets. Two loans were made to giant local firms - the natural preserve of commercial lenders and equity investors the world over. The EBRD contributed nothing to the emergence of a management culture, to the development of proper corporate governance, to the safeguarding of property rights and the protection of minority shareholders here. Instead, it colluded in the perpetuation of monopolies, shoddy and shady banking practices, the pertinacious robbery titled "privatization" and the pretence of funding languishing private sector enterprises.

RUSSIA

Its 2 billion US dollars portfolio all but wiped out in the August 1998 financial crisis, the EBRD has now returned with 700 million new Euros to be - conservatively but not more safely - lent in major energy and telecom behemoths.

The historic, pre-1998, portfolio appears impressive. Almost 11 billion US dollars were generated by the EBRD's less than 4. The bottom line reads 94 projects. Yet, when one neutralizes the infrastructural ones (including the gas and energy sector) - one is left with less than 50% of the amount. Add "infrastructure-like" projects (water transportation and the like) - and less than 30% of the portfolio went to what can be called proper "private sector". Moreover, even these investments and credits were geared towards traditional and smokestack industries: mining, food processing, pipelines, rubber and such. Not an entrepreneur in sight. And the EBRD's meagre loan-loss provisions and reserves cast serious doubts regarding the mental state of both its directors and its auditors.

To varying degrees, these two countries are typical. Development banks, like industrial policy, import substitution and poverty reduction, have gone in and out of multilateral fashion several times in the last few decades. But there is a consensus regarding some minimum aims of such bureaucracy-laden establishments - and the EBRD achieves none. It does not encourage entrepreneurship. It does not improve corporate governance. It does not enhance property rights. It does not allocate economic resources efficiently. It competes directly with other - more desirable - financing alternatives. It is not equipped to monitor its vast and inert portfolio. By implication it collaborates in graft, tax evasion and worse. It is a waste of scarce resources badly needed elsewhere. It should be administered a coup de grace. And its marbled abode - so out of touch with the realities of its clients and its balance sheet - should be sold to someone more up to the task. A bank, for instance.

About The Author

Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.

His web site: http://samvak.tripod.com

car service from Midway Burlington .. Lockport Chicago limo O’Hare

In The News:

Tech expert Kurt “CyberGuy" Knutsson says a malware app called SpyLend is posing as a financial tool, hitting 100,000-plus downloads.

Tech expert Kurt “CyberGuy" Knutsson says Clone Robotics’ Protoclone mimics humans with 1,000 muscles – too human for comfort.

Tech expert Kurt “CyberGuy" Knutsson urges you to use Apple’s App Privacy Report to see what your apps are really up to.

Tech expert Kurt “CyberGuy" Knutsson talks about how to smoothly transfer your data from an old laptop to a new one using cloud storage or external drives.

Kurt the CyberGuy offers tips to safeguard your personal information as scammers become more sophisticated with scam texts and other methods.

WeRide's unmanned electric delivery van, the Robovan W5, has 194 cubic feet of cargo space and can carry payloads up to about 2,205 pounds

Kurt the CyberGuy recommends deleting 16 browser extensions immediately in response to a report saying more than 3.2 million web users were affected by a security breach.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

A robotics firm in China claims a robot has performed the world's first humanoid robot front flip, which is significantly more difficult than a backflip.

A digital ID may be even more secure than a physical ID. Storing your driver's license in your Apple Wallet is an ideal solution for commuters.

A cybersecurity firm has shed some light on just how common tax scams have become. Kurt the CyberGuy offers his advice for how to protect your refund.

Lifesize Plans offers immersive walk-throughs that allow customers the opportunity to tour a home's design before construction actually begins.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

A man invested $4 million in bitcoin and lost it all with a single click when he was targeted by a vishing scam, which uses phone calls to trick people.

Expandable's Touchdown is a designer trailer that promises a luxury off-grid living experience and unfolds into a home in about 15 minutes.

Major employee screening company data breach affects 3.3 million people. Tech expert Kurt “CyberGuy" Knutsson explains what happened and gives five ways to protect your data.

Kurt “CyberGuy" Knutsson reveals mind-blowing tech that gives you sunlight on demand.

New malware "FrigidStealer" targets Mac computers. Tech expert Kurt “CyberGuy" Knutsson offers four ways to stay safe from infostealer malware.

Kurt “CyberGuy" Knutsson talks about how lab-grown muscles power a biohybrid hand for scalable prosthetics and research.

Reports of task scams have significantly risen in the past four years, according to the Federal Trade Commission. Kurt the CyberGuy offers some red flags.

iPhones have a hidden folder that eats up storage without you knowing it. Kurt the CyberGuy offers some tricks to free up storage on your device.

A recent ransomeware attack targeted Zacks, an American investment firm, and a cybercriminal claimed to have stolen records for millions of customers.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Researchers unveiled a new soft prosthetic hand that combines the natural coordination patterns of our fingers with the decoding of motoneuron activity in the spinal column.

Accidentally deleting a text message on your iPhone or iPad is not a problem if you still need the message. Apple has a built-in way to recover it.

The European Bank for the Retardation of Development

Political