In 2001, European Investment Bank (EIB) lending in the Mediterranean Partner Countries rose to a record figure of EUR 1.5 billion, confirming the European Union's financing institution as a major player in the economic development and stability of the region.
Active in the region since 1974, the EIB has granted loans worth over EUR 9 billion in the "Barcelona Process" countries. Its annual rate of lending has continued to grow, rising from EUR 680 million in 1996 to almost EUR 1.5 billion in 2001, thus positioning the EIB as one of the leading sources of bank financing for the sustainable development of the 12 Mediterranean Partner Countries. Its loans cover all sectors of the economy: the EUR 7.4 billion advanced over the past six years (1996-2001) broke down as follows 1) 27.6% for supporting the private sector; 2) 24.6% for safeguarding the environment; 3) 26.4% for harnessing and distributing energy resources; 4) 21.5% for communications.
With a budget of EUR 7.4 billion up to 2007, the EIB is set to pump substantial financial resources into the Mediterranean Partner Countries: EUR 6.4 billion under the mandate conferred by the Union, and EUR 1 billion under the "Euro-Mediterranean Facility" set up by the EIB in the wake of the Nice European Council (December 2000) for regional energy, communications and environmental projects.
Three priorities for sustainable development
Under the Euro-Mediterranean Partnership, Bank activity in support of the beneficiary countries' policy of economic development and openness focuses on three priorities:
- the first is to provide beneficiary countries, on optimal conditions, with essential long-term financing to encourage them to modernise and liberalise their economies. Such backing for the private sector is designed to boost the competitiveness of the Mediterranean Partner Countries' economies with a view to creating a free trade area with the Union by 2010. It takes the form of long-term loans and risk capital (especially for SMEs) made available to companies in close cooperation with the local banking and financial sector, so contributing to its modernisation. In 2001, 25% of EIB loans supported this objective in Tunisia, Egypt, Turkey and Malta via an investment fund operating throughout this area.
- in the infrastructure sector, the EIB accords top priority to projects safeguarding the environment, whether their aim is to rectify environmental degradation (for instance in Tunisia, Egypt, Turkey, etc.), in which case the EIB's loans receive a 3% interest subsidy financed from the EU budget, or to improve the management and distribution of drinking water resources (for example in Morocco, Algeria, Tunisia, Jordan, Lebanon, Gaza-West Bank, etc.). This activity, which in the 1996-2001 period represented on average a quarter of annual lending, rose dramatically in 2001 to account for 34% of loans (EUR 580 million). In particular, the EIB financed the improvement of drinking water supplies in 70 medium-sized municipalities in Morocco, the Sahel region in Tunisia and Greater Algiers, as well as the modernisation of wastewater management in Turkey.
- at the same time, EIB loans help to bolster and expand economic infrastructure - communications, energy - laying the foundations for development. The EIB focuses in particular on financing the establishment of physical links, i.e. regional infrastructure facilitating "South-South" cooperation and trade, the movement of persons and the use of common resources. In 2001, lending for such infrastructure accounted for 24% of loans and targeted Morocco, Tunisia (communications), Egypt, Syria (energy) and Cyprus (health).
Actively promoting these three priorities, EIB loans are characterised by the "value added" which they bring by virtue of the role of financial catalyst played by the Bank, whose involvement in a project serves to attract other sources of international, bilateral or local financing. This value added also takes the form of financial engineering tailored to long-term project requirements. Lastly, the EIB contributes to improving the technical and economic definition of projects by applying the same standards and appraisal criteria in these countries as in the Union.
Outlook: helping to revitalise the Euro-Mediterranean Partnership
The excellent results achieved by the EIB in the Mediterranean Partner Countries in 2001 were posted against a diverse backdrop marked by renewed political tension in the region and the need to revitalise the Euro-Mediterranean Partnership launched in Barcelona on 28 November 1995. In line with its role as the Union's financing institution, the EIB is committed to supporting a shift in the direction of the Euro-Mediterranean Partnership towards increased economic and financial cooperation between the European Union and the countries of the region, while deploying new financial instruments. In particular, the EIB plans to expand its activity in the following areas:
- Supporting the Union's action to promote an area of peace and stability throughout the Mediterranean region. In 2001, the Bank's most important operations were in Algeria and Syria, countries with which relations have been renewed or enhanced, as well as in Egypt and Morocco, the prime beneficiaries of EIB loans. For some time, the EIB has also been making a substantial contribution towards the economic development of the Middle East with EUR 1.9 billion granted over the past six years. It has especially focused on financing basic infrastructure in Gaza/West Bank, SMEs in Jordan and the West Bank, energy infrastructure in Syria and the reconstruction of Lebanon.
