Volume 13 | 2020 | Number 1 | 135 | THE EUROPEAN INVESTMENT BANK’S FINANCING ACTIVITIES IN THE SOUTHERN MEDITERRANEAN TAMÁS SZIGETVÁRI Pázmány Péter Catholic University, Hungary The Southern Mediterranean, as a neighbouring region for the European Union has received a special interest in the EU poli- cies towards external countries, and this special interest has been appearing in the EU assistance given for the economic development of the region. The raising social tensions in the Mediterranean countries and the growing migratory pressure in recent years, however, have increased the challenges con- nected to the region, and thus the importance of a broader and more complex development support as well. The European Investment Bank (EIB), as the European Union’s development bank carries out an ever-growing development lending activ- ity in the Mediterranean. In our study we analyse the role of the EIB in this financing, and argue that to be able to fulfil the expectations concerning the future role of the institution in de- velopment assistance, the EIB has to improve its financial as- sistance practices. Key words: Mediterranean countries, European Investment Bank, development, financial operations INTRODUCTION The EU’s Southern Neighbourhood 1 is of utmost importance for the European Union, as one of the major sources of challeng- es the EU has to face in recent years (e.g. migration, terrorism). 1 By Southern Neighbourhood or Southern Mediterranean countries the study considers Morocco, Algeria, Tunisia, Egypt, Israel, Jordan, Lebanon, the Palestine Authority and Syria. | 136 | Tamás Szigetvári Volume 13 | 2020 | Number 1 The activities of the European Investment Bank are mainly con- centrated in the EU Member States, but for decades, and to an increasing extent, it has been also supporting regions and coun- tries outside the EU. This study examines, in particular, how the EIB’s financial supports contribute to the achievement of these European efforts towards this region. In the first part, after a short overview of some relevant lit- eratures the study analyses the relationship of the EU and the Southern Mediterranean countries: the challenges that the re- gion poses for the EU, the institutions it created to address these challenges, and the extent to which these institutions are able to deal with the risks created by the Southern Mediterranean. The second part examines the priorities and the authorisation upon which the European Investment Bank carries out its financial activity, and the regions concerned by this funding outside the Union. The third part examines the EIB activities in the region in detail. Along with the presentation of the lending priorities, an analysis of the distribution of this lending broken down to countries and sectors based on statistical data is also provided. The cooperation of EIB with other development institutions the EIB in the area is also assessed. A brief evaluation of the EIB activities in the Southern Mediterranean concludes this study: the extent to which it was able to contribute effectively to the economic development in the region, and to the realisation of EU policies. A SHORT REVIEW OF LITERATURE There is a broad literature on the EU-Mediterranean relation- ship, dealing with this complex issue from different points of view. Bruns et al. (2016) reveals the geopolitical aspects behind the integration: how much the EU is able to act as a geopo- litical actor in the neighbouring regions, what kind of instru- ments it possesses to reach it goals outside its territory. Bouris and Schumacher (2017) provides an excellent analysis on the continuities and changes in the revised Neighbourhood Policy: how the Arab Spring and its aftermath affected the EU policies and bilateral relations. Kourtelis (2015) focuses on the political | 137 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 economic backgrounds, especially in the North-South relations: he reveals that the unchanged power structures in the domestic environment of both sides have reduced the expected efficiency of Euro-Med economic cooperation. For the purpose of our study literature that examines the EU financial support given to the region, its conditionality and effectiveness, are of special importance. Holden (2008) draws attention on the rewards-based conditionality of the EU’s aid policy towards Mediterranean countries that had been targeted at supporting reforms in key sectors. Ayadi and Gadi (2013) analyses the new priorities of assistance policy created as a reac- tion to the events of the Arab spring, and the possible scenarios to handle old and new challenges. Zorob (2017) goes further by assessing the social and economic consequences of the EU poli- cies in the Southern Mediterranean countries, and the impact of the EU assistance to improve the actual situation. Since we are focusing on the activity of the European Investment Bank, the literature on international development banking activity has also a relevance to our topic. Multilateral development banks (MDBs) are in general highly valued by re- cipient countries and they are considered more effective and efficient than traditional bilateral donors (Prizzon et al. 2017). However, the MDB model combining large-scale finance, at interest rates lower than countries could borrow from capital markets is under threat: more restrictive policies have become embedded in MDB management culture the influence of power- ful shareholders—most notably the US—who are reluctant to take any risks that could lead to an MDB bailout (ibid.). Spantig (2017) investigates how the activity of international financing institutions has been adapted to changing challenges and requ- irements. Here, the post-Arab-Spring Mediterranean region of- fers a good case to analyse. The EIB’s general extra-EU lending activity is widely ana- lysed in the literature. Antonowicz-Cyglicka et al. (2016) and Dobreva (2018) give a critical overview on the EIB external mandate, Lesay (2013) analyses the EIB’s external activity from a developmental policy approach, while Újvári (2017) discusses the EIB’s activity as a