Shareholder states in the Middle East Development Bank (MEDB) may reach agreement this month over a US call for a declaration against the Arab boycott of Israel, allowing the MEDB project to make symbolically important progress in time for the Cairo economic summit in November, sources close to the founders say.

The shareholders, who include the US, Japan, several European and Arab states, and Israel, have approved MEDB's articles of association. A majority of EU countries are opposed to the idea of a development bank, saying the issue is how to apply existing donor funds effectively. The problems for MEDB's founder states lie in a declaration explaining the articles - the US wants it to include a call for an end to the boycott (MEED 1:3:96).

'There are still differences on the interpretation of the bank's articles and recent events in Israel may have complicated things,' said one European source. 'But everybody wants the bank and everybody wants it soon. There will be an agreement, perhaps this month.' Another European source said different ways of dealing with the issue had been discussed.

'The Arab League Secretary General could send a letter saying (the boycott) does not apply to MEDB. But then they would have to convene a League plenary session to change the articles. They could wait till the end of time for that. They (the US) will have to be satisfied with what they have got.' A transition team starts work in Cairo at the end of April on technical details for setting up MEDB, which has authorised capital of $5,000 million and paid-up capital of $1,250 million.

'We're hoping for significant progress by November.' said an official close to the team.

'Cairo is an important way-station.'