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European Bank of Reconstruction and Development

Volume 448: debated on Wednesday 12 July 2006

3. If he will make a statement on the contribution to development made by the European Bank for Reconstruction and Development. (84329)

The European Bank for Reconstruction and Development was established in 1991 to assist the development of the private sector in the former communist countries of central and eastern Europe. Since then, it has developed a strong record in that area, helping to lever in considerable private sector investment, create jobs and generally help to promote economic growth. Since 2004, the focus of the bank’s operations has begun to shift further towards the poorest countries in the region.

I thank my hon. Friend for that reply. Is he aware that substantial criticism has been directed at Shell by environmental non-governmental organisations over the Sakhalin II oil and gas project? What is being done to address those concerns?

Let me reassure my hon. Friend that the Government are fully aware of the social, environmental and energy security issues that are associated with the Sakhalin project. A number of Ministers, myself included, have met the non-governmental organisations in the UK that are particularly concerned about the project. As a result, we have also met President Lemierre and representatives of Shell a number of times to discuss those concerns. At the invitation of Shell, I asked some of our officials to go to the Sakhalin project, the better to see for themselves how those concerns were being addressed. We have not yet been asked to support a loan by the EBRD or the Export Credits Guarantee Department to the Sakhalin project. If we are, we will obviously take full account of the concerns that have been raised with us.

Has the Minister assessed the effectiveness of development funding spent by the EBRD compared with that spent by the European Union—or, indeed, by his own Department—in particular to ensure good governance and transparency?

I have not conducted such a comparative assessment, but I do have a strong regard for the work of the EBRD. For example, it has played critical roles in helping to modernise a variety of electricity plants across Russia and Poland, in helping to upgrade regional road networks, and in railway projects. It is also playing a crucial role in the decommissioning of nuclear plants in Lithuania and in Russia. It is making an important contribution, and I welcome the fact that it is shifting its focus to the poorest countries in the region. We will continue to work with it very closely.

As my hon. Friend knows, I recently visited Kyrgyzstan, which is one of the countries most affected by the reconstruction after the fall of the Soviet Union. Is he aware that Kyrgyzstan’s economy is rapidly heading backwards, and that per capita income is in many cases lower than in some parts of sub-Saharan Africa? Is he confident that the EBRD has a role to play in central Asia, and that it can have a significant impact on the lives of those most affected by the changes of the past decade?

My hon. Friend is right to draw attention to the particular challenges associated with economic growth and poverty reduction in Kyrgyzstan. The international community needs to focus more on the specific challenges of addressing poverty in central Asia. We need to continue to work to promote good governance not only in Kyrgyzstan but in Tajikistan, in order to help those countries to tackle corruption and to get more international aid into both countries. DFID has been scaling up our work in Tajikistan and the Kyrgyz Republic, and we continue to work with the EBRD and other international financial institutions in the way that I have described.

The bank’s mandate clearly states that it must work only in countries committed to democratic principles, yet it has recently provided significant funding to Belarus, Uzbekistan and Azerbaijan. That is yet another example of an inherent contradiction within European institutions. Others include the EU water initiative, which has failed to provide access to water for a single individual. Moreover, a recent Save the Children report states that the EU is consistently the worst performer in disbursing aid and is mired in bureaucracy. What is the Minister’s strategy to improve the EU’s aid effectiveness, and what pressure is he putting on the bank to ensure that there is progress in both political and economic transition in these ex-Soviet republics?

I do not accept Save the Children’s critique of European Commission aid. There has been substantial improvement in the quality of EC aid over the past five years, although more reform is necessary. On engagement with regimes such as Belarus and Uzbekistan, we must recognise that we should not penalise the very poorest people in such countries, but that we also need to continue to champion democracy, good governance and reforms to improve poor people’s participation in the running of their country. We will continue to do just that through the EBRD, EC aid, other parts of the European architecture, other European member states and, indeed, our own programmes.