potential part of the EU external policy. | 138 | Tamás Szigetvári Volume 13 | 2020 | Number 1 On the Mediterranean activity of the EIB, however, we can find only few analytical literatures. The EIB itself provides ex-post analysis of previous FEMIP programs (De Laat et al. 2013), but we hardly find more detailed analysis that puts the issue in a broader framework. INSTITUTIONAL AND FINANCIAL FRAMEWORKS OF EURO-MED COOPERATION The evolving European integration — due to its geographical, historical, political, economic and cultural connections – has from the outset been interested and directly involved in the se- curity, stability and development of the countries of its southern neighbourhood, of those of North Africa, and of the so-called Levantine countries (Syria, Lebanon, Jordan and Israel). While during the Cold War, the relations were primarily focusing on bilateral trade and financing agreements, from the mid-nineties on, the need has increased for addressing jointly the region and its complex problems. The basic challenge was the fact that the economies of the region were not able to keep pace with the fast-increasing popu- lation, and hence most countries had to face growing social ten- sions due to increasing unemployment and stagnating or declin- ing incomes. These tensions may lead to radicalisation (Islamic fundamentalism), civil war and increasing migratory pressure. In response to these challenges, the EU was looking for a com- plex solution, the key element of which was to promote the eco- nomic prosperity of the region. The EU’s main instrument for fostering these goals was the economic integration (free trade), which was complemented by investment sources. The Barcelona Process, which was launched in 1995 and was aiming to tighten the relations between the EU and the Southern Mediterranean region in the framework of the Euro- Mediterranean Partnership (EMP), was built on three pillars (political, economic, and cultural). In the framework of the partnership, so-called Euro-Med Association Agreements were concluded with the countries in the region, which over a pe- riod of 15 years included the creation of bilateral free trade. | 139 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 While the short- and medium-term positive wealth impact of these free trade agreements is highly debated (see e.g. Langan 2015), the EMP has offered a broader financial assistance for the region. The MEDA (Mediterranean Economic Development Area) programme was established as the institution responsible for the financial support. MEDA I (1995-1999) disposed over EUR 4,422 million, while MEDA II (2000-2006) provided EUR 5,350 millions of funding for the beneficiary countries. The fi - nancial resources were assigned to the targets and programmes defined in the country-strategies (so-called national indicative programmes). Though the country-priorities were set together with the Southern partner countries, the final decision on the development targets was made in Brussels. The projects were financed mostly through the national governments, however, so the selection of firms and NGOs involved in the projects de- pended on local political preferences. 2 The efficiency of the fi - nancial subsidies aiming for economic and social reforms was below expectations (Holden 2008). The European Neighbourhood Policy (ENP), established after the 2004 EU enlargement, addressed the Southern and Eastern neighbourhood (Ukraine, Moldova, Belarus, the Caucasus states) jointly, but the EMP still remained in a separate unit. The financial resources, however, were merged, and the TACIS (the financial fund for the Eastern countries) and the MEDA operated after 2007 under the common name ENPI (European Neighbourhood and Partnership Instrument). The ENPI dis- posed over EUR 11,200 million between 2007 and 2013. The bi- lateral financial assistance from EU-members has well exceeded EU-funds. The EUR 13,803 million French support (1995-2009) was higher than the overall EU financing (12,758 million), but Germany (EUR 7,170 million), Spain (EUR 2,401million) and Italy (EUR 1,601million) were also important contributors (Ayadi-Gadi 2013, 8). 2 It has also contributed to the negligence of some social groups, to the deterioration of social cohesion, and as a consequence, to a de- creased efficiency of the subsidies. (Bicchi–Martin 2016, 144) | 140 | Tamás Szigetvári Volume 13 | 2020 | Number 1 On a French initiative in 2008, the Union for the Mediterranean (UfM) was established, which has sought to im- prove the cooperation between the two regions on six main ar- eas of support. 3 To finance the costly infrastructural projects, the Neighbourhood Investment Facility (NIF) was established. The NIF was financed both by the EU budgetary funds, and by member states’ contributions. Between 2008 and 2016, the 1,678 million euro of the EU budgetary support to NIF has mo- bilized ca. 15 billion euro of investments, 60 percent of it in the Mediterranean neighbours (European Commission 2016, 6). The Arab Spring initiated in 2011, however, has led to radi- cal changes and questioned the EU’s established relations with the region. The current uncertainties and the increasing role of the Southern Mediterranean in global migration are due to the failures of the economic and political processes of the region. The economic growth in the first decade of the 2000s was ben - efitting mostly the elites of the societies, and unemployment, especially among the youth has grown very high, and thus it has increased social tensions. Foreign investors see most of the countries of the region as non-competitive due to red tape, high political risk and poor economic structure. Economic prob- lems have affected even the political stability of the region: the authoritarian regimes, which were in power for decades, have weakened and completely lost their legitimacy in many coun- tries. The sometimes-revolutionary discontent could not lead, however, to a satisfactory solution and the rise of radical Islam adds to the uncertainty in the region. One of the most fundamental aims of the EU’ s Mediterranean