:00:00. > :00:17.Now on BBC News, it's time for HARDtalk. Welcome to HARDtalk. I am
:00:18. > :00:23.Stephen Sackur. Do you remember the tumultuous events in the early 1990s
:00:24. > :00:28.in Eastern Europe? From the Soviet empire, a more prosperous region
:00:29. > :00:31.emerged anchored in the EU and Nato. The European Bank for Reconstruction
:00:32. > :00:36.and Development was created to foster that transformation. My guest
:00:37. > :00:42.today is the president, Sir Suma Chakrabarti. These days, many of his
:00:43. > :00:46.investment projects are actually in Turkey, central Asia, and North
:00:47. > :01:12.Africa. Has mission creep undermined the values of the EBRD.
:01:13. > :01:24.Sir Suma Chakrabarti, welcome to HARDtalk. It is nice to be would you
:01:25. > :01:28.agree with me that your bank has moved an awful long way from those
:01:29. > :01:34.early days and from its original mission? I would not. I would
:01:35. > :01:39.certainly agree with you that we have expanded geographically, but
:01:40. > :01:48.the mission is the same. Private sector development, the creation of
:01:49. > :01:52.effect of markets. But because of the success of the business model,
:01:53. > :01:57.we decided we should expand to central Asia and Africa, as you
:01:58. > :02:01.said. It is a sign of success, not mission creep. The problem with that
:02:02. > :02:07.is that from the beginning, you were a financial institution underpinned
:02:08. > :02:11.by a clear statement of values. In the places you have just outlined
:02:12. > :02:18.where you operate today, those values do not seem to be applied in
:02:19. > :02:22.the same way. Sometimes there are values, such as political,
:02:23. > :02:29.democratic, values, pluralism, like stated. They are certainly applied
:02:30. > :02:34.inconsistently. I am not talking about the way they are applied in
:02:35. > :02:41.the country, but with those projects in those countries. That is not
:02:42. > :02:44.correct. We have strong diligent standards and our actions are very,
:02:45. > :02:49.very clear We apply those throughout our projects. Let us talk about
:02:50. > :02:56.specifics. You are big in central Asia these days. Azerbaijan. Can you
:02:57. > :03:01.tell me that Article one of your charter which commits the bank to
:03:02. > :03:05.applying the principles of multi-party democracy, pluralism,
:03:06. > :03:12.economics, how can that possibly be applied to an economy and a body
:03:13. > :03:18.politic like Azerbaijan? We say when we do our strategies, and they are
:03:19. > :03:25.coming forward this year, we look at the 14 point criteria. In some
:03:26. > :03:31.cases, Azerbaijan will find itself short. We don't actually make a hard
:03:32. > :03:38.and fast judgement because every country is on a scale are
:03:39. > :03:41.essentially. What we have said about Azerbaijan in the past is that they
:03:42. > :03:46.apply principles, though not perfectly. I am not sure that is
:03:47. > :03:54.right. I don't know if you bothered reading the independent human rights
:03:55. > :04:01.reports, but they recently said they are systematically dismantling the
:04:02. > :04:05.country's independence and society. Your first article, your adherence
:04:06. > :04:09.to multi-party democracy, pluralism, market economics, I fail to see how
:04:10. > :04:15.two of those statements can fit together. I would argue Azerbaijan
:04:16. > :04:20.has had problems. I would say it is the job of me and my team to take
:04:21. > :04:24.these issues up with them and we do that. But also in the last few
:04:25. > :04:28.years, it is apparent that a number of him and rights advocates have
:04:29. > :04:33.been released from jail in Azerbaijan. It is less corrupt than
:04:34. > :04:38.2-3 years ago. Forgive me, but on the fourth of May 2017, the
:04:39. > :04:43.Bloomberg financial news agency quoted you on the subject of
:04:44. > :04:48.Azerbaijan saying this, a direct quote, progress in the last year or
:04:49. > :04:54.so has stopped, really. I think so. I think that is an accurate quote.
