Report from the Commission - Annual report of the MEDA programme 1999
Date: 2000-12-20
Institutions: European Commission
Subjects: common agricultural policy, educational institution, milk, milk product, sales aid

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 20.12.2000
COM(2000) 472 final

REPORT FROM THE COMMISSION

ANNUAL REPORT
OF THE MEDA PROGRAMME 1999

REPORT FROM THE COMMISSION

ANNUAL REPORT
OF THE MEDA PROGRAMME 1999

TABLE OF CONTENTS

COMMISSIONER’S STATEMENT...................................................................................... 3

EXECUTIVE SUMMARY .................................................................................................... 4

I.

MEDA 1995-1999: AN OVERVIEW....................................................................... 5

I.1.

I.2.

I.3.

I.4.

II.

II.1.

II.2.

II.2.1.

II.2.2.

REVIEW OF IMPLEMENTATION............................................................. 5

REVIEW OF THE MEDA REGULATION (MEDA II) ............................. 10

THE ASSOCIATION AGREEMENTS: STOCK-TAKING ....................... 11

MEDA 1995-1999: DRAWING SOME CONCLUSIONS.......................... 14

THE MEDA PROGRAMME IN 1999.................................................................... 17

THE POLITICAL AND ECONOMIC CONTEXT OF 1999 ...................... 17

COOPERATION WITH THE MEDITERRANEAN PARTNERS.............. 21

BILATERAL COOPERATION................................................................ 21

REGIONAL COOPERATION.................................................................. 52

II.3.
INFORMATION ACTIVITIES ABOUT THE EURO-MED
PARTNERSHIP................................................................................................................... 53

III.

IV.

V.

EUROPEAN INVESTMENT BANK OPERATIONS IN THE MEDITERRANEAN
REGION ................................................................................................................ 55

EVALUATIONS OF THE MEDA PROGRAMME ............................................... 57

ANNEX: FOURTH MEETING OF EXPERTS ON ECONOMIC TRANSITION IN
THE EURO-MRDITERRANEAN AREA, BRUSSELS, 2-3 OCTOBER 2000:
WORKING DOCUMENT AND CHAIRMAN’S CONCLUSIONS

2

COMMISSIONER’S STATEMENT

The Conference of Euro-Mediterranean Foreign Ministers in Barcelona in November
1995 marked the beginning of the Euro-Mediterranean Partnership, which constitutes the
most important attempt in modern history to create durable and strong bonds between the
Mediterranean shores. To achieve this, the Partnership provides for action in the key areas of
political, economic and social affairs.

This is a difficult endeavour but also a necessary ambition: the Partnership is essential
to ensure stability and prosperity in the European Union’s neighbourhood. It is also important
for the Mediterranean partners who expect not only market access, investment and transfers of
know-how, but also better understanding in political, social, cultural and human affairs.

The MEDA Programme is

the Euro-Mediterranean
Partnership’s economic and financial co-operation. MEDA should facilitate one of the
Partnership’s key objectives: the gradual establishment of a free trade area (FTA) between the
European Union and its Mediterranean Partner countries by 2010.

the main component of

The FTA offers immense opportunities both to the EU and to our Mediterranean
Partners. To take advantage of these opportunities, our Partners will need to carry out policy
reforms, structural adjustment and modernisation processes. In turn, these reforms will help to
mobilise national savings and attract foreign investment. This will strengthen economic
growth, reduce unemployment and improve the citizens’ well being.

In the Euro-Mediterranean Partnership, the modernisation process is helped through
co-operation. The MEDA Programme is running at almost one billion
per year in grants
while loans from the European Investment Bank are at a similar level. It aims at easing the
economic and social consequences of free trade by providing substantial financial and
economic support: promoting economic transition and private sector development, support
vocational training, health, education and basic infrastructures such as water and sanitation
etc.

€

This report summarises the way EU financial assistance has been channelled to our
Mediterranean partners in the context of bilateral and regional projects and programmes. Its
publication this year coincides with the discussions between the Commission and the Member
States on a revised financial regulation, MEDA II, to govern EU assistance to the region for
the future. MEDA II aims at streamlining procedures to ensure increased efficiency in
delivering assistance. The experience gained with our Mediterranean policy to date should
serve to make the necessary policy adjustments and further enhance MEDA’s impact on the
economic and social reform of our Partners.

Chris Patten

3

EXECUTIVE SUMMARY

• Europe is, by far, the largest donor of non-military aid to the Mediterranean region and is
strongly supporting economic reform in the partner countries. In the period 1995-99, the
European Union has provided over
3.4
1.2 billion under other budgetary lines) while, in
billion under the MEDA programme and
€
addition, the European Investment Bank has granted loans of over

4.6 billion in grants to the Mediterranean region (

4.6 billion.

€

€

€

• All Mediterranean Partner countries have embarked on programmes of economic reforms,
at varying speeds. The main economic thrust of the EU’s Mediterranean policy, notably
since the decision to establish a Euro-Mediterranean free trade area by 2010, play an
important role in the reform process.

• Commitment appropriations in the context of the MEDA Programme were fully utilised in
1995-99. For the same period, payments averaged 26% of commitments. This is due to: (a)
the average implementation period for the type of projects financed by the MEDA
Programme of about 4 years, (b) delays with several Mediterranean Partners in the
framework for
signature of
implementation, and (c) political and other problems in financial cooperation with Turkey,
Algeria, Lebanon and Syria. Moreover lack of determination on the side of Mediterranean
partners to advance with structural reforms has also borne a significant share of the
responsibility for delays in the implementation of the Programme.

the Framework Agreements

establishing the

legal

• About 86% of MEDA resources were channelled to bilateral cooperation and about 12% to
supporting economic
regional cooperation. Bilateral cooperation includes projects
transition, structural adjustment, the socio-economic balance, environmental protection and
rural development. Actions under regional cooperation concern all the Mediterranean
Partners and support all chapters of the Barcelona process (political and security
partnership, economic and financial partnership, and partnership in social, cultural and
human affairs).

• Although it is still too early to quantify the impact of MEDA-financed actions, they do
contribute by their dynamic effects to the creation of a favourable economic environment
for business and investment and to the transfer of key economic decisions from the state to
the market. They also mitigate the social costs of economic adjustment by reinforcing
healthcare, education and environmental protection.

• The need to focus assistance under the MEDA programme on reform is compelling. It is
therefore necessary to improve strategic programming so as to ensure that MEDA
interventions are coherent with national reform strategies, promoting the overall objective
of the creation of a Euro-Mediterranean free trade area and strengthening the currently
very weak intra-regional economic links.

• The current revision of the MEDA regulation aims at achieving significant time gains in
the decision process and reinforcing the strategic planning of aid. Streamlining the
regulation and reorganising the Commission services involved in delivering external aid to
the Mediterranean should also contribute to a more efficient and rapid delivery of
assistance, as well as to its qualitative improvement.

4

• As it was emphasised in the Fourth Meeting of Experts on Economic Transition in the
Euro-Mediterranean Area held in Brussels on 2-3 October 2000 (documents in annex) the
MEDA funds would be increasingly channelled towards partners that have confirmed
absorption capacity as well as a good implementation record of heir association agreement.
The commitment of the partners to the implementation of their respective national reform
strategies would be decisive in the assessment of their absorption capacity.

I. MEDA 1995-1999: AN OVERVIEW

I.1.

REVIEW OF IMPLEMENTATION

The MEDA Programme is the main instrument of the Euro-Mediterranean Partnership’s
€
financial cooperation. For the period 1995-1999, it provided
4.685 million envelope allocated to the 12 Mediterranean partners for the period 1995-1999
by the Cannes European Council.1

3.437 million out of the

€

In 1995 and 1996, the MEDA Programme progressively replaced the existing financial
instruments (mainly the Financial Protocols) and in 1999 represented about 90 % of the total
financial commitments from the EU Budget for the Mediterranean. The MEDA Programme is
mainly made up of grants (90.4% of total budgetary commitments in 1995-99) managed by
the European Commission, but also includes risk capital and interest subsidies for loans
(9.6%) managed by the European Investment Bank (EIB).

Some 86% of the resources allocated to MEDA are channelled bilaterally to the Partners (this
concerns Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia, Turkey and the
Palestinian Authority). Three countries – Israel, Malta and Cyprus - do not benefit from
bilateral cooperation because of their high level of economic development. About 12% of the
resources are devoted to regional activities from which all twelve Partners are eligible to
benefit. MEDA resources are programmed through:
indicative
programmes and a regional indicative programme covering the multilateral activities.

three-year national

• Commitments

Commitment appropriations available on a yearly basis are managed by the European
Commission on the basis of the MEDA Regulation and within a programming process
undertaken with the administration of the beneficiary Partners. Commitment appropriations
were 99.9% utilised in 1995-1999.

MEDA commitment appropriations 1995-1999

Commitment appropriations
m)
available (

€

1995

1996

1997

1998

1999

Total

173

403

981

943

937

3 437

1

€

The remaining amount of
1.248 million mainly concerns the budget lines of the older Financial
Protocols (B7-4050 & 4051), the Peace Process (B7-4200) and the United Nations Relief and Work
Agency, UNRWA (B7-4210).

5

Commitment appropriations
used (

m)

€

173

403

981

941

937

3 435

Rate of utilisation

100%

100%

100%

99.8%

100%

99.9%

6

• Payments

As in any international financial cooperation activity, the rate of payments of the MEDA
Programme is a direct function of the type of operation for which commitments are made.
Some MEDA operations such as support to structural adjustment result in payments over a
short
time span, generally two years, provided that conditions agreed between the
Commission and the beneficiary Government are met.

Economic transition and private sector development operations generally consist of technical
assistance operations over a 3-4 year period, which influences the rate of disbursement.
Classical development operations (rural development, basic health care, education, drinking
water, sewage, etc) require works and services as well as procurement of equipment following
tendering procedures. The implementation period is longer, generally 4 to 6 years.

Regional projects financed under the Euro-Mediterranean Partnership often consist of
completely novel
forms of cooperation, necessitating innovative financial and legal
frameworks of a complex nature. On average, payments are spread over a 3-5 year period.

the average
Taking into account
implementation (i.e. payment) period for each of the annual
tranches of the MEDA
Programme is about 4 years. For the period 1995-1999 cumulative payments have reached
€

the current mix of operations,

is estimated that

it

890 million, or 26% of commitments made over the same period.

Rate of payments to commitments (1995-1999)

1995

1996

1997

1998

1999

173

50

403

155

981

211

941

231

937

243

/

29%

38%

21%

24%

26%

Total

3 435

890

26%

Commitments (

€

m)

Payments (

€

m)

Payments
commitments (%)

framework conventions2 with the beneficiary countries

The MEDA Programme is still young, its start having been delayed by lengthy negotiations
and highly complex
for
implementation procedures. Nevertheless, most of the committed projects will shortly be
moving into their operational phase and this will speed up payments significantly.

2

These conventions establish the legal and administrative framework for the implementation of the EU
cooperation activities.

7

Breakdown of commitments and payments according to countries

The disbursements to commitments rate has varied considerably from country to country.

Breakdown of MEDA commitments and payments by country

MEDA I (1995-1999) - bilateral and regional cooperation

Commitments

Payments

€

million

€

million

ALGERIA

MOROCCO

TUNISIA

EGYPT

JORDAN

LEBANON

SYRIA

TURKEY

West Bank and Gaza Strip

164

656

428

686

254

182

99

375

111

Bilateral cooperation

2 955

30

127

168

157

108

1

0

15

54

660

Regional cooperation3

480

2304

TOTAL

3 435

890

The lower disbursement rates can be explained as follows:

Payments /
commitments

(%)

18.2

19.4

39.3

22.9

42.5

0.5

0.0

4.0

48.6

22.3%

48%

26%

–

–

3

4

Algeria: implementation was hampered by the domestic political situation;

Lebanon: a high number of projects was decided towards the end of the period
(1999); difficulties were encountered in the implementation of two in particular (for
rehabilitating the Lebanese public administration, and standards and norms);

€

Includes
teams.
Includes around

63 million committed between 1997 and 1999 for technical assistance provided by MEDA

€

150 million in payments on horizontal cooperation commitments made before 1996.

8

–

–

Syria: the framework convention has still to be signed by the Syrian authorities;

Turkey: restrictions have been imposed by the European Parliament in view of the
human rights situation; also, the framework convention was signed only recently
(March 1999).

Although the Mediterranean partners have achieved considerable progress in macroeconomic
stabilisation in recent years, they have been rather hesitant in implementing key economic
reforms. Most countries in the region are still facing today an important reform agenda
relating to the creation of favourable conditions for the development of the private sector,
further trade liberalisation and privatisation. The slow pace of economic reform had an
adverse impact on the implementation of MEDA projects, particularly of those relating to
economic transition and structural adjustment.

Breakdown of bilateral activities

Bilateral MEDA operations from 1995 to 1999 can be broken down thematically as follows:
structural adjustment, economic cooperation, the social sector, the environment and rural
development.

• Structural adjustment

Structural adjustment facilities (SAF) allow direct and swift support to be given to reforms
undertaken by partners in full respect of agreed conditions. A total of
520 million was
committed under the SAFs between 1995 and 1999 - 15% of all MEDA commitments. The
SAFs were implemented in five countries (Morocco, Algeria, Tunisia, Jordan and Lebanon).

€

• Support for economic transition

Here the main aim is to foster the creation of a climate favourable to private sector
development, particularly by setting up effective financial instruments. Support takes the form
of Commission-managed cooperation programmes, or offers of risk capital to be managed by
the EIB.

Economic cooperation programmes accounted for almost
operations for a total of over
Tunisia, Jordan, Egypt, Turkey and the West Bank and Gaza Strip).

900 million. Risk capital
140 million were carried out in six countries (Morocco,

€

€

Overall, operations in support of economic transition came to
MEDA commitments.

• Support for socio-economic balance

€

1 035 million - over 30% of all

Operations in the social sector in the broader sense (taking in health and education) are
designed to support partners’ socio-economic balance. They include social funds and specific
cooperation programmes, but also, more recently, a sectoral adjustment facility for health
under which Tunisia has received support for the reform of its health insurance system.
Altogether, operations in the social sphere have accounted for
1 billion, or 29% of all
commitments in this period.

€

9

• Environment

Operations in this field in Morocco and Jordan accounted for a total of
interest rates on EIB loans were subsidised to the tune of over
for bilateral environmental action to more than
period).

45 million and
190 million, bringing the total
235 million (7% of all commitments in the

€

€

€

• Rural development

Decisions were taken for rural development programmes in Morocco, Tunisia and Syria for a
total of

155.5 million (4.5% of all commitments in the period).

€

Breakdown of regional activities

Over the period 1995-99, several activities have been decided or carried out in the following
areas:

• Political

Senior Foreign Ministry officials have met to discuss political and security matters regularly,
at least four times a year. They have agreed on a number of partnership building measures and
have made considerable progress on the Charter on Peace and Stability. The guidelines for
this Charter were agreed at the Third Euro-Mediterranean Conference held in Stuttgart (April
1999). Foreign Ministers agreed to have the text ready by the Fourth Euro-Mediterranean
Conference which will be held in Marseilles (13-14 November 2000).Formal adoption will
take place as soon as political conditions allow.

The following partnership building measures have been agreed:

–

–

–

–

–

establishment of a network of foreign policy institutes (Euro-Mediterranean Study
Commission, EuroMeSCo),

cooperation among civil protection services on natural and man-made disasters,

creation of a register of bilateral agreements,

exchange of information on international conventions on human rights, disarmament,
humanitarian rights,

- training seminars for diplomats,

MEDA finances the civil protection project, EuroMeSCo and the training seminars for
diplomats (

3 m).

