April 20, 2024

Development Coalition Looks to Aid North Africa

The European Bank for Reconstruction and Development, long focused on promoting democracy in Central Europe and the former Soviet Union through loans to business, is likely to extend its mandate to North Africa as part of a push by Europe and the United States to help countries in the region.

The bank, based in London and financed by 61 nations including the United States, will begin amending its bylaws on Saturday to allow expansion across the Mediterranean, probably beginning with Egypt, Morocco and Tunisia. The bank’s board of governors is holding its annual meeting on Friday and Saturday in Astana, the capital of Kazakhstan.

The expansion of the bank’s operations follows a call in April by Timothy F. Geithner, the Treasury secretary, for institutions like the World Bank and the International Monetary Fund to do more to support a transition to democracy in the Middle East.

“The World Bank and other multilateral development banks will be essential, just as they were in support of Eastern and Central Europe’s transition two decades ago,” Mr. Geithner said on April 16. President Obama pledged on Thursday to provide debt relief and aid to the region in a speech on the Middle East delivered in Washington.

Marisa Lago, an assistant Treasury secretary and a member of the bank’s board of governors, said the development bank’s expertise in Eastern Europe could be useful in North Africa.

“In both instances authoritarian political systems limited the freedoms of the citizens of these countries,” Ms. Lago said in Astana, according to the text of her remarks. “And in both instances the economic systems were dominated by cronyism and state control that limited the regions’ economic potential.”

On Wednesday, Germany officially endorsed deploying the European Bank for Reconstruction and Development in the Middle East. Jörg Asmussen, deputy finance minister of Germany, said a condition for aid would be that countries make “a firm commitment to the core principles of democracy, political pluralism and the market economy.”

But a coalition of 28 nongovernmental organizations and the Central and Eastern Europe Bankwatch Network, a regional group that is based in Prague and monitors international financial organizations, has urged the bank’s shareholders not to approve the expansion.

It is premature to make commitments for financing from the European Bank for Reconstruction and Development for the Mediterranean region “when it is by no means clear what kind of governments will follow the recently overthrown regimes,” the coalition said. It also criticized the bank’s record in helping to establish democracy in Eastern and Central Europe.

The United States is the largest shareholder in the European Bank for Reconstruction and Development, which was founded in 1991 to help countries trying to shift to market from planned economies. The bank typically supports small and midsize businesses and infrastructure projects by local governments like water and sewage systems.

Recent loans include $105 million to Metro Group, a large German retailer, to expand operations in Kazakhstan; and 3.7 million euros, or $5.3 million to Industrial Mecano, a maker of packaging for food and beverages in Romania. The bank valued its business volume in 2010 at 9 billion euros, $12.83 billion. The bank also helped support banks in Eastern Europe during the financial crisis, and has helped finance the continuing cleanup in Ukraine at the site of the 1986 Chernobyl nuclear disaster.

It has steadily expanded its territory, and operates as far east as Mongolia.

A person with knowledge of the plans, who was not authorized to speak publicly about them, said the bank would not need to raise more capital to expand into North Africa. The new loans there would not come at the expense of other countries the bank serves, the person said.

Whether other countries like Libya are added depends on political developments, the person said. Egypt is already a European Bank for Reconstruction and Development shareholder and asked to be considered for loans last year, before popular demonstrations toppled Hosni Mubarak as president.

Matthew Saltmarsh contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=ec78e7c271597bfc6c6b9b85035cafa4

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