:04:55. > :04:58.The context of the last five years, Azerbaijan has moved in the right
:04:59. > :05:03.direction, though in the last year, there has been some stalling. Let us
:05:04. > :05:06.get this correct, you are giving hundreds of millions of euros to
:05:07. > :05:12.Azerbaijan, with particular investment into the oil and gas
:05:13. > :05:16.industry, including the corridor. You have done that for several
:05:17. > :05:19.years, and you are telling you that you are overtly and exquisitely
:05:20. > :05:28.believed that in the last year progress has sold. -- explicitly. In
:05:29. > :05:31.some areas only. It has continued in the fight against corruption, where
:05:32. > :05:37.they have made major progress in the last few years, in fact. They are a
:05:38. > :05:40.benchmark, actually. In terms of human rights and other areas, we
:05:41. > :05:46.will have a dialogue over that. Be frank with me, what do you think the
:05:47. > :05:52.impact is on, for example, the president himself, of you and your
:05:53. > :05:57.people in the country consistently giving the Azerbaijan country more
:05:58. > :06:02.investment capital? What does it send to him? We work directly with
:06:03. > :06:10.the private sector in Azerbaijan. In the oil and gas... Your investment
:06:11. > :06:15.is in that. Yes. But the majority of projects are actually outside the
:06:16. > :06:21.oil and gas sector. A proportion of your overall spending, how much goes
:06:22. > :06:27.into the oil and gas sector? Yes, it is a large per cent... Yes. But in
:06:28. > :06:31.terms of projects... The capital flows are measured ultimately by,
:06:32. > :06:35.you know, frankly, where the money goes, and most goes to the oil and
:06:36. > :06:40.gas sector. It is not just a point of view frankly propping up a regime
:06:41. > :06:45.which many in the world believe is aces Danic human rights abuser, but
:06:46. > :06:50.also one of the key pillars of your mission, you say, is to aid and abet
:06:51. > :06:56.the transformation of economies to a much more sustainable model. --
:06:57. > :07:03.systemic. Yet Azerbaijan and a lot of other countries, your key
:07:04. > :07:07.investments, or in the age old oil and gas sector. It is fundamental to
:07:08. > :07:18.these economies. Look at others, collect and, Russia in the past. --
:07:19. > :07:23.Kazakhstan. You want to help them develop. You talk about
:07:24. > :07:29.transformation, developing a new sustainable economic model. I see
:07:30. > :07:34.not how that works. Not all of our money goes into the oil and gas
:07:35. > :07:39.sector. Lots of our projects are not. They are in other sectors,
:07:40. > :07:47.trying to diversified the economy and raise the share of GDP not for
:07:48. > :07:52.oil and gas. -- diversify. Otherwise they will be in a cycle of oil and
:07:53. > :08:00.gas driving everything. I wonder if you learned a very painful lesson in
:08:01. > :08:05.2014. As I understand it, in 2014, despite your beginnings in Eastern
:08:06. > :08:10.Europe, you act to put your biggest single lump of money and investment
:08:11. > :08:17.into Russia. -- actually. In 2014, the wheels fell off, because Russia
:08:18. > :08:21.invaded Crimea, annexed it, and as a result, the Europeans and Americans
:08:22. > :08:26.slapped sanctions on Russia, and you were told you had to stop all
:08:27. > :08:30.investment activity in Russia. Did that teach you something? Well, what
:08:31. > :08:38.it told us is of course politics does play a part, I think in in --
:08:39. > :08:44.institution. I remember Tiananmen Square and The World Bank at that
:08:45. > :08:49.time is well. It does play a role. -- as well. It gives an opportunity
:08:50. > :08:54.to diversify into other countries, like North Africa. You learned your
:08:55. > :08:58.lesson from investing, some would argue, far too much of your capital
:08:59. > :09:03.into Vladimir Putin's Russia at a time when nobody, I think, would try
:09:04. > :09:09.to argue he was upholding the principles back to good old Article
:09:10. > :09:14.one about market economics and so on. None would say he was filling
:09:15. > :09:18.those objectives. But you tell that money after you were told he could
:09:19. > :09:22.no longer invest there and you put it into countries in central Asia
:09:23. > :09:29.and North Africa which again do not come even close to meeting your own
:09:30. > :09:35.founding principles. -- told you could. In 2012, December, 2012, that
:09:36. > :09:40.was approved. That had political assessment in it. There was a lot of
:09:41. > :09:45.to and fro, of course, with Moscow over that. 2012. You were telling
:09:46. > :09:52.yourself that, yes, Vladimir Putin's Russia ticks all the boxes, fully
:09:53. > :09:56.free market economics, pluralism, multi-party democracies to be that
:09:57. > :10:02.was a terrible judgement. -- democracy. It is not exactly our
:10:03. > :10:07.rent judgement. What has happened since in Russia, yes, I feel if we
:10:08. > :10:11.did a new strategy for Russia they would be a much more testing
:10:12. > :10:16.conversation, I suspect so, because of what has happened in Russia.
