EurOrient Financial Group 2010 A Year in Review January 14, 2011 — As we approach the close the first decade of the Twentieth-First Century and as we are preparing to move forward into the second decade of the new millennium, we face extraordinary challenges. My note to you lays out some of the groundwork that the EurOrient Financial Group (“EurOrient”) has been doing in preparation to face these challenges squarely, most particularly our core concern, our support to the economic and social development of developing countries and economies in transitions. We must recognize how much has changed in the world since the beginning of the new millennium and how much these changes have sharpened our focus on our mission— to support the economic and social development efforts of the less developed countries as they, in particular, seek to achieve the Millennium Development Goals (“MDGs”). These changes are reflected all over the organization, and in the way we are now conducting business. The year 2010 has been marked by financial and economic and unemployment crisis as well as by natural disasters, both of which have ripped people out of their homes and challenged our responsiveness. I particularly want to thank the EurOrient Financial Group employees, executive officers, boards and committee’s members and advisors for their extraordinary efforts to find ways to meet the needs of developing countries and economies in transitions which have suffered in this way. The Global Crisis and Developing Countries The world is confronted with the worst financial and economic crisis since the Great Depression. The evolving crisis, which began within the world’s major financial centers, has spread throughout the global economy, causing severe social, political and economic impacts. We are deeply concerned about its adverse impact on development. This crisis is negatively affecting all countries, particularly developing countries, and threatening the livelihoods, well-being and development opportunities of millions of people. The crisis has not only highlighted long-standing systemic fragilities and imbalances, but has also led to an intensification of efforts to reform and strengthen the EurOrient Financial Group and its governance. The challenge of our time is to ensure that the collective action of all members of the international community and responses to the crisis are commensurate with its scale, depth and urgency, adequately financed, promptly implemented and appropriately coordinated internationally. External Environment and the Demand for EurOrient’s Services In response to the deepest global recession since the Great Depression, governments stabilized financial markets with exceptional monetary and quantitative easing, liquidity injections and fiscal stimulus, and the world is slowly coming out of the crisis. Markets
seem to believe that the worst part of the crisis is over. However, the ongoing global economic recovery remains fragile, and the fallout from the crisis is expected to change the global economic landscape for several years to come. Despite a return to positive growth, it is expected to take several years before economies recoup the losses already suffered. Within an environment of reduced financing flows to developing countries and budget constraints, governments are struggling to address these enormous challenges. With these challenges, the demand for private sector-led development has increased significantly. The demand for EurOrient’s services has never been greater. The private sector itself faces a financing gap that is likely to persist for years and the investment climate and gaps in local private sector know-how in most developing countries continue to constrain the potential for sustainable private-sector-led solutions. Other development banks such as the multilaterals and bilateral agencies are also stepping up activity, but the response falls far short of meeting the need. In fact infrastructure development in emerging markets continues to expect significant long-term financing needs estimated at $21 trillion for 2008-2017[1] According to the World Bank, at $900 billion a year, demand for infrastructure investment and maintenance in developing countries far exceeds supply, creating a finance gap[2]. Developing countries’ annual investment in infrastructure is about four percent of GDP. This needs to be doubled to 7-9 percent of GDP to sustain economic growth and reduce poverty. From Project Financier to Broad-Based Development Institution Over the last few months, we have been taking stock and reviewing what we have accomplished, and what remains to be done. I am happy to report to you that a significant portion of what we set out to do under the Road Map for the FY 2010 have been completed and we are well positioned to take on and finish the rest, which relates to the transformation of the organization from project financier to broad-based development institution, the challenge of scaling up, strengthening ourselves to meet the challenge ahead, strengthening the EurOrient’s effectiveness, internal matters and changes in culture. The strategic framework and the Road Map for the institutional development of the EurOrient Financial Group that we put in place two years ago, with the help of the Treasury Board Secretariat, has proven to be robust and able to respond to changing circumstances. After our reviewed of our progress we are very confident that we have a solid framework that enables us to do our job over the year ahead. But, there is much to be done. The first phase of the internal renewal and reform will end in December 2015, and as we take stock during the first year of this program, we are struck by the advances that we – Board of Governors, staff and management – have collectively made in achieving our
objectives. We are closer to becoming “A New Global Development Bank,” the world’s second global development bank – position next to the World Bank Group and next to the preeminent regional development bank – as we envisaged when we launched the Legacy Program[3]. We have made great strides in placing our clients at the center of our work and have demonstrated our commitment to partnership with others to serve the needs of the poor and now social and structural concerns are an integral part of our work program. Our ultimate objective is building a full-fledged private sector global development bank responding to a wide range of development needs in developing countries and economies in transitions is the challenge in front of us. It is the great mountain we need to climb together. We have to ensure that the “New Global Development Bank” can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff. We expect the Bank to adhere to a highest standard of internal governance. Internal Renewal: Responsive, Innovative, Flexible, and Accountable As the world changes, so must institutions. Increasingly interdependence world requires modern responsive, innovative, flexible, and accountable institutions that reach across low-income, middle-income and advanced economies to help them identify common interests, broker solutions and manage differences. The crisis has given new impetus to the reform of the EurOrient Financial Group. Both the EurOrient Financial Group and the affiliated development financial institutions and their agencies have taken commendable steps to enhance their responsiveness, but the crisis has also highlighted the need for more fundamental reforms. The central objective of these reforms is to enhance the responsiveness of the EurOrient Financial Group to its clients in an equitable way. In this regard, the EurOrient needs to be able to meet the diverse needs of its clients and on the scale that is warranted. Therefore, flexibility needed in the policies and instruments of the EurOrient including in its financial policies and for further measures to reduce the costs associated with its lending and with great emphasis on the need to focus on selectivity and the potential tradeoffs that may arise given the current capital constraints need to be guided by individual country demands. The EurOrient Financial Group to assess and meet the financial and technical assistance needs of all developing countries solely on the basis of economic and developments merits. The vision for the internal reform agenda of the EurOrient Financial Group aims to fulfill its mission of a professionally excellent institution that responds quickly to the evolving and varying needs of its clients To meet the challenges of the 21st Century, the EurOrient Financial Group needs to strengthen its global reach, deepen its local roots, and evolve into a dispersed, tightly networked organization that: responds quickly to the evolving client needs and changing
