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French Version

Euro-Mediterranean Partnership: the continued European Investment Bank's Support

During an intensive two day programme in Brussels, the Egyptian Minister of State for Foreign Affairs, Ms Fayza Aboulnaga and Dr El Saidi, Minister of Industry and Technological Development met with Chris Patten, Commissioner for External Relations.

The meeting was opened by R. Erdogan, Prime Minister of Turkey and held at Ministerial level under the joint chairmanship of the Turkish Minister for the Economy, Mr. Ali Babacan and EIB President, Mr. Philippe MAYSTADT. It was attended also by representatives of the European Commission, the World Bank group (WB and IFC), African Development Bank (AfDB) and the European Central Bank (ECB).
This PDCC session underlined the strong commitment of 27 European and Mediterranean Finance and Economy Ministers to forge a closer economic partnership; it also noted with satisfaction the tangible progress being made on implementation of FEMIP, despite the on-going politiTwo financing agreements were signed for a total of €73 million: Trade Enhancement Programme (€40 million); and Programme of Assistance to the Reform of the Technical and Vocational Education and Training (total €66 million of which EC contribution €33 million). The Ministers also had meetings in the Directorate General for External Relations (with Deputy Director-General Michael Leigh and with the Director Middle East and South Mediterranean Christian Leffler) and in EuropeAid (with the Director for the South Mediterranean, Near and Middle East Richard Webber). Discussions covered a wide range of issues linked to the programming and execution of the economic and technical co-operation programmes between the EU and Egypt. Both sides are committed to making bilateral co-operation 'better and faster' in its delivery and in its impact. The Ministers were also received by Philippe Busquin, Commissioner for Research & Development, when they discussed the state of play of the negotiations of the EU/Egypt Scientific Co-operation Agreement, both parties expressing the wish for a rapid and positive outcome. They also met Erkki Liikanen, Commissioner for Enterprise and Information Society to discuss subjects of mutual interest.
The visit builds on the October 2002 visits of Commissioner Patten to Cairo and that of Egyptian Prime Minister Atef Mohammed Obeid to Brussels. The timing was especially welcome given the ratification by the Egyptian Parliament two weeks ago of the EU-Egypt Association Agreement signed in 2001 which will mark an important milestone in the creation of the Euro-Mediterranean Partnership and the EuroMed Free Trade Area.

With Commissioner Chris Patten, the discussion covered the political situation in the Middle East, including the aftermath of the war in Iraq and the prospects for progress in the Middle East peace process. The Egyptian ministers expressed the urgency to move swiftly towards an independent and democratic Iraqi interim authority, as well as the need to make rapid progress regarding the implementation of the Quartet's Roadmap.

They also discussed current Egyptian economic and social development priorities in the light of the situation in the region, especially the enormous effect on Egypt's important tourist industry of the war in Iraq. The discussion was quite timely since the Commission is about to begin the programming of its 2004-2006 National Indicative Programme of co-operation with Egypt.

Finally, the meeting also covered the progress made in committing further programmes for 2003-2004, notably those covering the Integrated Local Development of South Sinai, Financial and Investment Sector Co-operation, and support to social development and civil society. The possibility of restructuring certain existing commitments to accelerate disbursements and payments was also explored.

Background Information

Trade Enhancement Programme: The TEP-B will last 30 months. The EU's contribution of €40 million will be disbursed in two tranches of € 39,6 million in the form of direct budgetary support and € 400,000 to finance the monitoring and evaluation of the programme. The programme aims at encouraging the implementation of reforms focused on cutting deadlines and costs associated with customs import and export formalities, strengthening export incentives, and reducing the deadlines and costs associated with checks on quality standards. The reforms are expected to contribute to the creation of conditions for higher and sustainable economic growth, by strengthening the contribution of exports to overall growth.

In 2002 the European Commission decided to commit € 53 million in financial support, of which € 20 million are funded in a first Trade Enhancement Programme (TEP-A) to upgrade the capacity of the Ministry of Foreign Trade and the efficiency of critical activities (export promotion, trade facilitation and customs administration).

Assistance to the reform of the Technical and Vocational Education and Training: The TVET, also signed by the Minister of Industry and Technological Development, Ali Fahmi Ibrahim El Saidi, for a duration of 6 years with a total budget of €66 million (€33 million being contributed by the EC). It will support the establishment of a number of pilot local Enterprise - TVET Partnerships (ETPs). These partnerships will include TVET providers in selected regions (Secondary Vocational and Technical Schools, Vocational Training Centres, and private training providers), as well as clusters of growth-oriented private enterprises. - The National Indicative Programme proposes wide areas of assistance including TVET reforms, trade enhancement and integrated local development (South Sinai). It supports social development, financial and investment sector co-operation, restructuring of the spinning and weaving sector, higher education (Tempus) as well as environment (Interest Rate Support to EIB loans).

Programming of additional actions for the period 2005-2006 is under way

General: Egypt is a major beneficiary of EU financial and technical co-operation and the portfolio of on-going projects covers a wide range of sectors, including private, social and economic development, environment, agriculture and local development. The framework of co-operation with Egypt is covered by a series of bilateral protocols as well as the MEDA programme, which was launched by the Euro-Mediterranean Partnership at the 1995 Barcelona Conference between the European Union and its 12 Mediterranean Partners to establish a common Euro-Mediterranean area of peace and stability. Commitments for Egypt under the MEDA I and II programmes represent some € 850 million. In 2002, € 78 million was committed and € 25,7 million of MEDA funds were disbursed. A further € 45,5 million have been committed in 2003 and more will follow.

