ECONOMY

EBRD shifts its attention to Balkans as European Union aspirants face slowdown

BELGRADE – The European Bank for Reconstruction and Development (EBRD) yesterday turned its spotlight on the Balkans to lure vital foreign investment to a region healing the wounds of bloody wars in the 1990s. By holding the meeting in the capital of Serbia, the biggest financial event there since 1979, the development bank for the ex-communist states of central and eastern Europe and former Soviet Union hopes to restore investor trust in the region. «Increased political stability and further integration through intra-regional trade may also help to make the region more attractive to investors over the medium term,» the bank said in its transition report, published yesterday. Senior officials praised the economic progress made by countries in the region in the post-conflict years, but urged them to continue with the reform process, anchored by the long term goal of European Union entry. «I hope that this process will take place in this region as soon as possible,» said EU Monetary Affairs Commissioner Joaquin Almunia in Belgrade on Sunday. «There is no alternative to this process of reforms. It is an opportunity that cannot be missed.» Putting its money where its mouth is, the EBRD announced ahead of the meeting it will lend Serbia at least 200 million euros to improve its roads and the financial sector. Last month, the EU recommended opening talks on a Stabilization and Association Agreement with Serbia and Montenegro, and Croatia hopes to start entry talks this year. But with several war crime suspects still at large the region’s nations still face political hurdles on their road to membership. The EBRD meeting is set to confirm the lender’s growing commitment to the poorer areas within its remit in southeast Europe and states of the former Soviet Union. «What I am going to say in Belgrade… is that, yes we have already done it, but we are going to move more and more to the east and southeast, that the center of gravity is moving,» EBRD President Jean Lemierre told Reuters in an interview last week. Lemierre was due to address the opening session of the bank’s Board of Governors yesterday. In its transition report, the London-based bank said those nations were more vulnerable to swings in global investor sentiment than the eight former communist countries of central Europe that joined the EU last year, and those preparing for membership. The EBRD said new and prospective EU members were poised to weather the global economic slowdown thanks to a steady stream of foreign investment. The nations of southeast Europe, for which EU membership remains a distant prospect, are less immune and growth in the region is expected to slow to 4.9 percent in 2005 from last year’s buoyant 6.4 percent expansion. «In a tighter global environment these countries may find it difficult to attract sufficient capital inflows, particularly FDI (foreign direct investment), to replace the declining official (aid) flows,» the bank said in the report. The EBRD was established in 1991 to fund investments to help build market economies in the former communist states of central and eastern Europe and central Asia. In its early years it had focused on central Europe, but as they moved closer to EU membership and proved successful in attracting billions of euros in private investments the EBRD began shifting its activities further south and east. So far the bank has invested 25 billion euros ($31.6 billion) in development projects across the region, and mobilized private capital for investments worth a total of 78 billion euros.