By Nevena Krasteva
The European Bank for Reconstruction and Development (EBRD) is a top investor in Southeast Europe. It has been investing over a billion euro per year in the Western Balkans in the past years. In Bulgaria, Croatia and Romania, the EBRD’s investments in 2021 totalled 970 million euro.
The Covid crisis and the war in Ukraine deepened divides within societies in Southeast Europe (SEE), as well as between this region and Western Europe. How is the European Bank for Reconstruction and Development (EBRD) helping bridge these gaps?
The Covid pandemic had a huge effect on exacerbating inequalities across a range of different areas. If you look at women for example, they shouldered the bulk of responsibilities during the Covid period and were more affected by changes in the labour market when some industries basically had to shut down.
Women-led enterprises in sectors that were substantially affected, the service sector for example, very often had to close for long periods of time. Gender-based violence too is always an issue, and particularly so during crises. Women were exposed to a number of additional barriers and risks, and so were young people. Their education was interrupted, creating huge, sometimes life-long challenges in terms of earnings and opportunities to complete their education and enter the labour market, which is always a difficult process, but particularly hard during times of crises.
Regional inequalities too were exacerbated, for example as a result of the challenges the tourism industry faced and the implications that this had on the economies of the affected regions. Also, global value chains are changing. The challenges really have been multiple.
And now, on top of that, the war that is being waged in Ukraine has a huge impact on Ukraine itself, but also on the surrounding regions. Bulgaria and Romania are seeing a huge influx of refugees coming into the countries. The energy security challenges, which were already there even before the Ukrainian crisis, are now exacerbated. In terms of food security, wheat imports from Ukraine and Russia too are having an impact on global commodity prices in this context. The challenges arising from these two crises are multiple, one overlaying the other.
Initially, as part of the Covid response crisis, we put together a Resilience Framework that specifically looked at supporting our countries of operation. For example, if you look at the people aspect in relation to enabling SMEs to continue to access finance, there is a lot of support to the banking sector and entrepreneurship, including women in business. We also work with corporate clients to help them understand to what extent they need to downscale their workforce, at least temporarily, and how can they do that in an inclusive way, without disproportionately affecting for example women or young labour market entrants.
Yet some corporate clients actually had to upscale. We had clients in the retail sector who suddenly had to provide all their services online. They had to upscale very fast and recruit huge numbers of people, and we helped them do that, making sure that equal opportunities and labour market standards were met in this context. At the same time, we continued with our infrastructure investments, with a special focus on inclusive infrastructure in this context.
We had this entire crisis response package, and then, with the war in Ukraine, we had to come up with a second crisis response package, which we have called a Resilience and Livelihoods Package with the important stress in my view on the livelihood aspect. We really see the centrality of making sure that whatever crisis response we put in place, it focuses on the people affected – on the refugees, on the host communities, and the challenges that they both face.
Specifically, in the context of the Ukraine, our resilience framework is about energy security, about food security, and in affected countries beyond Ukraine itself, it is about supporting SMEs that may have supply chain challenges with advisory services, about working with the banking system to ensure that they keep lending to SMEs, but also about capacity building for SMEs to know how to handle this situation. We work with corporate clients to employ refugees, to continue to offer employment opportunities to the local population, reskilling and upskilling and whatever is required.
And then on the infrastructure side, it is about particularly working with those communities that promptly have to deal with the longer-term consequences of this influx of refugees. We know from World Bank data and from experience within the UN that refugee crises are not short-term. On average, if you look at the 26 million refugees globally, they tend to stay an average ten years in another country. We need to work with the affected communities to find a solution in terms of housing, transport infrastructure, and municipal infrastructure. That’s another very important aspect of what we are doing.
We have talked about the challenges related to the influx of refugees, but what about the outflow of people from Southeast Europe? What incentives could countries in SEE offer now, in this context, to attract young entrepreneurs?
I think there are a lot of things that can be done. We are working in our countries of operations with our key partners and with the International Organization for Migration (IOM) to strengthen the focus on circular migration.
In a way, particularly in the Western Balkans, we have the perfect storm. We have very low female labour market participation, we have high outward migration and we have also low engagement in the labour market of all the workforces, people tend to stop working early, the retirement age is still relatively low. The size of the workforce that is left is too small. I think that what countries really can do, rather than try and prevent people from emigrating, which is a very difficult thing to do, is to focus on circular migration.
There are some really interesting schemes that the IOM and the International Centre for Migration Policy Development (ICMPDN) have, that we are looking to support, where you enable people to go abroad, gain experience but then encourage them to come and bring back that experience in the form of entrepreneurship and investments. Through labour market policies you can give an incentive for people to come back and bring back their human capital into the countries. We had our very successful Women in Business programmes in Southeast Europe and we are now looking to transfer that particular approach also towards younger entrepreneurs. Together with our partner financial institutions we are looking to target that group and to develop services and products that from a financial point of view support young entrepreneurs to further grow their businesses, to provide them with access to finance, also coupled with advisory services and know-how and networking and capacity building.
From our side the focus is on building the capacity in the banking sector to recognise young people as a viable market segment that is worth investing in. But at the same time it is also an incentive for young people to either stay or in many cases return. We see some very impressive examples of young entrepreneurs who have come back to their countries. We have some very interesting examples of young entrepreneurs who came back to Bosnia with some business ideas and who have set up there their businesses very successfully.