6 April 2010
As the World Bank increases cooperation and coordination of development schemes with the Europeans, how might this affect lending trends in the Middle East and North Africa?
The increasing cooperation between Europe and the World Bank in the Middle East and North Africa (MENA) region raises many questions on the Bank’s mandate of fighting poverty in the southern Mediterranean countries.
In October 2009, The World Bank launched the Marseille Center for Mediterranean Integration, together with the European Investment Bank (EIB), the governments of France, Egypt, Jordan, Lebanon, Tunisia and Morocco, and the city of Marseille, France. The Center is the latest mechanism in the cooperation and coordination efforts in the MENA region between the Bank and Europe, and it is tasked with improving cooperation to support development policies geared towards greater integration in the Mediterranean region.
This idea of greater integration in the Mediterranean region has long been a strategic objective of the European Union (EU) and has inspired the creation of several mechanisms and facilities including the Facility for Euro-Mediterranean Investment and Partnership (FEMIP) managed by the European Investment Bank, and the Union for the Mediterranean championed by France’s Sarkozy administration. To reach this goal, Europe has dramatically increased its investment in the region in recent years. EIB alone - not counting the other European lending mechanisms including the bilateral ones- lent €1.6 bn to the region (US$2.15 bn) in 2009; a portfolio that far exceeds the compiled portfolio of the different arms of the World Bank Group in the region for the same year - US$ 1.85bn [1]. According to the EIB website, those loans were made “in support of the objectives of the European Union”, which is essentially EIB’s mission - to “contribute towards the integration, balanced development and economic and social cohesion of the EU Member States.” Many of the projects funded by the EIB in the region are co-funded by the World Bank, whose stated mission is to fight poverty. This cooperation raises questions about the compatibility of the World Bank’s mandate to fight poverty, with the EIB’s mission to serve Europe’s interests, and the types of projects that are co-funded as a result.
The two most controversial sectors in which the World Bank cooperates with the different European funding mechanisms in the region are energy and water. In 2007, the EU adopted a new energy policy in which Europe committed itself to meeting 20% of its energy needs from renewable sources by 2020. In order to achieve this goal, the EU decided to increase its lending, through different finance mechanisms, to renewable energy projects in its neighboring countries - most importantly, the southern Mediterranean ones - from which Europe would then be able to import its needed energy. Interestingly, the World Bank has also increased its funding to the energy sector in the region and is now co-financing several large-scale renewable energy projects, including a concentrated solar power (CSP) program, for which the Bank has committed US$750 mn out of the Clean Technology Fund - a program aimed at mitigating climate change.
At a time when the Bank is trying to position itself as a leader in global climate finance, the institution is simultaneously co-financing, with Europe, several water projects in the Mediterranean which will actually have negative environmental consequences for the region. One such project will provide irrigation needs for farm lands that produce high water consuming crops that will be exported to Europe. This, in a region that the Bank itself acknowledges, is the driest in the world.
It seems that the Bank’s portfolio in managing the region’s abundant solar resources and scarce water ones should be examined more closely to determine whether or not the Bank is sacrificing sustainable development and its mandate to alleviate poverty, for an ideological belief that market integration is the only path to development. Let us hope that the Bank’s environmental and energy strategies for the upcoming decade, which are both currently under review, will address these concerns.
[1] Note that with respect to lending, the EIB defines the Mediterranean region as Algeria, Egypt, West Bank and Gaza, Israel, Jordan, Lebanon, Morocco, Syria and Tunisia. Meanwhile, the World Bank defines the same group of countries as the Middle East and North Africa (MENA) region but also include Yemen, Djibouti, and Iraq (the funds for which come from a special fund).