:10:17. > :10:21.Going back to lessons learned, one of the other countries, and, again,
:10:22. > :10:26.correct me if I am wrong, it is now the biggest single city of EBR
:10:27. > :10:31.investments, is Turkey. That is right. The largest market right now.
:10:32. > :10:35.Are you confident that Turkey, under President Erdogan, is going in the
:10:36. > :10:39.right direction, one that fulfils all the criteria for the first
:10:40. > :10:44.article of your mission? That is why you have to look at progress over a
:10:45. > :10:48.long period to be if you look at Russia and what we were doing the
:10:49. > :10:51.Russia, and I will come to Turkey in a minute, we were investing 90% in
:10:52. > :11:01.the private sector, in the automotive sector built up I EBRD.
:11:02. > :11:07.We were not working directly with the state. In Turkey, it is 98% of
:11:08. > :11:12.our investment in the private sector. More policy reform.
:11:13. > :11:16.Renewables, capital markets, those kinds of things. We are not working
:11:17. > :11:21.directly with the government on very much. I would put this to you as a
:11:22. > :11:25.result of our conversation. The more you tell me about the long-term
:11:26. > :11:28.commitment you have made in countries like Russia in the past.
:11:29. > :11:33.You still have some investments there. And Turkey today. My response
:11:34. > :11:35.is you have been there for the long-term, you have tried to
:11:36. > :11:40.persuade yourself and the outside world that this kind of economic
:11:41. > :11:47.engagement and investment result in a transition to a more democratic
:11:48. > :11:50.and more free, both politics and economy, there. But the proof in the
:11:51. > :11:55.pudding is that doesn't. Look at Turkey and its direction of travel
:11:56. > :12:01.today. Turkey is difficult. No one denies that. That is why this year,
:12:02. > :12:05.many investors, foreign and direct, they are trying to do what we are
:12:06. > :12:10.trying to do... Sorry to interrupt, but how much do you think you invest
:12:11. > :12:16.in Turkey this year? I cannot say for sure, but between 1.3 and 1.5
:12:17. > :12:20.billion euros. It will still be the largest market without a doubt
:12:21. > :12:29.because of the size of the economy. But it has been 1.9 billion. That is
:12:30. > :12:33.a light. They fear it is rapidly going down a spiral of
:12:34. > :12:37.authoritarianism. -- A lot. The private sector in support of reform
:12:38. > :12:43.and reaching people who cannot get access to finance, like freelance
:12:44. > :12:45.want of a nurse and other agency would be denied that finance. The
:12:46. > :12:53.year, -- did you, when we talk about
:12:54. > :13:01.renewable technology and solar panels and all about, again, when
:13:02. > :13:04.one looks at a case study like Mongolia, where you are working with
:13:05. > :13:11.a huge corporate like Rio Tinto on a copper and goldmine, do you feel
:13:12. > :13:15.that rather than transition economies, you are just making them
:13:16. > :13:19.extract more and more value out of what ultimately finite commodity
:13:20. > :13:24.-based sectors? I started in Botswana, another mineral-rich
:13:25. > :13:33.country. The issues are similar in Mongolia. There are people wanting
:13:34. > :13:40.to invest. There are challenging politics with the share of revenue
:13:41. > :13:44.in particular. We talk about Rio Tinto and others in the government.
:13:45. > :13:52.We achieved a good result because we also brought in new investors with
:13:53. > :13:58.that investment in the mine. It was a progressive approach.
:13:59. > :14:07.Another point about the way the bank operates and those who receive your
:14:08. > :14:12.investment capital. In recent years, you have invested in a series of
:14:13. > :14:19.projects in Serbia, I think in other parts of the Balkans, Romania is
:14:20. > :14:23.another example. You have offered a significant investment, the projects
:14:24. > :14:27.you have looked at have been mired in allegations of corruption,
:14:28. > :14:37.kickbacks, bribes. What due diligence do you do? Extremely
:14:38. > :14:42.strong. Commercial banks cannot achieve our home loan rates. Less
:14:43. > :14:49.than 1% of any project in any year of approved projects go through that
:14:50. > :14:52.mechanism. If you look at the universe of projects we look at
:14:53. > :14:57.every year, we often reject because of integrity standards, social
:14:58. > :15:06.standards. We take all that out before we go to... In these cases,
:15:07. > :15:11.the Serbian and Romanian examples, another coal power plant that has
:15:12. > :15:15.been under allegations of corruption, how did this get
:15:16. > :15:18.through? They have to go through strong compliance mechanisms. Our
:15:19. > :15:24.environmental and social officers would check these out. That is not
:15:25. > :15:28.to say that maybe one or two projects, afterwards, things come to
:15:29. > :15:32.light. We act on those things. Two hydro projects, one in Croatia and
:15:33. > :15:38.one in Macedonia. We have actually cancelled the loans, because the
:15:39. > :15:43.biodiversity impacts were such that they were not right to go ahead
:15:44. > :15:46.with. It is not as if we don't care about these questions, we do. There
:15:47. > :15:53.is an after-care issue as well. Trying to put this in a bigger
:15:54. > :15:59.picture context, we have talked about the origins of the bank.
