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CM/AS(2005)Rec1672 final 22 April 2005
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Council of Europe Development Bank: a voice for solidarity
Parliamentary Assembly Recommendation 1672 (2004)

(Reply adopted by the Committee of Ministers on 20 April 2005 at the 924th meeting of the Ministers' Deputies)

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1. The Committee of Ministers has taken note with interest of Parliamentary Assembly Recommendation 1672 (2004) on the Council of Europe Development Bank: a voice for solidarity. It has brought the Recommendation to the attention of member states' governments, in particular paragraph 8.i., which recommends that the Committee of Ministers urge member states not having done so to join the Bank at the earliest opportunity. It notes with satisfaction the recent accession of Ireland to the Partial Agreement on the Council of Europe Development Bank, bringing the total number of member states of the Bank to thirty-eight.

2. The Committee of Ministers believes that there is potential for the relevant intergovernmental committees in assisting the Bank in identifying different projects. New forms of such cooperation will be considered for the future. In view of this, it has communicated Recommendation 1672 (2004) to the Bank and to the European Committee on Migration (CDMG) and the European Committee for Social Cohesion (CDCS) (in both of which the Bank participates as an observer), as well as to the Ad hoc Committee of Experts on Legal Aspects of Territorial Asylum, Refugees and Stateless Persons (CAHAR) and to the Partial Agreement in the Social and Public Health Field.

3. With regard to the possibility of setting up a joint committee (paragraph 8.iii. of the Recommendation) and following consultation between the Secretary General and the Governor of the Bank, it has been agreed that new ways of enhanced cooperation and interaction between the Bank and other actors of the Council of Europe would be based on regular high-levels contacts. Such contacts have been already commenced.

4. The Committee of Ministers agrees with the Parliamentary Assembly that encouragement should be given to other member states to follow the positive examples set by Finland and Norway in setting up Trust Accounts to support specific activities of the Bank.

5. Comments from the Governing Board of the Council of Europe Development Bank are appended to this reply, in particular on the recommendations addressed to the Bank and its member states.

Appendix to the reply

Comments by the Council of Europe Development Bank (CEB) on Parliamentary Assembly Recommendation 1672 (2004) on the Council of Europe Development Bank: a voice for solidarity

The Governing Board took note of Recommendation 1672 (2004) and in particular is pleased to present herewith its opinion which it readily provides at the invitation by the Committee of Ministers' Deputies.

Paragraph 8 ii

The CEB takes part in the work of the European Committee on Migration.

Paragraph 8 iii, a and b

The Secretary General and the Governor, in conformity with the recommendations of the CEB's Collegiate Organs, met to discuss new ways of enhanced cooperation and interaction between the CEB and other actors of the Council of Europe, in particular in the context of the preparation of the Third Summit of Heads of State and Government of the Council of Europe. It was also decided that this increased cooperation would not be in the form of a structure (“joint committee”) but rather based on regular contacts between high-level representatives of the two institutions.

Paragraph 8 iii e

The 2005 budget, recently approved by the Administrative Council, envisages the creation of additional posts making it possible to match human resources with the objectives of the Development Plan in favour of the Target Group countries.

Paragraph 8 iv a

The Bank is very active in fostering social development in the countries of Central and Eastern Europe. Since 1995 the Bank's activities in those countries have grown considerably, particularly in recent years. Over that period, a total of 3,066 million euros in financing was approved for the countries concerned. This trend continued in 2004 with the approval of 17 projects in a total amount of 736 million euros to finance operations in the following ten countries: Bulgaria, Bosnia and Herzegovina, Croatia, Cyprus, Latvia, Moldova, Hungary, Poland, Romania and Slovenia. Serbia and Montenegro became the CEB's 37th member state on 23 April 2004, and, over the past year, the CEB has also approved three donations – two in favour of refugees and displaced persons in Bosnia and Herzegovina and Serbia and Montenegro, and another in favour of children in precarious situations in Moldova.

The 2005-2009 Development Plan, approved at the 39th Joint Meeting of the Governing Board and the Administrative Council (Budapest, June 2004), moreover sets the following objectives:

- 50% of loans to fund social projects in a target geographical area of 19 countries,1 together representing less than 17% of the subscribed capital;

- balancing the activities around three sectorial action lines (strengthening social integration, development of human capital and responsible management of the environment), reflecting the Bank's social purpose and clarifying the logic underpinning its activities; 

- highlighting the CEB's in-house expertise and strengthening cooperation with other financial and
non-financial development institutions.

The accompanying measures for the implementation of the Development Plan proposed to both Councils are intended to facilitate the process of realising at an operational level, the strategic objectives established by the Collegiate Organs of the CEB.

Paragraph 8 iv b

To date the CEB has two trust accounts, established with Finland and Norway respectively, the aim of which is to provide technical assistance for the preparation of pre-feasibility and feasibility studies and the establishment of pilot projects. The trust account with Finland was set up in 2001 for the preparation of projects in Lithuania, Latvia and Estonia. So far, it has played an essential role in promoting projects for women entrepreneurs, some of which were financed in the target group countries. The trust account with Norway was established in 2003 to benefit Albania, Bosnia and Herzegovina, Croatia, "the former Yugoslav Republic of Macedonia" and Serbia and Montenegro.

