BAC Meeting n° 4 - Istanbul, October 17, 2000

1.              Opening of the Meeting

           M. Kent, the Turkish BAC member and host of the meeting, welcomed everybody on behalf of the Turkish Chamber of Commerce ( Annex 1 : attendees ).

  2.              Speech of Mr. Hombach

           B. Hombach reported about the positive developments in the Region and repeated his expectations from the BAC : 

• Dialogue with SEE countries (country missions)

• Active participation in SP initiatives (Investment Compact etc…)

• Promotion of business opportunities in SEE

• Efforts to extend risk insurance facilities  

          There was excellent progress with regard to the 35 infrastructure projects in the quick start package : all of them are fully funded, 6 projects have started, for 9 projects, tendering is underway. On Serbia, B. Hombach stressed that the International Community must take the outstretched hand of the Serbian people without delay. The SP was the right instrument to start the reintegration of the FRY. In order not to create regional imbalances, the international community had to create new ressources for the FRY. It was also very positive to note that following the democratic changes in Belgrade the project on the clearance of the Danube in Novi Sad was deblocked.

3.              Report of the BAC meeting in Stuttgart June 23 ^rd . Adopted.

4.              New BAC Members

§                Y.T. de Silguy informed about : 

• The resignation of Mr. Zafir Sarafov from Macedonia for health reasons ; the BAC wishes him prompt recovery

• The acceptance of Mr. Ion Tiriac from Romania as new BAC member

 

§                The BAC agreed to increase the number of BAC members from 20 to 25 (statutes will be changed accordingly) to admit representatives from the following countries who applied for membership :

• Russia (Mr. Valery OTCHERTZOV, Chairman of Intera Holding)

• Spain (Mr. Antonio HERNANDO, Director of Union Fenosa ACEX)

• Turkey (Prof. Celik KURDOGLU, Chairman of Kurdoglu Consulting)

• United Kingdom (Mr. Nigel THOMPSON, Deputy Chairman of OVE, ARUP & Partners)

          (Please find the CV’s of the 4 new BAC member in the A nnex 2 of this report).

5.              BAC visit to Sofia 19-21 July 2000

          In July a BAC delegation headed by Co-chairman M. Nussbaumer joined the Special Coordinator on a country visit to Bulgaria (a detailed report had been distributed to all BAC members). Main results :

1. excellent organization of the meetings with business and government representatives

2. main problems business people are facing in Bulgaria : access to capital, poor enforcement of laws, customs, regulations and delays at borders, braindrain of well-educated people, etc…

           The BAC had an exchange of views on the organization and the follow up of country visits which led to the following recommendations :

• specify well in advance the main objectives of the visit and prepare an “issue paper” for the interlocutors (Government and business representatives)

• provide delegation members with relevant information before the visit

• follow up : make sure that promises made by Government representatives are implemented (ask for answer to the “issue paper” within a short period)

• pool information since most of the countries of the region have similar problems

           The Co-chairs summarised that the results of the first visit were very encouraging. The BAC therefore decided to continue with these efforts, taking into account the suggestions made by various BAC members. The Co-chairs will put forward shortly proposals for future country missions (first indications at the end of this report).

  6.              Report on S.E. Europe Economic Forum – Sofia 16/10/00

           Y.T. de Silguy reported ; his presentation is to be found at annex ( Annex 3 ).

  7.              Implementation of the previous decisions from Stuttgart

           71. Education – APPROVAL / DECISION

           D. Purg presented a project proposal which aims at improving management skills of relevant decision-makers in SEE.

           The presentation was followed by an extensive exchange of views. Main results :

1. BAC members expressed broad support for the proposition and the important task of improving management skills in SEE.

D. Purg will take into consideration the various remarks and suggestions made (which she accepted or explained they were already included in her proposition) :

• linking item, whenever possible, with projects

• making government “education” (avoid the word training) at home (avoid “road show”)

• avoiding another Davos

• liaising with IFI’s to suggest specific “scholars” involved in infrastructure investments

• avoiding overlapping

1. The revised proposal will be transmitted to the SP with a view to get donors support, and to see it implemented rapidly, the BAC being of course also available to contribute, since FDI’s are at stake.

