EUROPEAN COMMISSION Directorate-General for European Neighbourhood Policy & Enlargement Negotiations South Neighbourhood
Brussels, 12 November 2014
Note to the ENI Committee meeting of 17 November 2014
Proposed way ahead of AMICI “A southern Mediterranean Investment Coordination Initiative (AMICI): An enhanced EU coordinated approach to the region”.
1. Objective In the Southern Neighbourhood, against the background of regional developments in the past few years, substantial efforts have been made by the EU, International Financial Institutions and the international community to identify, prioritize and finance investments for socioeconomic development in the Southern Mediterranean partner countries. The drive towards reform and democratic consolidation could be jeopardized by political instability coupled with serious socio-economic challenges that many of these countries currently face. It is therefore crucial to help the countries of the Mediterranean achieve inclusive economic growth, job creation and social stability, thus paving the way for democratic transition. In view of this need, the AMICI initiative (Italian/Greek Presidency sponsored coordination mechanism developed in cooperation with the Commission and EEAS ) has been proposed to foster strategic co-ordination in the region by the EU, Member States and other donors and frameworks, in relation to investment facilitation, private sector development, and creating a favourable enabling environment for business and direct foreign investments. The objective of the initiative is to enhance coordination and efficient use of available resources, as well as improving partners’ capacities and ownership and regional cooperation to attract needed investment, with a view to enhance its development impact, in particular for job creation. This coordination initiative is fully in line with the EU Neighbourhood Policy and takes into account an improved international aid effectiveness agenda, in particular as defined in Busan (Korea) which covers inter alia Joint Programming.
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Any AMICI mechanism will be implemented taking full advantage of the existing institutional framework, without establishing new instruments or facilities, neither duplicating, nor substituting existing structures. 2. The mapping exercise 2.1 Ongoing projects and operations The first step of this initiative was to map ongoing EU (Commission, EFIs and Member States) projects and operations in the sectors listed below: (1) Economic governance, including macro-economic reform and public finance management; (2) Inclusive economic development, including skills development and TVET, job creation, support to regional and social cohesion, broader participation of women, and youth in economic growth; (3) Trade and private sector development, including business climate, support to SMEs, and microfinance; (4) Energy, including energy efficiency; (5) Transport; and (6) Environment, including water and sanitation. The instruments covered included: (i) macro financial assistance and budget support for sector reforms; (ii) grants including for blending (NIF); (iii) technical assistance; (iv) loans; (v) other financial instruments such as equity investment and guarantees. The Commission concluded the mapping/stocktaking exercise in September and presented the summary of the data findings (see annex) during the ENI Committee of 16 September 2014. 2.2 Existing coordination One of the main concerns regarding AMICI is to avoid the creation of new coordination mechanisms in a context where several coordination platforms already exist in the region. In this sense, an overview of existing platforms and mechanisms has been established to better understand how and where AMICI can help rationalize the existing fragmentation. Below, a summary of the main fora:
Country level (to be completed with inputs from EU Delegations and MS country offices): − EU Development Counsellors platform (Commission and Member States – MS);
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− Development Partners Group (Government-led coordination platform, organised by thematic sub-groups, which includes all development agencies – bilateral and multilateral – including Commission and MS)
Regional level: − NIF Operational Board (European Commission, EEAS, EU Member States as voting Members, and European Finance Institutions as observers) and strategic dialogue with beneficiary countries and relevant regional organisations (e.g. UFM). The NIF Operational Board is an important platform for strategic prioritisation of NIF funded projects, effective coordination of investments and joint-financing of operations. In the framework of its strategic dialogue, it is also a powerful instrument to enrich the policy dialogue and strategically orient and coordinate investments; − EIB Facility for the Mediterranean Partnership - FEMIP (EU-funded)) has as objective to promote economic developments and financial cooperation in the Mediterranean – with the EIB as a key investor and facilitator. The FEMIP Committee is