CAIRO March 24 2010 – Arab world ministers of transport, finance, power and investment, central and regional bankers, Arab fund representatives and the World Bank Group met in Cairo today to boost funding for regional infrastructure and micro, small and medium enterprises (MSMEs).
Gathered in the context of the World Bank’s Arab World Initiative, which promotes regional collaboration in the interests of development, the ministerial consultation welcomed World Bank proposals that draft the shape of regional funding facilities for infrastructure and MSMEs and underpin them with technical assistance and training.
“The lack of a common and effective institutional framework for integration; the absence of well structured, readily accessible financial arrangements; and deep differences in competitive, legal and regulatory frameworks across countries have impeded the region’s ability to work collectively,” said World Bank Vice President for the Middle East and North Africa Region Shamshad Akhtar. She said high unemployment in the region and a growing population of young people looking for jobs, was a spur to finding common solutions.
This reality had prompted the region to begin discussing approaches to these challenges and effective infrastructure and job creating MSMEs could help the region face this growing demand, she said.
The meeting discussed a World Bank and International Finance Corporation (IFC) proposal for a facility of up to $500 million to catalyze conventional and Islamic financing for infrastructure projects in MENA, with a particular focus on Public-Private Partnership (PPP) projects, and on cross-border projects. A further $500 million could be raised based on strong facility performance, according to the Bank.
A Technical Assistance (TA) window, with up to $10 million financing including from the Development Grant Facility, would support Arab governments in the preparation of infrastructure projects, the strengthening of PPP coordination units, and the enhancing of legal and policy frameworks for project financing. This could expand the pipeline of national and regional PPP projects, and attract significant investment, including Shariah-compliant investment.
Participating ministers particularly encouraged the Bank to secure more substantial financing for the TA window, which they saw as critically important in ensuring that the Facility had the intended impact of a sustainable increase in infrastructure investment.
Micro, small and medium sized enterprises, critical to creating jobs and boosting employment across the Arab world, could be supported by a regional financing facility starting from around $200 million and growing in tune with demand. The proposal, also a joint initiative by the World Bank and the IFC, stressed the importance of training and technical assistance to help local financial institutions respond to this sector of the market.
A recent survey of 130 banks across 15 countries in the Arab world by the World Bank and Union of Arab Banks, had demonstrated the urgency of technical assistance to facilitate lending as critical to the growth of this sector.
“I think of MSMEs as playing two vital roles at two levels in societies,” said Akhtar. “The micro piece helps you address poverty and issues like the empowerment of women and the opening of opportunity to those who have not had a chance before. And the Small and Medium enterprise level gets your job creation going. Both of these are critical in this region.”
Countries represented at the meeting were Lebanon, Morocco, Jordan, West Bank & Gaza, Tunisia, Iraq, Egypt and Yemen. The Islamic Development Bank was represented as was the Arab league and the Social Fund for development.