This has made the EIB, which runs FEMIP, more determined to help strengthen regional economies and, in particular, the private sector and small businesses. FEMIP has proved a useful vehicle since it was set up in 2002, and
it was with a view to renewing and expanding its mandate that officials met in Tunis on 25-26 June. ‘Our fund supports an increase in growth and adds to it,’ says
De Fontaine-Vive. ‘For every euro we invest, it generates three.’

In 1995, the EU initiated the Barcelona Process to improve relations between Europe and its Mediterranean rim counterparts, with economic and financial partnership one of its key pillars. Accordingly, the EIB created FEMIP to bring all its regional activities under the same roof, combined with a remit to make the region’s economies more competitive, more open and more prepared for the planned free trade area scheduled
for 2010.

An alternative proposal, to replace FEMIP with an EIB majority-stake bank, was supported by only one of the delegations at the meeting in Tunis, and is likely to be dropped when the European Council of Ministers meets in November to decide the future of the body. ‘A reinforced FEMIP is the most likely outcome,’ says one senior official. However, ‘it depends what the ministers are interested in’, says De Fontaine-Vive. ‘If they want to concentrate on jobs, private sector growth and so on, they should support FEMIP. But if they want a politically visible institution and to transfer large amounts of finance, then they might go for a bank.’

Using EIB funds and expertise, FEMIP has directed more than Eur 7,000 million ($8,955 million) of finance to partner states, often in the form of long-term soft loans and credit lines. Most funds have been directed towards infrastructure projects, particularly in the energy and transport sectors. FEMIP provided finance for both Egypt’s Idku liquefied natural gas (LNG) plant, as well as committing Eur 130 million ($166 million) to road projects in Morocco. The Eur 2,194 million ($2,807 million) it provided in 2005 made it the region’s largest foreign investor.

Despite earlier expectations, however, the majority of its finance is still directed towards projects in the public sector. This is one of the issues being addressed as the facility’s first mandate draws to a close. Another is the size of the funds on offer. ‘We must reinforce the resources available to FEMIP,’ says Jordanian Finance Minister Ziad Mohammed Fariz. ‘After all, it has been going only three years and has a successful institutional framework.’

Delegates are also keen for FEMIP to target the private sector by expanding its use of local currency loans, risk capital and private equity stakes. ‘We are keen to continue using it in the future, especially for venture capital and high-risk capital projects,’ says Fariz.

As a risk-averse body, FEMIP’s range of financial products remains limited. Although the 2003 creation of the Special FEMIP Envelope an instrument that allows FEMIP to accept greater credit risk itself and thus issue private sector loans without a sovereign or international guarantee was a big step forward, it has only been used three times. The facility will need to grow before it can diversify. ‘Equity stakes are the riskiest option, which we finance from external funding [for example, member states or the EU budget] and we can only do more if we have the resources to do so,’ says
De Fontaine-Vive.

At the forefront of FEMIP’s strategy is s