Proposal for a Council Decision on an Amendment to the Agreement Establishing the European Bank of Reconstruction and Development (EBRD), enabling the Bank to finance operations in Mongolia
Date: 2005-07-28
Institutions: European Commission
Subjects: EBRD, EU financing, Mongolia, economic development, economic reconstruction

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.7.2005 
COM(2005)342 final 

2005/0139(CNS) 

. 

Proposal for a 

COUNCIL DECISION 

on an Amendment to the Agreement Establishing the European Bank of Reconstruction 
and Development (EBRD), enabling the Bank to finance operations in Mongolia 

. 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1.  

Background 

The European Bank for Reconstruction and Development (EBRD, hereinafter also referred to 
as “the Bank”), is a multilateral financial institution which was established on 29 May 1990. 
The  Bank’s  shareholders  comprise  62 countries  and  institutions,  including  all  EU  Member 
States, the European Community (EC) and the European Investment Bank. The EC share of 
the  EBRD’s  capital  amounts  to  3.05 %.  Together  with  its  Member  States,  the  EU  holds 
61.70 % of the Bank’s capital. The EBRD invests in businesses and banks that form the core 
of strong market economies in 27 countries of operations from central Europe to central Asia. 
Investments are designed to foster the transition towards open market-oriented economies and 
to promote private sector development. 

At the time of establishment of the EBRD, Mongolia was neither part of the Soviet Union nor 
a  founding  member  of  the  Bank.  However,  Mongolia’s  location  in  the  sphere  of  economic 
influence of the Russian Federation and its historical links to the former Soviet Union place it 
in a situation similar to that of the Russian Far East, Kyrgyzstan and Kazakhstan, notably with 
respect to the need for the country to foster its transition process towards a market economy 
and to develop its private sector. Since Mongolia’s needs for assistance are consistent with the 
needs generally faced by the EBRD’s countries of operations, notably in areas where the Bank 
has  accumulated  considerable  expertise,  it  was  deemed  appropriate  that  Mongolia  should 
become a member of the Bank. This took place in October 2000 following a Resolution of the 
EBRD’s Board of Governors, dated 3 May 2000. 

Consistently, the Bank’s Board of Directors then decided that the Bank could have a role to 
play  with  its  special  expertise  in  fostering  transition  and  in  promoting  private  and 
entrepreneurial  initiative  in  Mongolia.  Since  early  2001,  the  EBRD  has  therefore  been 
providing  technical  assistance  to  Mongolia,  using  donor  funds  made  available  through  the 
Mongolia Cooperation Fund.  

However, the Mongolian authorities considered that the involvement of the Bank should not 
be  limited  to  technical  assistance,  but  should  also  include  financing  of  specific  projects. 
In July 2003, the Prime Minister of Mongolia formally expressed an interest that Mongolia be 
granted “country of operation” status. However, being non-European and located outside the 
territory  that  the  Bank’s  founders  had  originally  intended  for  its  activities,  Mongolia  could 
only become eligible for EBRD financing after an amendment of the Agreement Establishing 
the Bank.  

2.  

Decision to accept Mongolia as a country of operation 

In  October  2003,  the  EBRD  Board  of  Directors  adopted  a  draft  Resolution  to  Governors 
tabling an Amendment to the Agreement Establishing the Bank in order to admit Mongolia as 
a  country  of  operations.  By  adopting  unanimously  this  Resolution  on  30  January  2004,  the 
Board  of  Governors  voted  in  favour  of  the  necessary  Amendment  to  the  Agreement 
Establishing the Bank.  

However, as this Amendment concerns the purpose and functions of the Bank, it is necessary 
that  it  also  be  formally  accepted  by  each  and  every  member  of  the  Bank.  The  internal 
procedures  to  be  followed  by  each  member  to  accept  such  an  Amendment  are  governed  by 
that  member’s  own  constitutional  requirements  regarding  the  conclusion  and  amendment  of 

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international treaties. Upon receipt of the requisite documents from each of its members, the 
Bank  will  send  a  “formal  communication”  to  all  members.  The  Amendment  will  enter  into 
force three months after the date of the Bank’s “formal communication” unless the Board of 
Governors specifies a different period.  

3.  