- Fostering the growth of inter-regional cooperation through its backing for projects which engender closer ties between the Mediterranean Partner Countries ("South-South" cooperation) or with the Union ("South-North" cooperation). Having established its EUR 1 billion "Euro-Mediterranean Facility", deployed at the EIB's own risk in support of regional projects in the communications, energy and environmental protection sectors, the EIB has a wealth of experience in evaluating and financing such projects based on successful precedents, such as the gradual construction of the Trans-Maghreb motorway (Morocco-Algeria-Tunisia), the Syria-Turkey and Egypt-Jordan electrical interconnections, the telecoms interconnection between Jordan and its neighbouring countries, the Euro-Med gas pipeline (Algeria-Morocco-Spain), the Spain-Morocco electrical interconnection, the Europe-Morocco telecoms interconnection, port developments in Morocco, Tunisia, Jordan and Lebanon, as well as Beirut Airport.
- Underpinning foreign direct investment by the Union in the Mediterranean Partner Countries and the creation of joint ventures between European and local operators. With a combination of risk capital and long-term loans, the EIB is able to support the growth of the local financial sector in order to promote both large and small-scale joint ventures (Pirelli-Egypt, Midor refinery in Alexandria, Tétouan wind park in Morocco, etc.) and is committed to contributing to the development of new financial instruments designed to allow operators to take greater risks in these countries.
- Devising loans for projects with a social dimension: in 2001, the EIB elected to underpin projects directly assisting populations in difficulty (drinking water supplies for Greater Algiers) or improving access to optimal services in the health sector (Nicosia Hospital). It is actively preparing to expand its operations in the fields of health and education in the Mediterranean Partner Countries.
Projects financed in 2001 in Mediterranean Partner Countries
Loans provided by the EIB in 2001 in this region break down as follows:
- Algeria: EUR 225 million for construction of a drinking water supply network between the Taksebt dam and Algiers
- Cyprus: EUR 50 million for equipping a new hospital in Nicosia.
- Egypt: a total of EUR 180 million for construction of a natural gas-fired combined-cycle power plant in Cairo (EUR 150 million) and financing small and medium-scale ventures (EUR 30 million: global loan to the Export Development Bank of Egypt).
- Malta: EUR 25 million for financing small and medium-scale ventures (global loan to the Bank of Valletta plc).
- Morocco: a total of EUR 280 million for construction of a pumped storage power plant, south-east of Casablanca (EUR 90 million), construction of two motorways between Sidi El Yamani and Tangier and between Casablanca and El Jadida (EUR 100 million), improvement of drinking water supplies in 70 Moroccan towns (EUR 50 million) and rehabilitation of hydro-agricultural equipment (EUR 40 million) for irrigated areas in the south of the country.
- Tunisia: a total of EUR 225 million to improve and develop the road network around Lake Bizerta, north of Tunis (EUR 30 million), upgrade drinking water supplies to the eastern coastal regions of Sahel and Sfax (EUR 95 million) and finance small and medium-scale ventures mounted by Tunisian enterprises via ten Tunisian banks.
- Turkey: EUR 370 million in total for wastewater treatment and sewerage networks in the city of Mersin on the Mediterranean coast (EUR 60 million), urban development in Eskisehir (EUR 110 million), reconstruction of industrial facilities in earthquake-damaged regions (EUR 75 million) and EUR 125 million for financing small and medium-scale ventures through global loans (Turkiye Vakiflar Bankasi Tao, Turkiye Sinai Kalkinma Bankasi AS and Sinai Yatirim Bankasi AS).
- Syria: EUR 115 million for upgrading medium-voltage power transformer and distribution facilities.
- MED Group: a conditional loan from risk capital resources for EUR 6 million to EFG-Hermes Middle East Technology Fund Ltd to finance participations in investment funds supporting small and medium-sized enterprises (SMEs) in the high-tech sector.
The EIB in 2001: key figures
In 2001, EIB loans for projects furthering the European Union's policy objectives totalled EUR 36.8 billion. The Bank devoted EUR 31.2 billion to schemes in EU Member States and EUR 2.7 billion to those in the Accession Countries of Central and Eastern Europe, whilst its loans in other non-member countries topped EUR 2.6 billion. To finance these operations, the EIB borrowed EUR 32.3 billion on the international capital markets in 148 transactions; after swaps, the euro accounted for 63% of currencies borrowed.