initiatives was to reduce its safety risk by improving the eco- nomic development of the region. The reforms, however, which needed economic liberalisation and a fast opening of external trade, have posed huge economic burdens on the Southern countries, especially in the short term. The EU was providing a limited support to these reforms, due to its internal structural 3 The six areas are: transport and urban development, water and envi- ronment protection, energy and climate protection, social and civil affairs, higher education and research, and business development. | 141 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 tasks in the late 1990s and early 200as, and also due to the Eastern enlargement. Foreign investments that could have otherwise offer a solution to these specific problems (balance of payments, job creation) were also missing. A number of areas (liberalisation of services, labour mobility) are not yet, or only partially, included in the Euro-Med partnerships. The EU’s Mediterranean policy that was aimed originally to reduce the security risks for the EU, often has strengthened the ef- fects contrary to this process. As a first reaction to the events of the Arab Spring, the EU extended the ENPI funds with EUR 1,000 million between 2011 and 2013 and added new priorities (Zorob 2017, 10). In the framework of the reform of the ENP in 2015 and of the EU’s Global Strategy in 2016, the Union seeks to address these issues in a complex manner. The Mediterranean policy has been refocused with a greater coherence of the European Union’s policies (foreign and security, development, and neigh- bourhood policies), with providing bigger financial resources, with a differentiated treatment towards each country’s situa- tion and problems and with the support of inclusive economic policies aiming on the one hand, at reducing social tensions and poverty and at creating jobs on the other. These are now financed by the European Neighbourhood Instrument (ENI) that provides EUR 15,400 million, complemented by loans provided by the EIB. THE EIB AND ITS ACTIVITIES OUTSIDE THE EU The European Investment Bank is the EU’s long-term devel- opment lending institution, which was established under the Treaty of Rome establishing the European Economic Community in 1958. The bank is owned by the EU Member States, there- fore, its primary task is to contribute to the EU’s long-term ob- jectives. In 2000, the EIB was complemented by the European Investment Fund (EIF), which provides venture capital mainly to SMEs and, in 2012 the EIB Institute became the new member of the EIB Group. The EIB has an AAA credit rating, it finances its loan products from the capital markets and grants loans on a | 142 | Tamás Szigetvári Volume 13 | 2020 | Number 1 non-profit-making basis in the Member States and for projects of common interest to the Member States. 4 Since 1963, the EIB has been continuously and increasingly supporting the EU’s external policies, which resulted in an activ- ity that encompasses today practically all countries of the world. The EIB’s external lending activity aims at, in particular, the EU foreign policy, its neighbourhood policy and its development aids. In comparison with other multilateral development banks (IBRD, EBRD, the African Development Bank, etc.) the EIB is unique in a number of respects. It is active at the same time both in each of the EU Member States and in the developing countries, with no development objective on its own, but sub- ject to the goals set by the EU Member States and institutions. A significant part of its activity outside the EU is carried out under EU guarantee. It primarily focuses on investments and project- funding and participates in shaping the country- or the sectoral strategies only to a limited extent (since the latter are taken care of by different EU institutional resources). Beneficiary countries outside the EU are not shareholders of the EIB; it grants pref- erential loans only to a limited extent and mainly on a regional basis (e.g. ACP countries). It carries out its funding in develop- ing countries with far fewer human resources than other devel- opment banks (Steering Committee 2010, 8). The EIB’s External Lending Mandate (ELM) operates with the guarantee provided for external funding by the EU budget. The ELM includes not only the countries participating in the en- largement and neighbourhood policies, but also the countries of Latin America and Asia. A major part of the African countries may be granted EIB loans in the framework of a separate man- date (the Cotonou Agreement), established for the ACP coun- tries. In addition, the EIB grants loans through its Own Risk Facility (ORF) without an EU guarantee. The need for an EU guarantee follows partly from the Statute of the EIB, pursuant to which it may carry out any lending 4 See the Lisbon Treaty (TFEU 309). | 143 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 activity only under appropriate security, and the credibility of the bank needs to be maintained (even by loans granted to risk- ier third countries). The guarantee was initially country-based, then regional and in 2007 it became general (except for the ACP countries to which a specific rule applies) (EC 2013, 66). From 1997 schemes started to appear, where the EIB itself took parts of the risk on a regional (in the case of acceding then neighbour- hood policy countries) or on a thematic (energy, sustainability) basis. In many cases they shared the risks, and hence, the politi- cal risks were borne by the EU budget and the commercial risks by the EIB (covered by a third party). Since 2007 risk-sharing has become obligatory at each lending concerning the private sector. This is partly the reason why in 2011 the proportion of own risk loans exceeded the amount of the loans granted with an EU guarantee (EC 2013, 67). The EIB recommendations also propose the extension of own risk lending, reserving the EU guarantee primarily for countries with a higher risk (Steering Committee 2010, 21). Recent years’ experience also shows that the calling of guarantees is very rare. The EIB