:16:00. > :16:04.Investing capital through a bank which has, as its members, Europeans
:16:05. > :16:09.and a number of other shareholders, that you could nurture and foster
:16:10. > :16:14.free market capitalism and Democratic values, and that your
:16:15. > :16:19.work would herald a new era. It seems to me, in some ways, that job
:16:20. > :16:23.has pretty much been done. If you look across Eastern Europe, most
:16:24. > :16:27.countries are anchored in the EU, and those who aren't are desperately
:16:28. > :16:31.trying to get in. That is why it seems to me that you are desperately
:16:32. > :16:38.scratching around for new places you can invest money, and make money,
:16:39. > :16:43.and you are compromising on the core beliefs that the institution began
:16:44. > :16:46.with. I would of course reject that. Starting with the traditional
:16:47. > :16:52.countries we started with in Eastern Europe. You then have advanced very
:16:53. > :16:57.well over the last 25 years. Some are members of the EU and Nato. If
:16:58. > :17:04.the transition job done? Is it completely finished? No. A number of
:17:05. > :17:09.areas such as energy efficiency still remain. I think there is a lot
:17:10. > :17:14.of work to do there. In the areas of taking equity from companies,
:17:15. > :17:16.companies in Poland and other countries, they could become
:17:17. > :17:20.regional champions and hopefully global overtime. Those are things
:17:21. > :17:28.that are part of our mission. Yes, the challenge is diminishing, in the
:17:29. > :17:36.Balkans, they aspire to be in the EU, some areas. We want to help them
:17:37. > :17:42.be credible members of the EU, using the approximation process which
:17:43. > :17:49.helps them. A lot of our shareholders think that this pushed
:17:50. > :17:53.on creating effective markets has been very successful and it should
:17:54. > :17:57.be taken elsewhere. It is the concept that the business model
:17:58. > :18:01.matters more than geography to many of our shareholders. Yes, taking it
:18:02. > :18:08.elsewhere, looking eastward, does it sit confidently with you that China
:18:09. > :18:14.is now actually a shareholder? Yes it is. It sits very confidently with
:18:15. > :18:19.me. How do you think they relate to Article one of your charter? Article
:18:20. > :18:25.one applies to borrowing and China is not a borrower. If they are a
:18:26. > :18:32.shareholder, they clearly wield some sort of influence. They are one of
:18:33. > :18:38.67 shareholders. In terms of its weight, it is perhaps more... China
:18:39. > :18:46.is very important for our region, Central Asia and other regions.