€

• Economic and Financial

Regional fora have been set up covering the priority sectors agreed by Ministers for regional
cooperation: industrial cooperation, environment, water, energy, transport and information
society. In each case sectoral experts from the 27 Euro-Med countries meet to agree the
to endorsement by the Euro-
guidelines for regional cooperation programmes, subject
Mediterranean Committee. The emphasis in regional cooperation is on policy dialogue,

10

networking, promoting the interconnection of infrastructure and reforming the legal and
administrative framework to encourage pro-competitive regulation.

–

–

–

–

–

–

Industrial cooperation: four main themes have been identified: promotion of
investment, innovation and quality, Euromed market instruments and mechanisms,
improving the climate for SME development. Cooperation projects have already
€
been developed, notably a network of investment promotion agencies (
4 m), or
being developed, such as a programme for the promotion of Euromed market
instruments and mechanisms and a Euro-Mediterranean regional programme for
innovation and quality in companies, both to be launched in 2000. MEDA has
financed the MEDSTAT programme of cooperation among statistical offices
€
(
6 million) between chambers of
commerce, commercial fairs, export promotion institutions, SME organisations,
industrial
(Forum Euro
Méditerranéen des instituts des sciences économiques, FEMISE) (

federations. and a network of economic institutes

20 million), a number of economic networks (

2 million).

€

€

Environment: A Short and Medium Term Priority Action Programme (SMAP) has
been agreed and a first series of projects launched (
7 million). The second series is
to be launched in 2000.

€

Water: The general lines of an action programme have been agreed and a first series
of projects is to be launched in 2000.

Energy: Projects have been launched on legal and administrative framework;
dialogue on policy, interconnection and analysis; energy and urban environment;
solar energy applications; training network; and joining up electricity grids.

Transport: A first series of maritime transport projects was launched in 1997
€
(

9 million); an integrated transport project should be launched in 2000.

Information society: a project has been launched on the regulatory framework
€
3 million) and the major EUMEDIS programme (networking, interconnection and
(
€
pilot projects on specific applications of information technology) is operational (
45
million).

• Social, Cultural and Human

–

–

–

Culture: priorities for action have been agreed at two meetings of Culture Ministers.
The Euro-Med Heritage programme of cooperation on the cultural heritage is
operational (

17,1 million) and Euro-Med Heritage II is to be launched in 2000.

€

Audio-visual: the Euro-Med Audio-visual programme on cooperation in the field of
radio, television and cinema is operational (

20 million).

€

the Euro-Med Youth programme for youth exchanges is operational

Youth:
€
(

6 million).

I.2.

REVIEW OF THE MEDA REGULATION (MEDA II)

The legal framework for the implementation of the MEDA Programme is provided by the
MEDA Regulation approved in 1996. It is important that the experience gained from its

11

implementation be used to improve and accelerate the delivery of the EU aid to its
Mediterranean Partners. An independent evaluation of the MEDA Regulation carried out in
1998-99 showed that the current decision making procedures are cumbersome and rigid.
Based on the conclusions of this evaluation, the Commission submitted to the Council in mid-
1999 a draft proposal for the revision of the MEDA Regulation. The draft proposal has a
three-pronged strategy:

• Streamlining the decision-making process for more effective programming: The work
of the MED Committee (a management Committee composed by representatives of the EU
Member States to assist the Commission in the implementation of the MEDA Regulation)
should be refocused onto strategic planning and programming. This can be achieved by
having more substantial examination of the three year National Indicative Programmes
(NIPs)5 and the Regional Indicative Programme (RIP)6. To enhance the coherence of its
financial proposals with NIPs and the RIP, the Commission proposes to present
its
financing proposals in Annual Financing Plans for each Partner (NFPs) as well as one for
the region (RFP).

• Enhancing capacities

for programming and implementation: The Association
Agreements provide for the gradual introduction of free trade between the EU and its
Mediterranean partners. The MEDA programme is intended to play a major role in
assisting the partners in the reform process required in this context. Therefore, more
emphasis should be given to dialogue on MEDA programming over the medium term with
the partners, taking account of their respective reform strategies, as well as coordination
between the Commission and EU Member States, and coordination between bilateral and
regional cooperation.

• More efficient

In order

implementation procedures:

to improve the MEDA
programme’s impact on economic and social reform in the partners and with a view to
making the programme an even more effective instrument for the Euro-Mediterranean
Partnership, more rapid implementation procedures need to be introduced. Harmonised
procedures concerning technical and financial implementation of cooperation activities
have already been developed with the aim, notably, of further
rationalisation and
streamlining. A wider reform of the Commission’s delivery of external aid is currently
underway.

I.3.

THE ASSOCIATION AGREEMENTS: STOCK-TAKING

The Association Agreements are bilateral legal instruments for establishing deeper and wider
relations with the Mediterranean Partners and as such provide a strategic framework for
cooperation. Built upon the old generation of Cooperation Agreements adopted in the 1970s,
the Association Agreements provide for the institutionalisation of political and economic
dialogue, the establishment of a free trade area, social and cultural cooperation and financial
cooperation, notably through the MEDA Programme. Thus the Association Agreements
constitute, at bilateral level, the strategic framework for cooperation.

5

6

The NIPs reflect the planning of country programmes according to the MEDA Regulation. They include
indicative financial amounts for commitments and define the priority sectors for EU support.
The RIP reflects the MEDA Programme priorities, which are relevant for the region as a whole. It is
complementary to the NIPs.

12

The tables below summarise the progress of negotiations on Euro-Mediterranean Association
Agreements and the status of the framework agreements:

13

Stock-taking of the Association Agreements

PARTNER

CONCLUSION OF
NEGOTIATIONS

SIGNATURE
OF
AGREEMENT

ENTRY INTO
FORCE

Tunisia

Israel

June 1995

July 1995

March 1998

September 1995

November 1995

In the course of
2000

Morocco

November 1995

February 1996

March 2000

PLO for the benefit
of
the Palestinian
Authority

December 1996

February 1997

July 1997

Jordan

Egypt

Lebanon

Algeria

Syria

April 1997

November 1997

Negotiations
Concluded in June
19997

Negotiations
progress

Negotiations
progress

Negotiations
progress

in

in

in

-

-

-

-

-

-

-

-

-

No formal negotiation sessions were held with Lebanon and Algeria in 1999. However, there
have been informal contacts between the authorities of these two countries and the
Commission services. Formal negotiations are expected to resume in the course of 2000.

Financing conventions

The implementation of the MEDA Programme advanced significantly in 1999 as the last
remaining framework financing conventions were signed with the authorities of
the
Mediterranean partners. These conventions establish the legal and administrative framework
for implementation of EU cooperation activities (with the exception of structural adjustment
operations which are governed by specific arrangements) and their signature is a prerequisite
for the launch of individual projects.

7

The negotiations were effectively concluded by the General Affairs Council of 21 July 1999 which
approved the agreement reached by the negotiators. The government of Egypt is expected to decide
similarly in the near future.

14

MEDA framework conventions: state of play

COUNTRY

INITIALLED

SIGNED
(COMMISSION)

SIGNED (EIB)

ALGERIA

12 May 1998

29 July 1998

15 September 1998

CYPRUS

EGYPT

ISRAEL

JORDAN

LEBANON

MALTA

n/a

n/a

18 February 1998

2 July 1998

.

n/a

n/a.

2 February 1998

2 July 1998

13 May 1998

15 September 1998

n/a

n/a

MOROCCO

16 July 1997

28 August 1997

28 August 1997

PALESTINE

SYRIA

TUNISIA

TURKEY

12 December
1997

28 March 1998

15 August 1998

1995 Agreement
continues to apply.

Agreement signed by
EIB end of March
1999.

15 July 1997

20 September 1997

20 September 1997.

2 July 1998

19 March 1999

Agreement signed by
EIB end of March
1999.

15

I.4.

MEDA 1995-1999: DRAWING SOME CONCLUSIONS

Creating a Euro-Mediterranean economic area of shared prosperity is an ambitious objective,
as illustrated by the fact that the average income per head in Europe is presently about ten
times the average income per head in the Mediterranean partners. Achieving higher growth
rates, especially in view of unemployment
rates typically between 20-25% in many
Mediterranean partners, is therefore an important objective.

Creating a free trade area is not only an ambitious objective, but also a necessity for the
Mediterranean partners. One reason for this is that the markets of individual partners are
simply too small to attract meaningful levels of foreign direct investment. For example, the
combined GDP of the three Maghreb8 countries (combined population of 66 million people)
is smaller than that of Portugal, while the GDP of the Mashrak9 countries (combined
population of 86 million) does not exceed the GDP of Finland or of Greece.

Foreign direct investment could play a key role in modernising the economies of the region
through the transfer of advanced methods of production and management. So far the countries
in the region have not benefited from the world-wide increase in foreign direct investment
flows despite their proximity to Europe and despite the favourable access conditions to the
European market. To a large extent,
this poor performance is policy-induced due to
administrative constraints, prohibition to invest in certain sectors, unfavourable taxation etc.

The challenge

The need to accelerate the process of economic transition is evident. Despite often diverging
economic performances, our Mediterranean partners show remarkable similarities in terms of
future economic challenges. The youthfulness of their population together with expected
intensification of woman’s activity imply a considerable rise of pressure on the employment
market of these countries. According to international estimates, about 45 million new jobs
have to be created over the coming twenty years if the unemployment rate is to be kept at the
present level. This means that Mediterranean countries should steeply raise their annual
growth rates to 6-7% to absorb excess labour supply and catch up with the world economy.

However, the hesitant pace of economic reforms resulted in an inadequate mobilisation of
investment - domestic and foreign - and low productivity. Investment levels are currently
about 24% of GDP in Mediterranean economies, against an average of 34% in some Asian
economies. The share of the Mediterranean area in the flow of foreign direct investment (FDI)
towards emerging economies is very low (5%). Productivity is weak mainly due to huge
investments in state-owned enterprises still dominating several Mediterranean economies as
well as in human skills unsuited to today’s global marketplace.

Accelerating economic transition If there is to be acceleration in growth, this will come
from a more dynamic private sector. A more favourable regulatory and administrative
environment will play a key role in this respect. Reforms remain particularly pressing in such

8

9

Morocco, Algeria and Tunisia.
Egypt, Jordan, WBGS, Lebanon and Syria.

16

areas as the financial sector, restructuring of public enterprises and privatisation. Increasing
efficiency in the delivery of infrastructure services, including telecommunications, energy and
transport will also have a significant
living
standards.

impact on competitiveness and on overall

Modernising and transforming tax systems into equitable, efficient, and administratively
practical taxation systems in support of economic growth is a necessity and an essential
contribution towards improving the environment for investment and business. At the same
time this will provide an opportunity to reduce dependency on imports taxes as a major source
of revenue. In some countries this dependency is still high. For example 56.9% of tax
revenues in the case of Lebanon are trade taxes, 31.6% in the case of Jordan and 29.8% in the
case of Tunisia.

Respect of social cohesion.

social

integration is

cohesion and environmental

an important
Strengthening of
accompaniment
to the process of economic transition, on the basis of a sustainable
development approach. In order for structural economic reforms to be successfully applied
and accepted there must be a consensus in society about the objectives and the methods of
reform. This implies continued determined efforts to improve the standard of living of less
favoured groups of society, in particular through well-targeted interventions. Moreover, the
ongoing process of demographic transition implies a rapid growth of the labour force in the
short and medium term. If the unemployment situation is not to deteriorate any further, and in
order to improve the sustainability of the transition process, the social cohesion issue should
be taken systematically into account in the design of transition strategies. No economic
reform programme is sustainable in the long-term unless it is accepted by the people. Nor is it
sustainable if it does not improve the environmental conditions and does not allow the use of
existing natural resources by future generations.

The role of the European Union

The projects and programmes financed through grants from the MEDA programme and the
investment projects financed through loans by the European Investment Bank make an
important contribution to the economic transition of the Mediterranean Partner countries, in
parallel to the bilateral programmes run by the EU Member States.

inter alia, at
the
MEDA financed projects in the area of economic transition aim,
the acceleration of the
modernisation of the industrial sector (Algeria, Egypt, Jordan),
privatisation process (Tunisia, Algeria), the restructuring of the financial sector (Egypt,
Morocco), the upgrading of public administration (Turkey, Syria), the development of key
infrastructure (West Bank and Gaza Strip, Morocco).

MEDA projects further aim at strengthening the socio-economic equilibrium by improving
basic education and facilitating the access of girls and women to it (Turkey, Morocco),
modernising health services and pension systems (Egypt, Tunisia), strengthening civil society
(Algeria, Turkey) and protecting cultural heritage (Jordan, Syria). Most Mediterranean
countries have also benefited from interest rate subsidies financed by the MEDA Programme
for EIB loans in environmental protection.

Finally regional cooperation under MEDA have supported all chapters of the Barcelona
process (political / security, economic / financial and social / cultural / human) while

17

thoroughly maintaining the global and comprehensive nature of
contributing to social stability.

the partnership and

Conclusions

Although MEDA is the financial instrument for all chapters of the Partnership, its main focus
is on the creation of the Euro-Mediterranean area of shared prosperity which is the motor of
the process, and where the establishment of a Euro-Mediterranean free trade area is pivotal. In
this context the following conclusions can be drawn:

• Almost five years after the conference of Euro-Mediterranean Foreign Ministers in
Barcelona in November 1995 significant progress has been achieved. Negotiations for
Association Agreements between several Mediterranean partners and the Union have been
concluded. While the legal ratification process has delayed the entering into effect of these
agreements, this has not prevented most partners from embarking on a process of economic
transition.

• MEDA I has been slow in its implementation. Commission’s procedures have been
cumbersome and rigid. However, the revision of the MEDA Regulation allows for a
streamlining of procedures. It also favours a more strategic programming of assistance so
as to ensure that MEDA interventions are coherent with national reform strategies. The
ongoing reorganisation of the external services of the Commission should also contribute
to a more efficient and rapid delivery of aid.

• Lack of determination to implement key reforms has also been responsible for delays in the
implementation of the Programme. In an overall challenging budgetary context, MEDA
funds will be increasingly channelled towards partners that have confirmed absorption
capacity as well as a good implementation record of their association agreement concluded
with the EU. The commitment of the partners to the implementation of their respective
national reform strategies would be decisive in the assessment of their absorption capacity.
The economic dialogue established between the Union and its Mediterranean partners
would be a key instrument in this exercise.

18

II. THE MEDA PROGRAMME IN 1999

II.1.

THE POLITICAL AND ECONOMIC CONTEXT OF 1999

Political developments in the Mediterranean region in 1999 were to a large extent marked by
the rise to power of new personalities.

In Israel, Ehud Barak was elected in May with 56% of the votes. His election gave fresh
hopes for an impetus to the Middle East Peace Process following several months of paralysis.
The subsequent flurry of diplomatic activity materialised in the September 1999 Israeli-
Palestinian Sharm-el-Sheikh Memorandum. Its implementation is underway albeit with
delays. By the end of the year, the new atmosphere also reflected positively on the Syrian
track, leading to a resumption of direct Syrian-Israeli negotiations in Washington.

Two key figures in the region died in the course of 1999: King Hussein of Jordan passed
away in February and King Hassan of Morocco in July. They were both succeeded to the
throne by their sons, King Abdullah and King Mohamed respectively, young leaders who are
committed to political and economic reform.

Furthermore, the year was marked by a substantial improvement in EU-Turkey relations. The
Helsinki European Council in December accepted Turkey as a candidate for EU membership
on the basis of the same criteria as applied to the other candidates.