itself provides mostly loans (and not grants), but it offers other financial in- struments as equity investments, guarantees and advisory ser- vices for its clients. In general, supported projects outside the EU focus primar- ily on the development of the private sector, the economic and social infrastructure, the investments concerning climate and environmental protection, and those fostering regional coop- eration. In addition, the ELM supports the foreign direct invest- ment (FDI) of EU companies. The new External Investment Plan (EIP) adopted in 2016 extended the former EIP with a specific priority: addressing the root causes of migration. On the propos- al of the Commission, at the occasion of the mid-term review of the budget of the EU (MFF), the ceiling amount of the guarantee behind the ELM was raised from EUR 27 billion to EUR 32.3 bil- lion. EUR 1.4 billion from the increased amount is earmarked for the public expenditures concerning migration in the acced- ing and the Southern Mediterranean countries, while a further EUR 2.3 billion is earmarked for the private sector to support migration related activities (Dobreva 2018, 4). In addition, the | 144 | Tamás Szigetvári Volume 13 | 2020 | Number 1 establishment of the so-called Economic Resilience Initiative (ERI) was also adopted. The ERI is an additional financial sup - port tool for the countries of the same regions (Western Balkans and Southern Mediterranean) that can be rapidly mobilised to improve sustainable development and social infrastructure and cohesion, and thereby the economic resilience. Evaluations on the EIB activities highlight the importance of evaluation and monitoring concerning the EIB’s investment projects and pro- pose to improve them (Steering Committee 2010: 25). These evaluations emphasise local consultations relating to the pro- jects and the use of economic, social (e.g. human rights, gender equality) and environmental impact assessments and indica- tors. Priority is also given to money laundering, corruption, tax evasion and the risk of terrorist financing (Dobreva 2018). Of course, in the case of the EIB, projects within the European Union are the large majority (around 90 per cent), the remaining 10 per cent is shared among 160 countries outside of the EU. This amount, however, is also significant: since the establish - ment of the EIB, it allocated capital in an amount of EUR 120 billion for financing projects in non-EU countries and it lends currently around EUR 8 billion annually for projects outside the EU. In the first three decades, the former colonies of the African, Caribbean and the Pacific regions (the so-called ACP countries) were the priority, however, even at that time the Mediterranean countries were already significant beneficiaries. In the course of the nineties the main target region concerning non-EU loans be- came without doubt the Mediterranean in major part due to the special support of the Euro-Mediterranean Partnership process that was taking shape at that time. From the two-thousands on, the acceding states took the leading role, initially those acceding in 2004 and 2007 from Central and Eastern Europe, and later on the main beneficiaries of the loans became the Western Balkans and Turkey. The support of the Eastern Partnership also commit- ted significant resources, while in recent years the proportion of non-European (Asia, Latin America) lending has increased in or- der to reach foreign and development policy goals. On the whole, the Southern Mediterranean region has received one quarter – that is EUR 36.5 billion – of the non-EU resource-allocations, | 145 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 while the wider Mediterranean region (together with Turkey and the Western Balkans) – almost half of the funds. Table 1: The EIB’s external funding projects per region and per periods (million EUR) 1959-1989 1990-1999 2000-2009 2010-2019 1959-2019 EFTA 68 1,101 1,866 1,855 4,892 Accession countries 982 871 17,165 22,598 41,617 Eastern Europe 0 0 718 11,106 11,823 Medite- rranean 1,533 6,137 12,543 16,421 36,526 ACP 2,806 3,299 5,551 9,901 21,557 Asia and Latin America 0 1,701 5,705 13,620 21,026 Source: EIB (2020) 5 THE EIB’S ACTIVITY IN THE SOUTHERN MEDITERRANEAN The Development of EIB’s involvements’ The EIB has been providing loans to the Southern Mediterranean countries since 1978. Over the period 1978-1995, the EU con- cluded bilateral financial cooperation agreements with the coun- tries of the region. The agreements that were renewed every five years would not only enable budgetary aid, but also EIB sup- port to the countries of the region. Between 1978 and 1991, the Mediterranean countries received ECU 1,965 million, while be- tween 1991 and 1995 on the basis of the 4 th Financial Protocol ECU 1,300 million as loans. The New Mediterranean Policy adopted in 1990 guaranteed ECU 1,800 million loan volume for 5 If otherwise not indicated, data in the tables is based on the EIB database (http://www.eib.org/projects/loan/list/index), sometimes with own calculations. | 146 | Tamás Szigetvári Volume 13 | 2020 | Number 1 the period of 1992 to 1996, primarily for funding regional (ECU 1,300 million) and environmental (EUR 500 million) projects. Under the MEDA programme, which was established by the Euro-Mediterranean Partnership process launched in Barcelona in 1995, in the period of 1995 to 1999, the EIB provided EUR 4,808 million in loans from the Euro-Med programme launched to support EU activities in the Mediterranean, while between 2000 and 2007, the Euro-Med II disposed over EUR 6,400 million. In 2002, the EIB transformed the Euro-Med sup- port framework and established the FEMIP (Facility for Euro- Mediterranean Investment and Partnership), which has become the primary instrument for regional investments. Since 2003, in the framework of the FEMIP, the EIB provided EUR 27 bil- lions of project funding in the region. In 2008, the EIB also played a role in the financing of the initiative, called Union for the Mediterranean (UfM): it partici- pated in the funding of three out of the six planned UfM ar- eas. These