Who stands to gain from increased lending by the World Bank and other institutions in the Arab world? Will their support for private sector investment and trade benefit the rich or the poor? BIC's pilot MENA program will focus on the role, operations and impacts of international financial institutions (IFIs) in the region and civil society perspectives on development.
The extent of international financial institution (IFI) involvement in the Middle East and North Africa (MENA) region has fluctuated significantly over time. After a decade of relatively modest activity, the amount of new lending is again approaching the high levels witnessed during the early 1990s. While mainstream multilateral lenders such as the World Bank and IMF have traditionally predominated, the last few years have seen the emergence of new institutions, such as the European Investment Bank (EIB), whose funding in the region accounts for much of the recent escalation.
Both the World Bank and EIB are playing major roles in facilitating economic integration in the region as part of a push to promote "free trade" and private sector investment. Thus far, this approach has produced mixed results. Despite relatively high national incomes in MENA, successes in reducing poverty levels have been limited, and many countries in the region face a widening gap between the rich and poor. The World Bank itself acknowledges that in spite of positive trends in economic growth, the number of poor has increased and 80 million people in the region remain unemployed.
The EIB recently surpassed the World Bank as the largest multilateral lender in the MENA region, and it plans to increase its operations in Mediterranean countries in advance of the creation of the Euro-Med customs union, expected in 2010. At the same time, MENA represents the fastest growing regional portfolio at the International Finance Corporation (IFC), the private sector arm of the World Bank. The IFC's investments in the region are concentrated in the financial market, infrastructure, and oil and gas sectors. Other IFIs active in MENA include the African Development Bank (AfDB), which finances projects in North Africa, and the Islamic Development Bank (IsDB), which is headquartered in Saudi Arabia.
Several areas that are attracting significant IFI funds emerge as potential points of interest for civil society in the Middle East and North Africa. IFI support for private sector participation in the ownership and provision of public utilities such as water has sparked concerns about water management and affordability in the world's most water-scarce region. Meanwhile, the worldwide scramble for natural resources is also affecting the fossil fuel-rich region, raising questions about whether the World Bank and EIB, which have made public commitments to combat climate change, should continue to encourage and invest in oil and gas extraction.
Other trends to monitor include the increasing emphasis on financing for large, capital-intensive infrastructure projects, particularly in the energy sector, designed to promote foreign investment and export-led growth, as well as the flood of money into the banking sector in the Arab world. IFI funding for financial intermediaries, such as commercial banks, is typically promoted as support for small and medium enterprises, but it is unclear whether the intermediary banks provide loans at affordable rates or for sustainable activities, or more fundamentally, whether increasing credit will address the structural causes of unemployment and poverty in the region.
BIC's MENA Program
Partly in response to heightened IFI involvement, BIC is currently piloting a new MENA program to explore the interest of local groups in working on IFI-related issues and to assess the potential for future engagement in the region. The MENA regional program will focus on raising civil society awareness of the role, activities and impacts of IFIs in the Arab world, and supporting informed public engagement in development decision-making.
Some of its primary activities will include: conducting outreach to groups and networks involved in IFI-related issues; providing regular analysis and information about policies and trends at the IFIs; supporting the capacity of CSOs to engage and challenge the IFIs; and assisting in project monitoring and advocacy efforts.
By virtue of its proximity to the headquarters of the World Bank and IMF in Washington, D.C., BIC serves as a defacto "ambassador" for civil society to the institutions, gathering information and facilitating direct engagement with Bank staff.
Download BIC's primer for NGOs to find out more about the IFIs operating in the MENA region and some trends in their operations:
IFIs and the Middle East & North Africa: A Primer for NGOs, Bank Information Center, October 2007 (BIC website) (Acrobat PDF 224 KB)