ABU DHABI: The European Bank for Reconstruction and Development has started talks with North African governments and private firms on aiding the region, and aims to begin extending loans by the middle of next year, the bank's chief economist said on Tuesday. The EBRD, an international lending institution which has focused on emerging European economies, announced last week that shareholder governments had backed the expansion of its mandate to North Africa. The bank is one of the tools the international community will use to supply aid to Arab governments and encourage them to pursue democratic reforms in the wake of this year's Arab Spring political unrest. "We hope to start investing by the middle of next year," Erik Berglof told Reuters in an interview. "This means we have to start building projects now." He said the EBRD had up to €100 million ($135 million) to spend now on providing technical aid to Egypt, Morocco, Tunisia and Jordan — for example, advice on establishing public-private partnerships to build infrastructure, or on increasing bank lending to smaller companies. By next summer, the EBRD aims to have a fund in place to help finance projects in those countries, including privatizations and ventures to improve energy and water efficiency in the region. By 2014 or 2015, the EBRD expects to be providing about €2.5 billion of new lending from the fund each year, said Berglof, an academic by training who has held his post at the bank for five years. In contrast to its work in Eastern Europe after the fall of Communism, where unemployment was not so much of a problem, the EBRD will focus in North Africa on projects that create jobs for some of the millions of educated people who have been unable to enter the permanent workforce, he said. Berglof conceded that corruption in North Africa could prove a major obstacle to disbursing aid: "A lot of investors we couldn't work with for integrity reasons." But he said the EBRD's experience with an explosion of corruption in post-Communist Eastern Europe would help it to handle this problem. Outlook The EBRD plans in coming weeks to publish its first forecasts for growth in North African economies. Berglof said the region was "very fragile," because of the risk that national political tensions would continue for long periods, and also because of the weak global economy. "It can't be ruled out" that a possible recession in Europe could cause North African economies to shrink, he said. European banks helped to strengthen Eastern European economies with their investment and lending, but the euro zone financial crisis means this is unlikely to happen in North Africa, at least for now, Berglof said. "We thought of the financial sector in Europe as something which could play a role in the next few years. We have to have more modest expectations."
