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The private sector is the best way to help refugee-hosting communities

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Delivered by: 

Sir Suma Chakrabarti, EBRD President


EBRD HQ, London


Enabling the Private Sector to Support Refugee-Hosting Communities

Speech delivered ahead of the "Supporting Syria and the Region" Conference

Good afternoon and welcome to the EBRD.

Thank you, everyone, for joining us.

I know that many of you, our guest speakers included, have responded to our invitation to be here today at short notice. We appreciate your being here with us.

I would also like to express my gratitude to everyone here at the EBRD - and the hosts of tomorrow’s “Supporting Syria and the Region” Conference - for all the hard work to make this event happen.

There is a real sense of urgency about the themes we are going to discuss this afternoon.

The civil war in Syria is an appalling tragedy in itself.

But it has also provoked an enormous humanitarian crisis beyond its borders.

Millions of people have been on the move.

Many of the countries where we work are on their route out of Syria and are under huge strain themselves.

The ramifications of all this are being felt right across the Middle East and Europe.

That’s why it is so important that we mobilise our resources to help the refugees’ host countries – and the refugees themselves.

I am confident that today’s discussions here in London can help us with that goal.


The EBRD and its history

The scale of this crisis is such that the whole of Europe is involved.

This was not the vision for Europe we had when the EBRD was founded 25 years ago.

Our core mission then was to develop open and sustainable market economies in countries committed to, and applying, democratic principles.

The focus back then was on the countries of Central and Eastern Europe and the soon-to-be ex-USSR.  

We’re now active on a much larger geographic scale: from Morocco to Mongolia, from Estonia to Egypt, we like to say.

But that core mission – and our emphasis on working with the private sector to fulfil it – is still the same.

We recently adopted new strategic priorities to help us deliver that mission in the world we live in today. 

One of them is strengthening the economic resilience of the countries where we invest.  That means making them more competitive, stable, inclusive and better governed.

Another is addressing global and regional challenges.

At the time those priorities were approved, last May, I listed three of the many things the EBRD excels at.

  1. It delivers results.
  1. It innovates and modernises.
  1. It faces up to challenges squarely and directly.

Ladies and Gentlemen, the crises we are currently witnessing in Syria’s neighbours hosting refugees are a stern test of those countries’ resilience.

They are a major regional – and global – challenge.

I would argue too that, for the EBRD, they are a powerful warning against complacency about who we are and what we do.

It is imperative that we confront these challenges head on.


The EBRD in the region

I mentioned just now the way we at the EBRD have expanded our footprint since 1991, the year we opened for business.

In fact, two of our ‘newer’ countries of operation are particularly relevant to the themes we are looking at today.

One is Turkey, which is an astonishing EBRD success story.

We only started investing in the country in 2009. Last year, for the second year running in fact, we invested more in Turkey than in any other country.

The 2015 figure was a record €1.9 billion.

We’ve had real impact on the ground, across all of Turkey. We now have three offices there, including one in Gaziantep in the south-east, the very region hosting many Syrian refugees.

We intend to do much more.

For now, I would highlight two of the priorities we have set ourselves in our recently adopted Turkey country strategy.

One is: improving the quality of infrastructure with the participation of private sector.

Another is: promoting regional and youth inclusion, as well as gender equality, to support long-term growth potential.

Both of these priorities are crucial to helping the host communities in Turkey to manage the large refugee flows.

Let’s move south now to Jordan.

We have only been investing there since 2012.

But the four countries of what we call the Southern and Eastern Mediterranean, which also include Egypt, Tunisia and Morocco, are a very fast growing area of our operations.

Let me cite a few of our strategic priorities in Jordan.

Among them are:

Boosting the creation of high quality jobs, including for women, to further develop a thriving private sector;

Promoting infrastructure reform and facilitating non-sovereign financing, where feasible, to develop the efficient delivery of infrastructure services;

And supporting water and energy efficiency in the municipal sector.

All of these are relevant to helping Jordan manage the influx of refugees.

