New era beckons for EBRD bank
The European Bank for Reconstruction and Development headed into a new era Saturday after electing its first British president and approving investment for “Arab democracies” at its annual meeting.
After years concentrating mainly on investment partnerships with private-sector firms across the former Soviet bloc, the EBRD on Saturday approved the pumping of 1.0 billion euros into north Africa and the Middle East.
The bank said it was extending its reach in the wake of the Arab Spring uprisings with an initial investment equivalent to $1.28 billion spread across Egypt, Morocco, Tunisia and Jordan.
The EBRD though stressed that it would continue to support growth in eastern Europe, which was facing a slowdown in growth because of the eurozone debt crisis.
Its Arab investment announcement came on the final day of the EBRD’s annual meeting in London and after the bank on Friday surprisingly selected top British civil servant Suma Chakrabarti to run as its president for four years from July.
Chakrabarti replaces German incumbent Thomas Mirow, who failed to win a second term following a five-way battle.
“I’m lucky in the end to have got very wide support from a wide range of (EBRD) shareholders…. in the eurozone and outside the eurozone and also across the rest of the world,” Chakrabarti told a press conference on Saturday.
Chakrabarti, 53, said the bank faced “huge challenges” going forward including maintaining the EBRD’s triple A credit rating, that would enable it to continue to borrow money cheaply.
Mirow, who was sat alongside his successor, said he had been “privileged” to lead the bank, which on Saturday agreed “to the creation of a 1.0 billion euro special fund 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 EBRD added in a statement: “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 said it would focus on the development of the Arab private sector by fostering the growth of small and medium-sized enterprises as soon as this year.
“The Bank expects to be able to eventually invest up to 2.5 billion euros a year in the new region, while not detracting from investments in its existing countries of operations, where funding totalled 9.1 billion euros in 2011,” the EBRD 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 shortly 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 European Union finance ministers failed to reach a consensus in the run-up to the annual 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 successfully steered the bank through the financial crisis, had fought the contest without Berlin’s backing.
“There was a slight lack of enthusiasm from my own government,” Mirow jokingly told reporters Saturday when asked why he had lost the election.
Chakrabarti beat off two other rival candidates — ex-Polish prime minister Jan Krzysztof Bielecki and former Serbian deputy prime minister Bozidar Djelic.
The EBRD meanwhile said at the start of its meeting on Friday that the eurozone debt crisis would slash growth this year across its current and future “transition” countries of operation.
It forecast growth of 3.1 percent across a region that comprises 33 countries, including the four Arab nations plus Turkey and Mongolia — down sharply from 4.6 percent in 2011.
The bank’s shareholders comprise 63 governments plus the European Union and the EIB.