Moreover, in 1995 the CEB set up a Selective Trust Account (STA), a truly social dividend which is fed by the funds drawn from the annual profits of the Bank (for an amount of € 64,4 million from its inception until the end of 2003) exclusively in favour of the Central and Eastern European Countries. In fact, in addition to the favourable loan conditions granted by the CEB, approximately 25% of the amount of the projects approved for these countries since 1995 have benefited from an interest rate subsidy by means of the Selective Trust Account, which represents an overall contribution on the part of the CEB in the amount of € 37 million (end 2003). In addition, apart from the existing possibility to make donations for operations with a strong social impact, the options to widen the scope for greater and more differentiated usage of the STA are currently under consideration, in view of maintaining the overall balance required in the CEB.

Projects in non-member states can be financed by the CEB if, and only if, the following conditions are satisfied:

· the project must have the approval of a CEB member state;

· the non-member state's authorities must have approved the project's implementation and monitoring in their territory;

· the member state must have approved the borrower – non-member state or legal entity within such a state – to whom the loan is extended;

· the loan must be guaranteed by a member state or, alternatively, the Administrative Council must deem that sufficient guarantees exist.

Paragraph 8 iv c

The cooperation sought by the CEB primarily concerns access to additional financing and complementary expertise, particularly in fields with high social added value. In light of these priorities, the CEB has naturally:

- on the one hand, established privileged relations with other international financial institutions (IFIs): the World Bank, the EBRD, the EIB and the NIB;

- on the other hand, concluded both bilateral and multilateral agreements for heightened cooperation (Memoranda of Understanding). Over the period from 1999 to 2003 the CEB signed five such agreements, including three of a bilateral nature, with the EBRD, the World Bank and the NIB.

The CEB also pursues partnerships with other international organisations - firstly, the European Union, in connection with the European Union enlargement process, in liaison with the EIB, and, secondly, organisations such as the UNHCR, UNDP and the IOM.

The CEB also plays an active role in the work of the Stability Pact for South-East Europe.

This cooperation has resulted, inter alia, in joint seminars being organised in the CEB's fields of expertise, such as the “Ministerial Conference on Social Housing in South-East Europe”, which was welcomed by all the participants and which provided additional impetus to reforms in a sector experiencing serious difficulties.

The above-mentioned agreements have led to the joint or parallel financing of 25 projects. Two projects for Poland and Croatia in cooperation with the EBRD were approved in 2000. As a result of the partnership with the World Bank, nine projects have been financed in Romania, Turkey and elsewhere for a total of € 471 million. Cooperation with the Nordic Investment Bank has made it possible to strengthen the CEB's presence in the Baltic states. A trilateral agreement with the European Commission and Kreditanstalt für Wiederaufbau (KfW) was concluded in 2000, contributing to the social and economic development of the countries of Central and Eastern Europe. Cooperation with the EIB has made possible the financing of projects in six countries, more particularly: Romania, Bulgaria, Cyprus, Italy, Spain and Turkey. The Bank's privileged relations with the United Nations' specialised agencies, in particular the Office of the UNHCR, the UNDP and UNICEF, have resulted in projects and donations being implemented in priority fields of action of the Bank. The CEB, alongside the World Bank and the Open Society Institute (Soros Foundation), is equally present, as a key partner, in the project for the setting up of an Education Fund for the Roma (Donor Conference on 2 and 3 December 2004). The World Bank requested that the CEB contribute in view of its social vocation and its experience in favour of Roma minorities. The CEB has offered to make available office space for this new organisation at its premises, providing services on a fee-paying basis and to make a first donation of € 500,000.
  
Paragraph 8 iv d

The CEB is constantly enhancing the quality of the projects it finances. To this end, it has established an
Ex-Post Evaluation Department with the objective of assessing the long-term social and economic impact of projects that have been completed for at least two years, with a view to drawing lessons for the CEB's future operations.

In this connection, the CEB has implemented a programme for the evaluation of projects in the field of natural and ecological disasters, covering a total of eleven projects funded by the CEB between 1995 and 2001, for an overall amount of nearly 1 billion euros. These projects are located in five member states (Spain, Greece, Poland, Romania and Turkey). At the Executive Committee's meeting in May 2004, the Ex Post Evaluation Department, now fully operational, presented the initial results of its work, along with full reports, as they stood, on the first three Spanish projects evaluated in 2003.

Additionally, the Administrative Council has asked the CEB's Management to consider the best means for making public ex-post evaluation reports, taking into consideration also the practices of other international organisations.

Note 1 Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Moldova, Poland, Romania, Serbia and Montenegro, Slovak Republic, Slovenia, "the former Yugoslav Republic of Macedonia", Turkey


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