I would also like to take this opportunity to mention Lebanon, another country hosting large numbers of refugees.

We are not currently working in Lebanon. But its request to become a shareholder has been approved, with a view to being a recipient of EBRD investments in the near future.

I am sure we could have a similarly transformative effect on the ground in Lebanon as we have had elsewhere.

We have also witnessed an upsurge of refugees fleeing the Western Balkans.

There we intend to expand some of our existing lending to Micro Small and Medium-sized Enterprises and the agribusiness sector to deal with the causes of outward migration and to reintegrate returning migrants. 


New challenges

Such is the scale of our work in our region and some of the countries neighbouring Syria.

And, of course, those same countries are now playing host to millions of men, women and children who are fleeing the bloodshed in their native land.

This influx poses acute challenges for their labour markets, social cohesion and public services, as well requiring the emergency provision of shelter and humanitarian assistance.

By public services, I mean water, waste water, solid waste and urban transport, as well as others.

A small proportion of the refugees are in camps. But the majority are spread across the population at large. In Turkey, this includes a concentration in border regions as well as a presence across the country as a whole.

More than half the refugee population in Turkey is young, requiring education and seeking entry into the (informal) labour market.

And there is an important gender aspect to the crisis. In Turkey, half the refugees are female, the majority of whom are not in paid employment because they are care providers or cannot find work.

It is one thing to listen to these alarming statistics here in London, quite another to see for oneself.

I hope to do exactly that - see for myself - when I visit Turkey later this month.

In Jordan the situation is critical. There, at least one in five of the population are actually Syrian refugees – and many of them concentrated in the country’s north.

Here then are the challenges that the EBRD must face up to ‘squarely and directly’.

The good news is that we can do so in sectors of the economy where we have a notable track record: support for municipal services and support for small businesses.

Two important principles we will follow in this work are that it should benefit both host communities and refugees and that it should not grow the informal economy.  

Another is the central role of the private sector in securing sustainable medium-term livelihoods for both refugees and their hosts.  

That tallies with everything we have learned over the quarter of a century we have been in business.

One clear message I would convey from today’s proceedings is the need for international organisations, bilateral donors and multilateral development banks to foster partnerships with the private sector as they look beyond the short term humanitarian response to what is going on.

And we at the EBRD can help facilitate that dialogue and public-private partnerships in general. It’s one of our strengths.   

Work is already underway to engage the private sector in this and I hope that today’s event can give those efforts added impetus.

These are, after all, the economic opportunities that tomorrow’s conference will be looking at, as well as raising new funding to help those affected by the crisis.


EBRD priorities

We’ve already made a start in boosting our support for services trying to cope with the increased demand.

As many of you know, Jordan has a critical shortage of water resources. Water consumption per capita and per day there is among the lowest in the world.

Ageing infrastructure also leads to serious water losses, especially in densely populated areas, where the majority of refugees are now housed.

We’ve addressed this problem in the past with investments in the country’s water infrastructure.

A new project, backed by a loan of up to US$ 14 million to the Water Authority of Jordan and signed in December, will allow an urgently needed upgrade of the sewerage network and more capacity to deal with the increased burden.

Note that this latest project was built on the strong foundations of previous work in the same sector.

We can do the same - build on strong foundations - in small business support, job creation through the private sector, and economic inclusion as well.

We have tried and tested ways of providing credit lines to local banks and microfinance institutions and technical assistance to small businesses, including businesses led by women, in many countries, including Turkey and Jordan.

We can offer direct finance, with risk-sharing and post-investment support, to flagship SMEs.

We can also source know-how via consultancy projects and support resource centres to provide information about starting a business.


We can do this now

And we can start doing this now.

We are ready to go, with highly qualified and experienced staff already in place.

Our plans flow out of our overall strategy for the next few years, in particular boosting economies’ resilience.

And they also reflect our strategies for these individual countries. 

Clearly, there are still many obstacles to overcome before we can have the impact we would like, not least the lack of clarity regarding work permits.

I am glad to see that progress is being made on this front. 

