ARCHIVES HISTORIQUES
DELACOMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (81)153
Vol.1981/9009

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χ
COMMISSION
DES
COMMUNAUTES EUROPEENNES
Secrétariat généralCOM(81)153 final
Bruxelles ,le.
1stApril 1981
S
COMMISSION COMMUNICATION TOTHE COUNCIL
concerning therenewal ofCommunity financial
aidtotheMaghreb andMashrec countries andIsrael»v
0
COM (81)153 final

COMMISSION COMMUNICATION TO THE COUNCIL
CONCERNING THE RENEWAL OF COMMUNITY FINANCIAL
AID TO THE MAGHREB AND MASHREQ COUNTRIES
AND ISRAEL
I*Inits Communication tothe Council of 1August 1980 ,the Commission
stated thatitwasinfavour ofrenewing thefinancial aidaccorded ^^
theCommunity totheMaghreb countries (Algeria ,Morocco ,Tunisi ^^the
•Mashreq countries (Egypt ,Jordan ,Lebanon ,Efyria )andIsrael ._ – – \ wm * r w 1 v r
The Commission stressed inparticular that the Community should :
(a)demonstrate againitsdetermination tofolloigc^active policy in
the Mediterranean ;
(b)renew thefinancial protocols which ,though attached toagreements
ofunlimited duration ,were duetoexpire on31October 1981 .
Thus the Commission decided infcFSteur oftheprinciple ofmaintaining
andupdating theaidbypropc^^ig thatthefinancial protocols be
renewed foraperiod offive^years .
Itisnownecessary^o decide ,manappropriate manner toguarantee
thenecessary confidentiality ,theamounts tobeprovided forinthe
newfinancial j*$^tocols .
II.Itisproposed that budgetary funds should berestricted toupdating
of^JiS aid..Thisupdating would cover theperiod 1July 197&to
December 1980 . Asinthe case ofrenewal ofthe aidtothe
^LomS Convention countries ,thesuggested index istheimplicit price
deflator for Community exports ofgoods andservices ,which means a
43$rise inthenominal amount oftheaid.
COM(80)474 final .

Theupdating should also take account ofthefact that thefinancial aid
accorded tocertain countries under the existing protocols was for a
period ofless than five years ,which means that the Community should
reassess accordingly the basic amount that isupdated .
Tnaddition ,anappropriate sum should "beallocated from the "budget for
financing co-operation schemes tobeundertaken withIsrael under t^»
Community ^agreement with that state .
The amount which could beaccorded inthe form ofloans fin^ced from
the EIB*s own resources depends onthe Bank'sfinancial resources and
ourpartners *absorption capacity .This amount isexpected toincrease
by60fo.
IV.Inview ofthehighinterest rates current 1Y<5c^evai1ing,itisal
proposed toraise from 2$to¥?otheinterest rate subsidy onloans to
the Maghreb and Mashreq countries from the EIB'sownresources . The
cost ofsuch interest subsidies would be20$ofthe amount oftheloans
tobesubsidized andthiswill "h^^aken into account when determiningso
theamount ofgrant aidtobe^jk&e available toeach country .
^V .Theaidshould not beupdated inauniform ,equal manner foreach of
" thecountries concerned . Onthecontrary ,itshould beadjusted ,as
regards boththe^Jounts andtheterms ,totake account ofthechanges
thathavetak^^lace sincethefirst protocols weresigned concerning
factors suc^Sfeis percapita GIF,thecountry 'slevel ofindebtedness ,
its aidabsorption capacity ,the revenue derived from its energy
resources or,alternatively ,the cost ofits energy imports .This
sh^ild inparticular leadtoanimprovement inthequality ofCommunity
tothepoorest states and,asacorollary ,reduce accordingly the
^S&ruality oftheaidintended forcountries whose resources have
^ distinctly improved . Theprinciple ofadjusting both the amounts and
the terms means inparticular that the breakdown between amounts from
the budget and amounts able tobeaccorded inthe form ofEIB loans
must becoordinated .