EC procedures 

In  the  case  of  the  EC,  the  formal  acceptance  by  the  EC  Governor  of  the  EBRD  of  the 
Amendment  to  the  Agreement  necessary  to  enable  the  Bank  to  finance  operations  in 
Mongolia,  was  communicated  to  the  Bank  on  13  January  2004.  However,  the  formal 
acceptance of this Amendment by the EC also requires the adoption of a Council Decision. 
The Commission considers that the legal basis for this Decision should be  Article 181a of the 
Treaty, following  a Commission proposal and a  consultation of the Parliament.  

Against  this  background,  the  Commission  is  hereby  proposing  to  the  Council  to  adopt  a 
Decision  providing  acceptance  by  the  European  Community  of  the  Amendment  to  the 
Agreement Establishing the EBRD, enabling the Bank to finance operations in Mongolia.    

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2005/0139(CNS) 

Proposal for a 

COUNCIL DECISION 

on an Amendment to the Agreement Establishing the European Bank of Reconstruction 
and Development (EBRD), enabling the Bank to finance operations in Mongolia 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
181a thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the opinion of the European Parliament2, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

Although a member of the EBRD since 2000, Mongolia is not currently a country in 
which the Bank is authorised to carry out operations on its own resources. 

In response to the request of the Prime Minister of Mongolia, the Board of Directors of 
the  EBRD  has  expressed  unanimous  support  to  admit  Mongolia  as  a  country  of 
operations of the Bank, 

By Resolution adopted on 30 January 2004, the Board of Governors of the EBRD has 
voted in favour of the necessary Amendment to the Agreement Establishing the Bank, 
enabling  it  to  finance  operations  in  Mongolia.  All Governors  of  the  Bank  voted  in 
favour  of  this  Amendment,  including  the  Governor  representing  the  European 
Community, 

As  the  Amendment  concerns  the  purpose  and  functions  of  the  Bank,  it  is  necessary 
that it also be formally accepted by all member countries and institutions, including by 
the European Community, 

Acceptance by the European Community of this Amendment is necessary to achieve 
the  Community’s  objectives  in  the  field  of  economic,  financial  and  technical 
cooperation with third countries.   

1 
2 

OJ C […], […], p. […]. 
OJ C […], […], p. […].. 

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HAS DECIDED AS FOLLOWS:  

Article 1 

The  Amendment  to  the  Agreement  establishing  the  EBRD  necessary  to  enable  the  Bank  to 
finance operations in Mongolia is hereby approved on behalf of the European Community. 

The text of the Amendment is annexed to this Decision. 

Article 2 

The Governor of the EBRD representing the European Community will communicate to the 
Bank the Declaration of Acceptance of the Amendment. 

Done at Brussels,  

For the Council 
The President 

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ANNEX  

Amendment to the Agreement Establishing the European Bank for  
Reconstruction and Development 

Article  1  of  the  Agreement  Establishing  the  Bank  shall  be  amended  to  read  as  follows 
(new text in italics): 

Article 1 

PURPOSE 

In contributing to economic progress and reconstruction, the purpose of the Bank shall be 
to foster the transition towards open market-oriented economies and to promote private 
and entrepreneurial initiative in the Central and Eastern European countries committed to 
and  applying  the  principles  of  multiparty  democracy,  pluralism  and  market  economics. 
The purpose  of  the  Bank  may  also  be  carried  out  in  Mongolia  subject  to  the  same 
conditions. Accordingly, any reference in this Agreement and its annexes to “Central and 
Eastern European countries”, “countries from Central and Eastern Europe”, “recipient 
country  (or  countries)”  or  “recipient  member  country  (or  countries)”  shall  refer  to 
Mongolia as well. 

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LEGISLATIVE FINANCIAL STATEMENT 

1.  NAME OF THE PROPOSAL 

Amendment  to  the  Agreement  establishing  the  EBRD,  enabling  the  Bank  to 
finance operations in Mongolia. 

2.  ABM/ABB FRAMEWORK 

Policy Area(s) concerned and associated Activity/Activities: 

International  Economic  and  Financial  Affairs  -  Coordination  and  policy 
questions related to EBRD. 

3.  BUDGET LINES 

This proposal has no budgetary implications 

4.  SUMMARY OF RESOURCES 

This proposal has no financial or human resources implications. 

5.  CHARACTERISTICS AND OBJECTIVES 

1.1.  Need to be met 

The  proposed  decision  is  intended  to  provide  acceptance  by  the  European 
Community  of  an  Amendment  to  the  Agreement  Establishing  the  EBRD, 
designed to enable the Bank to finance operations in Mongolia. 

