A Financial Mechanism dedicated to the Mediterranean

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A Financial Mechanism dedicated to the
Mediterranean

• Radhi Meddeb
• President IPEMED

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Facts figures

• In 2010, EIB estimated the investment needs of
  the SEMC to nearly 250 billion 100 billion
  for energy, 110 for urban services (water,
  sanitation, education, public transport, health
  ...), 20 billion for national and international
  transport (ports, airports, highways ...)
  enhancing the need for structuring projects.
• All major world regions have their development
  banks and institutions except the Mediterranean
  which suffers from a lack of coordination between
  funding institutions, from under-mobilization of
  private savings, and from a lack of financial
  engineering support services, particularly for
  SMEs and infrastructure projects.
• Moreover the Mediterranean Region need
  government directed investment toward the
  under-developed sectors and regions over the
  long-term and into other projects that bring
  depth to the regions financial and stock
  markets.
•  
• By calling for a sustainable economic environment
  and a new public order based on democracy in the
  public sphere, Arab population has made it all
  the more urgent to support the Southern Med
  countries in their economic development and
  political transition.

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The need for a financial mechanism dedicated to
the Mediterrenean

• Time has come to establish a financial
  architecture specific to the region so as to meet
  its structural needs, with a the aim of
  eventually creating an economically integrated
  region. Arguments in favour of the
  implementation of the proposed architecture are
  as follows (i) Europe needs to find growth
  relays in its immediate environment (ii) the
  SEMCs are in transition to democracy and are
  unable individually to deal with monetary risks,
  long-term FDI risks, and export risks.
• The World Bank created at the global level a set
  of instruments for identifying, financing and
  underwriting projects and providing technical
  assistance and training, Similarly, the
  Mediterranean region needs to endow itself with
  similar facilities specific to the region.
• The establishment of a Mediterranean development
  bank is a strategic goal and it has little to do
  with moral, ethical or even historical
  considerations above all other things, it is an
  economic necessity, for countries on both north
  and south shores of the Mediterranean.

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What will bring the Mediterranean Development
Bank to the Region ?

• By its very existence, the Mediterranean
  development bank would contribute to
• improve security of savings and investment flows
• enable the transition from a funds remittance
  paradigm to a sustainable regional integration
  paradigm.
• facilitate transformation of liquidities into
  long-term resources and by fostering the
  prerequisites for monetary stability and
  solidity.
• raise the level of financing SMEs and the private
  sectors.
• improve the quality of projects by providing
  expertise and capacity for risk identification
  and assessment, both of which are lacking in the
  region.
• carry out ambitious, cross-cutting projects with
  the capacity to mobilise stakeholders across the
  board.

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Basic principles of the Mediterranean
Development Bank

• For it to be functional and inspire trust, the
  Development Bank should rest upon basic
  principles. These are conditionality
  complementarily subsidiarity to the private
  sector, and an AAA rating.
• Conditionality reforms are required in the
  region in order to establish a stable economic
  governance that will afford due protection to
  investors and an institutional framework that
  will foster a market economy. A development bank
  cannot remedy an absence of reform. However, it
  could help establish, in the transition process,
  a more business-friendly environment.
• Complementarity the development bank is not
  intended to replace institutions already
  operating in the region. Its ambition is to
  coordinate the action of existing institutions so
  as to offer services and functions that are
  poorly covered or not covered at all by existing
  stakeholders.
• Subsidiarity to the private sector the bank will
  not be replace the private sector or engage in
  activities specific to the private sector. It
  will support the private sector by seeking
  maximum leverage and by bringing different modes
  of financing that are lacking in the regions
  local markets.
• An AAA rating is a pre-requisite for the
  establishment of the bank. An AAA rating is
  crucial to the banks financial viability and
  proof of its financial solidity, its rigorous
  management of risk, and its exemplary
  professional management.

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Main tasks of the Mediterranean Development
Bank

• Transform local savings into medium-term
  investments
• Support the private sector, particularly growing
  SMEs
• Support the creation of innovative funds
  dedicated to early stage financing
• Support the development of the local financial
  markets.

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Financing and governance of the Mediterranean
Development Bank

• The Mediterranean Development Bank need to be
  majority publicly owned, so as to secure its AAA
  rating. The bank will also be open to other
  sources of financing sovereign funds and the
  private sector. An initial estimate of the
  capital required to launch the banks activities
  is between 10 and 15 billion euro.
• Public sector institutions would include
  multilateral financial institutions (EIB, EBRD,
  World Bank, etc.) and national development
  finance institutions (AFD, KfW, etc.), as well as
  northern and southern States wishing to
  participate. Involvement by States would mean de
  facto acceptance of the banks activities
  targeting enterprises in their territory, with
  the objective of integration into a regional
  financial zone in which each State would have
  helped define common rules.
• The Mediterranean Development Bank should propose
  a new governance approach more coherent with
  co-development imperatives. This new approach
  would involve closer involvement of the SEMCs in
  project design and in decision making mechanisms.
  Participation should encourage countries to
  re-establish their relations on a new footing, to
  revise their modus operandi, and to favour a
  regional approach.

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