International Finance Corp's CEO says figure could rise to $2.5bn annually by 2014
The World Bank's private- sector lending arm plans to increase its investments in the Middle East and North Africa despite the political turmoil that has deterred many investors, its chief executive has said.
The International Finance Corporation (IFC) has set aside about $1.5 billion for 2011, but that figure could rise to $2.5 billion annually by 2014, IFC Vice President and Chief Executive Lars Thunell told Reuters in an interview.
Much of the focus is on improving education, supporting small- and medium-sized enterprises (SMEs) and bolstering infrastructure projects, thereby creating more jobs, Thunell said.
The IFC's role had become more important because of the slide in foreign investment following the turmoil in the region, which has hit economies in North Africa and the Middle East.
"Investments went down by 50 percent or more in some countries," Thunell said.
Joblessness has been one of the main catalysts of the protests and Thunell said it was essential to address the high level of unemployment, which runs as high as 25 percent among the youth.
Supporting small business is a main focus in creating jobs, Thunell said, adding that the sector provides much less employment regionally than the 80 percent or so in many advanced economies.
The IFC will dedicate $500 million to regional SMEs in 2011 through a new fund. And 50 percent of the overall $1.5 billion will be channelled to local banks, with the objective of getting funds to SMEs faster -- a larger proportion of the funding than the IFC usually puts into local lenders.
"It's an easier way of getting money out (to businesses) and I think we will be seeing more of that over the short term, being over the next year," Thunell said.
The IFC will have to work to overcome suspicions among newly empowered populations about the private sector and crony capitalism, with corruption an issue cited by many in Tunisia and Egypt in their fury against their former rulers.
"Many of the privatisations and concessions have been questioned. There is some suspicion among the average person," Thunell said.
Questions also remain over whether new governments in Egypt and Tunisia will be as liberal economically as the pro-Western regimes that preceded them. And in the absence of greater clarity, foreign investors are wary of funnelling their money into these countries.
"For us to work with the private sector, the government has to be interested in the private sector's existence," Thunell said.
"But we have a respect for governments doing what they think is right for their country, and try to work within that context," he said, pointing to sharia-compliant transactions the IFC has been involved in as evidence of its flexibility.
Thunell said the IFC is confident anti-private sector sentiment will fade when decision-makers realise they need to work with the private sector to tackle serious budget deficits and lagging economic growth.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.