Monday,16 July, 2018
Current issue | Issue 1265, (8 - 14 October 2015)
Monday,16 July, 2018
Issue 1265, (8 - 14 October 2015)

Ahram Weekly

New support for the private sector

Nesma Nowar reports on the implications of the EBRD’s decision to grant Egypt “country of operations” status

Al-Ahram Weekly

The European Bank for Reconstruction and Development (EBRD) agreed to grant Egypt the status of “country of operations” in a meeting in London last week. The bank’s member states voted unanimously in favour of the decision, with the exception of Turkey, which abstained from voting.

The decision was hailed by the Egyptian presidency, saying that it was recognition that Egypt’s political and economic transition was “proper and sound.” Egypt’s status as a country of operations will not be official until it receives approval from the EBRD’s board of governors.

The newly acquired status means that Egypt is now allowed to use the bank’s ordinary capital resources for operations. The presidency statement said that the status will also increase the scope of activities and investment of the EBRD in the country, as well as its participation in the development process in the near future.

“This will support and advance the private sector, including small and medium-sized enterprises (SMEs), and finance joint ventures between the private and public sector. The EBRD has unique and wide-ranging expertise in these areas, which constitute pivotal aspects of Egypt’s development plans,” read the statement.

Egypt has been listed as a prospective country of operations since 2013. It made a request to be granted recipient country status in 2012, despite being one of the founding members of the EBRD in 1991, which includes 64 countries. The bank was established with the purpose of rebuilding the Eastern European countries following the dissolution of the former Soviet Union.

Since then, the ERBD has been mainly working in Eastern Europe. After the onset of the Arab Spring it expanded its operations to include countries in the southern and eastern Mediterranean region. Tunisia, Jordan and Morocco are among the bank’s countries of operations.

The bank does not grant this status to all its members, but only to those that carry out certain economic and political reforms. Former minister of international cooperation Naglaa Al-Ahwani said in a statement that the government has exerted intense efforts to convince member states that Egypt is committed to its political roadmap and that the parliamentary elections had been put off because of a judicial verdict.

The bank’s decision is considered to have sent positive messages regarding Egypt’s democratic transition and its economic recovery. But Gamal Bayoumi, former assistant minister of foreign affairs, said of the move, “It is not a big deal.”

In comments to Al-Ahram Weekly, he praised the decision but said the main implication for Egypt is that it has gained “an additional window for financing.” He added, “It indicates that relations between Egypt and Europe are good.”

Bayoumi hopes that Egyptian companies will make use of Egypt’s membership of the bank and invest in projects in Eastern European states. However, he has doubts over the ability of companies to do so because of “a lack of knowledge and experience” of operations outside the local market.

According to Bayoumi, Egypt is a founding member of the bank, where it has capital of $25 million.

Since it started operations in 2012, the EBRD has been working on 21 projects in Egypt, with investments worth $762 million. Thirty per cent of the projects are in the power and energy sector; 29 per cent in the industry, commerce and agribusiness sectors; 26 per cent in infrastructure; and 25 per cent in financial institutions. The private sector has received 56 per cent of the bank’s investments to date.

The EBRD is not a retail bank and does not offer commercial products such as mortgages and bank accounts. Instead, it funds companies and governments through loans and equity investments.

In a statement last week, the newly appointed minister of international cooperation, Sahar Nasr, said the bank’s resources will be directed mainly to funding major national projects prioritised by the government.

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