But our plans build on existing projects and pipeline – and acknowledged expertise in engaging with and mobilising the private sector.

That is our calling card.

I would stress too that we are, as always, ready to work very closely with our friends and colleagues from other multilateral development banks in dealing with these crises.

I have said many times that the IFIs can and should be greater than the sum of their parts.

But they can only be that if they do a better job of pooling their talents and leveraging their own special skills.

This is another great opportunity to grasp the nettle and rise to that particular challenge.


The importance of donors

I touched earlier on the principles which will guide our efforts in this sphere: 

That they should benefit both host communities and refugees;

And that they should strengthen the formal, rather than the informal, economy.  

There are some other principles at play here too, notably the principles that govern the way the EBRD operates day to day.  

We need to fulfil the terms of our mandate and abide by the business model that has been at the root of our success for 25 years:  sound banking accompanied by structural reforms.

Over time that model has been bolstered in no small way by the very generous support of our donors.

In the Southern and Eastern Mediterranean and Turkey, donors and shareholders alike have provided grants for technical assistance to help prepare and implement investment projects, and for policy dialogue.

Additional funds have also been made available in the form of investment grants, risk sharing and incentive payments to support investments.

Now, in our response to this current crisis, we are faced with two new, exceptional circumstances: significant affordability constraints and higher levels of risk.

For example, many municipal budgets across the region are overstretched.

Host communities therefore face even higher barriers to investing in the improved municipal and environmental infrastructure they so desperately need.

For the projects we have in mind to support host communities and refugees to succeed and be sustainable, we will need substantial amounts of grant funding.

Indeed, without such grant funding we will not be able to get such projects off the ground.

I should add too that such funding would need to come on top of the resources committed by donors until now. These have already been largely allocated to the existing portfolio.  A reallocation of existing grant resources will not do.

We are now building a pipeline of infrastructure and private sector investment projects in Turkey and Jordan to support refugee-hosting communities, under which we could finance up to €500 million in new transactions subject to mobilising an additional €400 million in grants.

In order to contribute to the mobilisation of grant funding, management will propose to shareholders an allocation from the EBRD’s net income of around €100 million over a period of three years, 2016-2018, subject to appropriate governance rules and to the Bank’s continuing profitability.

Management will propose to shareholders an initial allocation of €35 million in 2016.

At the same time we are already in advanced talks with several donors and are ready to widen those discussions to involve more.

The more resources we can tap, the more investments we can leverage.

We are also looking into calling on existing and emerging multilateral funding sources.

Such instruments are very powerful as they enhance coordination and can offer sizable funding.

But, given the need to move swiftly, we also need to secure bilateral funding. That, typically, comes with faster sign off.

I repeat:  we already have projects and clients lined up and ready to launch.

We also have “in-house” vehicles and project delivery mechanisms in place for donors to channel their contributions without delay.

More projects such as the one to upgrade strained wastewater infrastructure in the Zarqa river valley can then be fast tracked and deliver results.

We really can secure sustainable livelihoods for men and women, whether from host communities or refugees.


Sum up

Ladies and gentlemen, one of the targets contained within the new Sustainable Development Goals obliges us all to “facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned, well-managed, migration policies”.

It sometimes seems that that will be one of the hardest targets for us to deliver in time for the 2030 deadline for the SDGs.

But we need to get to work because, however appalling the current human tragedy, I fear it will not be the last.

Migration crises and the strains they impose on host countries are going to be the new normal.

Jordan has many decades of experience of the problem already.

The world as a whole is going to have to get much better at coping with these crises.

Tomorrow some of you here today will be attending the “Supporting Syria and the Region” Conference in London.

I will be there too and I will report to world leaders on our proceedings here.

Despite appearances to the contrary, my message will be one of optimism.

We can support refugee-hosting communities - and the private sector is the best way to do so.

It can deliver investments that secure lasting and sustainable results for both refugees and their hosts.

I hope that some of you here in the audience today can lead the way on this.

Rest assured, we will be leading the way, in partnership with you.

Thank you very much.

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