Statements by Governors 15-16 April 1996
Mr. Finnur Ingólfsson
Minister of Commerce and Industry
Governor for Iceland

Mr. Chairman, Ladies and Gentlemen

May I begin by thanking our hosts, the Bulgarian Government and the City of Sofia, for the generosity and hospitality they have extended to us who are guests in their country. The results of the European Bank in 1995 are a clear indication of increased operational efficiency. I commend the President of the Bank, for his leadership. The Bank is recognised as an efficient partner and investor in the Banks countries of operations.

New opportunities are emerging.

Last year we saw strong signs of renewed economic growth in many countries where the Bank operates as well as in many OECD countries. Worldwide foreign direct investments are increasing. Positive trends will open new opportunities for the Bank. It is, therefore, timely for the Board of Governors to look at the Banks capital structure and examine its ability to meet such new opportunities. Before I address that matter, I would like to mention three issues.

Equity Investments.

From the outset my country has emphasised the importance of equity investments and the support for small and medium sized enterprises. We have maintained the position that even though equity investments might reduce the profitability of the Bank in the short term, we have considered this a more effective means of facilitating the transition process and in the long run to be more profitable. This seems to be coming true as we can see from last years financial results. Successful exit from two equity investments contributed to improved results.

The Environment - renewable energy.

Mr. Chairman, the environment is a continuing concern for the region in which the Bank operates.

Increased energy efficiency would contribute very rapidly to improve the environment in many countries and I wish to complement the Bank management for its emphasis on energy efficiency measure. I am pleased to note that the Bank has now been involved in two projects which have as their main objectives to increase energy efficiency.

The most serious environmental issues can only be solved in the medium to long term. Increased emphasis on the development of hydropower and geothermal energy, must form a large part of any longer term strategy for environmental improvements. I must encourage the Bank and its countries of operations to direct their attention increasingly to such solutions.

Financial Sector - Support for small and medium sized enterprises.

I am pleased to note the increased emphasis on work in the financial sector in particular the development of locally managed early stage equity instruments. The support for the emerging local private sector has a vastly greater transition impact than any other support the Bank can render.

In order to further foster the growth of the local private sector it is important to support investments from smaller companies outside the region. Increased growth in the OECD countries has shown that small and medium sized companies are willing to explore partnerships in the countries where the Bank operates. The Bank could be well advised to set up a specialised team that would be exclusively devoted to foster such partnerships. Better access to the various local financing instruments the Bank is supporting, would be an important catalyst for partnerships between smaller companies in the region.

Growing Demand - Increased Resources.

Mr. Chairman, let me now turn again to the main issue of this meeting, the capital increase.

There is a growing need to support difficult projects through early stage equity instruments, - investments in the local financial sector and more complex energy efficiency projects. In my view new resources are needed to deepen the Banks involvement through such projects. I therefore support a manageable growth strategy for the Bank and support the proposed capital increase.

Finally Mr. Chairman, I would like to welcome Bosnia-Herzegovina as a member of the Bank and a new country of operations.