are: the environment (reducing the pollution of the Mediterranean Sea), financing of alternative energy projects (e.g. solar reactors) and the development of transport infra- structure (ports, motorways). In addition to the infrastructure projects, the Mediterranean Business Development Initiative was also established, which provides financial and technical as- sistance to the micro, small and medium-sized enterprises of the partner countries (Joint Declaration, 2008:20.). Over the period of 2014 to 2020, the EIB set new priorities for the financial aids. One of the primary objectives has become the support of the growth of the private sector, in addition to the other key areas, such as the development of the social and economic infrastructure, environment protection and combat- ing climate change. The EIB launched, in particular in Morocco and Tunisia new, innovative programmes, which focus on the support of economic operators who are of paramount impor- tance to the community with a view to increase the social impact of the projects. These may include, for example, job creation that is extremely important in the region because of its high unem- ployment rate and the resulting negative consequences (EIB 2015a, 15). | 147 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 EIB Supports in the Light of Statistics If one takes a look at the division of support given at the level of the individual Southern Mediterranean countries, then three beneficiary countries stand out: Egypt (EUR 11,057 million), Morocco (EUR 7847 million) and Tunisia (6637 million euro). The three countries received 70 percent of the total financial support granted by EIB in the region. Table 2: EIB projects in the individual Mediterranean countries per periods (EUR million), in proportion to the GDP and the population 6 1978- 1989 1990- 1999 2000- 2009 2010- 2019 Total 1978- 2019 Support/ 1000 EUR of GDP Support/ population (EUR) Algeria 200 1104 854 500 2719 17.7 63.2 Egypt 404 1293 2970 6390 11057 41.1 110.0 Israel 93 142 510 780 1525 4.4 165.8 Jordan 100 405 488 541 1524 38.8 143.8 Lebanon 40 516 742 1494 2792 53.5 410.5 Morocco 263 1620 2553 3411 7847 74.1 208.6 Palestine 0 217 68 70 356 27.3 71.2 Syria 102 20 1437 185 1744 32.6 99.7 Tunisia 272 819 2797 2750 6637 192.2 566.2 North Africa* 0 0 10 72 82 Mediter- ranean* 0 0 115 187 302 Total 1533 6137 12543 16421 36526 34.2 152.3 * regional programmes Source: Authors’ own calculations based on the available data by EIB, UN and IMF 6 The table compares the total support received between 1978 and 2019 with the GDP figures and population data for 2019. The GDP data are based on the IMF figures, but have been converted on the basis of the official dollar/euro exchange rate. | 148 | Tamás Szigetvári Volume 13 | 2020 | Number 1 Given the very different size and level of economic develop- ment in these countries, it is worthwhile to look at how the aid distributed in proportion to the population and the GDP. The last two columns of Table 2 show clearly that both as a share of GDP and of the population, Tunisia has been by far the larg- est beneficiary: its support amounted to almost four times the regional average in terms of population (EUR 566 compared to the EUR 152 regional average), and six times in terms of GDP (EUR 192, while EUR 34 for the region). As regards the share per population, the second one was Lebanon, followed by Morocco, while Egypt with its 100 million inhabitants ranked only the 6th, well below the regional average. Morocco was the second as a share per GDP , while Egypt received slightly above the average according to this comparison. What follows is a more detailed analysis of the EIB activity in the region between 2003 and 2019 concerning projects re- alised under the FEMIP. The biggest beneficiary of aids under the FEMIP is again Egypt (EUR 8,955 million), Tunisia (EUR 5343 million), however, was caught up with and even surpassed by Morocco (EUR 5601 million). 7 The three countries received 78% of the FEMIP support, so the dominance of the three coun- tries concerning the loans in this period is greater than that of the total period. When one takes a look at the number of approved and signed loan projects (Table 3), a total of 373 EIB projects have been launched between 2003 and 2019. On this basis, Morocco (83 projects) was the biggest beneficiary, ahead of Egypt (70) and Tunisia (69). Here, however, the combined share of these three countries is lower than 60%, and during the 2015-2019 period Lebanon (20) had signed more contracts than Tunisia (19). According to the size of the projects, however, Egypt by far leads the group. Between 2003 and 2019, out of the 12 larg- est projects financed in FEMIP, eight were in Egypt. (Table 4). Among the largest projects in Egypt there are mostly energy and transport developments: power plants, refinery plants, and the 7 These figures are also set out in Table 4. | 149 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 Metro in Cairo. More than 800 million euros was dedicated on the ADM motorway in Morocco, but a power plant in Syria, and gas pipelines in Algeria and Tunisia were also among the largest projects. In the last three years, two significant credit lines have been provided for Egypt to support the private sector and SMEs, intermediated by the Bank Misr and by the National Bank of Egypt. Table 3: Number of projects financed by FEMIP per country and per periods 2003-2007 2008-2014 2015-2019 2003-2019 Algeria 4 1 0 5 Egypt 19 20 31 70 Israel 3 8 4 15 Jordan 4 9 9 22 Lebanon 11 15 20 46 Morocco 21 35 27 83 Palestine 2 2 3 7 Syria 7 9 0 16 Tunisia 22 28 19 69 Regional 9 21 9 39 Total 102 149 122 373 Source: EIB (2020) | 150 | Tamás Szigetvári Volume 13 | 2020 | Number 1 Table 4: The top projects financed by FEMIP (2003-2019) Country Project Signed amount (million €) Sector Form Year of signature(s) Egypt Bank Misr SME loans 1,000 Credit facility 3 contracts 2017, 2018, 2019 Morocco ADM Motorway III-VII 805 Transport 5 contracts 2003, 2005, 2007, 2009, 2010 Egypt NBE loans for SMEs 750 Credit facility 2 contracts 2018, 2019 Egypt Cairo Metro