The Barcelona Process kept its momentum. Enhanced discussions on Regional Cooperation
underlined the growing importance of regional initiatives in the political, economic and
cultural spheres, and emphasised the urgent need for more South-South cooperation (notably
among the Med Partner counties). The Third Euro-Mediterranean Conference held in Stuttgart
to transform the
in April confirmed the goals set
Mediterranean basin into an area of dialogue, exchange and cooperation through the
strengthening of democracy, rule of law, good governance and sustainable balanced economic
and social development. Guidelines were approved for a Euro-Mediterranean Charter of
Peace and Stability to be elaborated by the time of the next Foreign Ministers meeting
(November 2000).

in the Barcelona Declaration,

i.e.

Movements in commodity prices largely influenced economic developments in the region.
The increase in oil prices since March 1999 is helping Mediterranean oil producers (Algeria,
Egypt, Syria10) to improve their external balances and strengthen their growth prospects.
Some countries like Egypt and Jordan could also benefit indirectly from higher oil prices
since they have large migrant labour forces in the Gulf oil producing countries and significant
trade relations with them. Pressure for structural reforms has increased in some countries
because of poor growth performance and inadequate employment creation. The full
implementation of such reforms would substantially benefit
the region’s longer-term
economic prospects.

10

In 1997-98, 18% of total public sector revenue was from oil revenue in Algeria, 8% in Egypt and 39%
in Syria (Source: IMF, World Economic Outlook, p. 26).

19

The EU absorbs between 60-75% of the exports of most of the Mediterranean Partners while
the European Union is the principal supplier of capital goods and basic agricultural
commodities. Capital inflows and tourists are predominantly of EU origin. Yet intra-regional
trade remains at under 5% of regional GDP and the lack of South-South integration means
that the economies of the region remain too small to attract foreign investment.

This is a crucial time to bolster the common resolution of the European Union and the
Mediterranean Partners to deepen and widen the economic reform process in order to achieve
long term improvements. In this context the MEDA Programme is an essential instrument for
catalysing and facilitating reform in the Partners.

20

MIDDLE EAST PEACE PROCESS, 1999

In spite of all the obstacles in the way, the peace process made substantial progress in 1999,
notably during the second half of the year. Indeed, the prolonged electoral period in Israel
paralysed most related initiatives and activities during the first semester.

The election of Prime Minister Barak and the coming into power of a centre-left government
in Israel led to a flurry of diplomatic contacts which ultimately materialised in the Israeli-
Palestinian Sharm Al Sheikh agreement in September. The agreement was basically a re-
negotiation of the November 1998 Wye River Memorandum. However, it also set a schedule
for Permanent Status Negotiations inclusive of a Framework Agreement, due by mid
February 200011, leading to a comprehensive Agreement by September 2000. Most of the
commitments contemplated have been implemented albeit with slight delays12.

The European Union actively supported these developments and assisted the parties in the
negotiations. Council President Fischer and Commission Vice-President Marín visited the
region during the first semester. Council President Halonen visited in the second semester.
The EU Special Envoy to the Peace Process Ambassador Moratinos continued to carry out an
intensive shuttle diplomacy throughout the region. In addition, EU officials held numerous
consultations with the core parties to the peace process and the main international players,
primarily the US and Russia and also Japan, Norway and Canada.

In parallel, the EU maintained its large programme of economic assistance to the Palestinian
Authority. Following the renewal of the 1993 pledges for a further five-year period13, the EU
hosted and co-chaired a meeting of the Ad Hoc Liaison Committee (AHLC) on Palestine in
Frankfurt in early February. Followed by the World Bank Consultative Group, both meetings
served to further efforts towards sustained economic development in the West Bank and Gaza
strip and enhanced budgetary transparency from the part of the Palestinian Authority. These
efforts were continued at the next meeting of the AHLC that took place in October in Tokyo.

11

12

13

Later postponed to May 2000
Including transfer to Palestinian Authority control of a total of some 40% of the West Bank, release of
several batches of prisoners and opening of the Southern route of the Safe Passage.
November 1998, Washington Ministerial Donors Conference

21

Maghreb and Mashrek: Demographic, Social and Economic Indicators

Indicator
Area

Unit
(1000 Km2)

Morocco Algeria Tunisia
2381

450

163

Egypt
1001

Jordan
89

Israel WB Gaza Lebanon
20,3

10,4

6,1

Syria
185

Turkey Malta

Cyprus World

780

0,3

9,5

-

Demography
Population
Ann. Popul.Growth
Ann.Lab.force growth
Infant mortality rate

Socio-cultural indicators
GNP per capita

Millions
%
%
°/°° live births

1998
1992-98
1992-98
1992-98

27,8
1,8
2,2
51

30
2,2
4,4
32

9,4
1,6
2,9
30

61,4
1,9
2,8
51

4,6
3,3
4,5
29

6
2,6
3,8
7

(Atlas method, US $,
1998)

1.250

1.550

2.050

1.290

1.520

15.940

H.D.I. (*)
Illiteracy rate
Men
Women

% of people 15+
% of males 15+
% of females 15+

1995
1998
1998
1998

0,582
53
40
66

0,665
35
24
46

0,695
31
21
42

0,616
46
35
58

Economy
GDP Growth rate
%
Forec.GDP growth rate %
%
Inflation rate (**)
% of GDP
Fiscal surpl/deficit
% of GDP
Current Acc. Bal.
% of GDP
Total debt

1998
1999-03
1998
1998
1998
1998

6,5
n.a.
2,7
-3,1
-0,1
55,8

5,1
6
5
-3,9
-1,9
63,4

5
6,1
3,1
-2,4
-3,4
51,8

5,7
6,1
3,8
-0,9
-2,5
38,2

0,715
11
6
17

2,2
3,2
4
-6,9
0
115,6

0,883
4
2
6

2
n.a.
5,5
-5,8
-0,7
n.a.

2,7
n.a
n.a.
n.a

n.a.

n.a..

n.a.
n.a.

4
n.a.
n.a.
n.a.
n.a.
n.a.

4,2
1,8
2,8
28

15,3
2,8
3,9
31

63,5
1,5
2,8
40

0,38
0,7
1,2
7

0,75
1,1
1,1
8

5896,6
1,4
1,7
55

3.560

1.020

3.160

9.440

n.a.

4.890

0,749
15
9
21

3
3,5
4,5
-18,9
-27,4
36,8

0,663
27
13
42

0,728
16
7
25

5,4
4,8
-0,4
-3,9
0,1
30,3

2,8
5
83,7
-8,9
0,3
51,4

0,850
9
9
8

4,1
n.a.
2,4
-10,5
-4,8
31,1

0,850
4
n.a.
n.a.

0,706
25
18
32

4,7
n.a.
2,2
1,4
n.a.
n.a.

1,7
3,1
-
-
-0,1
-

(*) The Human Development Index (H.D.I.) is a composite index including, inter alia, life expectancy at birth, adult literacy, real GDP per capita, gross enrolment in first-,
second- and third level education (UN Development Programme, Human Development Report 1999 – values for 1997) (London, 1999)

(**) Consumer prices

Source: World Bank, World Development Indicators 2000 (Washington, 2000)

22

II.2.

COOPERATION WITH THE MEDITERRANEAN PARTNERS

II.2.1. BILATERAL COOPERATION

ALGERIA

EU-Algeria bilateral relations

Negotiations for an association agreement had been launched in March 1997, but were
suspended by Algeria that June. Relations with Algeria picked up in the course of 1999, a
process helped by the fact that the Algiers Delegation of the Commission had reopened at the
end of the previous year.

Pending the conclusion of an association agreement, the political dialogue is conducted
through regular ministerial-level meetings. Following the visit to Algeria on 3 November by
it was announced that formal negotiations for the
the Council
association agreement would resume in the third quarter of 2000.

troika and Mr Patten,

At the request of the Algerian Government, the Commission organised a workshop on
economic transition and free trade in Algiers in June, with the participation of a number of
European experts.

Political and economic developments

The start of 1999 was dominated by the April presidential elections. The Algerian authorities
lost some of the reserve shown since President Zéroual had announced his resignation the
previous August when a new government was appointed in January whose main brief was to
prepare for the elections.

All the key political figures participated in the elections, which were won by Abdelaziz
Boutéflika with 73.8% of the votes. The six other candidates had withdrawn the day before,
objecting to voting conditions in the mobile and special polling stations. The official turnout
was 60%.

Boutéflika’s first measures as President reflected a programme for restoring civil peace and
the country’s standing internationally. The civil peace plan involved a new law under which
clemency would be granted to members of armed groups giving themselves up before
13 January 2000. The plan received broad support from the population (98.6% of votes cast)
in a referendum held on 16 September 1999. Though opposed by those who have suffered
personally or lost relatives or friends in terrorist violence, the law is regarded as an important
milestone in the process of restoring peace, and is also backed by Algeria’s main partners.

It took the whole of 1999 for the President to put together a new government that was in line
with his programme. The new team, under Ahmed Benbitour as Prime Minister, was finally
appointed on 24 December 1999.

Following steady improvement in the security situation, the year saw fewer reports of human
rights violations. President Boutéflika’s civil peace policy was a first step towards national
reconciliation. Nevertheless, the human rights situation in Algeria undeniably remains a cause
for concern and will be monitored closely.

23

The year began amid gloomy economic prospects. Low petrol prices forced the country to dip
into its currency reserves in order to meet its external obligations and 2000 was expected to be
yet worse. Petrol prices began to recover and stabilise from the second quarter of 1999,
however, which enabled the authorities to face payment deadlines with rather more
equanimity.

The drop in petrol prices was even sharper than that experienced in 1986, but the Algerian
authorities coped well. The country’s macroeconomic performance in 1999 was actually quite
good and overall stability was maintained both externally and internally. Economic growth
reached 3.6%, inflation continued to fall (from 5% in 1998 to 2.6% in 1999), the budget
deficit stayed at 2% of GDP, compared with 3.9% the year before, but at the end of the year
Algeria still had foreign currency reserves representing only 4.6 months’ imports (1998: 7.5
months). This downturn was due in part to external debt and very high debt servicing costs
(over 40% of the value of the country’s exports). The prospect of a third rescheduling of
external debt receded, however, with a steady recovery in petrol prices.

Despite its good macroeconomic performance, the Algerian economy continues basically to
rely on income from oil. Other exports remain marginal, accounting for only 3% of the total.
The growth recorded, therefore, has had no noticeable impact on unemployment, which still
affects almost 30% of the workforce. Reduced reliance on oil has been set as a priority, and
this can come about only through structural reform of the economy and attracting foreign
direct investment.

In spite of investment incentives, the privatisation process has ground to a halt. Over a year
after the launch of the privatisation programme, no privatisations have been completed
successfully. The process has stagnated under a welter of procedures and turf-battles between
the different institutions responsible. Foreign trade remains subject to heavy restrictions and
relatively high average levels of protection. Nevertheless, the opening of a stock exchange
and the arrival of the first private airlines testify to the authorities’ determination to redouble
their efforts to liberalise the economy.

MEDA financial cooperation

Financial cooperation between the EU and Algeria has habitually been hampered by structural
difficulties in the Algerian institutions, exacerbated by the security and political situation.
Since the end of 1998, however, things have been easier and it has been possible to prepare a
number of important private sector development projects. Two major financing agreements
€
were signed for MEDA projects involving
38 million for industrial restructuring and
57 million for helping small and medium-sized enterprises (SMEs). The
privatisation and
first of these projects includes technical assistance to revive the process of privatising
Algeria’s medium and large state enterprises, which are organised under various sectoral
holdings. The second aims to make SMEs more competitive as the economy gradually opens
up and a free trade area is established with the EU.

€

€

A major
23 million project was prepared for modernising the financial sector, which
involves technical assistance and training for the financial institutions, the Central Bank and
the capital market institutions and includes plans for twinning arrangements between several
Algerian banks and insurance companies and their European counterparts.

24

€

At the end of the year,
5 million was committed to a project to support civil society.
Institutional support will be given to around 50-60 non-governmental organisations (NGOs)
and development associations in Algeria, particular those active in the fields of local
development, the environment, and women’s and youth issues.

€

€

Over the 1995-99 period,
164 million was committed in MEDA cooperation in Algeria.
Apart from the projects mentioned above, the programme includes a Structural Adjustment
Facility (
30 million) and interest subsidies on an EIB loan for projects to reduce industrial
€
pollution (
10.7 million). Preparations got under way in 1999 for a major project to support
the social fund with the aim of shoring up social balance and creating jobs.

25

MEDA COMMITMENTS APPROVED IN 1999

ALGERIA

Description

1 – Support for financial sector modernisation

2 – Support for NGOs

Total

€

million

23.2

5

28.2

COMMITMENTS 1995-1999

Sector/Programme

€

million

Share

A. Support for economic transition

1 – EIB: interest subsidies - reducing industrial pollution

2 – Support for SMEs/SMIs

3 – Support for industrial restructuring and privatisation

4 – Support for financial sector modernisation

B. Structural/Sectoral Adjustment Facilities

5.- Structural Adjustment Facility

C. Socio-economic balance support

6.- Support for NGOs

79%

18%

3%

129

10.7

57

38

23.2

30

30

5

5

Total A. + B.+C.

164

100%

26

EU-Egypt bilateral relations

EGYPT

Negotiations on a new EU-Egypt Association Agreement reached their final stage after the
key outstanding issues (agricultural quotas, readmission of third country nationals, and human
rights) were resolved in the first half of 1999. The position reached by the negotiators was
endorsed by the General Affairs Council in June 1999 and was subsequently examined by the
Egyptian government. Initialling of the text by both parties is expected in the first part 2000
with formal signature to follow soon thereafter.

Pending the signature of a new Association Agreement, the existing bilateral understanding
on trade in textiles was renewed in December 1999 to maintain the existing trade regime.

Bilateral trade relations have been generally good but were overshadowed in 1999 by several
sensitive disputes, notably on technical barriers to trade and phyto-sanitary related import
bans. The two most serious food health related issues, the import restrictions on Egyptian
potato and peanut imports because of ‘brown rot’ and ‘aflotoxin’ respectively, were resolved
in time for the 1999-2000 shipping season. The dioxin-related suspension by Egypt of imports
of a wide range of EU food products was still in force, but the Egyptian authorities indicated
that the ban would be removed in early 2000 and replaced by a certification system to allow
trade to resume.

Vice-President of the Commission, Sir Leon Brittan, visited Egypt in June 1999 to prepare for
the WTO Seattle conference and to press the Egyptian authorities to resolve outstanding trade
issues.

Recent Political and Economic Developments

The main political events of 1999 were the endorsement by referendum of President Hosni
term, and the subsequent change of
Mubarak’s re-nomination for a fourth six year
government. The former Minister for Public Enterprises, Atef Obeid, was appointed Prime
Minister in October 1999 with a mandate to accelerate economic and structural reform.
Several new figures, including a new Minister for International Cooperation, entered the
cabinet for the first time although most main portfolios remained unchanged.

One of the most serious domestic political challenges of recent years has been the activities of
extremist terrorist groups. Harsh Government measures to crush the armed fundamentalist
opposition led to heavy casualties on both sides and the widespread use of military courts.
The massacre of foreign tourists at Luxor (November 1997) shocked most Egyptians and split
the fundamentalist Islamic movement. Although the ‘Islamic jihad’ movement did not
formally renounce violence, the main armed opposition declared a cease-fire which held firm
in 1999.

Having contained fundamentalist terrorism, the regime has begun to release political detainees
but many remain in prison. The State of Emergency (in force since 1981) has been renewed
for a further three years, and there are persistent reports of heavy handed policing and poor
prison conditions.

There is an extensive and active civil society. The new Non-Governmental Organisations
(NGO) Law was widely criticised when it was first adopted in 1999 but the all-important
administrative provisions appear less controversial. It is hoped that a compromise can be

27

found on the provisions for monitoring foreign (including EU) financing to allow for the
continued EC funding of NGO projects.

