US embassy cable - 05PRAGUE1182

UNCLAS PRAGUE 001182 
 
SIPDIS 
 
STATE FOR EUR/NCE, EB/IFD/ODF 
TREASURY FOR LESLIE HULL 
 
E.O. 12958: N/A 
TAGS: EFIN, PREL, EZ 
SUBJECT: CZECH REPUBLIC: NO PLANS TO GRADUATE FROM EBRD 
 
 
1. (U) SUMMARY: Ministry of Finance Department of 
International Organizations Director Lenka Loudova and Czech 
EBRD Member of the Board Igor Ocka made it clear that the 
current government has no plans to graduate from the European 
Bank for Reconstruction and Development (EBRD).  It is not on 
the current Ministry agenda.  Ocka noted that while the Czech 
Republic no longer considers itself a "developing" economy, 
which is why it will no longer borrow from the IBRD, it still 
considers itself a "transition" economy, which is why it has 
not made plans to graduate from the EBRD.  Additionally, 
Loudova noted that the Ministry of Finance will undergo 
significant reorganization starting October 2005, losing 20 
percent of its current staff.  END SUMMARY. 
 
2. (U) At the behest of the Department of Treasury, econoffs 
met August 10 with Lenka Loudova, Director of the Ministry of 
Finance Department of International Organizations, to 
ascertain the GOCR,s intentions with regard to graduating 
from the EBRD, and to encourage the GOCR to graduate from 
EBRD operations within two or three years.  Also attending 
the meeting was Czech EBRD Board Member Igor Ocka, who 
happened to be in Prague on vacation.  Highlighting the 
country's macroeconomic stability, successful private sector 
development and strong FDI inflows, econoff noted the 
transition process seems complete and the Czech Republic 
should look to graduate from the EBRD in the near term so the 
Bank can focus more on countries still undergoing transition 
to a market economy. 
3. (U) Loudova emphasized there was no government position on 
EBRD graduation, noting  there has been no discussion in the 
Czech government at either the cabinet or Ministry of 
Finance.  The government does not have EBRD graduation on its 
agenda. She also said that while the USG does not seem to 
make the distinction between &development8 and 
"transition,8 the Czech Republic does make the distinction 
and believes the former is complete but the latter is still 
ongoing. 
 
4. (U) EBRD Czech Member of the Board Igor Ocka noted EBRD 
activities in the Czech Republic had appropriately decreased 
over the last few years but the Bank still plays an important 
role in certain areas, including SME support and 
implementation of EU funds, and the process should be allowed 
to run its course and not hurried. Ocka took issue with the 
USG policy in the EBRD in general, stating that there is a 
tendency for the USG to lump development and transition into 
the same basket, noting that as a bank with a transition 
mandate, the EBRD should not be compared to the IBRD. 
 
5. (U) Loudova discussed the changes that the Ministry of 
Finance faces in the months ahead.  Approximately 18 to 20 
percent of current staff will be let go under ministry 
reorganization starting in October 
2005.  The Ministry will merge all of the international units 
into one 
department.  She believes that current Director General of 
the European Integration Department of the Ministry of 
Finance, Hana Heidlerova, is likely to be named head of this 
international department, but the appointment has not been 
confirmed. 
 
6. (U) COMMENT:  With the upcoming organizational changes and 
government elections in June of next year, further discussion 
on this issue seems unlikely without significant external 
stimulus, at least not for the next year.  If Washington 
wishes to push the issue further, Embassy believes a joint 
demarche with other G-7 partners would be more effective.  It 
would also be helpful to see what the other new EU countries 
are contemplating regarding EBRD graduation. 
CABANISS