Line 3 (Phase 3) 600 Transport 3 contracts 2012, 2015, 2016 Egypt Damanhour gas power plant 550 Energy 1 contract 2015 Egypt Idku LNG 538.9 Energy 4 contracts 2003, 2005 Egypt Private sector support 500 Credit facility 1 contract 2016 Algeria Medgas pipeline 500.0 Energy 1 contract 2010 Syria Deir Ali Power plant 475 Energy 2 contracts 2004, 2008 Tunisia ETAP South Tunisia gas pi- peline 380.0 Energy 1 contract 2014 Egypt Cairo Metro Line 1 350 Transport 1 contract 2019 Egypt ERC refinery 346.4 Industry 1 contract 2010 Source: Authors’ own calculations based on the available data by EIB (2019) | 151 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 If one looks at the sectoral distribution of all loans, the case is similar (Graph 1). According to the signed contracts between 2003 and 2019, the FEMIP was active in two priority areas of the UfM: 7,834 million euro (or 30%) has been dedicated to energy sector, while 5,022 million (or 20%) on the transport sector. Water and sewage projects (2,616 million euro) are also connected to an UfM priority, environment. After 2011, new priorities emerged, such as urban development and education, which were previously not indicated as priority areas, for the time being, however, they represent a rather low proportion in the financial aids. Graph 1: FEMIP loans provided by sectors (only sectors with largest amounts of loan, cumulative value, 2003-2019, million EUR)   0   1000   2000   3000   4000   5000   6000   7000   8000   9000   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017   2018   2019   Ener gy   C r e d i t  li ne s   T r a n sp ort   W at e r ,  s e w age   Ind us tr y   Ser vice   Source: Authors’ own calculations based on the available data by EIB (2019) With its more than EUR 6.3 billion amount overall, credit lines have become the second most important area of EIB loans after the energy sector. It shows the increasing importance of SME and other private sector projects in EIB (and in a broader term EU) policies. The majority of EIB funding was still for the public sector, and this is particularly true in the case of large volume projects. This does not mean, however, that agreements with the private | 152 | Tamás Szigetvári Volume 13 | 2020 | Number 1 sector had been totally abandoned. Beside the credit lines dedi- cated for SMEs a number of small- and medium scale loans have been provided for various industrial and service sectors. In addi- tion to loans, the EIB offered private equity capital which was an opportunity provided to companies in the producing sector with scarce capital and which was primarily used by companies of the industry (mainly food industry), the health sector, education, tourism and certain technological sectors. Institutional Cooperation of the EIB in the Region In order to finance FEMIP projects, the EIB has developed close cooperation with a number of European and international fi- nancial institutions for the co-funding or joint support of differ- ent projects (e.g. capacity building and new regional initiatives). Donors of the region have been increasingly seeking synergies in recent years, since the treatment of the growing security risks in the region requires that the effectiveness of financial aids is increased. The most fundamental is, naturally, the relationship with the European Commission, to which the European Neighbourhood Policy (ENP) provides a framework. Since 2014, the funding of the ENP is guaranteed by the European Neighbourhood Instrument (ENI) 8 , which disposes over EUR 15.4 billion over the current 7-year budget period for the support of the states of the Eastern Partnership, in addition to the Mediterranean countries. An additional institutional cooperation framework is provided by the Neighbourhood Investment Facility (NIF), which was established in 2008, primarily for the co-financing of expensive infrastructure projects, however, it also supports risk capital transactions for the private sector. The EIB built close cooperation with the development insti- tutes of the Member States, too. In the framework of the NIF , the EIB supports projects for the improvement of water and sewage supply together with the French Agency for Development (AFD 8 Between 2007 and 2014 it operated under the name of European Neighbourhood and Partnership Instrument. | 153 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 - Agence Francaise de Developpement). In 2016, for instance, a EUR 48 million project was realised for providing water supply of Syrian refugees in Jordan. Since 2015, the EIB and the German KfW (Kreditanstalt für Wiederaufbau) participates jointly in the preparations of the Mediterranean Solar Power project, while with the Spanish AECID they provide funding in the form of a new venture capital to the countries of the region that supports microfinancing in the amount of EUR 100 million. Together with the European Bank for Reconstruction and Development (EBRD), the EIB supports a programme pro- moting the trade and competitiveness of the four Southern Mediterranean countries that are the most active ones in terms of EU cooperation: Tunisia, Morocco, Egypt and Jordan. This EIB support is based on three complementary pillars. First, pro- viding long-term credit lines to local financial institutions with a view to supporting manufacturing and food production chains (in 2016 this subsidy reached EUR 120 million extended by the same amount in local resources). Second, providing a risk-hedg- ing instrument to local financial institutions for support SME lending (EUR 20 million in 2016). The third pillar provides for an export support tool on the one hand for SMEs – also with the intermediation of the financial institutions – with a view to fi- nancing mainly export ancillary costs (planning, accounting and compliance with EU standards and rules, etc.) and on the other hand, for financial institutions with a view to offering bank- ing services related to exports. The EIB has signed cooperation agreements on the coordination of development projects in the region with the World Bank (2004), the African Development Bank (2005) and