Work on setting up the Middle East Development Bank (MEDB) has not been affected by the turmoil in the regional peace process, but the US government, the planned bank's biggest shareholder, is still trying to persuade Congress to put up the money for its stake.

The MEDB was conceived of as part of the Middle East peace process and is intended to spur regional economic co-operation with a private sector focus. It will have paid-up capital of $1,250 million of which the US is committed to providing $750 million. Other shareholders include Israel, Egypt, Jordan, the Palestinians, Russia, Japan and several European states (MEED 30:8:96).

Western sources close to the MEDB project say that the US government and Congress have been negotiating for six months as to where the money will come from for the US shareholding. The Clinton administration wants the issue resolved as soon as possible, though negotiations are complicated by the fact that many Congressmen are preoccupied with the US elections in November.

'It still has to be worked out with Congress and the main question is the source of funding. Congress authorised joining the bank but it hasn't been pinpointed where the funds are being taken from,' says one official source in Washington. 'If you're talking about resources, it's a political question.'

The sources maintain that there has been no discernible change of attitude towards the MEDB amongst its members despite the deterioration of the peace process after the Likud party came to power in Israel in May, and the armed clashes which broke out between Israeli and Palestinian troops in the West Bank and Gaza last month. The MEDB, which would act as an investment bank promoting private sector projects, is a key symbol of the peace process and the economic benefits that it is intended to bring to the region.

The MEDB project will be aired at the Middle East and North Africa Economic Conference in Cairo in mid-November, when its sponsors will be able to announce that the basic operational structure of the bank has been worked out (see Regional Focus).

The MEDB's articles of association were deposited at the UN in September, and now have to be ratified by the legislature of each member state. This may prove difficult in some of the Middle Eastern states if the peace process as a whole continues to be under strain.