By Sanjay Suri
LONDON, Jan 31 2004 (IPS)

A 2.5 billion dollar facility is expected to give a significant boost to investment by EU companies in the Mediterranean countries.

The facility being provided by the European Investment Bank (EIB) of the European Union (EU) is aimed to encourage investment mostly by small and medium enterprises in the Mediterranean region.

The Facility for Euro-Mediterranean Investment and Partnership (FEMIP) is a part of several steps the EU is taking this year to build relations with the 12 Mediterranean countries – Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Palestinian Authority, Syria, Turkey, and Tunisia.

About 150 business executives attended a conference held in London last week on ‘Private Sector Development in the Mediterranean Partner Countries (MPCs)’. Several financing techniques that the facility offers were outlined to the business representatives. An EIB official said at the meeting that the bank is now inclined to be “more risk-taking”.

EIB vice-president Philippe de Fontaine Vive told the meeting that financing of small and medium enterprises would be made a priority because such investment “forms the basis for any sustainable economic development”.

The London meeting followed a conference in Casablanca in Morocco earlier this month to boost FEMIP. The meetings follow a decision taken at the European Council in December to strengthen the Euro-Mediterranean partnership.

The European Council brings together heads of state or government of the 15 EU member countries and the president of the European Commission, the executive arm of the EU.

FEMIP is looking to boost the partnership in the run-up to the creation of a Euro-Mediterranean free trade area planned for 2010. The creation of the free trade Euro-Mediterranean area had been proposed at a meeting of the European Council in Barcelona in 1995. FEMIP was launched at a European Council meeting in Barcelona again in March 2002.

The free-trade area is a part of the ‘Barcelona process’ which aims at establishing a “common Euro-Mediterranean area of peace, stability and shared prosperity”. It also aims at fostering South-South integration by encouraging Mediterranean partners to implement free trade among them.

The EU has in the meanwhile signed bilateral agreements with most of the Mediterranean countries. These agreements allow for the progressive elimination of tariff and non-tariff barriers to trade in manufactured products in accordance with timetables negotiated between the partners.

The new initiative seeks to take the push from trade towards investment. The get-togethers in Casablanca and London will be followed by meetings to be held in Marseilles in France in February and in Alexandria (Egypt) in June.

FEMIP is opening local offices in several of the Mediterranean countries. The 2.5 billion dollars being lined up to finance business this year follow a lending of more than 5 billion dollars through the EIB facility in nearly all the Mediterranean countries over the last two years.

Between 1974 and 2001 the EIB lent about 17 billion dollars to projects in the Mediterranean region. The EIB is clearly accelerating investment in the region now. It aims to inject about 12 billion dollars in financing projects up to 2006, including the financing for this year.

The projects financed over the last two years include the expansion of a Toyota factory in Turkey, the building of a natural gas liquefaction plan in Egypt, and construction of the first private sector cement plants in Tunisia and Algeria.

More emphasis will be given now to schemes relating to infrastructure, water, the upgrading of health facilities and the remodelling of education systems, bank officials say.

But the decision by the sixth conference of Euro-Mediterranean foreign ministers in Naples in December not to set up a separate bank for such financing is seen by many promoters of the Euro-Mediterranean partnership as a setback.

“We were hoping for an upgrade from FEMIP to a bank,” says Raffaele Fantetti, president of the UT Phoenix Foundation, an independent initiative launched in London this week to support the Euro-Mediterranean partnership.

“The decision not to set up a bank was a setback,” he told IPS. “An independent regional bank would have attracted more interest in investment into the Mediterranean countries.”

The Naples conference agreed to establish a Euro-Mediterranean parliamentary assembly and the Euro-Mediterranean Foundation for the Dialogue of Cultures. The proposal to set up a separate bank is due to be reviewed at the end of this year.

The basis for the new push could be political, says Gian Paolo Calchi Novati, a professor from Italy who is supporting the Phoenix foundation. “The EU countries are reluctant to follow the aggressive policy of the U.S. against an Arab country,” he told IPS.

The name of the independent initiative was symbolic. The Phoenix is the legendary bird that lives for a thousand years, and then throws itself into the flames only to rise from the ashes in a new birth.

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