The European Investment Bank, the European Union's long-term financing institution, is providing ECU 5 million(1) from risk capital resources as contribution to the West Bank and Gaza Investment Guarantee Trust Fund (the GWB TRUST FUND) to support investment for the development of industry and the private sector in Palestine.

Established and managed by the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank group, the GWB Trust Fund aims to issue guarantees for non-commercial risks, covering expropriation, inconvertibility and transfer, breach of contract, as well as war and civil disturbance. In addition to EIB's contribution, the Fund already has USD 10 million from the Palestinian Authority. Further financing of the Fund will be assured by MIGA member countries(2), multilateral and other institutions. For the initial phase of its operation, its capital base is to reach USD 50 million.

Functioning along MIGA's operational rules, the GWB Trust Fund will provide coverage to investments in the private sector of a maximum of USD 5 million per project, for a period ranging from 3 to 15 years. The Fund is designed for small and medium sized investments, with a special emphasis on projects with high employment generation capacity.

This financing is part of EIB's on-going effort to foster private sector investment and economic cooperation and development in the Mediterranean non-EU Member countries. Together with other EIB initiatives underway(3), it highlights the Bank's commitment to stimulate private sector investment in Palestine, and underlines its support to the Euro-Mediterranean Partnership. The Euro-Med Partnership places a particular emphasis on measures to encourage the liberalisation and privatisation of economies and in helping the private sector to restructure and expand in preparation for the gradual establishment of a Free Trade Zone with the Union by the year 2010.

The EIB was established in 1958 to provide long-term finance for capital investment projects which further EU policy objectives. Owned by the 15 EU Member States, it raises the bulk of its resources on capital markets. The EIB plays a central role in the European Union's technical and development policy towards third countries in the Mediterranean region. In most of these countries the EIB operates under Co-operation agreements negotiated with the EU to strengthen economic and trade relations as part of the Euro-Mediterranean Partnership, complementing bilateral aid from the EU Member States.Under the Euro-Med Partnership arrangements, the EIB is committed to lend some ECU 2 310 million between 1997 and end-1999 for investment projects in the region. The EIB also deploys risk capital funds drawn from the EU's budgetary resources, enabling the Bank to advance finance that can be specially tailored to the performance of the project being supported, as well as consolidating the capital base of the project sponsor.In 1997, over ECU 1 billion in both new financing commitments and disbursements were achieved by the EIB in support of investment projects in the Mediterranean partner countries.

(1) The conversion rates used by the EIB for statistical purposes during the current quarter are those obtaining on 31 December 1997, when ECU 1 = TND 1.25, CYP 0.58, MTL 0.43, JOD 0.77, EGP 3.78, GBP 0.67, IEP 0.77 and USD 1.10.

(2) Since its creation in 1988, MIGA's membership has expanded to include some 140 countries, which have subscribed its authorised capital of USD 1.08 billion. Another 19 countries are in the process of becoming members. All EU states are MIGA members, except Austria, which is in the process of becoming one.

(3) ECU 15 million (of which ECU 1 million risk capital) was granted to the Palestine Industrial Estate Development Management Co. (PIECO) for the development of a large industrial estate, with fully serviced factory units on the border with Israel. PIECO is a majority-owned subsidiary of the Palestinian Development and Investment Ltd. (PADICO), a consortium of prominent Palestinian business and banking interests. This major investment operation by the private sector in Gaza/West Bank is being co-financed with support from the IFC (International Finance Corporation) and other development agencies.