In the field of social legislation the Government successfully confronted conservative forces
by preparing new legislation to considerably improve the status of women, notably with
respect to divorce. However there is a recognition that political and social liberalism lags far
behind economic liberalisation and that new measures must follow.

On the international scene, Egypt continued to re-affirm its key regional role as an important
player in the Middle East Peace Process; it further improved its relations with neighbouring
states (notably with Sudan and Libya) and with sub-Saharan Africa through its association to
COMESA14 and further strengthened its links with Europe.

The Egyptian economy performed solidly in 1999 with a real GDP growth of 5%. This
performance was good in relation to the regional average but was below the government
target, and growth in employment was insufficient to absorb the rising numbers of un- and
under-employed. The level of savings remained far too low and the flow of foreign direct
investment was well below expectations.

Declining export revenues (due to very low oil prices in 1998/99) and steeply rising imports
led to a deterioration of the external accounts and increased pressure on the overvalued
Egyptian pound. Foreign exchange reserves were run down in defence of the currency but
they still remained relatively high (equivalent to more than 12 months of imports). Both oil
prices and tourism had recovered markedly by end 1999.

MEDA Interventions in Egypt

Most MEDA budgetary commitments to finance the actions included in the 1996-1999
National Indicative Programme (NIP) were already made in 1996-1998. As a consequence,
only two new commitments were approved in 1999, both with respect to MEDA interest rate
subsidies to EIB loans for environmentally positive actions.

By end 1999, more than 90% of the actions initially foreseen in the NIP 1996-99 for Egypt
had been committed. Proposed actions in support of financial sector and technical-vocational
training (TEVT) reform were not finalised although discussions with the Egyptian authorities
on defining a reform policy framework on TEVT reform continued.

Cooperation activities in 1999 focused on the implementation of the four major MEDA
funded programmes approved in 1996-98, notably the:

• Social Fund for Development – Phase II (

€

155 million, in collaboration with World Bank);

• Education Enhancement Programme (

€

100 million, in collaboration with World Bank);
€

• Industrial Modernisation Programme (

250 million);

• Health Sector Reform Programme (

€

110 million).

14

COMESA (Common Market for Eastern and Southern Africa) was established in Lusaka in 1981.
Currently twenty-one Subsaharan African countries participate in COMESA.

28

The EU’s extensive support to the Egyptian Social Fund for Development (SFD) constitutes a
major contribution to Egypt's programme to mitigate the adverse effects of economic
transition. Following the positive evaluation of the first phase of the SFD, additional MEDA
financing of
155 million was committed in 1996 (SFD II). Recruitment procedures for the
required technical assistance for the SFD II were completed and the contract signed. The TA
team will assist the SFD II in the coordination and monitoring of donor inputs.

€

The EU supports the Government of Egypt Education Enhancement Programme (EEP) to
improve the quality of basic education. It emphasises: (1) increasing access to compulsory
education, particularly for girls and under-privileged children; (2) improving the quality of
education through reducing wastage and ensuring the attainment of basic skills; and (3)
improving system efficiency by enhancing resource use, planning and management and
accountability of teachers and system managers. Activities undertaken in 1999 in support of
EEP focused on the recruitment of the technical assistance required for
the project
implementation.

In health, the EU supports the Government’s comprehensive 10-15 years Health Sector
Reform Programme (HSRP) whose ultimate objective is to offer the Egyptian population
universal access to high-quality and cost effective services in a fiscally sustainable and
efficient health and health insurance system. The HSRP will initially focus on primary care,
and will lay the basis for overall health manpower and system reform for which policies will
be developed and implemented progressively. Following the finalisation of the tendering
procedures, the contract for technical assistance to the Health Sector Reform Programme was
signed in November 1999 and the full team of experts was mobilised by the end of the year.

The Industrial Modernisation Programme (IMP) is a shared vision between the Egyptian
Government, private sector and the European Union to help Egypt compete successfully in
both the domestic and international markets. The objectives of the IMP will work at three
levels. First at the policy/enabling environment level, second at the sectoral level, and third at
the individual enterprise level. Assistance will be given to the Ministry of Industry to help it
continue to facilitate the growth of the private business sector and produce a more business-
friendly policy environment. Assistance will also be given to businessmen’s associations and
to other related organisations to address the needs of the business sector. At the enterprise
level,
some 5,000 enterprises have been targeted for assistance to improve their
competitiveness. The Financing Agreement for the IMP was signed in late 1998. In 1999 the
project activities centred on the finalisation of tendering for essential studies foreseen for the
initial phase and on the tendering of the complex technical assistance package to provide the
director and key managers for the Industrial Modernisation Centre which will manage the
implementation of this ambitious project.

With respect to interest subsidy support to EIB operations, two new commitments were made
(see above), and considerable progress was made on the disbursements of "interest subsidies"
approved in previous years. With respect to "risk capital" operations, the budget for the
"Lecico Ceramics" project was fully disbursed and a satisfactory level of disbursement was
achieved under the "SME Competitive Upgrading" facility, which is complementary to the
IMP. The Egyptian financial institutions that manage this facility reported considerable
interest by the Egyptian business community.

29

EGYPT: 1999 MEDA COMMITMENTS,

€

million

Name of project/programme

Alexandria Wastewater (EIB Interest Subsidy)

Red Sea Hotel Environmental Facility (EIB Interest Subsidy)

Total

Amount

6.1

4.9

11

EGYPT: Commitments 1995-1999

€

(

million)

EGYPT – Indicative Programme Update
1997-1999

1 ECONOMIC TRANSITION SUPPORT

Industrial Modernisation Programme (IMP)

E.I.B. interest subsidies

E.I.B. capital risk

Sub-total 1

2 SOCIO-ECONOMIC

BALANCE

SUPPORT

Social Fund for Development (II Phase)

Basic Education Enhancement Programme

Health Reform Support Programme

Sub-total 2

3 STRUCTURAL ADJUSTMENT

---

Sub-total 3

TOTAL

€

Amount (

million)

Share

250

41.8

29

320.8

155

100

110

365

---

0

685.8

33.1%

6%

4.2%

46.8%

20.5%

13.2%

14.5%

53.2%

0%

0%

100 %

30

EU-Jordan bilateral relations

JORDAN

By end of 1999, the Hashemite Kingdom of Jordan as well as six EU Member states had
ratified the EU-Jordan Association Agreement, signed in November 1997.

Under the Finish presidency (second semester of 1999), an EU-Troika on ministerial level,
accompanied by the Commission, visited Jordan, underlining the country’s important role in
the Middle East Peace Process.

Recent political and economic developments

King Hussein passed away on 7 February 1999. His son and successor, King Abdullah, has
committed himself to political and economic reform. Despite its shortcomings, Jordan’s
democratisation process is regarded as something of a model in the region.

King Abdullah has been active in promoting the rights of women in his country. He supported
the initiative of the Government to cancel the Penal Code article providing for a lenient
treatment of men physically attacking women suspected for adultery (so called “honour
crimes”).

Abroad, King Abdullah and his Government further improved ties with Europe and the US
and are working successfully to repair relations with the Arab world, particularly with Syria
and the Gulf countries. He has continued his father’s mediation efforts in the peace process
and managed to mediate between Israelis and Syrians before talks were resumed in December
1999

Moreover, King Abdullah has launched a number of initiatives with a view to modernising
the public sector and promoting privatisation.

The difficult economic context prevailing in the country and the region in late 1998 / early
1999 led the General Affairs Council of 22 February 1999 to request the Commission to
consider additional financial assistance to Jordan. The unstable regional situation – following
the renewed conflict in the Gulf and the deadlocked peace process – adversely influenced
Jordan’s economic situation. Political uncertainties, together with a very high budget deficit
(estimated to have been over 10% in 1999), put the country’s foreign exchange reserves under
considerable pressure.

In April 1999, Jordan signed a new programme with the International Monetary Fund (IMF)
for the period 1999 – 2001 (Extended Fund Facility (EFF) reinforced by a Compensatory and
Contingency Financing Facility, together worth US$228 million). In May, the World Bank
accorded Jordan a new Economic Reform and Development Loan (ERDL III) of
US$120 million. Furthermore, the Paris Club decided in April 1999 to reschedule some
US$800 million of Jordanian debt.

Towards the end of 1999, the economic situation improved and foreign exchange reserves
rebounded to relatively comfortable levels (equivalent to about 6 months of imports). These
positive trends are expected to further strengthen since higher oil prices have improved the
economic situation for Jordan’s trading partners, especially in the Gulf. Furthermore, the
election of Mr Barak in Israel is expected to give a new impulse to the Middle East peace
process.

31

MEDA interventions in Jordan

Jordan has received substantial resources from the MEDA Programme in support of its
economic transition programme. Under MEDA I (1995 – 99) Jordan received grants of
€
254 million within bilateral cooperation while EIB lending operations on own resources

€

amounted to

223 million.

The following four programmes were approved by the Commission in 1999:

€

• Structural Adjustment Facility (

80 million): The Commission prepared a new Structural
Adjustment Facility in favour of Jordan with a view to accelerating the implementation of
the country’s structural reform programme. Tranche disbursement depends upon the
satisfaction of conditions negotiated with the Jordanian authorities. These mainly concern:
(a) macroeconomic management, (b) fiscal reform (e.g. introduction of VAT), (c) social
investments, (d) public sector reform. The disbursement of the 1st tranche (
40 million)
planned for end of 1999 was postponed, because a core condition (presentation of a draft
legislation for the introduction of VAT to the Parliament) could not be fulfilled.

€

€

improving competitiveness of

• In the context of the implementation of the EU-Jordan Association agreement and Jordan’s
recent accession to WTO, the
40 million Industrial Modernisation Programme (IMP) aims
at
the country’s private industry. The programme’s
objectives include, inter alia: (a) the provision of non-financial services for beneficiary
enterprises, particularly SMEs; (b) the diversification of financial instruments for private
sector enterprises, especially for medium and long-term financing; (c) the strengthening of
vocational training; and (d) the acceleration of institutional reform (reform of the Ministry
of Industry and Trade and technical assistance to Jordanian institutions in charge of
industrial policy).

• In view of the implementation of the Greater Amman Water Sector Improvement
€
5 million).
Programme, the Commission approved the financing of its Management Unit (
200 million coming from
The programme consists of a large capital investment of around
various international donors and lenders (e.g. EIB, World Bank, Germany, Italy and US-
AID) to restructure and rehabilitate Amman’s water network, in order to significantly
reduce the current high level of water losses.

€

• The Protection and Promotion of Cultural Heritage (

3.9 million) aims at enhancing
awareness and strengthening protection of Jordan’s cultural heritage (e.g. development of
two archaeological sites, Um Al-Rasas and Lehun, that offer a good overview of Jordanian
civilisation). This project also aims at further developing the tourism sector by providing
support to Jordan’s Tourism Board.

€

Finally, it must be noted that the third Euro-Mediterranean Conference of Foreign Ministers
held in Stuttgart in April 1999 decided to pay tribute to the legacy of the late King Hussein.
To commemorate his contribution to peace in the region, the Conference approved the idea of
cultural events in the year 2000, aimed at enhancing harmony and mutual respect among the
peoples of the Euro-Mediterranean area.

32

Jordan: 1999 MEDA commitments,

Name of project/programme

Structural Adjustment Facility II

Industrial Modernisation Programme

Management Unit for the Greater Amman
Water Sector Improvement Programme

Protection and promotion of cultural heritage

€

million

Amount

80

40

5

3.9

128.9

Jordan: Commitments 1995 – 1999,

Total

€

million

Sector/Programme

A. Support to Economic Transition

Private Sector Development Programme (Business
Service Team)

Risk Capital Resources (EIB) in support of SMEs

Industrial Modernisation Programme

B. Structural Adjustment Facilities

Structural Adjustment Facility I

Structural Adjustment Facility II

C. Socio-economic balance support

EIB interest
subsidies
Rehabilitation Programme

for Amman Water

Management Unit for Greater Amman Water Sector
Improvement Programme (Rehabilitation)

Tourism development and preservation of cultural
heritage

Total

€

million

57

7

10

40

180

100

80

17.1

8.2

5

3,9

254

Share

22,4 %

70.8 %

6.8 %

100%

33

EU-Lebanon relations

LEBANON

Progress on negotiations for the Association Agreement with Lebanon has been slow.
Negotiations began in November 1995, with the last session in April 1998, after a break of
almost two years. At present, there is an agreement on most subjects. Obstacles to resuming
negotiations are internal (general elections in August/September 2000), economic (resistance
of protectionist private sector), fiscal (high dependence on customs revenues) and external
(dominating influence of Syria). New revenue sources from the introduction of VAT foreseen
for 2001 would allow for the gradual dismantlement of customs tariffs in preparation for a
free trade area. The government has embraced economic liberalisation, transparency and
modernisation, and is committed to fiscal reforms in its 1999 and 2000 budgets to tackle the
large budget deficit. The Commission is taking the lead in assisting with these reforms in
preparation for the future Accord. A call for the resumption of Association Agreement
negotiations was made by the Commission in early 2000.

Recent economic and political developments

the Parliament

Since the end of the civil war (1975 to 1991) Lebanon has been governed by a troika
composed of a President (Maronite Christian), a Prime Minister (Sunni Muslim) and a
Speaker of
the October 1998 elections,
(Shiite Muslim). After
General Emile Lahoud replaced Hariri as President with an agenda to combat corruption,
open up the political debate, accelerate economic liberalisation and strengthen transparency in
public administration. He appointed Selim Hoss as Prime Minister. He has attempted to
reshape state institutions along non-sectarian lines, but with limited success so far.

The new government inherited a crippling public deficit (
19 billion in early 1999), which it
has sought to reduce through two successive budgets. Liberal economic policies, tax reform
and privatisation are seen as the basis for economic recovery. The task of pushing through
economic reforms is complicated by the current recession.

€

The political situation is coloured by the Israeli occupation of the southern border area,
prompting a festering conflict between Hizbollah and Israeli and Israeli-backed South
Lebanese Army (SLA) forces. Around 4,500 United Nations forces (UNIFIL) monitor the
situation. A significant development was the withdrawal of SLA from the city of Jezzine in
mid-1999 and its return to Lebanese police control. The south has become increasingly
volatile. Reprisal air raids by Israel destroyed two key power stations in June 1999, and added
further burdens to an already struggling economy. Lebanon is host
to around 300,000
Palestinian refugees confined to several camps,
to radical Palestinian resistance groups
(opponents of Arafat) and to around 30,000 Syrian troops who ostensibly keep the peace.

The resumption of direct contacts between Syria and Israel in late 1999 and early 2000 has
brought closer the prospects for a peace treaty, the return of the Golan, and the withdrawal of
Israel from south Lebanon (unilaterally, if necessary, by July 2000, according to PM Barak)
in line with UN Security Council resolution 425. At present, the two sides have yet to agree
the basic framework for continuing the talks.

34

Financial Cooperation under MEDA

184 million in the context of the MEDA
Lebanon has benefited from grants amounting to
Programme (1995-99). Most of this amount of aid was committed in 1999. In aid per capita
terms, Lebanon is among the leading beneficiaries of EU assistance from within the group of
MED partners. In addition to grants, the European Investment Bank has accorded loans of
over

200 million to Lebanon.

€

€

this financial support goes to Lebanon’s economic restructuring and
The bulk of
administrative rehabilitation. In August 1998 a
38 million Financing Agreement was signed
for a programme of rehabilitation of social service ministries, state agencies (electricity,
water) and municipalities, following a long and catastrophic civil war. An investment
planning programme accord (
25 million) was signed in June 1999 to further strengthen the
planning and management capabilities of ministries dealing with water, energy, public works,
environment and solid waste facilities.