The main priorities of EU co-operation with Egypt, as set out in the Country Strategy Paper 2002-2006 and adopted by the Commission in December 2001, include implementing the EU-Egypt Association Agreement signed in 2001(1) to support the process in economic transition, assisting regional stability and sustaining socio-economic development.

Actions to be funded under this co-operation are covered by the National Indicative Programme 2002-2004 for Egypt, which foresees programmes with an overall indicative budget of € 351 million during this period. Main objectives are to promote the effective implementation of the EU-Egypt Association Agreement, which helps to support the process of economic transition and increase the country's stability through balanced economic and social development.

(1) EU-Egypt relations- initialling of new Association Agreementcal tensions facing the Region.

Operational results on the ground

The year 2002 saw EIB lending in the region reaching EUR 1.8 billion in favour of a wide range of investments in the Mediterranean countries. Highlights included: the financing of the first private investments under FEMIP (a Toyota factory in Turkey, and cement plants in Algeria and Tunisia) and long term credit lines for some forty financial intermediaries in the Mediterranean Partner Countries to strengthen the equity base of small and medium size enterprises (SMEs) and support private investment projects. To name two examples of the efficiency of such mechanism, some EUR 180 million was disbursed to SMEs under EIB Global Lines of Credit in Turkey, which leveraged some EUR 600 million of new investment from other sources and led to the creation of more than 6 000 new jobs; in Tunisia, the Bank has disbursed 100 million to SMEs over the past years, helping to catalyse some 400 million of new investement and to create more than 3000 jobs.

Private-sector financing accounted for more than 30% of project approvals in 2002. Moreover, during the six months to end of March following the establishment of FEMIP, some EUR 1.5 billion were approved by the EIB's Board for cross-section investments in Human Capital Development (Jordan), substantial Support for private SMEs ( Tunisia, and Turkey), Urban Transport Development (Turkey), Risk Capital (Algeria), as well as a number of projects in the Energy, Transport Communications and the Environment (Morocco), and a large LNG project in the energy sector in Egypt. The FEMIP project pipe-line is available on EIB's website http://www.eib.org.

Development of ownership by the Mediterranean Partners

In the context of the current political tensions in the region, there is more than ever more work to do for a closer Euro-Med Partnership and the further development of the economies of the region. In this regard, FEMIP is serving as a key vehicle for close cooperation of all partners involved. The Istanbul PDCC meeting discussed factors affecting Access of the private sector to Finance, particularly SMEs, banking sector and institutional and legal aspects.

The Istanbul meeting decided that FEMIP would work towards facilitating access to finance by private sector firms, through:
- Increased provision of long term credit directly to firms and/or by offering long term credit resources to banks for on lending (global loans).
- Promotion of new financial products or arrangements with the aim of relaxing access to long term credit, such as financial leases and guarantee funds (with risk capital resources).
- Development of new or little used financial products (and institutions providing them) for equity and quasi equity financing (e.g. participatory loans, subordinated and conditional loans).
- Technical assistance to the banking sector in particular to improve use of credit risk management and so improve prospects for lending to SMEs.
- Organisational changes

As part of its efforts to bolster FEMIP activities, the EIB is significantly reinforcing its staff resources and presence in the Region, having already established a special Private Sector Development Division and a Unit for operations in Turkey. Moreover, the Bank is in the process of opening its first Office in Cairo, covering the Middle East Region, for further strengthening the Bank's business development, technical assistance and monitoring activities .

The next meeting of the PDCC is scheduled to take place in November in Italy.

Background notes

FEMIP was set up in response to the conclusions of the Barcelona European Council (15-16 March 2002) and Valencia Euro-Mediterranean Conference (22-23 April 2002). Its objective is to help the Mediterranean Partner Countries meet the challenges of economic and social modernisation and enhanced regional integration, with a view to the planned creation of a free-trade area between Europe and the MPC by 2010.

The Facility represents a major step forward in financial and economic cooperation between the Union and the MPC. Its new priorities are:
- extensive involvement of the MPC in FEMIP policy with the creation of the PDCC and opening of regional offices in the Mashreq and Maghreb countries;
- focus on development of the wealth- and job-creating private sector, "South-South" regional cooperation projects and investment in human capital;
- greater technical assistance for the design of quality projects and the process of economic reform and privatisation in the MPC;
deployment of innovative financial products and risk capital;
gradual increase in the annual volume of EIB activities in the MPC from EUR 1.4 to 2 billion.
By 2006, the EIB plans to invest between EUR 8 and 10 billion in the MPC.

To this end, the EIB has at its disposal funds under the existing Euro-Mediterranean mandates, risk capital resources entrusted to it from the EU budget as well as technical assistance and investment aid funds provided by the Union in application of the decisions of the Barcelona European Council (March 2002).

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For further information, please contact the EIB's Information and Communications Department: Mr Henry Marty-Gauquié, tel.: +352 4379 3153 or Ms Helen Kavvadia, tel.: +352 4379 3146.

Further information on the EIB's activities in the MPC since 1974, the origins of the Facility, the economic background of the MPC and the inaugural FEMIP meeting in Barcelona is available on the Bank's website in the section dedicated to the Mediterranean Partner Countries:
http://www.eib.org/lending/med/en/index.htm.

Brussels,05 06 2003
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