This coordination will beaimed atachieving abreakdown which isboth
balanced andpolitically acceptable .
The Community will notify the Council ,byappropriate channels ,ofthe
precise figures resulting ,according toitscalculations ,from theg^f »
principles for updating the aid.
I,Oneworking paper isattached tothis Communication ,namely :areport
onthe implementation ofthefirst financial protocols .

WORKING DOCUMENT
REPORT ONTHEIMPLEMENTATION OFTHECOMMUNITY 'SFINANCIg^ID
TOCERTAIN MEDITERRANEAN COUNTRIESxJ >
 
«#

REPORT ONTHE IMPLEMENTATION OPTHECOMMUNITY 'SFINANCIAL AIDTO
CERTAIN MEDITERRANEAN COUNTRIES
1*Althou^i thefinancial protocols annexed totheagreements concluded
with theMaghreb andMashreq countries ,Israel ,Malta andCyprus have been
inforce foronlytwoyears andenvisage different periods forcommitment ,^
aninitial survey canalready bemade ofthefinancial aidbrought into X
operation bytheCommunity forthebenefit ofthose countries .
1.SPECIAL CONDITIONS GOVERNING THE IMPLEMENTATION OPFINANCIAL A3D^
2.Inaccordance with thewish expressed bythecontracting parfcjfifes inan
exchange ofletters ,thepreparatory workfortheimplementat^v^l ofeconomic ,
financial andtechnical cooperation wasbegun after thesigning ofthe
agreements orprotocols without awaiting completion oftheratification
procedures# However ,theproblems within theCommunity which slowed upthe
procedures created aclimate ofuncertainty aroui^Sythe entry into force of
these agreements andprotocols andthis wasn^a>conducive tonormal progress
ofthework# Following completion ofthe^-Jrtif ication procedures after an
exceptionally long period ,thefact there wasnoregulation laying down the
procedures tobeapplied forimplementing theaidfinanced bytheCommunity
budget caused afurther delay ,^grtain financing decisions hadtobe
deferred -untilatemporary ad^& procedure wassetupforconsulting the
Member States .
Furthermore ,theabsence ofdelegations inthecountries concerned made all
the more difficult thework ofthe joint missions from theCommission and
theEuropean Inv^tment Bankwhich went tothese countries todrawupan
indicative pr^^&mme ofprojects andschemes whichcouldbefinanced .
After dele^jjS&lons hadbeenestablished intheMaghreb andMashreq countries
these were ofcourse ofgreat help intheappraisal work ,butthey were notyet
<#"
■»' .

able toprovide theCommission with the same "back-up asthedelegations
intheACP States ,since they were still attherunning-in stages andhad
very limited staff#
3.Conditions inthe "beneficiary countries themselves played adetermining
role .TheCommunity found inthese countries that the state ofthe <
preparatory work forimplementing cooperation reflected theinternal
political andadministrative problems with which ,tovarying degrees ,
these countries were faced .Difficulties arose particularly inthe
preparation oftheindicative programmes .Incertain countries itwas
difficult atthe outset toproduce programmes comprising projects and
schemes which could befinanced andenable theaidtobeused rap^j&y .
Conversely ,other countries were already able tosubmit acompla *^programme
atthepreparatory stage ,butonewhich didnottakesufficie^£>account
oftheopportunities offered bytheagreements inthevariouj^spheres of
economic "cooperation (scientific andindustrial ,forexamp&F ).
Generally speaking ,most ofthecountries didnotpresent anyproblems
asregards their absorption capacity .Itshould Jpenoted ,however ,that ,
because ofthesmall scale oftheaidavailable^wne Community 's
contribution very often constituted ameans o^V^ipplementing –toa
relatively small degree –thefinancing ofobjects which hadalready to
alarge extent been elaborated orwhich wqre *already being carried out.
Experience hasshown that theprocedures^ind methods foridentifying sectors
andprojects tobefinanced should infuture bere-examined andapplied
more pragmatically .
Thefactthatitwasthefirsi^^jne thattheCommunity wasproviding these
countries with financial aickyas also adrawback .Itwasnecessary to
acquaint themwiththepra^aures andrules applied bytheCommission and
theEuropean Investment Sank inimplementing aid ,although these are
generally similar tothepractices ofallaiddonors .
II.USE )OPTHEJBINMCIAL AID
4.Despit^^ill thefactors referred toabove which slowed down thelaunching
ofthefimSiqial cooperation ,ithasalready been possible tocommit a
substantial part ofthetotal aidgranted tothe countries concerned .As
shown inthetable below ,thecommitments at31December 1980 represented
52$ofthat total .Itistrue ,however ,that thecommitment levels
r^ried greatly from onecountry toanother andwere unsatisfactory forsome.^countries asaresult ofthespecial problems affecting them .
Itisimportant tonote that the stage reached mtheappraisal offurther
projects onwhich financing decisions aretobetaken suggests that almost
alltheCommunity aid should becommitted bythedeadlines laid down in
thefinancial protocols .