€

€

In December 1999 the Commission formally approved a
50 million grant structural
€
adjustment facility designed to reinforce fiscal reform, and a
25 million grant for the creation
of a social and economic development fund to help provide a safety net to lower income
groups through micro-credit schemes, community development actions and social services.

€

A project for industrial modernisation (
begin in early 2000. Industry is also to receive support
institutions responsible for
€
(

11 million), approved in November 1999, is due to
through the strengthening of
the preparation and certification of standards and norms

6 million), scheduled for start in first half 2000.

€

Lebanon: 1999 MEDA Commitments,

Name of project/programme

Industrial modernisation programme

Structural Adjustment Facility

Fund for social and economic development

TOTAL*

(EIB risk capital and interest subsidies are
forecasted for 2000)

€

million

Amount

11

50

25

86

€

* plus

31 for rehabilitation and humanitarian assistance, outside MEDA

35

Lebanon: Commitments 1995 – 1999,

Sector/Programme

A. Economic transition

Norms

Investment Planning

Industrial modernisation programme

€

million
€

million

107

6

21

11

E.I.B.
pollution)

interest

E.I.B.
wastewater)

interest

rate

subsidies

(coastal

10.2

rate

subsidies

(Tripoli

20.8

Rehabilitation of the public administration

B. Structural adjustment

Structural Adjustment Facility

C. Socio-economic support

Fund for social and economic development

38

50

50

25

25

Share

58.8%

27.4%

13.8%

TOTAL

182

100%

36

EU-Morocco bilateral relations

MOROCCO

By October 1999, the EU Member States’ national parliaments had all ratified the Association
Agreement but its entry into force was subsequently delayed at Morocco’s request so that
certain changes could be made to Annexes 2 and 6.

The changes were made by means of an exchange of letters and the Agreement, together with
the letters, entered into force on 1 March 2000.

The Fisheries Agreement expired at the end of November 1999. Morocco confirmed that it
did not want to renew it, but said it was prepared to look at other forms of partnership on
fisheries. This was the purpose of Mr Fischler’s (the Commissioner for Agriculture, Rural
Development and Fisheries) visit to Morocco on 20 and 21 December.

Some tension has arisen in trade relations between Morocco and the EU because of problems
posed by the management of the import regime for Moroccan tomatoes. The Commission
imposed a system of import licences on 23 December after the relevant EU tariff quotas had
been exceeded. Consultations held on 17 January 2000 between the Commission and the
Moroccan authorities led to the system being dropped, subject to Morocco’s undertaking to
place strict limits on its exports.

Political and economic developments

The year was marked by the death of King Hassan II on 23 July and the accession of his son,
Mohamed VI. The new king has departed from tradition and taken a number of measures to
create a new, more liberal, political landscape. In particular, the return from exile of political
opponents was a clear signal of the new regime’s will to liberalise and democratise.

The “partnership” Government that had been in power since the start of 1998 remained in
office. It was, however, criticised, by the opposition in particular, for inaction.

While macroeconomic indicators are stable - a budget deficit in 1999 of less than 2.3%, a
drop in outstanding external debt, greater foreign investment, recovery in the tourism sector
and satisfactory foreign assets - the stagnation of growth is somewhat worrying. The farm
sector is growing at a rate far below 1%. Agriculture aside, GDP growth tends to be around
only 3%. These results are insufficient for genuine economic recovery, particularly given the
persistence of social problems such as unemployment and poverty, which has been increasing
for ten years.

MEDA operations

€

€

1999 marks the end of the stage of the MEDA programme that started in 1995. The financial
objectives set at the beginning (
580 million) have been exceeded, with 31 projects financed
656 million, of which 55.4% was to support economic balance, 26.4%
for a total of around
to support economic transition and 18.2% for the Structural Adjustment Facility. In 1999, the
Commission shifted its activities to the northern provinces, which received 77% of the funds.
These included the Mediterranean rocade (road link)
the second largest project
€
(
120 million). Other projects
affecting the northern region are hydro-agricultural improvements around Sahla in the north
of Taounate province, slum clearance in Tangiers and support for traditional Mediterranean

-
€
80.3 million) after the Structural Adjustment Facility (

37

inshore fishing. Part of the funds for other projects has been specifically earmarked for the
north of the country (see box).

The third and last
disbursed in December 1999.

instalment of the Structural Adjustment Facility (

€

50 million) was

Support for the development of the northern provinces

The north’s difficulties are basically linked to its poor state of development. The region has suffered from
isolation and lack of investment in all areas. Today, a third of all Morocco’s migrants come from the north and a
large proportion of the cultivated area is for growing kif (hashish). The EU supports the fact that development
activities prioritise this region. The Commission has really intensified its efforts since 1996 and 27% of MEDA
programming between 1996 and 1998 was for the north. In 1999, it received 77% of the funds, in addition to
which a number of individual projects were financed under other budget headings.

The Commission’s action is designed to augment incomes with productive projects, overcome the lack of
investment in the social infrastructure and fight ecological decay.

Projects in the north involve integrated rural development and the management of natural resources, support for
health sector management, the integrated development of forested areas in Chefchaouen, hydro-agricultural
improvements in Sahla, support for traditional inshore fishing, and slum clearance in Tangiers. Total amounts for
projects concerning water and sanitation in the countryside, support for young people and sport, support for basic
education and cultural centres include funds earmarked for the north.

As regards improving access to the region, 2000 will see the launch of a major new project: the Mediterranean
rocade (road link), to which the Community will contribute
80 million. At the same time, a programme of rural
tracks and roads in the Rif mountains will connect the most remote douars (villages) to the existing road
network, making tens of thousands more mobile.

€

38

Morocco: Commitments approved in 1999

Project/Programme

€

million

Interest subsidies for sanitation in:

Meknès

Settat

Agadir

EIB-managed
projects

Support for development NGOs

Support for professional associations

Hydro-agricultural improvements (Sahla)

Support for employment

Support
programme

for

the

national

geological mapping

Mediterranean rocade (road link)

Slum clearance (Tangiers)

Support for traditional Mediterranean inshore fishing

Cultural centres

TOTAL

5.9

2.2

4.7

4.0

5.0

28.6

3.3

5.0

80.3

7.0

21.0

5.0

172

39

Morocco: Commitments 1995-1999

Projects by sector

€

million

Share (%)

A. Support for economic transition

173.5

26.4%

Support for upgrading technical training and professional development

Support for the quality promotion programme

Support for privatisation

Support for telecommunications regulation and liberalisation

Guarantee fund

Euro Maroc Entreprise business centre

Support for professional associations

Risk capital (EIB)

B. Structural Adjustment Facility

Structural Adjustment Facility

C. Socio-economic balance support

Interest subsidy for sanitation work (EIB)

Water and sanitation in the countryside

Slum clearance in Tangiers

Support for health sector management

Support for basic education

Support for employment creation

Sport development for young people

Network of cultural centres

Support for Moroccan development associations

Rural roads and tracks in the north of Morocco

Mediterranean rocade (road link)

Support for national geological mapping programme

Support for traditional Mediterranean inshore fishing

Participative development of forested areas in Chefchaouen province

Hydro-agricultural improvements around Sahla (north Taounate province)

Support for integrated rural development

Total

40

38.0

15.7

5.0

5.0

30.0

30.0

5.0

45.0

120

120.0

18.2%

363.3

55.4%

20.7

40.0

7.0

20.0

40.0

3.3

6.0

5.0

4.0

30.0

80.3

5.0

21.0

24

28.6

28.4

656

100%

Bilateral relations

SYRIA

In the course of 1999, further discussions were held on the MEDA Framework Convention,
which was finally signed by the three parties (Commission, EIB and Syrian Government) on
9 November 1999. By the end of 1999, the Convention was still pending ratification on the
Syrian side and in the absence of a Framework Convention in force, none of the MEDA I
projects was operational.

Negotiations on the Association Agreement continued in 1999. Meetings were held on 16/17
March in Brussels and on 9/10 November in Damascus. Discussions focused on tariff
dismantling for industrial and agricultural goods, rules of origin and cooperation in the areas
of industry and agriculture. The EU also organised a series of meetings on technical issues,
such as rules of origin and possible tariff dismantling schedules. During the fourth round on 9
and 10 November negotiations covered all topics including the human rights clause and the
Syrian emergency laws.

Recent developments

The internal political situation did not present major changes in 1999 with President Assad, in
power since 1971, re-elected for the fifth time on 10 February.

With respect to foreign affairs, Syria continued strengthening its links with Europe, whilst
maintaining good relations with the Gulf States, Iran and several Asian countries. Syria has
reinforced its relations with countries of the old Soviet block and, more recently, with Iraq.
Relations with both Jordan and Turkey improved significantly in 1999. A breakthrough was
achieved in the Middle East peace process with the relaunching of the Syrian-Israeli peace
talks in December 1999.

The economy recorded a slight improvement in the course of 1999. The authorities stabilised
the exchange rate in the black market and gradually raised the official exchange rate. The
inflation rate fell to 1%. Rising oil prices, the announcement of economic reforms and
improved business expectations due to the Syrian-Israeli negotiations added to the positive
trend and supported the expectations of an economic recovery. The real GDP annual growth
rate is expected to have reached about 2% in 1999.

Syrian exports recovered in 1999 and the trade deficit narrowed from 30% to 13% of GDP.
The share of public sector production in exports fell to 71% in 1999, compared with 79% in
1997. The Syria-Lebanon Free Trade Agreement, which foresees tariff reductions of 25%
annually, led to a significant increase of trade with Lebanon (from US$1.47 million in 1998 to
US$3.34 million in 1999). The agreement was seen as a stepping stone to the Association
Agreement with the EU. The country’s external debt continues to be a pressing issue for the
Syrian authorities. Although there are indications that an agreement has been reached with
Russia, no progress has been recorded on this issue with Germany.

In his inauguration speech on 10 March 1999, President Assad underlined the need for closer
links to the EU and for economic reforms, particularly in the business and banking sectors.
President Assad’s son, Bashar, is considered as reform-oriented. Recently, the authorities
in order to create a more
announced the revision of Law No.10 (1991) on investment
favourable business environment.

41

MEDA interventions

The projects defined in the MEDA programme (1995-99) focus on key institutional areas
including:

–

–

–

the reform of the administrative and economic structures

the support of the business sector

the development of human resources.

MEDA financed projects and programmes mainly relate to public administration (reform and
infrastructure
modernisation of the Ministry of Finance and of
(telecommunications and electricity) and private sector support (the Damascus Higher
Institute of Business Administration).

local administration),

12 million) and the Institutional and Sector Modernisation Facility (

In 1999 financial commitments were approved for the Syrian-European Business Centre II
€
(
21 million). Owing to
the fact that the MEDA Framework Convention had not been ratified by the end of the
reporting period, none of these projects have reached implementation phase.

€

These programmes are intended to support and encourage the Government's reforms, to create
the structures and the instruments necessary for the development of the economy of Syria and
to establish a favourable economic and institutional environment. The future Association
Agreement with the EU will help the country to adopt structural measures intended to reform
its economy to cope with free trade.

1999 MEDA Commitments,

€

million

Name of project/programme

Power Sector Action Plan

Syrian-European Business Centre II

Institutional and Sector Modernisation
Facility

Archaeological Training Programme (to
be
under MEDA global
allocation)

financed

TOTAL

Syria

Amount (

€

million)

11

12

21

2

44

42

Share

93.4%

6.6%

100%

Syria

Commitments 1995-1999,
€

€

million

million

Sector / Programme

A. Economic Transition Support

Modernisation of municipal administration I

Modernisation of municipal administration

Telecom sector support programme

Business administration sector

Modernisation of Ministry of Finance

Power sector action plan

Business centre (II phase)

Institutional and sector modernisation facility

B. Structural Adjustment Facilities

C. Socio-economic Balance Support

Development of cultural tourism

Forest sector support programme

Archaeological Training Programme (to be
financed under MEDA global allocation)

Total

92

6

12

5.5

14

10.5

11

12

21

---

6.5

3

3.5

2

99

43

EU-Tunisia bilateral relations

TUNISIA

Tunisia was the first Mediterranean country to sign an Association Agreement with the
European Union (on 17 July 1995). The Agreement entered into force on 1 March 1998, the
first meeting of the EU-Tunisia Association Council was held on 14 July that year and the
Association Committee met in Tunis on 25 June 1999.

The Association Committee agenda covered political dialogue (human rights),
the
establishing of the free trade area, agriculture (olive oil), social issues and the implementation
of financial cooperation.

Political and economic developments

1999 was marked by the presidential and legislative elections on 24 October, which were
characterised by the introduction of two changes to electoral law whereby other candidates
could participate in the presidential elections for the first time, and a minimum of 20% of the
seats from the legislative elections were set aside for the opposition. President Ben Ali was
re-elected by a virtually unanimous 99.44% of the votes and the Parti du Rassemblement
Constitutionnel Démocratique confirmed its dominance.

Though the President claims to be in favour of pluralism and press freedom, in practice he
leaves a lot to be desired as regards respect for fundamental freedoms, particularly freedom of
association and expression. The main product of his desire to promote reform seems to have
been the setting-up of a special office under the Prime Minister which is responsible for
human rights, communication and relations with the Chamber of Deputies.

Economic forecasts for 1999 indicate that positive trends have continued. GDP growth should
be 6%, with an 11.5% rise in investment (26% of GDP). The government deficit should reach
3% of GDP and inflation 2.8%. According to Tunisian Government estimates, customs
receipts lost as a result of the Association Agreement being implemented are likely to come to
400 million dinars (
320 million) a year. In order to compensate, the Government has raised
VAT to 18% and abolished a number of tax allowances. The weakness in the country’s
economic development continues to be unemployment, which is running at 15%.

€

MEDA operations

The MEDA Programme includes support for economic transition in Tunisia, with particular
emphasis on structural reforms, private sector development and socio-economic balance. The
Commission committed

428.4 million between 1995 and 1999.

€

The main operations in 1999 were:

Structural reforms: Following the successful structural adjustment operation (SAF I) in 1998,
80 million was committed for a second
a new programme of reforms was drawn up and
operation (SAF II) in February 1999, focusing on a number of key areas: the financial sector,
the privatisation process and primary and secondary education. Like its predecessor, SAF II
was prepared jointly with the World Bank, which for its part granted Tunisia a loan to back
financial sector reform. By the end of 1999, the conditions and criteria for disbursing
payments had been met and the Commission made an initial payment of

40 million.

€

€

44

Private sector development: This is supported by means of several technical assistance and
training programmes, the main aim being to make the economy more competitive. The
following projects were implemented in this field in 1999:

–

–

–

–

–

a private sector development programme (support
expertise and services);

to upgrade SMEs through

support for reform of the vocational training system;

technical assistance programme for privatisation;

programme to promote foreign direct investment;

programme to support economic competitiveness (particularly in the banking sector).

A new heading for risk capital (
30 million), managed by the European Investment Bank and
devoted to the restructuring of Tunisian businesses, brought a doubling of the funds already
approved by the Commission to finance this kind of operation.

€

Socio-economic balance: Tunisia keeps a close eye on the social impact of the reform process
and MEDA Programme support is given to operations with a social dimension.

Two projects are being implemented:

an integrated rural development programme; and

–

–

a programme to support employment creation (approved at the end of 1998).
€

11.5 million was committed in interest subsidies to help Tunisia repay an EIB loan

A further
for an environmental project in the Gabès region.

40 million to a sectoral facility for
At the end of 1999, the Commission committed another
health to support a major project to reform Tunisia’s health insurance system (see box).

€

45

MEDA Sectoral adjustment programme:

€

health insurance reform in Tunisia,

40 million.

