The European Bank for Reconstruction and Development (EBRD)

What are the goals of the EBRD’s expansion?

The European Bank for Reconstruction and Development (EBRD) was founded in 1991. The initial goal was to invest in the economies of the former communist states. Over the time the EBRD got more and more shareholders, which spread all around the globe. China became a member of the EBRD in 2016 and India has recently officially joint the EBRD. Not only the number of members increased over time, but also its operation areas have been expanded.

The EBRD expects a series of new opportunities through the membership of China. The President of the EBRD, Suma Chakrabarti, hopes that China will increase its sustainable investments in the operational regions of the EBRD, especially in the context of the New Silkroad Initiative. Furthermore, the EBRD hopes that a closer cooperation with China, will provide an indirect way to influence the Asian Infrastructure Investment Bank (AIIB).

The membership also received criticism. Experts expressed concerns, that China’s membership would violate the EBRD’s principles. The EBRD would only work with states with a democratic multiparty system and which respect the human rights. According to the President Chakrabarti, this criterion applies mainly for the EBRD’s countries of operation and less to its shareholders. In addition, China would fully respect the working principles of the EBRD.

The admission of India raised hopes that the number of joint initiatives will continue to increase. Like China, India does not receive any financial support from the EBRD. However, India will indirectly benefit from the investments of the EBRD. The managing Director for Energy and Natural Resources of the EBRD, Nandita Parshad, emphasized that the main impulse for a membership came from the Indian economy itself, because a membership would offer an easier access to the operation regions of the EBRD. Furthermore, India would play a growing role in developing strategies at a global level, particularly concerning the UN climate goals. Therefore, the EBRD wants to invest more and more in green technologies.

In this context, the EBRD plans to invest more in sub-Saharan Africa in the future. The work portfolio of the EBRD is a perfect match for the African economic needs. According to experts, the economic development in this region needs to be focused on the private sector. This planned expansion of the operation regions of the EBRD encounters resistance of the northern and eastern European states, which say that the EBRD should concentrate on its initial goal of Eastern Europe.

According to experts, an enlargement of the area of operations would counter the risk of concentration of investment countries, since the main beneficiaries are momentarily only Turkey, Egypt, Ukraine, Hungary and Poland. In addition, these states are currently moving away from the principles of the EBRD.

As for the future, President Chakrabarti emphasized the necessity of starting to act. In particular with regard to the climate goals of 2030, the investment and financing policies of the various institutions and states have to be restricted and reevaluated.