US praises bank`s work with ex-communist states

East Europe`s development bank, the EBRD, won a ringing endorsement from tough-talking US Treasury Secretary Paul O`Neill who has slated other top international financial organisations.

O`Neill highlighted the work the European Bank for Reconstruction and Development has done in helping countries like Romania, long a reform laggard, to tackle the difficult economic challenges left by decades of central planning.

O`Neill, the highest ranking US official to attend the EBRD`s annual meeting in a decade, said the bank had proved itself "an exceptionally effective tool" in enhancing the shift from communism to capitalism in its 27 countries of operation.

The EBRD has a 20 billion euro investment war chest, small in comparison to other financial institutions, but concentrates on private sector lending, strengthening companies and mobilising foreign investment.

"The best projects that I`ve personally seen have been the EBRD projects," said O`Neill.

The former top industrialist has slated the World Bank for spending US taxpayers money on loans unlikely to be repaid.

O`Neill saw at first hand EBRD funds at work in a small Romanian furniture factory and has studied other investments by the EBRD which was created in 1991 to help countries throw off their communist economic pasts.

"We view these activities as among the most effective that international financial institutions can undertake in raising productivity and spurring growth and higher living standards," the US Treasury chief said.

O`Neill`s praise boosted EBRD chiefs and bolstered their efforts to portray Romania positively.

Past unwillingness to reform and rampant corruption in this Balkan country of 22 million people where the average monthly wage is $100 have left scepticism among international investors. But the EBRD said the country had taken a turn for the better.

EBRD President Jean Lemierre has coaxed Romania forward, offering funding for key sell-offs, such as the sale of the largest employer, oil company Petrom. It has initialled a preliminary deal to provide $140 million for the company.

Prime Minister Adrian Nastase and Finance Minister Mihai Tanacescu have convinced the EBRD they are serious on reform and now stand a chance of convincing foreign private investors who have put just $356 per capita into the country since 1989.

"Here in Romania, the government has made some tough choices," Lemierre said.

But not all investors are totally convinced. A week before the meeting the World Bank delayed a $300 million loan because key conditions had not been met.

Elsewhere the EBRD faces tougher conditions with many countries, particularly in the former Soviet Union, opposed to change and paying scant attention to the adherence to democracy that is the bank`s core constitutional requirement.

The EBRD has sent yet another letter to Belarus saying that unless autocrat President Aleksander Lukashenko, whom the United States has dubbed Europe`s last dictator, improves human rights, EBRD lending would be severely curtailed.

The EBRD has taken similar action in Turkmenistan where President Saparmurat Niyazov, who holds exceptionally wide powers, has been named ruler for life.

Next year the EBRD is due to hold its annual meeting in Uzbekistan, Central Asia`s most populous country, where human rights campaigners say democratic abuses are rampant.

A coalition of 50 human rights groups said the bank would be endorsing Uzbekistan`s flagrant breaches of democratic standards if next year`s meeting went ahead without reforms.

Partly in response to criticism that the bank was ignoring the plight of the ordinary people in eastern Europe who have seen living standards plunge because of painful reforms, the EBRD said it would pay more attention to the social costs of change.

"Each of the countries of operation must know the EBRD understands the social dimension of reform," said Lemierre.