The sectoral adjustment programme in favour of Tunisia’s health sector was approved in
November 1999 and is the first sector adjustment programme funded under MEDA.

Contrary to a structural adjustment programme that has in general a global objective of
restoring / consolidating macroeconomic balances accompanied by the introduction of a series
of economic reform measures (legal framework, privatisation, social safety net, tax reform
measures etc), sector adjustment programmes have a more limited focus supporting policy
and institutional reforms in major sectors.

The Tunisian sectoral programme aims at a comprehensive reform of the health insurance
system. The programme also contains certain macro economic conditions to reinforce the
sustainability of the reforms.

The programme’s primary objective is the publication in the official journal of Tunisia
(following the adoption by Parliament) of a law reforming the health insurance system. It also
supports the adoption and publication of a series of implementation decrees (for example, on
the services covered by the basic package, the development of a complementary insurance
system or on measures that improve targeting of free services or of services at reduced user
fees). These decrees are a condition sine qua non for the rapid entry into force of the law once
it has been adopted.

Why a programme in the form of a sector adjustment operation? Firstly, the initiative to the
reforms dates back to 1996. Since then the Government of Tunisia has been working
consistently on its preparation, especially in the context of the CNAM (Commission
Nationale d’Assurance Maladie) and the seven specialised working groups established by the
CNAM. This indicates that there is a strong ownership of the programme. Secondly, the
Tunisian authorities have demonstrated that they have the necessary know-how to prepare and
implement this programme. Thirdly, in the concrete case of Tunisia, the World Bank is
already supporting the health sector through an investment loan of US$50 million. Fourthly,
the Commission, together with the World Bank, has a good experience with structural
adjustment programmes in Tunisia.

In view of the specialised character of the operation, the Commission will have at its disposal
specialised technical expertise to monitor the implementation and evaluate the impact of the
reforms.

The programme has been closely co-ordinated with Member States and the World Bank.

46

Tunisia: MEDA commitments approved in 1999

Name of programme

1 - Support for economic reform (SAF II)

2 - Support programme for health insurance reforms

3 - Pollution reduction in Gabès: interest subsidy (EIB)

4 - Risk capital for private sector support (EIB)

Total

Tunisia: Commitments 1995-1999

Sector/Programme

A. Support for economic transition

1 – Vocational training (MANFORM)

2 – Risk capital - restructuring (EIB)

3 – Risk capital - privatisation (EIB)

4 – Support for privatisation

5 – Promoting competitiveness of the economy

6 – Promotion of outside investment (FIPA)

7 – Euro Tunisie Entreprise business centre

B. Structural/Sectoral Adjustment Facilities

8 – Support for economic reform (SAF I)

9 – Support for economic reform (SAF II)

10 – Support programme for health insurance reforms

C. Socio-economic balance support

11 – Integrated rural development (DRI/GRN)

12 – Support for employment creation

13 – Sanitation - Lac Sud: interest subsidy (EIB)

14 – Sanitation - ONAS III: interest subsidy (EIB)

15 – Pollution reduction in Gabès: interest subsidy (EIB)

€

million

80

40

11.5

30

161.5

€

million

Share

119.0

27.8%

45.0

15.0

15.0

10.0

10.0

4.0

20.0

220.0

100.0

80.0

40.0

89.4

50.0

9.6

9.25

9.05

11.5

51.4%

20.8%

Total

428.4

100%

47

EU-Turkey bilateral relations

TURKEY

In international terms, the key event in EU/Turkey relations in 1999 was the recognition by
the Helsinki European Council in December of Turkey’s status as a candidate for EU
accession. Turkey will be treated in the same way as the other candidate countries; an
accession partnership is being prepared.

Political and economic developments

At home, the centre-right/leftist coalition, which enjoys a large majority in Parliament,
launched a programme of structural reforms addressing the functioning of political life, the
legal system,
the protection of human rights, public administration and social security.
Economically, the reforms are directed at the banking system and support for agriculture. The
stability of the Government coalition augurs well for effective implementation of the reform
plans, in particular for controlling inflation.

The earthquake that struck Turkey in August caused 17 000 deaths and significant economic
damage. The spontaneous expressions of solidarity that followed served as a catalyst for
rapprochement between Turkey and Greece.

Turkey was also hit by recession in 1999, with GDP falling by 5.8%. Among the causes cited
are trade difficulties and the restrictive policies adopted to combat inflation, which dampened
domestic demand. The August earthquake only made things worse.

Turkey failed to achieve its objectives in the struggle against inflation: the rate remained at
68.9%, only just below the 1998 level of 69.7%. The Government deficit rose to 12% of
GDP, as against 8.9% in 1998. The Government has set itself the target of getting inflation
down to 25% by the end of 2000. The credit stand-by agreement for US$4.3 billion signed
with the IMF in December will help bring inflation down.

Trade volumes dropped by around 10% (figures for January to November) as a result of
recession at home and in Russia. By the same token, however, the trade deficit fell by almost
30% thanks mainly to fewer imports. Invisibles (e.g. rebates, tourism) kept the balance of
payments in the black, despite an overall drop in income from tourism.

The EU remains Turkey’s top trading partner with 54% of all trade. Turkey’s trade deficit
with the EU fell substantially from
5.7 million (January to
November). 90% of
raw materials and
semi-finished products.

its imports from the EU are capital goods,

8.9 million in 1998 to

€

€

MEDA operations

It was agreed with the Turkish authorities that Community financial assistance in 1999 would
focus on a limited number of priorities. The aim was twofold: to be able to allocate sufficient
resources to achieve projects’ objectives, and to enhance the impact of EU action.
€

The three main programmes for the year were in the fields of basic education (
administrative cooperation (
€
contributed

100 million),
8 million). The Commission also
1.7 million to help establish effective intellectual property legislation and

12 million) and civil society (

€

€

48

€

committed
water networks in Tarsus and Diyarbakir).

18.6 million in interest subsidies for EIB loans for environmental projects (waste

€

The Community’s largest contribution in the framework of financial cooperation with Turkey
-
100 million - went to a basic education project supporting the extension of primary
education for children between the ages of five and eight. Aid will be given to the Ministry of
National Education to pay for a qualitative overhaul of initial and vocational training,
ensuring a positive spin-off for the country as a whole. In addition, substantial support will be
devoted to implementing the reform in twelve of the most disadvantaged provinces to achieve
a quantitative and qualitative improvement in education, for girls and women in particular.
Finally, support will be given to the opening of local multidisciplinary centres for sections of
the population excluded from basic education (children, young people and adults) in cities
with a high level of immigration, mainly Istanbul.

The administrative cooperation programme is proving very important in allowing the Turkish
the customs union agreement and generally pursue greater
authorities to implement
integration with the EU across the board. It will be used to finance visits by Turkish officials
and experts to meet their EU counterparts, and also to carry out work by specialists to help the
Turkish administration and to organise training for Turkish ministries, etc.

The framework programme for the development of civil society is aimed in particular at
backing citizens’ initiatives and helping to establish more equitable relations between people
and government.

As regards geographical distribution, project operations tends to focus on the provinces to the
south-east and east whose development is lagging behind that of the rest of the country.
Particular attention was given to those provinces affected by the earthquake in August. A
special effort was also made to address gender issues.

€

€

140.3 million committed in 1999, Turkey will have received a total of

With
376.2 million
in the course of the MEDA I Programme (1995-1999). Around fifty projects have been
conducted,
in the following areas: private sector support (SMEs), public health, basic
education and vocational training, environment, and the defence and promotion of human
rights and civil society.

49

€

million

Amount

100

12

8

1.7

9.5
9.1

140.3

Turkey

1999 MEDA commitments,

Name of project / programme

Support to basic education

Administrative cooperation programme

Framework
development of Civil Society

programme

for

the

Effective
property rights

enforcement

of

intellectual

rate

Interest
(E.I.B.)
– Tarsus waste water management
– Diyarbakir waste water management

subsidies

Total

50

TURKEY: Commitments 1995-1999

€

million

A. Economic transition support

Food inspection

Business innovation centers

Interest rate subsidy : wastewater for Izmit (E.I.B.)

Risk capital (E.I.B.)

Interest rate subsidy: wastewater for Adana (E.I.B.)

Industrial zone for SMEs (automotive components)

Information network for SMEs (KOBINET)

Mechatronics

Development EU-Turkey Business centers

Strengthening of the Vocational Education and Training system

Interest rate subsidy: Diyarbakir wastewater (E.I.B..)

Interest rate subsidy: Tarsus wastewater (E.I.B.)

B. Structural Adjustment Facilities

---

C. Socio-economic balance support

Jean Monnet Fellowship Programme

Modernisation of education and vocational training (8 sectors)

Mobilisation for economic and social development

Sanliurfa drinking water supply

Rehabilitation of Balat and Fener districts (Istanbul)

Programme of Reproductive Health

Support to basic education

Administrative cooperation

Civil society development programme

Urban Community Empowerment

State reform programme

Forming Consumer Awareness

Women cancer pre-diagnosis

Women entrepreneurs

Effective enforcement of intellectual property rights

Other small projects

Total

Share

37%

0%

63%

138

10.1

3.1

11.4

12

10.7

1.2

0.8

1.8

17.3

51

9.1

9.5

--

--

237

5

14

0.9

21.3

7

55

100

12

8

1

0.6

0.4

1.9

1

1.7

7.3

375

100%

51

WEST BANK AND GAZA STRIP

The European Community's cooperation with the West Bank and Gaza Strip is mainly
financed through a specific budget line entitled "Support to the Middle East Peace Process"
(B7-420). Cooperation activities under this title, which amounted to around
41 million in
1999, are the subject of a separate report which will be prepared by the Commission in
compliance with Article 6 (1) of Council Regulation (EC) No 1734/94.

€

MEDA financing is integrated into the overall cooperation strategy being pursued in the
abovementioned framework. The objective is to improve the living conditions of the
Palestinian population and to support the peace process in the region by financing investment
and operating costs in infrastructure, urban and rural development, education, health,
environment, services, foreign trade and institution building.

€

In 1999 the MEDA programme financed an operation entitled "Cargo Facility for Gaza
International Airport" for an amount of
25 million. Following the signature of the Wye
Memorandum, Israel agreed that an airport in Gaza could be opened. In view of its strategic
economic importance, the Palestinian Authority raised with the Commission the possibility of
getting financial assistance for the development of cargo checking facilities. Since one of the
objectives of the Euro-Mediterranean Partnership is to promote trade in the region it was
decided to make MEDA funding available from the 1999 budget for the construction of the
cargo facility as a first step to enable trade operations to begin at the airport. It was also felt
that this project would contribute to the EC’s efforts to implement fully the EC-PLO Interim
Agreement on Trade and Cooperation.

the MEDA programme financed a Risk Capital Operation (EIB) for the
In addition,
8 million. The operation aims to
“Palestinian Banking Corporation” (PBC) for an amount of
provide long-term funding to assist small and medium sized Palestinian enterprises to start-up
or expand in all the business sectors of the economy, through an operation on risk capital
which would allow PBC to finance direct or quasi-equity participation in suitable projects.

€

WBGS: 1999 MEDA commitments (

€

million)

Cargo Facility for Gaza International
Airport (grant)

Palestinian Banking Corporation
(risk capital)

Total

25

8

33

52

WBGS commitments 1995-1999 (

€

milion)

Economic transition support

90.5

81.5%

Economic policy support programme

Technical assistance on customs administration

Budget stabilisation fund

EIB interest rates subsidy (Gaza water and sanitation)

Technical assistance to the Palestinian authority (Coter)

EIB interest rate subsidy (industrial estates)

EIB risk capital Investment guarantee fund (MIGA)

Private sector development

EIB, risk capital (Palestinian Banking Corporation)

EIB, interest rate subsidy (West Bank water project)

Gaza Airport Cargo Facility

EIB interest rate subsidy

Structural Adjustment Facility

Socio-economic balance support

Recurrent costs of the Education Ministry

Monitoring Israeli colonising activities

0.5

1.2

25

7.4

3.6

1

5

3

8

8.6

25

2.3

---

20.5

20

0.5

0%

18.5%

Total

111

100%

53

II.2.2. REGIONAL COOPERATION

The implementation of the regional indicative programme expanded significantly in 1999.
The emphasis was mainly on introducing a tighter focus on priorities identified for regional
cooperation and ensuring that this is reflected in the critical mass of the projects financed. A
high level conference on regional cooperation was held in Valencia on 28-29 January which
confirmed the priorities for cooperation, emphasised the need for complementarity between
regional and bilateral activities and endorsed the principle allowing for a sub-regional
approach (whereby programmes of activities open to all partners could be made up of a series
of projects with the participation of a smaller number of participants). The role of civil society
was also underlined. The Valencia Conference also confirmed the importance of South-South
cooperation particularly concerning harmonisation and compatibility of measures related to
the EU Single Market.

The conclusions of the Valencia Conference were endorsed at the Stuttgart Foreign Ministers
Conference on 15-16 April, which also called for the Commission to prepare a reflection
paper on the methodology for regional cooperation. This paper, outlining the respective roles
of the Euro-Mediterranean Committee for the Barcelona Process and the Med Committee in
the elaboration of regional cooperation activities, was prepared during the year.

The main developments in specific programmes during the year were as follows:

• Industrial cooperation: 1999 was the year of strategic reform for industrial cooperation.
In line with the new methodology, four priority themes were defined – investment
promotion, innovation and quality, Euromed market instruments and mechanisms and
SMEs.
3.95 million was committed for the first theme, investment promotion, to establish
a regional network of Investment Promotion Agencies.

€

€

• Environment: the amount of

6 million was committed for the first series of projects
selected in the context of the Short and Medium-Term Priority Environmental Action
Programme (SMAP). The Programme aims at identifying and implementing appropriate
activities for five priority fields and promotes action plans that offer environmentally
sound, technically and economically feasible and socially acceptable solutions for the
conservation and rehabilitation of the Mediterranean environment.

€

• Information Society:

45 million was committed for the implementation of the Euro-
Mediterranean programme on the Information Society (EUMEDIS) comprising a network
of focal points and their interconnection, and a series of pilot projects on applications in the
fields of electronic commerce, industry, education, health, cultural heritage and tourism

• Local Water Management: a Ministerial Conference was held in Turin on 18-19 October
which reached agreement on the general lines of an action plan designed to lead to the
launching of a regional cooperation programme in this sector

• Audio-visual:

€

20 million was committed for the first phase of the Euromed Audiovisual
programme, which comprises a cluster of 6 regional projects selected after a call for
proposals. These projects have a duration of 3 to 4 years and mainly deal with audio-visual
archives preservation, support to co-production / distribution, and training in the field of
cinema and television.

54

II.3.

INFORMATION ACTIVITIES ABOUT THE EURO-MED PARTNERSHIP

To increase the visibility of the Euro-Med Partnership, the Commission has pursued the
following initiatives, initiated in 1998 for the majority of them. Beyond this list of activities,
the Commission is currently carrying out a reflection on a more ambitious information and
communication strategy.

Euromed Internet Forum and Publications

The EUROMED INTERNET FORUM website has been set up by the University of Malta’s
Mediterranean Academy of Diplomatic Studies with the support of
the European
Commission. This site has been operational since the second Euro-Mediterranean Conference
Internet users
of Foreign Affairs Ministers (Malta, April 1997).
(http://www.euromed.net) and provides detailed information on the Euro-Mediterranean
Partnership. In 1999, this website saw a substantial improvement in terms of quantity and
quality.

is open to all

It

In addition, a series of brochures and information notes has been compiled, containing basic
information on specific activities, programmes or themes related to the Euro-Mediterranean
Partnership. Brochures published cover the Barcelona Declaration, the Euro-Mediterranean
Partnership, Private Sector Development and Structural Adjustment. During 1999, two new
brochures were published on the MEDA Programme and the environmental programme
SMAP (Short and Medium-Term Priority Environmental Action Programme).

