EBRD, Egypt discuss developing country’s water desalination sector

Hagar Omran
12 Min Read

The European Bank for Reconstruction and Development (EBRD) discusses with the Egyptian government developing the country’s water desalination sector, said Heike Harmgart, Managing Director for the Southern and Eastern Mediterranean (SEMED) region at the Bank.

“We want to potentially prepare a number of desalination plants on a public–private partnership (PPP) basis in the same manner we prepared the 6th of October Dry Port Project which was recently awarded to a large private sector consortium,” Harmgart added.

Interestingly, EBRD’s interest in developing Egypt’s desalination sector is in line with the country’s efforts to face water shortage issues through alternative solutions due to the shaky outcomes of the Grand Ethiopian Renaissance Dam (GERD) negotiations.

Egypt is expanding the implementation of desalination projects with costs worth EGP 200bn which will increase to EGP 300bn in 2020, President Abdel Fattah Al-Sisi said on 13 October 2019.

Political events in some countries in the SEMED region do have an effect on the economy and the overall business environment which includes the appetite of foreign investors, she added.

“As a development Bank, we are more resilient to political events and we are committed for the long run to develop the economies of our countries of operations, not only through our financial support but also by strengthening their governance and by creating an enabling investment climate as well,” she assured.

Daily News Egypt seized Harmgart’s first interview to the Egyptian media since assuming office in December 2019, to learn more about the Bank’s plans for 2020 in Egypt and SEMED region, transcript of which is below, lightly edited for clarity;

What is EBRD’s plan for Egypt in 2020?

Egypt has done very well in putting forward the reforms over the last three years and is becoming more dynamic, competitive, and attractive to foreign investors.

We will continue in 2020 investing across all sectors and increasing our support to the private sector, which accounted for 80% of our financing in 2019.

Equity is an important sector for us and we try to do more this year however they are limited compared to the loans we provide.

What is the share of the banking sector of the total EBRD’s funds for Egypt in 2019?

In total, 25% of our investments in Egypt are in the financial sector but more importantly is the impact that the Bank is trying to achieve through its investments in the financial sector.

The Bank has previously introduced small and medium enterprise (SME) lines to help target that particular sector of the economy, it has also introduced GEFF lines and Women in Business credit lines to directly provide better access to finance to target specific segments of the economy to ensure financial inclusion.

In 2019, the Bank introduced for the first time Youth in Business and Skills in Business lines to promote access to finance for the young and skilled population of the economy, which we rolled out through our credit line to the National Bank of Egypt (NBE).

Can you please elaborate on the EBRD’s SMEs assistance in Egypt in 2019? What is the plan for 2020?

In addition to our financial support to SMEs that I mentioned, we also run our advisory programme, which provides direct technical assistance to SMEs. In 2019, we started 200 new advisory projects which include 46 projects owned and led by women and 60 projects are in Alexandria and its neighbouring governorates in the Delta.

This year we are planning to start 158 new advisory projects with a special focus on youth and employment.

What is the exact timing of EBRD’s inauguration of new branches in Egypt in 2020?

We are aiming to inaugurate two offices in 2020. We will open the Ismailia office in the first quarter (Q1) and Assiut towards by the end of the year.

How many projects does the Egyptian government negotiate with EBRD now?

The Bank is in constant dialogue with the Egyptian government to identify key priority projects to which it can contribute effectively. One of the key priorities of the EBRD is to increase private sector participation in infrastructure projects which are typically undertaken by the state.

The Bank also seeks to improve governance of state own entities through direct engagements.

Did EBRD take real steps to assist Egypt in offering its state-owned companies and military owed enterprises in to EGX? Do you think 2020 will witness updates in this file?

We are still looking forward to our first investment in the government’s state companies’ offering programme, which we hope to have an effective engagement to improve governance on the level of state-owned companies. We also welcome the idea of offering military owned enterprises (MOE) on the EGX, which would help level the playing field, and in turn, help unlock FDI for Egypt. The devil is in the details of course and we wait eagerly to understand how this will be implemented to see how we could potentially engage on a constructive basis.

Will EBRD announce new projects in the water sector with Egypt in 2020?

We are very interested in developing the water desalination sector and we are in discussions with the Egyptian government to potentially prepare a number of desalination plants on a PPP basis in the same manner we prepared the 6th of October Dry Port Project, which was recently awarded to a large private sector consortium.

What is the total amount that EBRD offered for SEMED region in 2019? What are the expectations for the region’s funds in 2020?

We have been very active developing the economy in the SEMED region, which currently includes Egypt, Jordan, Lebanon, Morocco, Tunisia, the West Bank, and Gaza. Our investments have reached more than €11bn in 255 projects across a wide spectrum of sectors of which 72% are in the private sector.

In addition, we have an advisory programme for small businesses supported by the European Union. In 2019, we provided our support to 676 projects.

Do you think that the recent political events in some countries in the SEMED region would negatively impact your activities there?

EBRD was founded after the collapse of the Soviet Union, which is by itself a historical political event that has marked the 20th century and our current time. Since then, we have been active in our countries of operations despite the difficulties.

Political events do have an effect on the economy and the overall business environment including the appetite of foreign investors. But as a development Bank, we are more resilient to political events and we are committed for the long run to develop the economies of our countries of operations not only through our financial support, but also by strengthening their governance and by creating an enabling investment climate as well.

Can you please rank the SEMED’s countries in terms of the largest recipient of EBRD’s funds?

The size of economies in the SEMED region varies from one to another and obviously, our investments reflect the relative size of the economy. Egypt is by far the largest economy in the region and for the second year in a row, it topped the Bank’s annual investments with €1.2bn in 26 projects in 2019.

Since we started working there, we have invested over €6 billion in Egypt. We have so far invested close to €1.5bn in Jordan, over €2bn in Morocco and close to €1bn in Tunisia.

In Lebanon, the West Bank, and Gaza where we started investing only 2 years ago, our investments are €558m and €15m, respectively.

How many projects do you have in the SEMED region? What about the expectations for the projects’ numbers in 2020?

In just eight years, we have invested over €11bn in more than 250 projects in the region and we expect to have another strong year in 2020.

How many offices do you have in the SEMED region? Do you have plans to inaugurate new offices in the region in 2020?

We believe it is very important to have a presence on the ground so we have a better understanding of the countries where we work. It allows us to maintain closer relations with our counterparties including the clients, the authorities, and other international financial institutions (IFIs) and stakeholders. This helps us deliver even more impact in the countries we serve.

We have nine offices in the region, including offices outside the capitals to help develop regional integration and to reach out more broadly across the countries. We have two in Egypt (Cairo and Alexandria) with plans to open another two this year.

We have three in Morocco (Casablanca, Agadir, and Tangiers), two in Tunisia (Tunis and Sfax) while we have one office for Lebanon and one in Jordan from which we serve the West Bank and Gaza.

What are EBRD’s main economic sectors in the SEMED region?

We focus across the SEMED region on supporting the competitiveness of the private sector, helping to improve access to finance for small and medium-sized enterprises and achieving greater economic integration and increased opportunities for women and young people.

We also work on the modernisation of municipal infrastructure and on improving the quality and sustainability of public utilities through private sector participation and helping to improve the level of services in each country.

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