The European Bank for Reconstruction and Development (EBRD) plans to boost equity investment in the Balkans in a move away from debt finance, the bank's president told Reuters on July 16.
The move by the development bank for east Europe and the former-Soviet Union, which has already invested 1.6 billion euros ($2.21 billion) in Serbia, Montenegro and Bosnia, will boost competitiveness and trade and create jobs, Jean Lemierre said. "When we finance infrastructure, it's mainly debt. But looking at the private sector my strong view is that the portion of the equity part of the deal would increase," he said.
In its recent financial report, the bank said the business environment could become increasingly challenging as it continues to shift activities east and south and that the benign risk environment "may not hold". "The world and the whole region, the eastern part of Europe, enjoy today very good conditions of funding," Lemierre said, but added that global conditions could become less positive.
"But on the Balkans and even more on Serbia, we see a positive trend, especially after the decision about the European Union and Serbia," he said. "Serbia is a very important country for the Balkans and Serbia will make the tone for the Balkans."
After the latest round of talks with the European Commission last week, Serbia looks likely to initial a pre-membership pact with the EU in October, giving it six years to adjust to EU trading rules.
That will release EU funds needed for reform. Lemierre said that for foreign investment in Serbia to rise, a settlement of the status of Kosovo's sovereignty would be needed, something that Serbia, with the aid of Russia, has been blocking.
"Investors will monitor this very carefully and a smooth and positive progress towards a solution would be very important for investors," Lemierre said, adding that the Kosovo issue was part of the western Balkan picture investors were monitoring.
Lemierre said the EBRD was ready to take part in any privatisation efforts, through lending or equity investment. Serbia plans to put its NIS oil monopoly, JAT Airways flag-carrier and its former aircraft maintenance unit up for sale in 2007.
There are no plans to privatise the power monopoly EPS, but there could be ways for improvements other than privatisation, Lemierre said. "Privatisation is sometimes seen as a black-and-white approach but you can go different ways...The power sector will need investment and my main message here will be that there is a need to invest in power," he said.