EBRD Expansion to Tunisia Brings New Focus on Private Sector

25 May 2012, Tunisia Live

With its sights set on Tunisia and other countries in the southern and eastern Mediterranean (SEMED), the European Bank for Reconstruction and Development (EBRD) declared at a recent summit in London that it is breaking away from the free-market approach it employed to shore up the economies of Eastern European states in the post-Cold War period.

Founded in 1991, the EBRD sought to assist countries of the former Soviet Union in liberalizing their economies and privatizing various sectors that were once state-run. Looking beyond Eastern Europe, the bank’s shareholders voted last year to create a €1 billion ($1.27 billion) special fund for the Middle East and North Africa following the Arab Spring uprisings.

This change in approach is welcomed by Tunisia’s delegation members, who attended the 21st EBRD Annual Meeting and Business Forum in London from May 18-19.

“The EBRD cannot just translate the experiences it had in Central and Eastern Europe and Central Asia. When EBRD was created in the 90s, there was a great deal of focus in creating a market economy – in terms of liberalizing the economy and privatizing state assets,” said Mustapha Kamel Nabli, governor of the Central Bank of Tunisia.

“This cannot be the main focus of the EBRD in Tunisia. On the other hand, developing the private sector and creating a competitive private sector are most relevant now,” Nabli continued.

Indeed, representatives of the bank laid out their plan to focus on developing the private sector, fostering the growth of small and medium-sized enterprises, helping to improve municipal services, creating stable financial sectors, and improving energy supplies.

Nabli emphasized that countries that succeeded in their political transformation tended to demonstrate robust economic growth as well. Therefore, it is incumbent upon the EBRD to choose the right corrective measures to address the economic woes of the SEMED, asserted Nabli.

“Focusing on liberalization and privatization might be counter-productive for the SEMED region,” he added.

According to a Tunisian delegate at last week’s London meeting, Tunisia had historically adopted a free-market policy that would have been anathema to the fallen Soviet Union.

As the bank expands its geographical area of activity, it is also valuing different aspects of economic growth, such as sustainable development and women’s employment.

The EBRD stated that it was committed to financing projects that are environmentally and socially sustainable. In its press release at last week’s meeting, the bank announced its efforts to improve energy efficiency and deal with the threat of climate change through investment projects in the SEMED region worth up to €25 billion over the next three years.

The NGO Bankwatch, whose work is to monitor the activities of international banks and investors and propose constructive environmental and social alternatives to the projects they support, has called upon EBRD to stop supporting projects that involve the extraction and combustion of coal, the most carbon intensive-energy source.

The EBRD’s work in the field of sustainable energy financed 111 operations in 2011, accounting for almost 30% of its total investments last year.

Additionally, the bank is committed to promoting equality of economic opportunity between women and men, and seeks to empower women in the countries of its operations.

In EBRD’s expansion to the SEMED, the bank is planning to improve women’s economic participation, especially in the private sector, though so far no specific plan on how to do this has been unveiled.

The investments by the EBRD come at a time when Tunisia’s interim government is regarded as unable to confront many of the obstacles that lie in the way of the country’s economic recovery. The American ratings agency Standard & Poor’s recently downgraded Tunisia to “junk” status.