:18:47. > :18:52.China is also important, EBRD is also important to the Chinese model
:18:53. > :18:57.so that they can take you to their own banks. I can see that you are
:18:58. > :19:04.very aware that they are now rivals in the international multi lending
:19:05. > :19:08.sphere. I don't think they are rivals. They have their own
:19:09. > :19:17.international infrastructure in beds and bank... Is not their own. Is
:19:18. > :19:21.based in Beijing. He would not quibble whether they decide their
:19:22. > :19:27.own strategy. Yes I would. We helped set it up. We were the last
:19:28. > :19:32.multilaterally created bank. They asked for our help on governance,
:19:33. > :19:37.appraisal standards, environmental and social standards. They have
:19:38. > :19:41.pretty much developed what the older models have used. I don't think the
:19:42. > :19:52.Chinese run this on their own. You are talking about shareholders who
:19:53. > :19:58.own about 25%, quite sizeable. We have financed projects... I know,
:19:59. > :20:01.thank you for reminding me. You are working with them in some countries
:20:02. > :20:07.we have discussed in Central Asia. The Chinese want to develop their
:20:08. > :20:12.economic powers, some people call it the new silk road. You are now
:20:13. > :20:16.involved in road, rail and infrastructure projects with the
:20:17. > :20:20.Chinese. Some would say you are doing their bidding. We are involved
:20:21. > :20:24.with the Asian infrastructure investment bank, I don't think you
:20:25. > :20:30.would be calling the United States World Bank 's... It is somewhat
:20:31. > :20:34.different. I would just point out the inconsistency. This is not a
:20:35. > :20:39.Chinese lead banker. They have a Chinese president Hu is the largest
:20:40. > :20:45.shareholder, but they have 77 other shareholders. We will incur finance
:20:46. > :20:52.with them in Central Asia, we had already done some. But we will do
:20:53. > :20:58.our appraisals and due diligence. I think it is a win-win situation for
:20:59. > :21:03.the region. The point about the way it the Chinese do business, not
:21:04. > :21:06.getting stuck on the argument about whether the Chinese are... They
:21:07. > :21:13.don't make value judgements. Repeating your Article one mission
:21:14. > :21:16.to apply the principles of multi-party democracy, pluralism and
:21:17. > :21:21.economics, that is the sort of value based submission that the Chinese
:21:22. > :21:25.don't recognise. The World Bank doesn't either. Many banks don't. I
:21:26. > :21:31.don't see why this is just about the Chinese. They are not the only
:21:32. > :21:36.bank... Is about the fact that you have compromised, as you have sought
:21:37. > :21:40.to expand your markets, whether you have compromised your baseline
:21:41. > :21:45.principal. I don't think we have. We apply those principles for central
:21:46. > :21:49.Asian countries and all other countries. We go through these
:21:50. > :21:54.criteria in great detail. A lot of public consultation as well with
:21:55. > :21:58.lots of societies and organisations. I don't think we have compromised,
:21:59. > :22:04.we are rather transparent about it. A final thought on the international
:22:05. > :22:08.context. In the early 1990s, the West thought they had won the sort
:22:09. > :22:13.of values battle, and the economic battle and that liberal democracy
:22:14. > :22:16.and free markets were the way the world was going to go, and that free
:22:17. > :22:19.markets would propagate those western visions of how the world
:22:20. > :22:25.economy should work. Things look a bit less clear now, not least with
:22:26. > :22:28.Donald Trump talking the language of protectionism while the Chinese
:22:29. > :22:34.appear to be the greatest defenders of open borders and free trade. Does
:22:35. > :22:39.the current political climate make it more difficult for you,
:22:40. > :22:43.particularly as Western governments seem to be more economically
:22:44. > :22:48.nationalist? I think what has happened is after the event for us.
:22:49. > :22:53.A few years ago, before some of the political changes in the West as you
:22:54. > :22:57.described, we were already seeing that many other countries we worked
:22:58. > :23:05.with, yet globalisation was successful in everyone out of
:23:06. > :23:09.poverty, or large chunks of people. Relativity had Western Force but he
:23:10. > :23:15.had growing inequality, take Turkey. If you judge them on the basis of
:23:16. > :23:21.Istanbul, you get a false reading. Go to suburbs and you will see. Talk
:23:22. > :23:27.to female entrepreneurs who can't get finance. Also things were before
:23:28. > :23:30.the changes from Donald Trump and the Brexit referendum. What we saw
:23:31. > :23:36.was that globalisation was not working for everyone. Inequality was
:23:37. > :23:42.becoming an issue. We published reports on this and we had a
:23:43. > :23:48.strategy to wrap this up. We have 16 women in business programmes in 16
:23:49. > :23:50.different countries. Helping female entrepreneurs getting access to
:23:51. > :23:54.finance. We try to tackle youth unemployment in many countries, one
:23:55. > :23:59.of the byproducts of the age we are living in. It is dangerous socially,
:24:00. > :24:04.politically, economically. We are trying to match what firms and
:24:05. > :24:08.companies want with the education sector. Are you saying that
:24:09. > :24:12.globalisation in its worst sense doesn't work? I have thought that
:24:13. > :24:15.for some time. My view is that you have got to make globalisation work
:24:16. > :24:21.better. It has got to have an inclusive agenda. Suma Chakrabarti,
:24:22. > :24:27.we have to end there, but thank you very much for being on HARDtalk.
:24:28. > :24:51.Thank you. Thanks very much indeed. Tuesday was a predominantly dry day
:24:52. > :24:55.with the heart of the country