          72. Good governance Principles – APPROVAL

          R. Alter pointed out 3 specific OECD guidelines, concerning particularly the Region :

-       combating Bribery (10 rules concerning multinationals behavior in the world),

-       OECD Convention on bribery addressing governments (34 countries already signed it),

-       OECD Convention principles for corporate governance (dealing with shareholders, stakeholders, etc…).

          Responding from the chair to different observations, Y. Th. de Silguy concluded that the OECD points were fully supported by the BAC.

          73. Summary of SP activities – SUPPORT

          D. Kursch reported on :

-       the 3 working tables at work,

-       the March 30.31 Donor Conference in Brussels, the SP being happy with,

-       35 infrastructure projects on schedule.

          It was followed by an exchange of views.

          74. Disincentives to investments – APPROVAL

          The 1 ^st BAC target being to foster FDI’s, the answer to the above question is of utmost importance. Unfortunately, many intervenants reported on their reluctance to give specific cases, although they have many, fearing of reactions leading to being blacklisted. This is particularly true for alleged cases of corruption. This report will hence mention specific and largely approved points without any additional details :

-       hidden liabilities for candidates to assets purchase

-       uncertainty on infrastructures, implementation of legislation and transportation

-       too low salaries to judges

-       arbitrary decisions at many levels ; administrative delays ; slow procedures

-       customs habits

-       no reliable criminality statistics ; corruption

-       lack of transparency and brutal changes in privatization processes

-       failure to understand risk assumption (“the private sector will take all the risk”)

-       resistance of governments to privatize ; or misuse of MBO’s (loans without interest)

-       old fashioned accounting standards and procedures

-       no chance to convince management to participate in a 2 ^nd or 3 ^rd bid in the Region if loss of first bid(s) unclear and questionable

          All the above points were shared by the BAC members and will be transmitted to the SCSP for action.

          Co-chairman M. Nussbaumer introduced a “disincentive questionnaire” which had been distributed among German business people active in SEE. Mr. Nussbaumer will report about the results of this initiative at the next BAC meeting. Other BAC members were encouraged to start similar initiatives in their respective countries.

          75. VOLUNTARILY ADHESION to OECD CONVENTION against BRIBERY – APPROVAL / DECISION

          The Chairs noticed that the point has been de facto covered with the discussion point 72. The BAC transmits to the SP its recommendations to have all countries of the Region voluntarily adhering to the OECD Convention. This would be a strong signal to foreign investors.

          76. Suspension of payments by IFI’s

          Time constraints did not allow to cover the subjects, which will be on the agenda of the next BAC meeting.

          77. Rules for international bids – APPROVAL / DECISION

          Following the principle decision of the previous BAC meeting, the recommendation to have the contract bond accessory to any public tender in the Region will be transmitted as a BAC recommendation to the S.P. Lack of time did not allow a longer debate, which will be on the agenda of the next meeting. (Note on the Contract Bond in the Annex 4 ).

8.              Next BAC activities

81. Planned BAC visits to SEE :

 

-       Bosnia & Herzegovina : 3-7 Dec. 2000

-       FRY : second half of January 2001

-       Albania : second half of March or 1 ^st part of April 2001 (in connection with the BAC meeting)

          82. Next BAC meeting

-       In Tirana if in the 2 ^nd half of March

-       In Paris end of January if the Tirana meeting takes place later than March

          83. BAC members will be provided shortly with more specific information, especially with regard to the planned visit to Bosnia and Herzegovina. The visit to the Federal Republic of Yugoslavia will differ from other BAC visits since the size of the delegation is likely to be considerably larger.

9.              Meeting with BAC SECI

In the margins of the BAC meeting in Istanbul a side meeting between the co-chairs of the SP BAC and the SECI BAC and Mr. Hombach took place. Given the similarity of goals, it was agreed, in the interest of SEE, to cooperate and exchange information.