The EBRD may struggle to deal with the challenge of assisting Libya, which the bank is expected to confirm as a member at its annual meetings, analysts have warned.
Libya applied for membership of the bank in December 2013. The EBRD’s board of governors is due to vote on the country’s admission this week, but senior bank staff expect that confirmation is a formality.
The EBRD began working in the Middle East and North Africa in the aftermath of the Arab Spring uprisings, which deposed governments across the region. Morocco has been a shareholder in the bank since 1991, while Egypt, Jordan and Tunisia joined in 2011.
All four attained country of operation status in 2013. The EBRD invested €500m into the region in 2013, and has a pipeline of between €500m and €1bn in the region for 2014.
Egypt in particular has been a challenging environment for the bank. The country followed 2012 elections with a military coup in 2013 that deposed a controversial — but democratically elected government.
Libya is an even more complex context, analysts warned, and one that the EBRD may struggle to adapt to. “Libya is a special case, and is entirely dissimilar to Morocco, Jordan or Tunisia,” said Jason Pack, a consultant and Libya specialist at Cambridge University. “Egypt is beginning to be totally screwed up, and the institutions don’t function — but at least they have them.”
Armed militias still hold sway over large areas of Libya, and disputes over the control of energy resources continue to disrupt exports. For the past eight months, rebel groups have occupied the crucial eastern oil ports of Ras Lanuf, Es Sider, Zueitina and Hariga, costing the country an estimated $7bn in lost revenues.
Libyan institutions have no political power, Pack said, and are incapable of making unpopular decisions. “Although the state controlled everything, the state was Gaddafi’s family. With the Gaddafis out, who controls the state and [former state institutions] is just a free-for-all.”
Hildegard Gacek, EBRD managing director for the southern and eastern Mediterranean acknowledged there were institutional weaknesses to be overcome, and that the security situation in the country could make operating there more challenging than the bank is used to.
“The security situation is of concern. We will take sufficient measures to make sure that staff are not exposed to undue risk,” she said, adding that the bank may decide to run the operation out of its London office. Even so, Gacek added, the bank’s mandate, backed by is shareholders, mean that it is required to seek out difficult political environments and not wait for conditions to improve.
“We are in a chicken and egg situation. Do we wait for the chicken or do we start with the egg?” she says. “Libya is in a very difficult situation, and Libya needs every support that donors, including the EBRD, can provide.”