The following documents are also available on the Euromed Internet Forum:

Euromed Synopsis: weekly news bulletin on the main ongoing and forthcoming projects,
programmes and events related to the Euro-Mediterranean Partnership. It announces the most
relevant events scheduled within a period of four to five weeks and also contains background
information as well as a follow-up of the most recent events.

Euromed Special Feature: monthly publication that addresses in depth one specific issue
within the framework of
the Barcelona Process such as a regional programme, a
Mediterranean Partner profile, a project or a theme of common interest for the 27 Euro-
Mediterranean partners.

Euromed Report:
meetings and of summaries of reports concerning the Euro-Mediterranean Partnership.

irregular publication for quick dissemination of conclusions of major

Monthly Calendar: published every month, it brings to the attention of the general public
important information on events related to the Euro-Mediterranean Partnership. It is divided
into three sections: calendar of priority actions of the Barcelona process; information sheets
on future meetings; and conclusions of previous meetings.

Information visits for specific groups from the Mediterranean Partners

The main objective of these information visits is to allow representatives of media and civil
society from the Mediterranean Partners to come to Brussels to visit the European institutions
and meet EU officials, and acquire information about the Euro-Mediterranean Partnership,
mainly with respect to their specific field of activity. These visits were in the past addressed
only to journalists, but they have now been extended to other groups from the civil society
and from the private sector. Three visits of this kind took place in 1999.

55

Information and culture activities of Delegations

Since 1995, within the MEDA Programme, the Delegations of the European Commission in
the 12 Mediterranean Partners receive annual funding for their culture and information
activities programme. These activities are divided in three main categories: local cultural
activities, regional cultural activities and information activities, the latter being designed to
inform the public in the Mediterranean Partners about
the activities undertaken in the
framework of the Euro-Mediterranean Partnership (information seminars, visits to MEDA
funded projects, contacts with local media, leaflets and brochures). All activities are identified
by the Delegations and proposed to Headquarters on a yearly basis. In 1999,
262 000 have
€
been allocated for these activities (compared to

230 000 in 1998).

€

56

III. EUROPEAN INVESTMENT BANK OPERATIONS
IN THE MEDITERRANEAN REGION

In the Mediterranean region, the European Investment Bank’s (EIB) lending takes place
mainly within the framework of the Euro-Mediterranean Partnership,
in support of the
economic development of
the countries concerned. EIB lending supports individual
investment projects and, through the global loan mechanism, smaller projects and SMEs,
while at the same time strengthening the financial sector in the various countries. Under the
terms of the Euro-Mediterranean Partnership, EIB’s lending is complemented by interest
subsidies (for loans in the environmental sector) and risk capital from EU budgetary sources,
managed by the Bank.

Lending activities

In the Mediterranean region, the Bank signed 21 loans in 7 countries in 1999 for a total of
€
€
200 million in Cyprus under the Pre-Accession
745 million (not including 2 loans totalling

Facility). Loans for projects in Egypt and Morocco accounted for 60% of the overall amount.

€

• 16% of total financing (

122 million) was allocated to the Water Management and
Miscellaneous sector, underlining the importance of water as a scarce resource in this part
of the world. Projects financed include the rehabilitation and extension of wastewater
networks sewerage networks and treatment plants in Morocco, Egypt and Turkey.

• In the Energy sector, which accounted for 4% of total financing (

€

28 million), a gas

pipeline in Egypt was supported.

• Egypt, Jordan, Morocco and Tunisia benefited from loans to the Industry and Services
sector for 44% of total financing (
330 million). The loans supported an industrial gases
plant and a hydrocracking unit in Egypt, two chemical plants in Morocco, fertiliser plants
in Tunisia and Jordan, and a phosphate mine in Jordan.

€

• A railway project in Tunisia and a road project in Morocco were financed under the
heading of Communications and accounted for 23% of total financing in the region
€
(

170 million).

• Global loans in Egypt, Lebanon and Turkey accounted for almost 13% of overall financing

€

(

95 million).

• As regards MEDA Budgetary Funds, several Risk Capital operations were mounted during

1999 :

–

–

–

–

€

€

2 million equity participation in Morocco

34 million for building up equity of private companies and a global loan to

local development banks in Tunisia
€

12 million for participation in investment funds in Turkey

€

8 million for SMEs in Gaza-West Bank

57

In the Mediterranean region, the Bank’s activities are conducted within the framework of
EU policy and form part of a concerted approach that is being pursued in close cooperation
with the Commission and, as appropriate, with other international financial institutions,
including through co-financing operations.

The aforementioned projects represent a good cross-section of operations, which are designed
to underpin the sustainable economic development of the Mediterranean partners concerned.
Falling within the Financial Cooperation volet of the Barcelona Declaration, these actions are
compatible with the development strategies of the beneficiary countries and coherent with the
activities of other Donors and Financing Agencies in the Middle East and North Africa
region.

58

IV. EVALUATIONS OF THE MEDA PROGRAMME

The MEDA Regulation provides for regular evaluations of both the overall programme as
well as of aspects of it in order to increase transparency and assess the efficiency of the EU
action in the Mediterranean region. In this connection,
the following evaluations were
launched and carried out by independent experts in 1998 and 199915:

1.

2.

3.

4.

Evaluation of the MEDA Regulation,

Evaluation of Structural Adjustment Facilities,

Evaluation of the MEDA Democracy Programme, and

Evaluation of cooperation with West Bank and Gaza Strip ;

The main conclusions of the three evaluations are the following:

MEDA Regulation

The evaluation concludes that the coherence between EU financed projects and programmes
and the overall MEDA objectives has been strengthened in the context of the indicative
programming. Significant improvements have been achieved in the designing of the EU
projects for the Mediterranean countries. The need for an ongoing political dialogue between
the Commission and the authorities of the Partner countries is emphasised to better adjust EU
programming to country-specific priorities.

To make the indicative programming system effective, the evaluation suggests the setting of
strategic plans. Their function would be: (a) to help define and measure, by quantified
indicators, the overall goals and MEDA programme objectives in the context of the needs,
and the institutional and absorptive capacity of the Mediterranean partners, and (b) develop
monitoring systems, in the absence of which it would be impossible to access “outcome-to-
purpose” impacts. At present, “such strategic planning and monitoring is unsatisfactory”.

It is further underlined that the performance-based programming exercise has been seriously
constrained by MEDA I procedures. Particular reference is made to the requirement to seek
approval for each significant financing decision from the MED Committee (in which Member
States are represented). It is noted that the MED Committee is already involved at an earlier
this MED
stage,
Committee involvement in the Commission’s commitment system at the level of single
programme/project increases the administrative workload of the Commission.

that of the National Indicative Plans. The evaluators conclude that

It is also stressed that the negotiating process and the establishment of rules and procedures
for financial and technical co-operation under MEDA I (except in the case of Structural
Adjustment Facilities) became a time-consuming undertaking and led to serious delays for the
the late conclusion of the Financing Framework
implementation process. In particular,
Conventions hampered efficiency in terms of implementation, since they provide the
necessary legal and administrative framework for procedures to be laid down before
Financing Agreements could be signed.

15

For more information see http://europa.eu.int/comm/scr/evaluation.

59

The overall recommendations of the evaluation report includes, inter alia, the streamlining of
the programming process, the simplification of the implementation rules and procedures and
the strengthening of the Commission’s capacities for programming and implementation. The
evaluation proposes the revision of the MEDA Regulation for further enhancing the impact of
the EU Mediterranean policy.

Structural adjustment

for structural adjustment
A separate evaluation has been carried out on the support
implemented through the instrument of the Structural Adjustment Facility (SAF). SAFs make
up a substantial share of the overall MEDA programme (15% in 1995-99), providing direct
budgetary support conditioned to the effective implementation of a reform programme agreed
with the partner country.

The evaluation study, finalised during the first semester of 1999, concluded that SAFs had a
beneficial impact on the Mediterranean economies since they have clearly contributed to an
improvement of the macro economic situation. In the context of the preparatory work, an
intensive economic dialogue was held between the authorities of the Partner countries and the
Commission services. Furthermore, the operations were well co-ordinated with the IMF and
the World Bank.

However, difficulties in the implementation of the conditionality have led to delays in the
implementation of the adjustment operations The study recommends a better linkage of SAF
conditionalities to the preparation of the free trade area with the European Union and the
strengthening of the socio-economic balance in the countries concerned.

MEDA Democracy

The evaluation examines the impact of the MEDA Democracy Programme (MDP) launched
in 1996 following the 1995 Barcelona Declaration and now an integral part of the European
Initiative for Democracy and Human Rights. Under the MDP subsidies are granted to non-
profit-making associations, universities, research centres and various public bodies. At the
time of reporting, 148 operations had been funded at a cost of

22.85 million.

€

The main findings of the evaluation indicate that the MDP had correctly addressed the issues
most relevant to human rights and democracy. Projects were mostly well designed, linked
well with other programmes and were efficient and relevant to need. Training and education
projects targeted a limited number of beneficiaries but had high impact on them, whereas
human rights and democracy awareness programmes targeted larger numbers but yielded
lower beneficiary impact. The programme should improve its strategy in addressing human
rights problems in Tunisia and Syria. The study recommends that a new and more
comprehensive programme guide to local civil societies should be prepared for each
Mediterranean partner and made available on the Europa Internet site.

West Bank and Gaza Strip Assistance

This evaluation examined the EU programme of assistance to the Palestinian Authority in
support of local economic and social development in the WBGS.

The main findings show that the programme had provided considerable help in the area of
private sector development. The strengthening of the financial credit sector has brought about
significant improvements in job creation and credit recovery levels. However the average
duration of credits remained too short to support many investments. In the education area, the

60

EU programme contributed to the implementation of a number of key internal reforms,
particularly with respect to the drafting of a new Law on Higher Education.

61

Euro-Mediterranean Partnership

ANNEX I

FOURTH MEETING OF EXPERTS ON

ECONOMIC TRANSITION IN THE EURO-MEDITERRANEAN AREA

BRUSSELS, 2-3 OCTOBER 2000

WORKING DOCUMENT

1. This year’s Meeting of Experts on Economic Transition in the Euro-Mediterranean Area will be
held shortly before the fourth Euro-Mediterranean Conference of Ministers of Foreign Affairs in
Marseilles. It is therefore an appropriate forum to take stock of economic progress achieved by
Mediterranean partners and review future prospects. Both the present framework document of the
Commission as well as FEMISE’s Second Report on The Euro-Mediterranean Partnership are inputs
to the Meeting’s discussions.

STABILISATION HAS ADVANCED, BUT GROWTH REMAINS WEAK

Following the implementation of successive adjustment programmes over the last twenty years,
2.
Mediterranean partners have achieved considerable macroeconomic stabilisation. This
is an
achievement which, however, cannot be taken for granted. Indeed, some countries in the region are
still facing today an important stabilisation agenda, while in others macro-economic consolidation is
fragile.

3. Mediterranean partners have also made notable progress in demographic transition and a relative
stabilisation of their population is projected within the coming 20 years. However, the population of
these countries is predominantly young due to past demographic trends. A higher level of new entrants
together with the expected intensification of women’s activity imply a significant rise of pressure on
their labour market in coming years.

4. According to international estimates, Mediterranean economies need to achieve real GDP growth
rates of the order of 6-7% to absorb the excess labour supply. However, the growth performance of
Mediterranean partners has been weak in recent years, despite their considerable progress in
macroeconomic stabilisation and the improved international environment This seems to be due in
great part to the hesitant progress in structural reform which has resulted in an inadequate mobilisation
of investment –domestic and foreign – and low productivity.

5. To generate the necessary economic growth and close the gap between their present and needed
growth rates, Mediterranean partners could adopt a double strategy based on accelerating structural
reform and preparing themselves to take advantage of new forms of economic growth. The
implementation of this strategy would also consolidate progress in stabilisation and shape the
conditions for sustainable growth.

ASPECTS OF THE REFORM AGENDA

6. What could be the elements of such a strategy? The reform of the state is one of its cornerstones.
The public sector in the Mediterranean economies remains large. It often dominates the financial

62

sector through public commercial banks,
inter-mediation,
affecting adversely small- and medium-sized enterprises, as well as the development of a dynamic
capital market. The accelerated privatisation of public industrial and financial enterprises would
liberate new forces in the economy.

thus harming the quality of financial

7. The state’s institutional capability should also be strengthened since it improves the capacity of
governments to implement change effectively. Weak institutions and weak organisations impede
policy reforms. International experience shows how the failure to improve governance, in both the
public and corporate sectors, is at the heart of weak investment, the failure of enterprises to restructure
and capital flight.

8. Whilst
the “first generation” of reforms focused on stabilisation and growth, a “second
generation” focusing on the regulatory functions of the state needs now to be implemented. They
would address the incentives and actions that are required for private sector development and for
developing the institutional capacity for reforms. A greater flexibility in the labour market and the
modernisation of the financial sector would also contribute to channelling private investment into
efficient activities and attracting a return of flight capital. Competition policy backed by modern
competition law and efficient competition agencies would help establish a level playing field for
business activity and control the possible abuse of power in the market place.

9. The room for further progress with respect to foreign direct investment remains considerable.
Although it is true that most countries have developed a more welcoming attitude towards it, certain
sectors remain the exclusive domain of public enterprises and domestic investors. This concerns in
particular the services sector. Moreover, it should be recognised that foreign investors are particularly
sensitive regarding the process of obtaining approval for their investment (speed and efficiency of the
registration and approval process), investment conditions (investment in land is often not permitted) as
well as the regulatory framework that directly affects their operational performance (conditions of
work for non-nationals, labour code, tax laws, social security provisions, environmental legislation).

10. Accelerating reforms is also needed in view of tariff dismantling vis-à-vis the EU. The counterpart
of lower domestic prices resulting from this is a revenue loss for the Government. This can be
considerable in countries that have a high dependency on trade taxes. Fiscal reform could focus on
modernising the tax system (introducing VAT in countries that do not yet have it), creating more
equitable and efficient tax systems, broadening the tax base particularly by simplifying procedures and
limiting exemptions in indirect and direct
taxation, as well as upgrading the system of tax
administration. Projects and programmes in the area of fiscal reform would play a central role in
financing plans under the revised MEDA Regulation.

11. The importance of agriculture for the Mediterranean partners is understandable. The sector still
plays an important role in the economies of the Mediterranean partners and is crucial for the welfare of
their rural populations. The association agreements foresee a resumption of negotiations with a view to
deepening the exchange of concessions on a reciprocal basis. In this respect it can be expected that the
reform of the CAP, as well as the resumption of negotiations under the auspices of the WTO as part of
the Uruguay Round agreement on agriculture can give a welcome impetus to these negotiations.

12. Because of the small size of most Mediterranean economies, trade could become an essential
source of demand. Further diminishing the degree of protection of the local markets particularly with
to tariff barriers and taking favourable measures for exporters would encourage trade.
respect
However,
trade should also be encouraged in the south-south context. Accelerated south-south
integration would certainly offer enhanced growth potentialities for the Mediterranean economies and
attract additional foreign direct investment.

13. New technologies are rapidly changing the face of the global economy. The Mediterranean
countries have to develop bolder strategies allowing them to better adapt to the new conditions of
economic growth. They will soon have to tackle issues relating to the telecoms regulatory framework
as well as to the legal framework for electronic commerce. The access to Internet, currently

63

particularly expensive in the Mediterranean partners, should be facilitated. The shift to a knowledge-
based economy, prompted by new goods and services, would be a powerful engine for growth and
jobs.