Particular mention must bemade ofMalta andCyprus ,which have protocols
covering commitment periods extending to31October 1983 and31December 1983
respectively .Inthecase ofMalta ,abalance of13million ECUinEIB
loans cannot beused owing toMaltese legal restrictions which prevent the
granting ofloans ataninterest rate exceeding 3%.Inthecase ofCyprus
ithasnotbeen possible tocommit any funds todate owing tothedelays e
resulting from theneed towork outprojects ofcommon interest tothe two
communities living inthe count iy.
RATE OPCOMMITMENT OPCOMMUNITY AID AT31DECEMBER
Pra$§^ols )
MAL CYP TOTAL
19 0 47
100 0 74
98 0 45
50 0 52AL MOR TU EG JO
EIB2 29 46 71 70 83
Special loans 79 100 69 0100
Grants 22 87 60 25 58
TOTAL 35 75 68 48 74LE_SY IS
57*46 0
0#"
56 0
including emergency aid
Iftheresults obtained a^5rnowconsidered interms ofquality ,one
feature ofnote isthedi\^§!>sity ofthespheres towhich theaidhasbeen
allocated ,despite theimportance assumed bycertain sectors .Inaddition
totheinfrastructure projects (inparticular energy ),attention should be
drawn totheall^jition ofEIBloans toindustrial development schemes in
the form of credit and onterms suited totherequirements ofSME
including ^fcisanat .Asfortheaidfinanced bythebudget ,attention
Seethetables intheAnnexes giving details concerning theamounts committed
thevarious countries .
Itshould benoted that anumber ofoperations notyetdecided onwith the
beneficiary countries have already been approved bytheEIBBoard ofDirectors
sothat ,oftheloans from ownresources provided forintheprotocols ,the
full amount hasbeen allocated forJordan andLebanon and 50/°forIsrael .

-4-
should bedrawn tothe importance accorded ,mainly through grants ,totraining
and awhole range ofother schemes which ,invarious forms ,involve atransfer
ofknow-how (technical ,scientific ,industrial ,agricultural andcommercial ^
cooperation ). Theuseofspecial loans forriskcapital operations ,althon^*atpresent confined toasingle project ,isworth noting . ^
Afewprojects werefinanced jointly byaspecial loan andanEIB^oan,and
anumber ofEIB operations were co-financed with other donors KfW,
ArabFunds ,etc.). TheCommission 'soperations havenothitl^^to beenof
Awatype .which lends itself toco-financing .
The following table illustrates the above remarks bygiving anoverall view
ofthevarious sectors towhich Community aid has^been allocated inthe
countries concerned . cS^
S

ALLOCATION OF COMMUNITY AID
BYSECTOR A3AT31DECEMBER 1980
(Loans granted orproiects under apprai sal)
EIB LOANS
Agri culture 3•1
Energy • 36.0 .
Other infrastructure 41•5
Industry 19^
SPECIAL LOANS
 GRANTS.0
62.8 Infrastructure 62.0
Agriculture ,stock-farming 17»8
V ocational training >53" 15«7
Risk capital ,artisanal crédit 3.6
100.0
V ocational training * 29.4
Infrastructure 20.0
Interest rate subsidies 15•5
Scienti^^cooperation 13.6
Agriçojjrcure ,stock-farming 8.4
Teti^lcal assistance ,studies 5*3
Industrial cooperation 6.1
Trade promotion 1.7
100.0

