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A Financial Mechanism dedicated to the Mediterranean


A Financial Mechanism dedicated to the Mediterranean Radhi Meddeb President IPEMED Facts & figures In 2010, EIB estimated the investment needs of the SEMC to nearly $ ... – PowerPoint PPT presentation

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Title: A Financial Mechanism dedicated to the Mediterranean

A Financial Mechanism dedicated to the
  • Radhi Meddeb
  • President IPEMED

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
  • 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.

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.

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
  • facilitate transformation of liquidities into
    long-term resources and by fostering the
    prerequisites for monetary stability and
  • raise the level of financing SMEs and the private
  • improve the quality of projects by providing
    expertise and capacity for risk identification
    and assessment, both of which are lacking in the
  • carry out ambitious, cross-cutting projects with
    the capacity to mobilise stakeholders across the

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
  • 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.

Main tasks of the Mediterranean Development
  • Transform local savings into medium-term
  • Support the private sector, particularly growing
  • Support the creation of innovative funds
    dedicated to early stage financing
  • Support the development of the local financial

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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