composed of representatives from Partner countries, EU Members States, the European Commission and EIB. The FEMIP Ministerial Council meets annually and provides a unique forum for high-level dialogue where EU Finance Ministers meet their counterparts from the Mediterranean countries to discuss policy reforms and investments priorities; − G7 Deauville Partnership (G7, GCC1, 6 Mediterranean partner countries2, regional and multilateral international organizations3) and, in particular the IFI coordination Platform (African Development Bank, Arab Fund for Economic and Social Development, Arab Monetary Fund, EIB, EBRD, IFC, IMF, Islamic Development Bank – IsDB, OECD, OPEC Fund for International Development – OFID , WB). The Deauville Partnership is an important tool to promote dialogue and coordination among key actors in the region, with a strong political weight and catalytic role; − Coordination Secretariat of the Arab Funds (Kuwait Fund for Arab Economic Development, Saudi Fund for Development, Abu Dhabi Fund for development, Arab Fund for economic and social development, IsDB, OFID, Arab Bank for Economic development in Africa, AGFUND and the Arab Monetary Fund); − Luxembourg Group (EU – including European Commission; EEAS; EIB; EBRD; WB Group – including IFC; IMF);
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Kuwait, Qatar, Saudi Arabia, Turkey and the UAE Egypt, Jordan, Libya, Morocco, Tunisia, Yemen 3 OECD, UNDP, UfM, Arab League 2
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− Secretariat of the Union for the Mediterranean (MS; European Commission; Partner Countries). Union for the Mediterranean aims to enhance regional cooperation and partnership between the two shores of the Mediterranean through the implementation of specific projects. The governance of the UfM is based on equitable functioning and shared responsibility. A co-presidency shared between the North and South ensures that countries from both shores are placed on equal footing. The next step will be to define how AMICI can create synergies andlinks with thedifferent platforms. It should be noted that 70% of the on-going EU funding identified by the mapping in the region formally involves the Commission institutional framework (EIB Art.21 consultation with the EC or NIF Board/ ENI Committee opinion procedures, as well as incountry coordination through the EU Development counsellors platform). Obviously, this does not take into account financing coming from International and Arab FIs, GCC countries and other key bilateral partners (such as US, Japan and Canada). 3. Key issues emerging from the findings of the mapping / stocktaking exercise and proposed way forward:
The mapping exercise revealed an impressive number of projects/programmes funded by different EU actors at country and at regional level. While ODA funding levels may not increase, there is scope to achieve better impact, create synergies, and to fully use visibility. In the medium-term, this should help to attract additional finance from other actors in the region.
There is a need to maintain the rolling character of the mapping of ongoing projects, ensuring that - while supporting management decisions - it provides the necessary basis for strategic orientations and deliberations.
Some thematic areas, such as trade integration, transport interconnectivity at regional level, economic governance and inclusive growth emerged from the mapping as deserving more attention.
A variety of coordination mechanisms exist at country and regional level, mainly used at the design stage/decision phase of new projects/programmes. Coordination and exchange of experience during implementation is equally important, identifying challenges, best practice, evaluations, feedback from stakeholders etc.
Partner countries' ownership and capacity in setting and financing the national and regional reforms and priorities should be further strengthened, in particular regarding economic governance, investment promotion, public-private partnerships in infrastructure investment, trade and regional integration, private sector and SME development, job creation and skills development, and a broader economic participation of women and youth in the economy. All of this would require appropriate and coordinated technical assistance and capacity building to help partner 4
countries implement their reform agenda and attract the needed investments and the use of co-ordinated and streamlined information management systems.
Donor coordination and division of labour, in partnership with the beneficiary countries, should be enhanced and intensified, both at national and regional level. Joint needs assessments and jointprogramming, where feasible, should be considered especially when launching the new programming cycle4
Strategic policy dialogue with partner countries, both a local and regional level, should be further enhanced and aligned with policy objectives. The EU, as a major donor in the region, should lead in this process. It could also seek greater coordination with other relevant regional players such as the Gulf countries.
