Turkey rowing to a sinking ship?
Posted by meb at May 20th, 2008
Nearly two decades after it became a member, Turkey expects to finally cash in from the European Bank for Reconstruction and Development, or EBRD – but that cash may be about to disappear.
The EBRD, founded in 1991 with the purpose of supporting former Warsaw Pact countries in nurturing “a new private sector,” prepares to add Turkey in its list of investment countries, but the future of the London-based organization, which is currently holding its annual meeting in the Ukrainian capital Kiev, looks cloudy. In a similar process endured by bodies “inspired” by the Cold War or its aftermath, the EBRD is deep in discussions about what course it should take in the future.
Former Warsaw Pact countries “have turned their faces to the European Union, thus they no longer need EBRD credits,” said Gazi Erçel, a former governor of Turkey’s Central Bank. “What should the bank do? It has to give the credit to somewhere. Thus, the United States was convinced on Turkey [as a destination].”
Turkey needs the EBRD for projects financing infrastructure investments, but the bank also needs Turkey as a “location to give credits,” Erçel told the Turkish Daily News, highlighting some sort of mutual dependence.
The EBRD has shareholders comprising 61 national governments, including the United States and Turkey, as well as the European Union and the European Investment Bank.
“The bank is rapidly approaching an important decision about its future strategic direction,” David McComick, U.S. Treasury undersecretary for international affairs, told a meeting of EBRD governors Sunday, reported Agence France-Presse.
“We will work with other shareholders to give Turkey’s application a serious and thorough review in the coming months,” McCormick said.
Job done:
The EBRD currently invests in 28 countries in central and eastern Europe and the Commonwealth of Independent States (CIS). It left the Czech Republic at the end of last year. By 2010, the institution is expected to depart Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia – seven countries that together with the Czech Republic joined the European Union in 2004. The EBRD leaves countries when they “attract a sufficient level of private sector investment.”
The bank’s board of governors voted yesterday that Turkey’s membership request should be decided on in October. Turkey has been an issue that highlighted divisions between the United States and its transatlantic allies. European countries support the idea of Turkey becoming a new area of investment for the bank. But McCormick wrote in an article for British-based Emerging Markets magazine that the move could dilute the EBRD’s central focus.
“While acknowledging the potential benefits of an expanded mandate, the United States and a number of other countries are concerned that it would dilute focus from the EBRD’s core mission,” he wrote.
Divisions in the West:
Washington, which claims the bank’s activity should remain strictly within ex-Warsaw Pact states, is harshly opposed by European Union countries, which control 60 percent of the EBRD. According to a Financial Times leader dated May 12, Washington seems to have backed down. The bank “could bring on a modest acceleration to Turkey’s wheel of progress,” the FT said, linking the issue with Turkey being a “modern Muslim democracy” that deserves Western support.
Washington and Brussels also have divisions on how the bank should operate. The United States proposes installment of a “commercial banking logic,” while EU members say the EBRD should finance development projects.
A possible opening of an EBRD office in Ankara would be “an important step in joining the EU,” the Anatolia news agency said.
Australia to leave:
As the bank appointed Thomas Mirow as a president yesterday, the summit was clouded by an announcement of withdrawal by Australia.
“The EBRD has achieved a great deal in its 17 years,” said Peter Reith, EBRD director for Australia and New Zealand, at a meeting of the EBRD’s board of governors.
“The transformation of central and eastern Europe is in part a testimony to efforts made by the bank to assist willing governments and businesses to create new opportunities and better institutions. It is in this context of a job well done that the Australian government intends to withdraw from the bank from 2010, and more will be said about that in due course.”
Reith also complained that the EBRD president is practically chosen by the eurozone finance ministers “to the exclusion of other shareholders.”
Thomas Mirow, Germany’s deputy finance minister, will take the helms from French executive Jean Lemierre as of July 3.
source: Turkish Daily News
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