global and local conditions; develop and uses knowledge as the critical competitive advantage and manages its resources to achieve excellence in services to client; and drives global agendas that matter for poverty reduction, economic growth and development. To do so, the EurOrient Financial Group strides to become a trusted partner of choice – not of necessity. During year 2010 substantial progress on the EurOrient Financial Group governance was achieved in the three distinct areas, Board Effectiveness, Oversight and Strategy, which are crucial to enhancing the EurOrient’s legitimacy and restoring trust in the institution by the vast majority of our stakeholders. In this Year in Review we are reporting also on our progress to date and on direction for advancing these reforms, which were the focal point of our work and the cornerstone of institutional development. This report reflects on internal governance as it relates to the Main Board and Main Committees to its relationship with management. While acknowledging that existing systems and structures that we put in place in previous years are serving the Organization well, our efforts are intended to promote continuous and dynamic reform. The reform targets scope for change in three distinct areas, Board Effectiveness, Oversight and Strategy. The adoption of 21st Century governance by the EurOrient Financial Group was recognized by the EurOrient as an essential mechanism for strategy formulation and for setting priorities and guiding operations. Insuring that the EurOrient Financial Group and its agencies are firmly focused on its mission and on its vision of the Organization for the 21st Century; strengthening accountability for results and for managing risks, and for insuring that resources are correctly allocated and not spread too thin, and for fostering institution’s effectiveness. The adoption of 21st Century governance is also insuring that the EurOrient’s decision‐making process is widely seen as transparent, offering to all stakeholders’ voice and opportunities for participations. Insuring sufficient institutional accountability for results and strengthening the EurOrient’s effectiveness and legitimacy. Encouraging the use of conventions and best practices that enhancing accountability and responsiveness of the EurOrient Financial Group to all stakeholders. These types of strengths spring in large measure from the fact that the EurOrient’s governance—forged in the 1988s—has kept up with historical change and today is adequate to deal with global challenges that require forward‐looking, flexible, inclusive, and legitimate institutions. Financial Capacity and Financing Instruments We are also working to strengthen and simplify our range of lending and investment products – both for the EurOrient Financial Group and for its affiliated development financial institutions[4] with a common mission and distinct mandate toward its
fulfillment – recognizing that in practice there are multiple categories, which need to be customized to meet widely varying country circumstances such as investment and loans in support of individual investment projects. Conclusion Over the next two years, we will face enormous challenges—including promoting long-term development in low-income countries, supporting reforms and safeguarding stability and confronting squarely the challenge of Africa. All of this must happen in an international environment that is less conducive to growth and development than it was only two years ago. We must rise to these challenges. This is a formidable agenda for the EurOrient Financial Group. We will need to work closely with our many partners — multilateral agencies, including the United Nations agencies, partner countries and other stakeholders — and focus our efforts where we have a comparative advantage. Implementation of various measures presented in the package various reforms is a longer term process, and requires careful sequencing and coordination that take into account institutional resources while continuing to deliver results to clients. The initial phase has focused mainly on internal reforms, including the establishment of new institutional structures and frameworks as platforms for facilitating modernization and monitoring further progress. But as a concluding note, let me step back once again from those specific initiatives and underline the spirit in which we must move forward. The need for scaling up our efforts cannot be overstated; nor can we afford to delay. If we are to rise to the challenge of making a better world for the 6 billion who are here and the 2 billion more who will join us in the next 20 years, we must act now. In practical terms, no one player can do this alone. Equally important, the legitimacy and effectiveness of the effort will depend on its inclusiveness and recognition of diverse values and approaches. About EurOrient Financial Group EurOrient Financial Group (“EurOrient”) is a private sector global development finance institution accredited financial institution by United Nations General Assembly on Financing for Development. The mission of the EurOrient Financial Group is to support the economic and social development efforts of the less developed countries as they, in particular, seek to achieve the Millennium Development Goals (“MDGs”). The EurOrient’s principal objective is to reducing poverty and promoting sustainable economic growth. EurOrient invests in projects and programs that promote social development, build human capacities, and address host government priorities for investments in physical infrastructure that promote and enhance social development. These projects include roads, transportation and communication systems, water,
sanitation and other types of investments with social development outcomes such as improved quality of life and increased human knowledge and skills. The EurOrient Financial Group vision is to become a full-fledged private sector global development bank, as it evolving from mere project financier, which is dedicated to address emerging challenges of development and circumstances, and the financial risks, which are posed by global trends as we move into 21st century. More detailed information http://www.eurorient.org/
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[1] World Bank Group, Sustainable Infrastructure Action Plan FY 2009-2011 [2] World Bank Group, Sustainable Infrastructure Action Plan FY 2009-2011 [3] The Legacy Program is the blueprint document describes actions that will be taken over the period 2010-2020 by the EurOrient Financial Group [4] The affiliated development financial institutions are the jointly-owned financial institutions by the EurOrient Financial Group with a common mission — to support the economic and social development efforts of the less developed countries as they, in particular, seek to achieve the Millennium Development Goals (“MDGs”) —and distinct mandates towards its fulfillment.