LONDON (Reuters) - After years of rapid expansion, the European Bank for Reconstruction and Development will have to “think carefully” before moving into more countries, the lender’s head Suma Chakrabarti told Reuters in an interview.
Chakrabarti also said the bank, which marks its 25th anniversary on Friday, would remain based in London regardless of whether Britain votes in June to leave the European Union.
Created in 1991, the EBRD has evolved far beyond its original mandate of investing in ex-Soviet bloc states and it is now active in Turkey, Mongolia, North Africa and Jordan as well as euro zone crisis states Greece and Cyprus.
During this period it has invested more than 100 billion euros, funding roads, banks, gas pipelines and small businesses, as well as a steel hanger the size of London’s St Paul’s Cathedral that is being built at the site of the 1986 Chernobyl nuclear disaster in Ukraine.
But there are questions about the EBRD’s longer-term role, for example whether it should be involved in North Africa or continue to invest in increasingly prosperous economies such as Poland.
Asked whether he saw more expansion on the horizon, Chakrabarti said shareholders would have to “think carefully”.
“I myself feel we have a huge task already. We have 36 countries of operation and they are very heterogeneous,” he said. “I think we need to focus, therefore, the efforts (of staff) fully on delivering within the existing set of countries.”
The EBRD has just opened offices in the United States and Japan, however, and plans one in the Gulf. Chakrabarti declined comment on speculation that the EBRD could start operating in communist Cuba, which is mending ties with the United States.
But he made clear the outcome of the British referendum on its EU membership on June 23 would have no impact on the EBRD.
“We are an international institution with a European heart so we are not an EU institution. Therefore the question of whether Britain leaves the European Union or not does not actually impact this bank,” he said.
Controversy is nothing new for the bank. Its founding father and first president, Jacques Attali, stepped down two years into his term after fierce criticism over lavish spending on re-marbling the bank’s headquarters.
More recently, the EBRD stopped new lending in Russia, where it has invested almost a quarter of its money since 1991, after the West imposed sanctions on Moscow over the Ukraine crisis. Russia said the EBRD move was politically motivated.
Instead, the bank has pumped 2 billion euros into Ukraine over the last two years, a reflection of Western support for Kiev. Chakrabarti pledged to continue investing as long as Kiev did not let up on reforms [L5N17H51V].
The former civil servant, who is seeking a second term as EBRD head, expressed some disappointment with a pushback by some countries against economic reform.
He did not name any countries but several ex-Soviet republics could fit that description and investors are also becoming increasingly concerned that Poland is following Hungary down the route of populist policies.
“If you look at the last 25 years there is no doubt the countries of operation of the EBRD have made enormous progress,” Chakrabarti said.
“But we have huge challenges. The institutions in some of these countries are not as strong as they need to be and not as strong as we thought they might have become by now.”
For FACTBOX on 25 years of EBRD investments click [L5N17H4PO]
For sidebar story on Ukraine click [L5N17H51V]
Reporting by Marc Jones; Editing by Gareth Jones
Our Standards: The Thomson Reuters Trust Principles.