Big loans to big players

To many outsiders looking in, the seemingly resounding “yes” vote in Egypt’s recent constitutional referendum might suggest that, three years on from the January 25 protests that kick-started the country’s revolution, the democratic transition is healthily moving forward.

Yet the violence that occurred last week during the third anniversary of January 25, with official estimates from the Ministry of Health reporting at least 64 dead and more than 1,000 detained by security forces — this the day after four bomb blasts in Cairo killed another four people and injured 76 — is a sobering reminder of the country’s tenuous state of flux.

Uncertainties surrounding the precarious political situation have not guaranteed access to social justice, better living standards or the protection of human rights for those that set out three years ago to demand just that.

Indeed, the last six months in Egypt have seen the most intense repression against those striving for justice since the revolution began — the country has witnessed a military takeover, in addition to a recent spate of violence and the killing of another 1,300 protesters, the vast majority of whom at the hands of state forces.

But what could be seen as a disastrous backtrack for the revolution has been a boon for the international financial community. Shortly after January 25 2011, the European Union and its allies in the United States tasked the European Bank for Reconstruction and Development (EBRD) to aid Egypt’s blossoming transition.

Established in 1991 to lend to countries in Eastern Europe and the former Soviet Union, the EBRD’s work centers on fostering transition. And unlike the World Bank and other multilateral financial institutions of its ilk, the EBRD should only lend to countries committed to democracy.

As outlined in its founding mandate, “The purpose of the bank shall be to foster the transition towards open market-oriented economies and to promote private and entrepreneurial initiative in countries committed to and applying the principles of multiparty democracy, pluralism and market economics.”

This is what it is meant to be doing, at least.

EBRD’s lending policies have had mixed results. A recent study by academics at Harvard and Cambridge Universities found that the rash wave of privatization and market reforms that the bank pursued just after the crash of the Soviet Union led to economic ruin and increased levels of corruption.

In spite of the havoc it wreaked in Eastern Europe, the bank did little to amend its modus operandi upon entering Egypt and other countries of the region — Tunisia, Morocco and Jordan. Bar some formal nods to gender rights and small businesses, the bank’s approach has stayed the same: Promote the private sector to promote democracy; promote the private sector to promote social justice.

To be sure, EBRD is working in full swing in Egypt. Since Egypt began receiving loans from the EBRD in August 2012, the bank has lent 110 million euros for four projects across the country, most recently inking a deal with IPR Transoil Corporation, IPR Energy Red Sea and IPR Energy Suez for field development and upgrades at their oil and gas operations.

The ironic tragedy is that the very next day after the EBRD signed this loan, security forces raided the offices of the Cairo-based Egyptian Center for Economic and Social Rights (ECESR).

As it stands, the EBRD is convinced that lending to the energy sector and to agribusiness — one of the most recent loans that it is considering in Egypt is for the food giant Nestle — is the way to assist democracy and development in the region. This approach is at least ignorant, if not hypocritical. Egyptian NGOs are already concerned that to date they have not been properly involved in decisions about the projects that the bank is financing in the country.

On Monday, ECESR and other Egyptian and international NGOs sent a joint letter to the EBRD president, Suma Chakrabarti, in which they argued that, “The EBRD sends a very clear message that it is acceptable to implement loans while ignoring preconditions to democracy in revolutionary times within a deeply troubled and divided country.”

The NGOs also ask the bank to “draw a benchmark beyond which it shall no longer engage nor expand in a country of operation.”

If the EBRD is to stay in a country like Egypt, it needs to work harder. It needs to be responsive to the challenges of implementing democratic processes, while remaining alert to abuses of human rights and calibrating its lending policies in response to such developments.

Most importantly, it needs to work together with Egyptians to understand what the country really needs, rather than continue its usual game of handing in big loans to big players. 

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Kuba Gogolewski