The CGD Podcast: Sir Suma Chakrabarti on the EBRD, Ukraine, and the SDGs

Date: June 30, 2015
Host: Rajesh Merchandani (CGD)
Guest: Sir Suma Chakrabarti (President, EBRD)

Overview

In this episode, host Rajesh Merchandani speaks with Sir Suma Chakrabarti, President of the European Bank for Reconstruction and Development (EBRD), about the institution’s evolution since its formation, its strategic response to the conflict in Ukraine, and the challenges of financing the Sustainable Development Goals (SDGs). The conversation delves into EBRD’s approach to supporting transition economies, leveraging private finance for development, the continued relevance of grant aid, and the practical implications of the SDG framework for development banks and countries.

Key Discussion Points and Insights

1. The EBRD’s Origin, Expansion, and Continued Mission

• Historical Mandate: Founded post-1991 to assist former communist states in Eastern Europe in their transition to market economies.
• Scope Broadening: Operations now include the Middle East, North Africa, and Central Asia.
• Successful Early Transition: Many countries progressed significantly and joined the EU; however, progress stalled for some around 2005-2006.
• Reform Fatigue: Many transition countries “got stuck,” as EBRD detailed in its 2013 report.
• Case in Point—Ukraine:
  • Ukraine lagged behind peers like Poland post-1991.
  • The current government is reform-minded, tackling energy, banking, investment climate reform, and corruption.
• Quote:
  “Ukraine now, in my view, has the best chance it’s ever had. It’s got a fantastic, really reformist government trying to do the things it should have done many years ago.”
  — Suma Chakrabarti [01:29]

2. Development Amidst Conflict: The Case of Ukraine

• Ongoing Conflict: The war in Eastern Ukraine significantly disrupts development and causes severe GDP contraction.
• Rationale for Continued Investment:
  • Large parts of Ukraine remain viable for reform and investment, despite conflict elsewhere.
  • Domestic leadership asserts, “conflict should not be an excuse to avoid reform.” [02:48]
• Challenges of Uneven Development:
  • Risk of “dual speed development” between conflict and non-conflict regions.
  • Importance of planning for the reconstruction of conflict areas should peace arrive.
• Limits of EBRD’s Role:
  • Economic organizations can aid post-conflict, but political resolution is a prerequisite.
• Notable Quote:
  "Our whole region has a few too many frozen conflicts…these need resolution because through their resolution can we bring transition and prosperity to these parts of Europe.”
  — Suma Chakrabarti [04:43]

3. Financing the SDGs: Role of EBRD and Multilateral Banks

• Scale of Ambition vs. Financing: SDGs require “trillions of dollars,” far exceeding the capacity of MDBs alone.
• Leveraging Private Finance:
  • EBRD’s specialty is attracting private sector co-investment—every €1 of EBRD financing leverages €2.50 in private funds.
  • Success in energy efficiency projects, which comprise over a quarter of EBRD financing.
  • New focus: Attract pension funds, sovereign wealth funds, and create equity participation funds for higher development impact.
• Traditional Aid Remains Vital:
  • Many projects—especially in poorest countries or social sectors—require grant aid, which private finance will not provide.
• Quote:
  “We can’t just say that it’s all going to be about private sector finance. It’s very important for traditional forms of finance, aid…to still play a big role.”
  — Suma Chakrabarti [07:34]

4. The Changing Landscape of Development Finance

• Concerns about Government Commitments:
  • There’s a risk that focusing on private finance allows governments to shirk their aid commitments (“0.7% of GNI” target).
  • Only the UK (via DFID) is praised for meeting targets; others must “up their game.”
  • The game has changed since Gleneagles 2005—now private finance is more central, but not exclusive.
• Quote:
  “It's still very, very important for countries that committed back in Gleneagles in 2005…to still perform and try and meet their commitments. They're already way behind schedule, most of them.”
  — Suma Chakrabarti [09:22]

5. Tackling Barriers to Private Investment—Governance and Corruption

• Investment Hesitancy: Poor governance and corruption deter private investment in developing countries.
• EBRD Approach:
  • Supports systemic improvements: policy, regulation, competition, inclusivity, and institutional capacity.
  • Example: Helped establish a business ombudsperson in Ukraine to provide impartial recourse for private sector complaints—already issuing decisions.
• Co-Investment as Risk Mitigation:
  • EBRD’s “preferred creditor status” protects co-investors by leveraging its multilateral standing.
• Quote:
  “One of the first places to start, though, is not on your own, but it’s to come in with EBRD…you get the advantage of our preferred creditor status…that really helps many investors come in for the first time with us into difficult environments.”
  — Suma Chakrabarti [12:51]

6. The Purpose and Practicality of the SDGs

• SDG Expansion: From 8 MDGs to 17 SDGs and 169 targets—raising concerns about practicality and prioritization.
• Chakrabarti’s Perspective:
  • MDGs gave coherence, but covered only part of the development agenda (mainly social outcomes).
  • SDGs now attempt to capture the full sweep, including infrastructure and economic development.
  • Real prioritization should happen at the country level—national determination, not global.
• Quote:
  “If you say that’s the agenda for every country, that’s the road to madness…which are the SDGs that really matter for your country should be determined by sovereign countries themselves.”
  — Suma Chakrabarti [15:09]
• Country Relevance: SDGs give EBRD and similar organizations better alignment for their work, allowing them to focus on domains like infrastructure and energy.

Notable Quotes & Memorable Moments

• On Ukraine’s Reform Opportunity:
  “Ukraine now, in my view, has the best chance it’s ever had…” [01:29]
• On Conflict and Development:
  “These need resolution because through their resolution can we bring transition and prosperity to these parts of Europe.” [04:43]
• On Private vs. Traditional Finance:
  “We can’t just say that it’s all going to be about private sector finance…” [07:34]
• On Government Aid Commitments:
  “They're already way behind schedule, most of them. I absolve, obviously the UK in this because DFID has actually hit the 0.7 target.” [09:22]
• On Practicality of the SDGs:
  "If you say that's the agenda for every country, that's the road to madness...which are the SDGs that really matter for your country should be determined by sovereign countries themselves..." [15:09]

Timestamps for Important Segments

• 00:43–03:16: EBRD’s historical mission and Ukraine’s transition journey
• 03:16–05:10: Challenges of investing in conflict zones and implications for development
• 05:10–07:49: EBRD’s financial strategies & leveraging private finance; role in SDG financing
• 07:49–10:13: Government aid obligations versus private financing, especially for poorest countries
• 10:13–13:58: Barriers to private investment: corruption, governance; EBRD’s interventions (Ukraine focus)
• 13:58–16:17: The SDGs—scope, practicality, and relevance at country level

Conclusion

Sir Suma Chakrabarti offers a candid, practical perspective on the role of multilateral development banks like the EBRD in facilitating development, especially in challenging environments like Ukraine. He advocates for a nuanced balance between private and public finance, emphasizes the importance of strong institutions, and welcomes the broader agenda of the SDGs—provided there is room for country-level prioritization.

For more information: Visit www.cgdev.org.