Discussions with several key stakeholders, including EU Member States, EFIs, the private sector, partner countries, Arab financial institutions and the UfM Secretariat, took place in different fora in September and October 2014 to gather views on the proposed way forward. As emerged from this consultation exercise, AMICI could work as a platform to enhance coordination in relation to the following topics:
a) AMICI as a platform to enhance coordination and policy dialogue AMICI can help rationalise coordination by linking the several existing fora such as: − Country level: AMICI could become part of the EU Development Counsellors platform as a tool to coordinate EFIs and promote joint programming in the framework of investment projects and inclusive growth. As regards the country dialogue, the local AMICI platform/group could liaise with the Development Partners Group (or other national coordination mechanisms) to establish a more focused national dialogue with the Government on investments. This dialogue on investments may be extended to other donors and IFIs; − EU-MS level: the ENI Committee and the NIF Operational Board and its strategic dialogue could be the central coordinating bodies for AMICI for what concerns programming priorities, joint strategic direction and experience sharing; − International / Regional level: the UFM could play a leading role in coordinating the aspects of AMICI related to information sharing (and where relevant, sector dialogue), as well as in liaising with the main existing regional fora such as the G7 Deauville Partnership (in particular the IFI coordination Platform), to which it is already associated, and the Coordination Secretariat of the Arab Funds. 4
In 2015, for the countries with a 2-year Single Support Frameworks (SSFs), namely Egypt, Palestine and Tunisia. In 2017 for the other countries. Concerning regional cooperation, joint programming could be piloted in key sectors such as trade facilitation and regional connectivity for transport networks 5
b) AMICI as a tool for enhanced information sharing As previously mentioned, the mapping of ongoing projects should be kept regularly updated. A web-portal including information on ongoing investment projects and related issues in sectors related to the scope of work of AMICI could be developed and eventually run in partnership with the UFM. This information system would help to increase aid visibility and accountability, and be used as a management tool for donors and investors to align their financial support with country’s priorities. c) AMICI as a platform for joint programming on investments Within the broader exercise on joint programming that will be launched by the EU in 2015 (in line with EU policy on aid effectiveness and division of labour), AMICI could be the platform to pilot joint programming on investments and inclusive growth, both at country and regional level. AMICI could become a technical subgroup of the EU Development Counsellors platform, including all EFIs operating in the country, mandated to carry out the joint needs assessment and preparing the joint response strategy.
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ANNEX: AMICI mapping – Summary of data and findings (version of 31.10.2014) The data gathered through the mapping exercise has been analysed per country, sector and financial instrument. The analysis reveals the following: (i). volume and distribution of EU assistance (both grants and loans): -
The total EU assistance provided (Commission, Member States, and EFIs) represent about € 21.7 billion with total project costs for on-going operations of approx. € 55 billion. These collective efforts are not well known and would benefit from higher visibility.
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To note that 80% of the support concern loans and financial instruments (including macro financial assistance), which are usually not captured in country-led programming processes. The remaining 20% correspond to grants (including budget support) and TA to support reforms and sustainable development of different stakeholders. In this regard it is important that the support provided by the different instruments is appropriately linked – and supports policy reform, complementarity and coherence. Joint programming may open new possibilities for synergy and impact.
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The countries benefiting more from EU operations are Morocco with €7.4 billion, Egypt with €4.6 billion, Tunisia €4.1 billion and Jordan with €1.6 billion. The higher share of investments in Morocco could be attributed to a number of factors, such as higher degree of political stability, commitment to reforms – in particular in the context of DCFTA with the EU – and to an overall better regulatory framework for investments. At the same time, we can note that investment operations in Jordan seem below potential in a comparative basis. Further improvement of their regulatory frameworks, investment climate and engagement on trade openness are needed to attract higher investment.
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Energy and transport appear to be the core sectors for investments in the region, whilst social and environmental protection (including water and sanitation) seem not to be equally appealing (probably too risky or not rentable / mature enough for the investors)
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Private sector development and trade are the core sectors for regional programmes (€1.26 billion). In countries aspiring to deeper trade integration with the EU, the use of financial instruments for trade should be more fully exploited (DCFTA facility). Trade integration within the region is still very low and there is high potential for its development as a source of innovation, competitiveness and job creation. Transport connectivity, targeting links with more than one country, is still underrepresented and certainly below the needs.
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Improved economic governance, although reflecting only a moderate share of the overall assistance, is a key leverage factor for mobilising domestic finance. Targeted support in this area may lead to high results.
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Support to inclusive growth is high in some countries (Palestine, Jordan), but underutilised in other countries (Morocco, Egypt) and at regional level. This area should be further explored, in view of its impact on employment creation. 7
(ii). donor coordination mechanism indicated in the mapping: -
At country level about 90% of the operations seem to be well coordinated through the different local fora, which involve the Commission (through the EU Delegations), EFIs and Member States. This is often ensuring a good degree of coordination at EU level and should further strengthened (also in view of a better division of labour). However, about 10% of bilateral operations are indicated as ‘intergovernmental negotiations’ by some Member States – showing a low degree of coordination with other donors. Therefor there is potential to increase information / consultation of MS bilateral operations at least with EU partners.
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Regional programmes could benefit from a greater and more strategic involvement of the UfM Secretariat as key regional stakeholder.
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70% of the funding is channelled through operations which have the Commission as key actor (either main financer – as in the case of bilateral programmes and NIF operations – or as key scrutinizer – as in the case of EIB-funded initiatives, which are subject to Commission scrutiny under Art.21 consultation). This underlines the necessity for the Commission to continue leading the strategic and operational coordination of EU operations.
(iii) Summary of gathered projects data
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