Although there was renewed interest in European aid to Lebanon following the Paris III donor conference last January, it is worth remembering that there is a strong tradition in European funded local projects, whether they be under the umbrella of the European neighborhood policy — which currently applies to Europe’s 16 immediate neighbors, with the exception of Russia — or as envisioned by the Barcelona Process, which aspires to deepen relations between the European Union and its southern neighbors with bilateral agreements, leading ultimately to the promotion of a Euro-Mediterranean free trade agreement in 2010. “The European Investment Bank’s (EIB) operations in the Mediterranean partner countries have in fact been brought together under the Facility for Euro-Mediterranean Investment and Partnership (FEMIP) since October 2002,” explained EIB spokesperson Orlando Arango.
Active in Lebanon since 1978, the EIB has invested a total of 800 million euros, especially to reconstruction, water and sanitation infrastructure and transport projects. The total financing by FEMIP in Lebanon between 2002 and 2007 is estimated at around 325 million euros, of which 320 million euros was made up of long-term loans. “FEMIP tends to consider this particular type of financial instrument more adequate for such projects,” said Arango.
The general aid given to the region through the partnership is outlined by an investment strategy in which top priority is given to private sector ventures, whether they stem from purely local initiatives or from foreign direct investment projects. “In order to create an environment, which is favorable to the development of private enterprise, FEMIP also supports infrastructure projects; investments in human capital as well as any scheme specifically targeting environmental protection,” Arango added. The general idea behind FEMIP projects is to provide support to Mediterranean partners enabling them to meet their economic objectives, rise up to the challenges brought by social modernization as well as advance each country’s regional integration. “This ultimately determines financial allocation for each sector and more particularly in the run-up to the creation of a common customs union with the EU by 2010,” he underlines.
Allocations based on country size
However, according to figures released by the European Union, investments in Lebanon occasionally appear to lag behind other countries in the region. Between 2002 and 2006, Morocco, an important EU partner, received 1,040 million euros, while Tunisia got 1,114 million euros. Israel has collected 275 million euros divided among environmental projects and credit lines. The same amount was granted to Lebanon, where the disbursement mainly targeted the transport industry, the environmental sector, while part of the amount covered credit lines. Aid to Jordan consists of 166 million euros divided among various activities such as energy, transport and human capital.
Regional bad boy, Syria, has received 635 million euros between October 2002 and December 2006. This amount was primarily directed toward the energy, transport, telecom and environmental sectors as well as in opening credit lines. “The budget allocated to each country depends however on the size of the economy, the level gross fixed-capital formation (GFCF) and the demand for external financing namely eligible investment projects addressed to the EIB,” Arango defended.
This summer witnessed the one-year anniversary of the July war. The event celebrated as a divine achievement by some, has nonetheless also resulted in sluggish, if not negative growth.
The EIB has also taken into account the added burden of funding part of the recovery and reconstruction processes according to the reform program put forward by the Lebanese government. Over the next five years, 960 million euros will be invested in key projects under the Public Investment Program in support of both the private and public sectors. This amount includes 400 million euros destined to priority transport, wastewater and energy infrastructure projects. “Technical assistance grants will facilitate the preparation and implementation of privatization programs,” said Arango. On the other hand the EIB is allocating 560 million euros to the private sector, an amount that will be channeled trough local Lebanese banks.
“The European Union has also earmarked 5 million euros of its budget for the recently-launched Building Block Equity Fund, to acquire equity in innovative small and medium-sized Lebanese enterprises,” Arango confirmed.
The EIB also intends to develop a venture capital market by assisting Lebanese companies. “This particular type of financing is expected to act as a catalyst in the Lebanese marketplace and promote the inward flow of funds into Lebanon as well as in the region,” he added. To implement efficiently its policy on the local level, EIB has also chosen financial partners including Byblos Bank, Bank of Beirut, Banque Audi, Banque de la Méditerranée, Banque Libano-Française, BBAC, Crédit Lebanaise, First National Bank, Fransabank, Lebanese Canadian Bank, Société Générale de Banque au Liban.
Byblos Ventures gets its start
At Byblos Bank the collaboration has materialized into the Byblos Ventures, the bank’s first equity project worth $20 million at inception. The Byblos Bank Group stake amounts to 50%, partnering the EIB which owns 25% while the remaining equity is divided among other financial institutions. “I would expect the fund to grow to $40 or $50 million,” says Paul Chucrallah, assistant general manger at Byblos Bank. “This equity project is introducing Lebanese companies to alternative financing as well as acting as a financial accelerator,” he added. As Executive went to press, other institutions were signing on the remaining 25%. “The size of each individual investment will vary between $1 and $3 million with an average of 10 to 15 projects to be taken on,” said Chucrallah.
One of the last instruments EIB is relying on pertains to the field of human resources. An internship program has been made available for students from countries in the Mediterranean basin such as Algeria, Egypt, Gaza and the West Bank, Israel, Jordan, Lebanon, Morocco, Syria, Tunisia and Turkey. It provides candidates with an opportunity to improve their skills and boost their experience by exposing them to a multicultural environment. Candidates must either have a degree from an institute of higher education or be enrolled in their final year.
Despite the current government paralysis, many projects are being executed. “Water and sewage installations in North Lebanon have been completed,” confirmed Arango, “while a storm and wastewater drainage network and a sewage treatment plant for the greater Tripoli area has also been further upgraded and developed,” he said, adding that power transport cables in Greater Beirut have also been installed while the motorway linking Tabarja to Tripoli, north of Beirut, has been finalized. This particular road work comprised the rehabilitation of the 38 km existing motorway between Tabarja and Chekka and the construction of the missing 15 km section between Chekka and Tripoli. Other projects include the upgrade and extension of Beirut’s international airport as well the Port of Beirut and the renovation of installations as well as the modernization of Air Traffic Services at the Rafic Hariri International Airport.