Plans to create a regional development bank have been revived in the run up to the Middle East and North Africa economic summit to be held in Casablanca at the end of October. The bank would finance private and public-sector projects in the Middle East and North Africa. The Casablanca summit will also see efforts by Israel to promote new links with Middle East financial institutions.
The plan has the support of North African states, who for several years have argued in favour of a development bank for the Mediterranean region. It is also being promoted by some parties to the Middle East peace process, including Israel whose recent enthusiasm for the project could deter several important Arab participants, analysts say.
The Middle East/Mediterranean bank’s board would comprise regional and non-regional governments and other multilaterals. Plans for the bank envisage an institution like the London-based European Bank for Reconstruction & Development (EBRD), which was established in 1991 to underpin private- sector development in former communist states. The EBRD’s charter says that over a five-year period 60 per cent of its lending must go to private- sector projects.
The Casablanca conference, sponsored by US President Clinton and Russian President Yeltsin, will include discussion of a development bank with $10,000 million capital, senior Moroccan officials say. Also on the agenda are moves towards a regional common market, international investment guarantees and the management of water resources.
Morocco has been working to obtain agreement for the conference to issue a statement of intent on regional economic co-operation. The Casablanca declaration could include a commitment to study the regional development bank scheme. A second meeting is already planned in Amman in 1995.
More than 30 heads of state or government have so far accepted invitations to attend the 30 October-1 November conference, including an Israeli team led by Prime Minister Yitzhak Rabin and Foreign Affairs Minister Shimon Peres. Peres has recently been active in promoting the development bank idea as part of a wider strategy to benefit from the peace process.
‘Peace implies massive redevelopment in the Middle East which requires investment on a very large scale,’ Bank of Israel (central bank) governor Jacob Frenkel said in an early October interview in Madrid. New institutions and closer private-sector links are required to consolidate the process, and Israel would like to promote itself as a source of investment and financial expertise in the region, Frenkel said.
‘Normally the peace dividend is measured in narrowly defined economic indicators,’ Frenkel said. ‘In Israel’s case I don’t think we will see a significant saving on defence – we will need a security safety net for the foreseeable future. Rather, the peace dividend will come from elsewhere, from investment, high-technology growth and the expansion of new markets.’
This includes Israel marketing its financial services. ‘The Middle East’s needs require massive investment and the emergence of new financial centres and institutions,’ says Frenkel. ‘I can see Israel as a prime candidate for such a function.’
Israel has created inter-bank links with Egyptian institutions and is developing ties with Jordan. ‘Next year it could be Syria,’ says Frenkel.