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EBRD: Bank To Curtail Activity In Belarus

The European Bank for Reconstruction and Development says it will curtail activity in Belarus to protest the country's failure to enact political and economic reforms. The new strategy, announced this week at the EBRD's annual meeting in Bucharest, was not unexpected. The EBRD said it would undertake a review of its operations in Belarus following presidential elections last year that were widely viewed as flawed.

Bucharest, 21 May 2002 (RFE/RL) -- The European Bank for Reconstruction and Development, or EBRD, says it is suspending most of its operations in Belarus because of that country's failure to adopt political and economic reforms.

In a new strategy announced at the bank's annual meeting this week in Bucharest and published on the bank's website, the EBRD said there has been little evidence since elections last September that Belarus is committed to the principles of multiparty democracy, pluralism, and market economics.

According to the new strategy, the bank will continue to maintain its existing small portfolio of loans and support small, privately run companies in the country, but it will not undertake any new large-scale loans or investments.

In an interview with RFE/RL this week, EBRD President Jean Lemierre outlined the bank's new strategy. "The bank has expressed concerns about the political/democratic situation and economic reforms in Belarus. This has been made clear and we have had very important discussions with the government. We [took] a position a few weeks ago, which is simple: At the present time, we do not see how we can do more than financing the SMEs [small and medium-sized private companies]."

Lemierre said future cooperation with Belarus is possible, but only if Belarus makes progress in enacting political and economic reforms. He said Belarus would have to introduce what he called "important" reforms before the EBRD would renew large-scale loans to the state.

"We are ready to do more provided some progress is made in both the political/democratic situation and the economic situation. If this progress is made, probably we could do much more in the private sector, but progress has to be much more important to start again [with] making [large] loans to the state," Lemierre said.

The move was not unexpected. Last year, the EBRD said it would review its strategy for Belarus pending the outcome of presidential elections last September. Incumbent president Alyaksandr Lukashenka won in a landslide in a vote that was widely criticized as not meeting democratic standards.

It's not clear what effect the new strategy will have. Any economic impact is likely to be negligible, since the bank is a relatively small investor in the country. The EBRD has committed only about 200 million euros ($184 million) in Belarus since 1991. This compares with the bank's total loans and investments to Eastern Europe and the former Soviet Union of more than 10 billion euros ($9.2 billion).

Diederik Lohman of Human Rights Watch in Moscow said the move is a welcome step, but it is not likely to have much of an immediate impact on the situation. He said the country's leadership does not really care what the international community thinks.

"The big problem really is that there is very little leverage on Belarus. You can criticize it, but the leadership in Belarus doesn't really care. And there is very little you can do to, say, [to] penalize it or push it in the right direction," Lohman said.

In the new strategy, the EBRD is scathing in its criticism: In Belarus, the bank says, "the economic transition process has continued to be undermined by [a] rigid and centralized system of economic management." It continues: "Market mechanisms remain heavily distorted, business is hampered by state intervention, privatization is practically stalled, the banking system remains controlled by the government, and the investment climate remains one of the most difficult in the region."

The Belarus delegation to the Bucharest meeting did not respond to RFE/RL's request for an interview. But country representatives to the meeting stressed that Belarus is making progress in introducing market mechanisms.

The EBRD's charter obliges it to support democratic structures in choosing where to invest.

The action on Belarus is not unprecedented. Last year, the EBRD -- fed up with political repression in Turkmenistan -- similarly downgraded its activity in that country to supporting only a few small businesses.

The EBRD was set up in the aftermath of the fall of communism to help transition countries establish democratic governments and market-based economies. Among its 60 shareholders are the largest Western countries, as well 27 former communist countries -- including Belarus -- where the bank has its activities.

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    Mark Baker

    Mark Baker is a freelance journalist and travel writer based in Prague. He has written guidebooks and articles for Lonely Planet, Frommer’s, and Fodor’s, and his articles have also appeared in National Geographic Traveler and The Wall Street Journal, among other publications.