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Mixed signals

Turkey, the European Bank for Reconstruction and Development and the European Union

by André Juneau

Geographically and symbolically, Turkey is “on the edge” between the more or less liberal democratic and more or less open market capitalist countries of Europe and the much less democratic and much less market-oriented countries that stretch to the south and east. In 1999, the European Union accepted Turkey as a candidate to join the European Union – but has yet to grant admission. A decade later, whether the EU should accept its Turkish suitor remains one of the divisive topics of European diplomacy.

An interesting aspect of this courtship is Turkey’s role in the European Bank for Reconstruction and Development (EBRD). The Bank uses the tools of investment banking to help former Communist countries, in eastern Europe and what had been the Soviet Union, make the transition – remember this word – from planned to market economies. It started to operate in 1991 on the basis of subscribed capital of €20 billion invested by shareholder countries.1 Canada and Turkey were both among the initial countries to subscribe capital.

In the fall of 2008, the Bank admitted Turkey as a “country of operations” – a country whose businesses are eligible to receive EBRD loans or investments. This decision was the culmination of a process set in motion by a request from Turkey in April of that year. Already a shareholder in the Bank, Turkey wanted to become a country of operations as well. In May, after intense negotiations, both in London where the Bank has its headquarters and in other capitals, the Governors of the Bank (representatives of all the member countries; Finance Minister Jim Flaherty is the Canadian Governor) had asked the Board of Directors (a smaller group responsible for the ongoing operations of the Bank) to undertake a review of the issue.

In the initial Board debate on the request, most countries, but not all, were supportive. As a result, the United States proposed that a strategic review be undertaken to determine whether admitting Turkey would be consistent with the Bank’s mandate. Was Turkey’s stage of development comparable to that of existing countries of operations? And were the tools and competencies of the Bank relevant to its transition needs? The strategic review concluded that the principles and mandate of the Bank could be respected while investing in admissible private-sector projects in Turkey.

I was the Canadian Director on the Board of the EBRD while this process was going on. Incidentally, the Canadian Director also represents Morocco, another moderate Islamic country with a possible interest in obtaining the same country of operations status as Turkey. This put me in an interesting position as I tried very hard to keep our options open. In addition, having been elected as Chair of the Board Steering Group, a kind of elected dean, I was quite active in looking for common ground between the United States, other key directors and management.

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About the Author

André Juneau
André Juneau is currently the Director of the Institute of Intergovernmental Relations at Queen’s University in Kingston, Ontario. From 2006 to 2009, he was the Director for Canada and Morocco on the board of the European Bank for Reconstruction and Development in London, and before that he was the deputy minister at Infrastructure Canada. The views expressed in this article are his own.




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