Reinforced FEMIP exceeds expected 2004 objectives

FEMIP continues its strong support for the Euro-Mediterranean Financial Partnership on the eve of the tenth anniversary year of the Barcelona Declaration with innovative financial instruments and the promotion of private sector development.

In 2004, the Facility for Euro-Mediterranean Investment and Partnership (FEMIP) lent a record EUR 2.2 billion in the Mediterranean Partner Countries (MPCs). Additionally, grants under its Technical Assistance Support Fund reached EUR 13.8 million.

Its sectoral objectives have been fully met. The trend towards increased financing of private sector operations continued in 2004, with over one third of signatures aimed at supporting SMEs and FDI in the region. Lending in transport, energy and environment amounted to EUR 660 million, EUR 728 million and EUR 159 million respectively. In 2004 FEMIP signed in Morocco its first social housing loan in the Mediterranean Region.

During the year, it enlarged the range of its financial instruments for private sector development. The FEMIP Trust Fund was established at the end of 2004, with initial pledges of EUR 31.5 million. Its first operation, a grant of EUR 200 000 for a study on improving the efficiency of workers' remittances, was approved at the Donors Meeting on 25th January 2005.

In its first full year of operation, the FEMIP Technical Assistance Support Fund (1) signed 20 contracts for a total of EUR 13.8 million in grants for studies on increasing the efficiency of investments in the environment (EUR 6.7 million - 48%), private sector (EUR 5.8 million - 42%), infrastructure (EUR 1.2 million - 9%) and human capital (EUR 0.1 million - 1%) in the MPCs.

FEMIP also strengthened its local presence to ensure efficient coordination with the authorities, borrowers, the banking sector and lenders in the MPCs, inaugurating its Tunis FEMIP office in December 2004. This is FEMIP second office in the region, after Cairo, which was inaugurated in 2003. A third office will be opened in Rabat in June 2005.

FEMIP's success has been supported through the reinforced cooperation among the Mediterranean and EU countries at a political level with the FEMIP Ministerial Meetings. Since the June 2004 meeting in Alexandria, this forum has become the Mediterranean Ecofin Council. The Alexandria Ministerial Meeting, attended by representatives of the 25 EU Member States, focused discussion on recommendations for privatisation and improving private companies' access to finance, put forward by the first FEMIP Experts Meeting held in Marseille in February 2004. The Experts Meeting is a think tank charged with putting forward practical and operational recommendations to FEMIP's Ministerial meeting. The Committee's second meeting, in Amsterdam in October, called for the extension of the Trans-European Networks (TENs) and the reinforcement of Public Private Partnerships (PPPs) in water and transport in the Mediterranean region. Its recommendations will be discussed at the next Ministerial Meeting to be held on 20 June 2005 in Skhirat in Morocco.

A Memorandum of Understanding covering the Mediterranean Partner Countries was signed on 3 May 2004 between EIB, the European Commission and the World Bank. This formalizes a long history of strong and productive cooperation between the three institutions.

Additionally, FEMIP held six investment conferences to encourage private sector activities, targeted at the industrial and financial communities and the professional associations in the MPCs and the EU. These conferences, which attracted a broad range of prominent speakers from the MPCs and the EU, as well as the European Commission and FEMIP, were held in Morocco, Spain, Tunisia and the UK.

Philippe de Fontaine Vive, EIB Vice-President in charge of FEMIP said: "The Barcelona Process' undertaking to establish a free trade area between the southern and northern shores of the Mediterranean by 2010, calls for substantial financial support and a firm political commitment on both sides of the Mediterranean. Wide-ranging reforms are necessary to improve the investment climate and foster the emergence of a prosperous private sector. FEMIP is there to help the Mediterranean Partner Countries meet the challenges of economic and social modernisation and enhanced regional integration within the framework of the Wider Europe-Neighbourhood. FEMIP's support includes lending some EUR 2 billion a year, and new financing instruments and techniques, as well as its dialogue with the Partner Countries through the Ministerial and Experts Committees.

Our results in 2004 underline the extent of our support for the Barcelona objectives. A review and evaluation of our activities to be carried out this year, the tenth anniversary of the Barcelona Process, will mark the way ahead. FEMIP is ready to continue as a major player together with all the Barcelona Process partners in meeting the future challenges of promoting the region's economic and social stability.

Since its creation in 2002, FEMIP has met all the objectives set out by the March 2002 and December 2003 European Council resolutions establishing the Facility. The volume of its lending has reached record levels for the third consecutive year (EUR 2.2 billion in 2004, EUR 2.1 billion in 2003 and EUR 1.8 billion in 2002).

Focus on private sector and private-sector enabling infrastructure

To meet its primary objective in the Mediterranean Region more than one third of FEMIP's lending went directly to promote the growth of private businesses, through Foreign Direct Investment (Algeria, Egypt), and SME financing (Egypt, Lebanon, Morocco, Tunisia and Turkey). FEMIP also placed an emphasis on infrastructure projects, including energy, transport and environment, underpinning private sector development in Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia and Turkey.

Such projects included:

• Power generation and gas transmission/distribution in Egypt, Jordan, Morocco and Syria;
• Improvement of transport infrastructure in Egypt, Tunisia and Turkey;
• Water supply and water treatment in Lebanon, Morocco and Tunisia; · Social housing in Morocco.

FEMIP lending in 2004 by sector (EUR 2.2 billion):

• Risk Capital 1%
• Industry 1%
• Environment 7%
• SMEs 25%
• Energy 33%
• Transport and other Infrastructure 33%