The European Bank for Reconstruction and Development yesterday approved a €1 bn investment for expansion into North Africa and the Middle East under its first British president.
The bank expects to be able to eventually invest up to €2.5 billion a year in the new region
After years concentrating mainly on investment in private-sector firms across the former Soviet bloc, the EBRD said it was extending its reach in the wake of the Arab Spring uprisings.
It is planning an initial investment equivalent to $1.28 billion (€0.9 billion) in Egypt, Morocco, Tunisia and Jordan, although it stressed that it would continue to seek to support growth in eastern Europe amid the eurozone crisis.
The announcement came on the final day of the EBRD’s annual meeting in London and after the bank last Friday selected top British civil servant Suma Chakrabarti as its president until 2016.
Chakrabarti replaced Thomas Mirow from Germany in a surprise result.
A statement issued ahead of the conference said: “The EBRD’s shareholders agreed on Saturday to the creation of a €1 billion specialfund to start investments in emerging Arab democracies in response to the wave of political change in parts of the Middle East and North Africa.
“The fund is being financed out of the bank’s reserves and will allow the bank to start operations as a prelude to full-scale investment in the new region after an extension of the EBRD’s geographic remit has been ratified.”
It added in a statement: “The EBRD is planning to invest specifically in Egypt, Morocco, Tunisia and Jordan. It has opened preliminary offices in all four of these countries, appointed a managing director for the region and hired additional staff with regional experience.”
The EBRD said it would focus on the development of the private sector in those countries, fostering the growth of small and medium-sized enterprises, with the first projects likely to be concluded around September.
“The bank expects to be able to eventually invest up to €2.5 billion a year in the new region, while not detracting from investments in its existing countries of operations, where funding totalled €9.1 billion in 2011,” it added.
Founded in 1991 to help former Soviet bloc countries such as Hungary, Kazakhstan and Russia to switch and adapt to a market economy, the EBRD will from July be led by its first president who is neither German or French.
For the first time at the EBRD, shareholders considered more than one candidate for the role of president after EU finance ministers failed to reach a consensus in the run-up to the meeting.
Chakrabarti’s victory came as a surprise as it supposedly broke an unwritten rule that a Briton would not run for the presidency in return for the bank being based in London.
British finance minister George Osborne said Chakrabarti’s victory was “the product of a serious campaign and strong diplomacy” and because Britain’s top civil servant at the justice ministry was “the best person for the job”.
Eurozone titans Germany and France had wanted the position to go to Frenchman Philippe de Fontaine Vive Curtaz, a vice-president of the European Investment Bank (EIB). Britain is not a member of the eurozone.
Mirow, who has successfully steered the bank through the financial crisis, had hoped to win a second term but fought the contest without Berlin’s backing.