-6-
6.Rate ofuse ofCommunity aid interms ofdisbursements
1.Budgetary aid
Aggregate payments madeat31December 1980 (29*2million ECU)represent ^
16foofcommitments . ^
Itshould bepointed outthat 1980 wasonly the' second year ofactual
application oftheprotocols andthat theprojects financed do give
risetosubstantial payments inthefirst twoyears ofexecu^bn .There
isalsothefactthatthepayment procedures arestill cu^Js^rsorae andcentralized ,paying agents nothaving been appointed by^he countries
concerned .
2.EIB loans
Asfortheloans financed from theEIB*^ownresources ,disbursements
(48.4 million ECU)amounted to16%oftheamounts committed .This rate
was 25%ifthe emergency aid granted toLebanon ista'cen into account .

III.RJTURE GUIDELINES POR FIMCIAL AID
7.What are the lessons tobelearnt from the implementation ofthe
first financial protocols relating tothe Mediterranean countries x
covered "bythis report concerning the guidelines for thefuture . In
choosing possible priorities account should "betaken ofthe inadequacies
encountered onthe side ofthe country concerned and the need toensure
optimum effectiveness oftheCommunity aid,which isonasma]^t*scale in
relation totherequirements andactual absorption capacit^j^of mostof
the countries .
Inthe light ofthese two sets ofconsiderations ,itwould seem
appropriate ,generally speaking ,forloans from the Community (in
particular EIBloans )tobeconcentrated prioj&ily onthefollowing
objectives :
(i)establishment anddevelopment cSp^asic infrastructure (energy ,
communications ,water supplies ,industrial zones ,building materials
etc.)and removal ofbottlenecks ;
(ii)development andmod^wization ofagricultural production inorder
toraise thebenq^&Lary countries' level ofselfsupply forfood ;
(iii)development ,modernization and,asfaraspossible ,decentralisation
ofindustry ,particularly of SME.
Grants an^also ,toacertain extent ,soft loans would enable the
coopei^^on schemes already initiated tobeintensified inorder to
promote ,inter alia ,training and thetransfer ofknow-how inawhole
range ofspheres :industry ,agriculture ,fisheries ,technology ,energy ,
environment ,commerce ,etc. Among the aims tobeassigned tosuch
cooperation ,thetraining ofmiddle-level cadres ,the improvement offood
security andthesearch for new sources ofenergy (renewable energy
sources )areoperations thevalue ofwhich should beparticularly
emphasized .

Furthermore ,certain shortcomings have come tolight intheapplication
ofthefirst financial protocols and these should berectified infuture .
Asstated earlier ,these shortcomings were particularly evident inthe
identification ,elaboration andpreparation oftheprojects .Inorder ^
toprevent arecurrence ofthis situation ,itwould beadvisable fora
proportion ofthegrants tobeused forassisting theinstitutions
responsible inthe countries concerned forelaborating and preparing the
projects .These projects could perhaps be -designed with avie^to
three-way cooperation ortocofinancing .Furthermore ,cert^^cooperation
schemes (training ofcadres ,forexample )could embrace a^^berofcountries
atAtimeifthepolitical conditions intheregion so^^ttnitted .
The foregoing remarks concerning possible priorities for the future are
ofcourse nomorethanpreliminary suggestions^jjnd theguidelines forthe
implementation ofthenewfinancial protoco^cp^will havetobelaid down
bycommon accord with thepartner count
Lastly ,itwould beadvisable tonote theparticular problems which the
EIB might encounter inselecting projects which meet its operating
conditions .Inviewofthe^j^se ininterest rates inrecent years anincrease intheinterest subsidy from 2%to3%might beappropriate .
IV.CONCLUSIONS
8.Toconclud ^,theresults ofthefinancial andtechnical cooperationwith theMediterranean countries covered bythisreport maybeconsidered
asgeneirfj^y satisfactory ,since ,despite thedifficulties encountered in
launching this cooperation ,itshould bepossible tocommit almost allthe
aid for these various countries within the periods laid down inthe
financial protocols . Interms ofquality ,the Community aid covers a
^wide range ofsectors (seepage 5a"dtheAnnexes ). There isnodoubt ,
however ,that itshould infuture bepossible tointensify the cooperation
provided forinthe agreements ,notably the promotion oftraining and the
transfer ofknow-how . This presupposes that appropriate funds ofbudgetary