the Islamic Development Bank (2012). The Impact and Evaluation of the EIB’s activity The EIB with its annual funding framework totalling EUR 8 bil- lion provides a very effective support tool that may contribute to the success of EU’s foreign, enlargement, neighbourhood or global development policy. Recent events that resulted in in- creasing external challenges, mainly coming from the neigh- bourhood, demanded strategic responses from the EU. And as we can see, these responses (e.g. the Global Strategy adopted in | 154 | Tamás Szigetvári Volume 13 | 2020 | Number 1 2016) are already relying on an increasing engagement of the EIB in the actions to be carried out (Újvári 2017, 33). Analyses on the EIB’s activities and in particular on its activities in the Mediterranean region in recent years provided criticisms and suggestions in relation to the strategic and operational activity of the institution. Antonowitz-Cyglicka et al. (2016) express a number of criti- cisms concerning the EIB activity in general. One of these is transparency: there is hardly any total assessment available concerning the projects, the assessment of the results and their impact is often unnecessarily treated as confidential informa- tion, which is contrary to the transparency rules of the EU’s own institutions. It was also criticised that the clients involved often have an off-shore background and hence there is a suspicion of tax avoidance (or even that of corruption). In addition, the opin- ions of locals were not adequately taken into account according to the analysis: in these authoritarian regimes, the government often not only disregards, but also resorts to violence to silence any opposition expressed by the local public (Antonowitz- Cyglicka et al. 2016, 7). There are clear differences in the evaluations made before and after 2011. In the period between 2007 and 2013, a mid-term evaluation concluded that the EIB might be a very strong tool of the EU, while at the same time more human and financial re- sources would be necessary (Steering Committee 2010: 2). The document also highlights the importance of institutional coor- dination both with the institutions interested in the EU’s ex- ternal development policy, as well as other, global and regional development institutes. The evaluations made after 2011 (e.g. de Laat et al. 2013), however, make their assessments in the light of the events of the Arab Spring of 2011, reflecting strongly to the apparent deficiencies of the EU’s development policy. To address the re- gion’s challenges, one of the most central elements is job crea- tion, which is in the view of most experts can best contribute to achieve an inclusive economic growth that is having a perceiv- able impact for the broader society. In this respect, the result of the analysis of the EIB projects is a mixed one (EIB 2015b). | 155 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 While infrastructure investments have the potential to create a significant number of jobs, the actual number of new jobs in the case of the projects examined failed to meet the expectations. Sustainable job creation is even more important: here, too, only individual projects (e.g. in the health sector) managed to create a significant number of long-term sustainable jobs, while the proportion of these were considerably less in the case of energy and road building projects (ibid.). The broadening of the scope of EIB financing referred to above (support of new areas and sectors) and of its sources (and the extension of the EU guarantee) can be considered as the pri- mary reaction to these changes. However, this is a slow process. As Spantig (2017, 229) also points out, the modification of the funding priorities is negligible, and it is hardly to be perceived in the target countries, in addition, the EIB focuses rather on the (economic) interest of the EU and not on that of the target countries. It is also true, that the EIB’s primary objective is not poverty reduction, as these objectives are supported by the EU from other sources – it is a question, how much the EIB should and could focus on such priorities. Lesay (2013) also comes to the conclusion that unlike other international development institutions, the EIB has never had its own development policy targets. As a consequence, the pol- icy followed by the institution was determined by the interests of the main shareholders, i.e. the EU member countries. In re- cent years, with the increasing need to achieve sustainable re- sults in the development of Southern countries, a more complex approach of development financing has emerged. The current capacities of EIB, however, are not sufficient for such deeper approach. That is why the cooperation with other development institutions of larger human resource and of broader local ex- pertise was appreciated CONCLUSION Key objective of the European Union is to promote peace, its values and the well-being of its peoples. To reach these goals, the EU needs to support and foster stability, security and | 156 | Tamás Szigetvári Volume 13 | 2020 | Number 1 prosperity in the countries closest to its borders. The Southern Mediterranean occupies a central position in this framework, with recent political and social upheavals, however, the support of economic development became of utmost importance for the EU. The European Investment Bank, which was established as the EU’s development bank, has become an increasingly impor- tant player in financing and supporting the EU’s global and re- gional engagement. The objectives to be pursued by the Bank are defined by the European Union’s priorities and hence the EU’s Global Strategy or in the context of the Mediterranean area, the Euro-Mediterranean Partnership, the European Neighbourhood Policy, or the Union for the Mediterranean shall specify the lim- its within which the EIB provides its funding. The analysis of the EIB lending in the Mediterranean region shows that it is highly concentrated: countries carrying out the most reforms (Tunisia, Morocco) received a proportionally much higher support, whilst in the Euro-Med relations less