14. However, to underpin reform, a broad base of social support is needed. Growth should be not only
sustainable but also equitable. The strengthening of the social safety net to support restructuring and
growth contribute to the shaping of consensus in society on the reform agenda. Investment
in
education helps the new generation cope with the market economy. Job schemes facilitate the
reintegration of those who have been affected by the stabilisation programmes, particularly women.

THE ROLE OF THE EU

15. The main economic thrust of the EU’s Mediterranean policy, notably since the decision to
establish a Euro-Mediterranean free trade area by 2010, provides an appropriate and indispensable
framework for the partners’ reform process. To alleviate the economic and social costs of reform and
particularly of the establishment of the FTA, the EU has steadily increased its financial aid to
4.6 billion in grants to the
Mediterranean partners. In the period 1995-99, the EU has provided over
€
3.4 billion under the MEDA programme and 1.2 billion under other budget
Mediterranean region (
lines) while in addition the EIB has granted loans of over
4.6 billion. Furthermore, Member States
have provided considerable aid to Mediterranean partners in the context of bilateral co-operation
programmes.

€

€

16. Through the MEDA Programme, the main instrument of financial co-operation in the Euro-
Mediterranean Partnership, the Union is financing projects in the area of economic transition in
Mediterranean Partners, such as the modernisation of the industrial sector, the acceleration of the
the public
privatisation process,
administration, the development of key infrastructure. MEDA projects further aim at strengthening the
socio-economic equilibrium by improving basic education and facilitating the access of girls and
women to it, modernising health services and pension systems, strengthening civil society and
protecting cultural heritage. Regional projects focus inter alia on the promotion of industrial co-
operation, environmental protection and the development of the information society.

the financial sector,

the restructuring of

the upgrading of

17. Although commitment appropriations in the context of the MEDA Programme were fully utilised
in 1995-1999, payments averaged only 26% of commitments. One of the reasons for the delays in the
implementation of the Programme has been its cumbersome and rigid decision-making procedures.
The revision of the MEDA Regulation, currently under negotiation at the Council, aims at achieving
significant time gains in the decision process. In addition it favours a more strategic programming of
aid so as to ensure that MEDA interventions are coherent with national reform strategies. Moreover,
the ongoing reorganisation of the Commission services involved in delivering external aid to the
Mediterranean should also contribute to a more efficient and rapid delivery of assistance, as well as to
its qualitative improvement.

18. However, lack of determination on the side of the Mediterranean partners to implement key
structural reforms has also borne a significant share of responsibility for delays in the implementation
of the Programme. In an overall challenging budgetary context, MEDA funds will be increasingly
channelled towards partners that have confirmed absorption capacity as well as a good implementation
record of their association agreement concluded with the European Union. The commitment of the
partners to the implementation of their respective national reform strategies would be decisive in the
assessment of
their absorption capacity. The economic dialogue between the Union and its
Mediterranean partners would be a key instrument in this exercise.

64

GDP growth (annual percentage)

Countries

Algeria
Cyprus
Egypt
Israel
Jordan
Lebanon
Malta
Morocco
Syria
Tunisia
Turkey
West Bank and Gaza
European Union  (15)
World

1995

1996

1997

1998

1999

3.8
6.1
4.7
7.1
3.9
6.5
6.2
-6.6
6.7
2.3
7.3
-1.4

2.4
2.7

3.8
1.9
5.0
4.6
1.0
4.0
3.9
12.2
2.2
7.1
6.8
-1.0

1.6
3.7

1.1
2.5
5.5
2.9
1.3
4.0
4.8
-2.3
4.0
5.4
7.7
-0.7

2.5
3.6

5.1
4.5
5.6
2.2
2.2
5.0
4.1
6.5
5.0
5.0
2.8
4.0

2.7
1.7

3.5
4.5
5.9
2.0
1.2
..
..
0.2
5.3
6.2
0.4
3.8

2.3
2.8

Source: World Development Indicators database

GDP deflator (annual %)

Countries

Algeria
Cyprus
Egypt
Israel
Jordan
Lebanon
Malta
Morocco
Syria
Tunisia
Turkey
West Bank and Gaza

European Union (15)
World

1995

1996

1997

1998

1999

28.5
3.0
11.4
9.8
3.4
10.6
4.9
8.0
5.4
5.2
87.0
10.1

3.0
..

25.7
1.7
7.1
11.4
2.3
8.9
0.9
1.0
12.6
4.7
78.3
11.0

2.5
..

6.5
2.3
5.9
8.8
3.7
8.5
2.3
2.0
8.5
4.0
81.2
15.4

1.9
..

-4.2
2.3
3.6
6.7
3.7
8.0
0.5
0.7
7.0
3.5
74.2
5.6

2.0
..

8.7
1.0
5.6
6.9
1.8
..
..
1.0
5.8
3.6
52.2
5.8

1.6
..

Source: World Development Indicators database

65

Current Account Balance (% of GDP)
Countries

1995

1996

1997

1998

1999

Algeria
Cyprus
Egypt
Israel
Jordan
Lebanon
Malta
Morocco
Syria
Tunisia
Turkey
West Bank and Gaza

European Union
World

..
-1.8
0.6
-5.9
-3.9
-28.2
-10.9
-3.6
2.2
-4.3
-1.4
..

0.6
..

..
-5.1
-0.3
-5.6
-3.3
-25.7
-10.6
0.1
0.5
-2.4
-1.3
..

1.0
..

..
-3.7
0.2
-3.5
0.4
-23.3
-6.0
-0.3
2.9
-3.1
-1.4
..

1.5
..

..
-6.2
-3.3
-0.7
0.1
-22.6
-5.8
-0.4
0.3
-3.4
0.9
..
0.9
..

..
..
-2.7
-2.6
0.8
..
..
-1.3
..
-3.7
..
..

0.2
..

Source: World Development Indicators database

66

Table / Foreign Direct Investment Flows into the Mediterranean region (mln $)

1987-1992

1993

1994

1995

1996

1997

1998

annual average

Algeria
Cyprus
Egypt
Israel
Jordan
Lebanon
Malta
Morocco
Syria
Tunisia
Turkey

-
83
806
187
21
2
46
203
67
160
578

-59
83
493
429
-34
7
56
491
176
562
636

22
75
1.256
355
3
23
152
551
251
432
608

-24
119
598
1.306
13
22
183
332
100
264
885

447
259
636
1.389
16
64
325
354
89
238
722

630
175
891
1.455
361
150
128
1.079
80
339
805

500
200
1.076
1.839
223
230
130
258
100
650
807

Source : UNCTAD

2.840

3.728

3.798

4.539

6.093

6.013

Table : Foreign Direct Investment Flows into the Mediterranean region (% of gross capital formation)

1987-1992

1993

1994

1995

1996

1997

annual average

Algeria
Cyprus
Egypt
Israel
Jordan
Lebanon
Malta
Morocco
Syria
Tunisia
Turkey

Source : UNCTAD

-
6,5
4,4
1,8
1,8
0,5
7,4
3,8
1,4
5,8
2,0

-0,5
5,6
5,3
2,9
-1,8
0,4
7,8
8,1
1,8
13,7
1,3

0,2
4,9
11,9
2,1
0,1
1,8
19,1
8,8
1,9
10,2
1,9

-0,2
7,0
5,3
6,4
0,7
1,5
17,8
4,7
0,7
6,1
2,2

3,6
15,0
5,1
6,2
0,8
4,3
34,0
5,0
0,6
5,3
1,6

5,1
10,6
6,1
6,9
20,3
10,8
15,0
15,6
0,6
7,3
1,6

67

Trade flows of Mediterranean Partner Countries (MPC)
(millions current dollars)

Partners

EXPORTS

IMPORTS

Partners

EXPORTS

IMPORTS

1981

1992

1998

1981

1992

1998

1981

1992

1998

1981

1992

1998

WORLD

E.U.

13.296
557
3.034
5.662
510
741
386
2.320
2.102
2.502
3.385
34.495

6.989
169
1.451
2.167
8
60
350
1.363
1.370
1.517
2.122
17.566

11.830
501
4.970
13.082
697
495
1.361
5.668
2.502
4.040
14.715
59.861

9.112
309
3.224
4.658
78
111
1.150
4.160
1.985
3.164
7.933
35.884

11.646
426
3.195
23.304
452
452
1.711
6.919
2.238
5.738
26.881
82.962

7.523
215
1.197
7.181
175
177
925
5.649
1.658
4.601
13.446
42.747

11.301
1.101
8.244
7.860
3.140
3.548
958
4.351
5.039
3.765
5.785
55.092

7.567
605
4.075
2.960
1.167
1.975
804
2.180
1.835
2.460
3.121
28.749

8.380
7.017
3.686
3.142
16.479
7.948
27.469
18.814
2.852
2.514
4.904
2.914
2.667
2.459
8.433
6.686
3.658
2.830
8.347
6.432
22.871
45.908
83.627 132.783

5.253
1.773
4.707
9.831
1.015
1.715
2.000
4.919
1.409
4.709
10.655
47.986

5.811
2.018
5.978
13.335
1.222
3.104
1.847
6.489
1.681
6.265
24.077
71.827

MPC
(intra-
regional
trade)

REST
of the
WORLD

67
92
594
160
59
208
2
73
101
95
249
1.700

6.240
296
988
3.336
442
473
34
883
631
890
1.013
15.226

187
67
211
150
32
79
5
205
136
225
1.136
2.433

2.532
126
1.568
8.274
587
305
205
1.232
381
650
5.646
21.506

704
69
360
471
51
62
45
112
366
159
2.465
4.864

3.041
143
1.638
15.652
227
214
741
1.158
215
978
10.969
34.976

173
100
259
67
232
154
53
71
286
105
202
1.702

3.611
446
4.051
4.884
1.791
1.469
151
2.150
2.928
1.250
2.512
25.243

208
77
277
159
179
180
87
295
306
344
322
2.434

1.556
1.291
5.743
8.874
1.320
1.069
422
1.523
1.163
1.378
11.894
36.233

570
209
633
578
206
224
41
166
365
388
1.485
4.865

2.048
1.509
9.917
13.607
1.425
1.578
778
1.778
1.611
1.778
20.347
56.376

Algeria
Cyprus
Egypt
Israel
Jordan
Lebanon
Malta
Morocco
Syria
Tunisia
Turkey
MPC

Algeria
Cyprus
Egypt
Israel
Jordan
Lebanon
Malta
Morocco
Syria
Tunisia
Turkey
MPC

MPC: Mediterranean Partner Countries

Source: FEMISE Network, The Euro-Mediterranean Partnership in the Year 2000 , July 2000, p. 18. Some of the Mediterranean Partner Countries are not “reporter” in
the WTO COMTRADE database. For Syria, Jordan and Lebanon trade data have been reconstructed using declarations of the trading partners. It is also the case for
Algeria and Malta before 1994, Morocco in 1992 and Egypt in 1992 and 1993.

68

FOURTH MEETING OF EXPERTS ON ECONOMIC TRANSITION IN THE
EURO-MEDITERRANEAN AREA

ANNEX II

1.1.

1.2.

Brussels, 2 and 3 October 2000

Chairman’s conclusions

1. During a meeting held in Brussels on 2 and 3 October 2000, government experts of the 27
members of the Euro-Mediterranean partnership discussed under
the
European Commission the progress in economic transition in the Mediterranean region. The
discussions were held at the time the Commission had just been making proposals with a view to
that
reinvigorating the Barcelona Process. In this context
the
there was general agreement
financial and economic partnership should be further strengthened in particular
through
introducing a greater focus on key issues.

the chairmanship of

2.

It was highlighted that most partners have achieved considerable progress in macro-economic
stabilisation. Yet, this achievement must be characterised as fragile for a number of partners.
Moreover, despite a more favourable international environment in recent years and good prospects
for the European economy almost all countries are confronted with a growth deficit. This has
prevented a deepening of the macro economic stabilisation effort.

3. Participants agreed on the pivotal role of sound public finances as a key conditioning factor of the
transition process. While progress has been made, it was also highlighted that countries face often
‘contingent liabilities’ that are related to the public enterprise sector and social security systems. In
that light, participants agreed that deepening the public finance aspect of the partnership should be
pursued vigorously.

4. Reaching a higher steady level of economic growth is also essential in the context of the
employment challenge. The level of unemployment is too high today in most countries. Moreover,
the changing demographic profile of the countries in the region,
together with a higher
participation rate of women, will accentuate labour market pressures in the future. A higher level
of growth is therefore needed.

5. The meeting discussed possible explanations of the growth deficit. One factor is without doubt the
low level of investment in relation to GDP. Regarding foreign direct investment it is true that most
countries have developed a more welcoming attitude towards it, yet certain sectors remain the
exclusive domain of domestic investors. This concerns in particular the services sector.

6. The meeting also identified a number of governance issues. In this connection, it was stressed that
weak institutions impede policy and institutional reforms. An important feature of modern market
economies and democratic societies is an elaborate system of institutions that exercise key
supervisory functions on the basis of a legal mandate and independent from the Government.
These institutions, such as Central Banks, competition agencies, supervisors of the capital market
and the insurance sector, are essential for a good functioning market economy. However, in many
Mediterranean countries these functions are still under-developed and/or predominantly exercised
by the central Government.

7. The room for further trade liberalisation remains considerable. Apart from a reduction of tariff and
non-tariff barriers, there is a need to harmonise rules and practices in areas relevant to the
establishment of a single market among the Mediterranean partners. This will act as a catalyst for
South-South integration, attracting foreign investment and fuelling economic growth.

69

8. Participants also stressed the importance of identifying constraints at the micro economic level
that inhibit growth. In this respect financial sector reform can play an important role in improving
financial intermediation.

9. The meeting underlined that the region has a comparatively favourable poverty alleviation record,
although exclusion and pockets of poverty exist. Both economic growth and efficient re-
distribution policies are needed to address this issue, and it was highlighted that the transition
process will only be sustainable if the benefits of reforms are shared equitably.

10. The meeting had a very stimulating exchange on new technologies as a factor of economic
growth. The meeting discussed the recent experience of a partner country in telecommunication
liberalisation. This demonstrated the considerable gains that can be realised from openness and a
transparent regulatory framework. The benefits from the ‘new economy’ will be determined by the
success of the region in eliminating illiteracy and practising openness and allowing the free flow
of information.

11. The meeting also reviewed the transition process in accession countries. It was noted that the
process of adhesion is characterised by a high degree of ownership of partner countries. At the
same time the key issues in the accession process have a close resemblance with the issues of the
financial and economic partnership. The meeting recognised that the experience resulting from the
process of accession is highly relevant in the Euro-Mediterranean context. For that reason it was
agreed that the relevant enlargement services of the Commission should be associated with the
work of the group of experts in the future.

12. Several participants highlighted in the course of

the discussions the need for a better
understanding of the nature and the impact of the transition process. The dialogue between
partners in the context of the financial and economic partnership should be enhanced, both at the
multilateral and bilateral level so as to create synergies. It was suggested to have a more
systematic exchange on country experiences (macro-economic consolidation, fiscal transition,
industrial upgrading) as well as on horizontal issues of common concern (developments in the
Common Agricultural Policy, enlargement of the Union, European regulatory practices). The
importance of impact studies was equally mentioned. At the bilateral level, the economic dialogue
between the Union and the Mediterranean partners should play a key role.

13. The experts welcomed the revision of the MEDA Regulation, which will provide for a
streamlining of procedures thereby contributing to an acceleration of assistance delivery. In
addition it favours a more strategic programming of financial support so as to ensure that MEDA
interventions are coherent with national reform strategies. It was mentioned that in an overall
challenging budgetary context, MEDA funds would be increasingly channelled towards partners
that have confirmed absorption capacity as well as a good implementation record of their
association agreements.

70