|Paris III includes something for private sector, too
|The windfall from the Paris III donor conference will not only help Lebanon whittle down its mountainous public debt, but the country's small- and medium-size enterprises (SMEs) can look forward to hundreds of millions of dollars in financing becoming available in the next few months.<:I>
The European Investment Bank (EIB), the largest institutional donor at Paris III, has allocated to the private sector $724.5 million of its total pledge of $1.24 billion. Bank officials told The Daily Star Monday $78 million of that sum will be ready for Lebanese companies to snap up by the end of March through intermediary Lebanese banks.
The International Finance Corporation (IFC) also promised to make loans up to its $275-million country limit for Lebanon, and $200 million of that should be transferred within one month for Lebanese banks to lend to domestic firms, said Julia Brickell, IFC country manager for Lebanon.
The European bank's first tranche of $78 million is earmarked for long-term financing of SME investment projects in industry, agro-industry, IT, services, health and education, said Bram Schim van der Loeff, information officer at the EIB.
"We have a political mandate, a philosophy to try to help Lebanon get back on its feet in the current circumstances," he said. "We target the private sector to invest as much as we can."
The EIB's country manager for Lebanon, Carl-Fredrick Gronhagen, will arrive tomorrow to meet with local banks and Finance Minister Jihad Azour, Gronhagen said. He emphasized that the EIB pledge consists entirely of loans - the bank is not giving any grants. The interest rates will depend on the risks of individual projects.
The IFC is also targeting SMEs with its $200 million credit line for Lebanese banks, specifically SMEs affected by the summer 2006 war with Israel. SMEs represent the "bread and butter" of the Lebanese economy, which depends on services for about 70 percent of its GDP and cannot rely on natural resources or heavy industry as a safety net, Brickell said.
"We're looking to giving them much larger access to financing. The objective is getting to the SME sector, not a specific sub-sector. That's where you lift people out of poverty.
"They need access to finance; they need to refinance their existing commitments. We can see that access to funds for private companies is still an issue. They don't necessarily comply with the standards and criteria ... to get good rates."
The IFC intends to invest the remaining $75 million in microfinance, to finance trade expansion and to meet large loan requests that commercial banks might avoid. The IFC might also provide additional funds to the public sector for reform, privatization and financial-market development, Brickell said.
The EIB has also designated about $130 million to help SMEs recover from the war, but these loans must be approved by Parliament, which has not met since Lebanon plunged into its latest round of political chaos in December.
The EIB refused to disclose how it will divvy up the remaining $517.5 million for the private sector, but it will, for example, invest in public-private partnerships in the transportation and energy sectors, Gronhagen said.
Transportation and waste-water treatment should also absorb about $259 million of the EIB's public-sector loan commitment of $517.5 million. The EIB began working with the government about three years ago, and so these funds should arrive in "a shorter period of time," Gronhagen said.
The EIB and IFC are both pushing the privatization of Electricite du Liban (EDL), and are now developing projects to allow private companies to produce power and sell to the EDL grid, Brickell said.
The Daily Star