ac- tive Algeria, or Syria that lead earlier a similar policy (and which is not concerned currently due to the ongoing civil war) receives hardly any resources. In recent years, however, Egypt has be- come the most important partner, both regarding the number of contracts, as well as the amount of loan provided, despite European concerns over the authoritarianism of the Egyptian political regime. The sectoral foci of the financial assistances have been pre - viously the large infrastructure sectors, energy and transport. The power plants and motorways built with the support of the EIB are important elements of the economic catch-up of the Mediterranean countries. The change in the approach in recent years, however, has increased the importance of the direct fi- nancial support of the economic operators, in particular in the form of loans granted to small and medium-sized enterprises via credit facilities provided by intermediating banks, or in a much lower scale by private equity operations through mutual funds. With the over-36-billion-euro financial support provided for the region, the EIB was able to strengthen key elements in the | 157 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 economic development process of the Mediterranean countries. The Bank’s activities, however, are still facing numerous criti- cisms due to limited transparency, weak monitoring, evaluation procedure and the mismanagement of infringements concern- ing the projects. This would require that the EIB’s external fi - nancing activity which is becoming increasingly important in the coming years would be carried out with staff and structural conditions which are adequate to its growing role, and with a more consistent application of the EU transparency rules. ACKNOWLEDGEMENT This study was supported by the János Bolyai Scholarship of the Hungarian Academy of Sciences. REFERENCES Antonowicz-Cyglicka, A. et al. 2016. Going abroad. A critique of the European Investment Bank’s External Lending Mandate. CEE Bankwatch Network. Accessed on 12 March 2020, https:// bankwatch.org/wp-content/uploads/2016/11/going-abroad-EIB. pdf Ayadi, R. and Gadi, S. 2013. The Euro-Mediterranean Partnership and Development Assistance: Past Trends and Future Scenarios. MEDPRO Technical Report, No. 32/March. Bicchi, F. and Martin, M. 2016. Talking Tough or Talking Together? European Security Discourses towards the Mediterranean. In Twenty Years of Euro-Mediterranean Relations edited by R. Youngs, 134-153. London and New York: Routledge Bouris, D . and Schumacher, T . 2017. The Revised European Neighbourhood Policy. Continuity and Change in EU Foreign Policy. London: Palgrave Macmillan Bruns, B. Happ, D. and Zichner, H. 2016. European Neighbourhood Policy. Geopolitics Between Integration and Security. London: Palgrave Macmillan de Laat, B. et al. 2013. Operations Evaluation. Ex post evaluation of EIB’s Investment Fund Operations in FEMIP and ACP countries, Synthesis Report. Luxembourg: European Investment Bank | 158 | Tamás Szigetvári Volume 13 | 2020 | Number 1 Dobreva, A. 2018. Guarantee Fund for External Action and EIB external lending mandate. Briefing – EU Legislation in Progress, February. European Parliament EIB (European Investment Bank). 2010. Union for the Mediterranean. Role and vision of the EIB. Luxembourg: European Investment Bank EIB (European Investment Bank). 2015a. FEMIP Annual Report 2014. Luxembourg: European Investment Bank EIB (European Investment Bank). 2015b. FEMIP. Study on the employment impact of EIB infrastructure investments in the Mediterranean partner countries. Summary Report. Luxembourg: European Investment Bank EIB (European Investment Bank). 2017. Southern Neighbourhood & FEMIP Trust Fund Annual Report 2016. Luxembourg: European Investment Bank European Commission. 2013. Impact Assessment – EIB external mandate 2014-2020. DG ECFIN, SWD(2013) 179 final European Commission. 2016. Neighbourhood Investment Facility. Operational Annual Report 2016. Luxembourg: European Union European Commission. 2017. Report on the 2016 EIB activity with EU Budget Guarantee. COM (2017) 767 final (SWD (2017) 460final Holden, P . 2008. ‘Development through integration? EU aid reform and the evolution of Mediterranean aid policy’. Journal of International Development, 20(2): 230–244. Joint Declaration 2008. Joint Declaration of the Paris Summit for the Mediterranean, ‘3 July, Paris. Accessed on 10 March 2020, https:// ec.europa.eu/research/iscp/pdf/policy/paris_declaration.pdf Kourtelis, Ch.2015. The Political Economy of Euro-Mediterranean Relations: European Neighbourhood Policy in North Africa. London and New York: Palgrave Macmillan Langan, M. 2015. ‘The moral economy of EU relations with North African states: DCFTAs under the European Neighbourhood Policy’. Third World Quarterly, 36 (10): 1827-1844 Lesay, I. 2013. ‘Discoursing development: the case of the European Investment Bank’. Nova Economia, 23(2): 429–462. Prizzon, Annalisa et al. 2017. Six recommendations for reforming multilateral development banks. London: Overseas Development Institute. Accessed on 9 March 2020, https://www.odi.org/sites/ odi.org.uk/files/resource-documents/11908.pdf#page=30 Spantig, L. 2017. International financial institutions: business as usual in Tunisia? In Tunisia’s International Relations since the ‘Arab Spring. Transition Inside and Out edited by T. Adbelrahim et al. 215- 237. Abingdon and New York: Routledge | 159 | The European Investment Bank’s Financing Activities In The Southern Mediterranean Volume 13 | 2020 | Number 1 Steering Committee. 2010. European Investment Bank’s external mandate 2007–2013. Mid-Term Review. Report and recommendations of the Steering Committee of “wise persons. Accessed on 10 March 2020, http://www.eib.org/attachments/documents/ eib_external_mandate_2007-2013_mid-term_review.pdf Újvári, B. 2017. The European Investment Bank: An Overlooked (f) actor in EU External Action? Egmont Paper No. 94, June Zorob, A. 2017. Analysing the economic and financial relations between the European Union and the South Mediterranean Countries. Report. EuroMed Rights, Brussels