origin areavailable under thefinancial protocols . The best proof of
this isthe experience with theEEC-Israel Agreement ,thepotential of
which could not beexploited owing tothe lack ofsuch funds . Furthermore ,
theguidelines which could beadopted for implementing the Community 's
financial aid tothe Mediterranean countries concerned and also the
shortcomings which were brought tolight byexperience and should be
rectified were indicated inparagraph 7•
Aproposal onprocedures wasmadebytheCommission intheaboves^ntioned
communciation of1August 1980totheeffect thatcertain pro^j^lons on
theexecution oftheaidinoperations administered bythe^bmmissionshould beannexed tothenewfinancial protocols .Furtl&r ,itistobe
hoped that thefinancial regulation ,which has been inthepipeline for
over two years ,will beadopted soastopermit the normal operation of
thedecision-making process foraidfinanced btfjj&e budget .
*
Although itisnot covered bythis report ,reference could also bemade
<\JboYugoslavia .Asinthe case ofIsrael ,itwould beappropriate to^expand thefinancial protocol ,which does notinclude themeans for'carrying out the cooperation provided forinthe agreement with that
country .

%
%Applic.^E.on ofMaf;hreb -Mashreq -Israel -C.ypru£^^ilta protocols
Allocation ofEIB own resources
Situation at31.12.80 million ECU
I
Amount
under
Protocol
7° ALGERIA
56 MOROCCO
41 TUNISIA
93 EGYPT
18 JORDAN
401 LEBANON
MSYRIA
30 ISRAEL
20 CYPRUS
16 MALTA
418 TOTALftM^stry
12
15
6
33,0Infra -
struc -
ture
263
12+5
25
5
15.7
88,7Electrl
city
20
23J
72.0II
TOTAL
20
26
29
65
15
23
M5'7
193,7Rate of
commit -
ment ,
(II/I
*
28.6
46.4
70.7
69.9
83.3
57-5
46.2
50.7
%
'Including 20mECU emergency aid.
%X

TFiT»a">a1ii^jaMM
Application oftheMa^hreb -Mashrecr -Cyprus -Malxa protocols
Allocation ofspecial loans
Situation at31.12.80 million ECU
I
Amount
under
Protocol Ä
%Induo –
tryInfra -
struc -
tureTrainingII
TOT ALRate of
commit -
ment
II/I
11
58
39
14
4
2
7
4
5
152ALGERIA
MOROCCO
TUNISIA
EGYPT
JORDAN
LEBANON
SYRIA
CYPRUS
MALTA
TOTAL3.7
3.70.3
5.345.5»5
7.5
S'
Î.5
76.0 22.5%>%
%15
58
27
0
4
0
3,5
107.5*
.79*0 *
100.0
69.2
0.0
100.0
Û.O
50,0
75.2
%
t•~w

VA,^fcication oftheMaghre'b -Mashreq -C.ypr'^ -Malta protocols
Allocation ofgrants
Situation at31.12.80 million ECU
îount j
ider J
•otocol
ALGERIA
MOROCCO
TUNISIA
EG1PT
JORDAN
LEBANON
SYRIA
CYPHJS
MALTA
TOTAL :Agri­
culture
1.98
1.98try% .Infra -
struc -
ture[TrainingJ
% ■
5.4
8.3
%
3.35
7.83
0.2
4-2
30.08Scienti­
fic co-
opera -
tion
Υ0.4
1.38
2.38
0.987
4*82
9-967Indus -
trial
coopé­
ration
2.75
0.63
0.80
4.18Techni­
cal oo.-
opera­
tion
2.0
1.45
0.63
3-50
Vt»
10.58Trade
promo­
tion
0.455
0.497
0.025
1.882\%n%Interesi
rate __
subsi­
dies
3.637
8.067
1.7U
0.385
2,077
15-877
\ïII
TOTALRate oi
commit -
ment
5*40
13.885
8.944
16.072
10.528
1.215
14*597
74.546