The European Bank for Reconstruction and Development could make its first investments in Kosovo and Montenegro as early as September, an official said Thursday.

The multinational development bank was set up in 1991 to help the countries of central and eastern Europe and the former Soviet Union.

Kosovo is still legally a province of Serbia, while Montenegro is joined with Serbia in the Federal Republic of Yugoslavia, which is not a member of the bank.

Still, the bank could invest indirectly in both Kosovo and Montenegro through existing projects in nearby nations, said the official, Charles Frank.

"We have a legal basis for operations in Montenegro provided we do it through operations in neighboring countries," said Mr. Frank, who is first vice president of the bank.

Mr. Frank also said that this year it plans to make new commitments to invest $479 million in the six countries affected most by the Kosovo conflict: Albania, Bulgaria, Bosnia-Herzegovina, Croatia, Macedonia, and Romania. The bank intends to increase that amount next year, he said.

Officials of the development bank have already visited Kosovo to assess investment opportunities there and have prepared a strategy that would allow the bank to invest in the province.

"We have presented a short-term action plan and said we don't need to have Yugoslavia as a (bank) member," Mr. Frank said. The development bank's board has said it will consider and perhaps authorize the plan, he said.

The European development bank is examining the possibility of lending to companies in Kosovo and Montenegro through banks based nearby that could establish branches there, Mr. Frank said.

The development bank is also in talks with a manufacturing company that has a branch in Kosovo and with an equity fund it helped establish in Albania that could also invest in the province, Mr. Frank said.

The bank is also preparing a medium-term strategy that would require it to make direct investments in both Kosovo and Montenegro.

Mr. Frank said Montenegrin President Milo Djukanovic has asked to meet with the development bank during his visit to the Balkan Stability Pact summit, which formally begins today. Mr. Djukanovic will attend the summit at the invitation of the European Union presidency.

Though the development bank's investments in Kosovo are likely to be dwarfed by the sums pledged by European Union countries and the United States, Mr. Frank said his agency's activities could have a significant effect on the province's economy.

"On the whole, it's more important where the money goes," he said. "We can have a major impact with relatively little money."

Unlike other sources of funds for economic reconstruction, the European Bank for Reconstruction and Development invests primarily in the private sector and says it is particularly eager to provide funds to small and medium-size companies.

The bank has had discussions with potential foreign investors in Kosovo. Mr. Frank said it has detected some interest, though "not overwhelmingly large," among foreign investors, particularly in such sectors as hotels, telecommunications, food processing, cement, and metallurgy.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.