The European Bank for Reconstruction and Development (EBRD) is fast shaping up to be a major supporter of Jordan’s economy, having sunk no less than $260 million into a variety of projects over the two years it’s been operating in the Kingdom.
This year alone it has boosted its investments in the Kingdom to top $130 million. “If you look at the size of the economy, it’s not the biggest in the region, but that’s a huge boost from a standing start from a bank that wasn’t here two years ago,” EBRD’s President Suma Chakrabarti told Venture during a brief visit to Jordan last month.
The EBRD has just sent its first country strategy for Jordan to the bank’s board for approval. The plan, which outlines the main sectors the EBRD wishes to invest in, revolves around three main themes; energy, SMEs, and municipal development.
In the energy sector, Chakrabarti said his bank will mainly focus on renewable power projects and helping debt-saddled NEPCO with developing its transmission line network. Chakrabarti stressed that Jordan should still pursue a broad-base portfolio to secure its energy needs, despite a recent agreement to import gas from an offshore Israeli gas field. Some energy experts fear the agreement, which could meet Jordan’s energy needs for 15 years, would allow the government to sideline other energy projects, particularly renewables where many foreign investors have shown great interest.
But Chakrabarti said Jordan’s Ministry of Energy strongly assured him these green-minded projects would still go ahead. “If it hadn’t gone ahead for any reason then it would’ve had quite a bad effect on foreign investment into the country, not just in the [renewable] area. Everybody is observing this area because everyone knows that it makes economic sense for Jordan to go down the solar route. So it would look very odd to foreign investors if in this area Jordan says no to foreign investment.”
A further $30 million loan was signed last month with the Abdali District Heating and Cooling Company, which is set to build the country’s first district cooling and heating plant at the Abdali regeneration project. This comes less than a year after the bank lent $80 million to the company developing the huge Abdali Mall, as part of the EBRD’s support for the private sector.
The EBRD has also shown strong support for small and medium sized enterprises. It recently approved a four-year lending framework of $150 million for the country’s SMEs. Heike Harmgart, head of the EBRD’s Jordan office, said they will most probably lend out $25 million of the total amount to Bank al Etihad and the Cairo Amman Bank this year. “We started with two banks, and we are hopeful that this will be an example for more banks,” said Harmgart.
SMEs make up 95 percent of Jordanian companies, 70 percent of private sector employment, 40 percent of GDP, but end up getting only 11 percent of lending from banks, said Chakrabarti. “These SMEs are starved of finance. I think one of the things that we need to do with SME lending isn’t just about money, but about making the banks in Jordan more capable of lending to SMEs, because many of them don’t really have SME specialists.”
As for municipal investment, they will support projects in a number of areas, such as transportation, waste water disposal, and street lighting, with the aim of improving energy efficiency and delivering better services.
“Every year we are going to increase [funding] and that’s the plan,” Chakrabarti said. “Unlike some of the banks, we don’t publish a figure for every year going forward because ours depend on demand—it’s very private sector led. There’s plenty of demand so I expect the numbers to be higher in the future.”
The EBRD was established in London in 1991 after the fall of the Berlin Wall. The organization has investments worth $2 billion spread across Morocco, Tunisia, Jordan, and Egypt.