Statement by Finnur Ingólfsson, Minister of Industry and Commerce, Governor for Iceland

Mr. Chairman, fellow Governors, Ladies and Gentlemen.
The 1996 operational results of the Bank demonstrate that the EBRD is on the right path. Allow me to congratulate the President, the Board of Directors and the staff of the Bank on the results achieved. The Bank was able to ensure continued growth while financing more complex projects. This is well evidenced in an increase of projects in countries in early stage of transition as well as an more complex projects with deeper involvement in the private sector.

We welcome the Banks work through financial intermediaries and the growth of equity investments. This deepens the Banks involvement in the emerging local private sector and contributes to the transaction process by strengthening of institutions. Furthermore it transfers expertise in general business conduct.

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

Mr. chairman, while the transition process advanced very significantly in most of the Bank}s countries of operations, several of the countries face new serious challenges and even backlash. Implementation of sound macro-economic and structural reforms at the national level is the only way forward. Recent developments also show, however, that strengthening of legal structures and in particular effective licensing and regulatory structures are of paramount importance. Strong financial sector supervision matters much in this regard.

The Report to Governors on Capital Utilization and Sustainability provides the parameters for sustainable growth based on the capital increase agreed to last year at the annual meeting in Sofia. I endorse the Report and offer the following comments.

•The transition impact must increasingly form the basis of project development, in particular institution building and transfer of financial skills. Continued emphasis on wholesale operations and equity investments should form the core component of the Bank}s effort in this regard. •An active portfolio turnover effort will be a key to the overall strategy of sustained growth. The divestment of, in particular, equity investments already achieved, is encouraging in this regard. An active equity policy will also contribute positively to portfolio turnover. •In order to further foster the growth of the local private sector it is important to support investments of smaller companies. We therefore support increased emphasis on locally managed early stage equity instruments that are of great value in this area as is well evidenced through the Baltic Investment Programme.



Mr chairman.
Over the last two years we have seen strong signs of renewed economic growth in many countries. World-wide foreign direct investment is also steady and even increasing. Positive trends will open new opportunities for the Bank which will allow it to strengthen and deepen its involvement in the region. The operational results of 1996 shows that the goals set by you Mr. President, to develop the Bank into a cost efficient institution with clear priorities has been achieved. I sincerely hope that the Bank will continue to benefit from your strong leadership.