1.2.  Value-added of Community involvement and coherence of the proposal with 

other financial instruments and possible synergy 

The  Community  is  a  shareholder  of  the  EBRD  and  its  acceptance  of  the 
proposed  amendment  is  necessary  for  the  extension  of  the  Bank’s  activities  to 
Mongolia. 

The  Community  has  a  trade  and  economic  cooperation  agreement  with 
Mongolia since 1993 and has, over recent years, consolidated its relations with 
this  country.  These  relations  are  set  to  develop  further  in  the  future,  also  as  a 
consequence of EU’s recent enlargement to Central and Eastern Europe. Since 
January  2004,  EC  financial  assistance  to  Mongolia  is  funded  under  the  ALA 
programme targeted towards Asian and Latin American developing countries. 

EC/EBRD cooperation has been developing since the establishment of the Bank. 
It  is  today  wide  ranging  and  covering  all  EBRD’s  countries  of  operations. 
Potential synergies between EC grand support and EBRD financing also exist in 

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Mongolia and will be explored as soon as the Bank will become active in this 
country. 

1.3.  Objectives,  expected  results  and  related  indicators  of  the  proposal  in  the 

context of the ABM framework 

The  principal  objective  of  this  proposal  is  to  allow  the  EBRD  to  meet 
Mongolia’s  financing  needs  in  areas  where  the  Bank  has  accumulated 
considerable  experience  and  expertise,  notably  the  promotion  of  transition 
towards an open-market economy and the development of the private sector. 

The  unfolding  of  EBRD’s  activities  in  Mongolia  will  also  create  potential 
synergies  with  the  EC  financial  assistance  priorities  for  this  country  and  it  is 
expected  that  joint  or  concerted  EC/EBRD  initiatives  will  develop  along  the 
lines experienced in the Bank’s other countries of operations. 

1.4.  Method of Implementation 

This  action  is  a  formal  requirement  designed  to  allow  the  EBRD  to  operate  in 
Mongolia. 

The actual implementation of operations in Mongolia will be undertaken by the 
Bank  according  to  the  policy  orientations  agreed  by  its  Board  of  Directors,  in 
which the Community is represented. 

6.  MONITORING AND EVALUATION 

1.5.  Monitoring system 

EBRD’s operations in Mongolia (like all its other operations) will be monitored 
within the governance structures of the Bank, of which the EC (represented by 
the Commission) is a full member. 

1.6.  Evaluation 

1.6.1.  Ex-ante evaluation 

The decision to propose the extension of EBRD’s activities in Mongolia is the 
result  of  a  lengthy  process  following  the  acceptance  of  this  county  as  a 
shareholder  of 
the  establishment  and  successful 
implementation  of a  Special Technical Cooperation Fund in Mongolia (funded 
by donors and operated by the EBRD) and the unanimous approval by the Board 
of  Directors  and  the  Board  of  Governors  of  the  EBRD  of  the  request  by  the 
Mongolian authorities to also become a country of operations of the Bank. 

the  Bank 

in  2000, 

The basic rationale behind such unanimous support, is that Mongolia faces the 
same  constraints  and  challenges  as  the  former  Soviet  Union  Republics  and 
should  therefore  similarly  benefit  from  EBRD’s  experience,  expertise  and 
support. 

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1.6.2.  Measures 

following  an 
(lessons learned from similar experiences in the past) 

taken 

intermediate/ex-post  evaluation 

This is the first extension of the geographical scope of EBRD’s activities. The 
pertinence  of  EBRD’s  operational  priorities  and  the  quality  of  the  Bank’s 
projects  have  so  far  been  praised  by  the  Commission  and  the  European 
Parliament. 

1.6.3.  Terms and frequency of future evaluation 

Like all other operations of the EBRD, the Bank’s future operations in Mongolia 
will be evaluated according to the Institution’s established rules and procedures. 

7.  ANTI-FRAUD MEASURES 

Like  in  the  case  of  all  other  operations  of  the  EBRD,  the  protection  of 
Community’s  financial  interests  and  the  fight  against  fraud  and  irregularities 
will  be  ensured  according  to  well  established  procedures  within  the  Bank’s 
governing bodies, of which the Community (represented by the Commission) is 
a full member. 

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