Despite significant contributions to investment and economic growth in the southern Mediterranean region, the EIB could do a lot more to support SMEs. The European Commission?s verdict, following a review of the European Investment Bank?s Facility for Euro-Mediterranean investment and Partnership (FEMIP), should result in a facility that focuses more on private sector and SME needs.

SMEs account for more than 95% of all business, and 50-70% of employment in many Mediterranean countries. These businesses provide a livelihood for millions of people, and contribute significantly to economic growth in the region. Despite a clear need to develop the private sector, some 60% of FEMIP loans finance infrastructure projects, such as the light rail transit system in Tunis, the Amman ring road, or the wind park in Tangiers. The Commission has now called on the EIB-led facility - which offers loans in Morocco, Algeria, Tunisia, Egypt, Gaza-West Bank, Israel, Lebanon, Syria and Jordan - to adjust its financial instruments in order to better address the needs of SMEs.

With a 4.8% economic growth rate in 2005, the Mediterranean region is responding well to the challenges posed by economic modernisation. Nevertheless, employment rates remain high (between 9% and 23%) and the region still lags behind the average of comparable middle-income countries. Between the start of FEMIP in 2002 and the end of 2005, FEMIP granted €7.2 billion in loans to southern Mediterranean countries. Loans to private companies and SMEs have trebled over the last three years, but support to the private sector could still be taken up a notch.

A permanent advisory committee with Mediterranean partner countries and EU Member States to discuss priorities and results of FEMIP funding could raise the level of ownership. By strengthening FEMIP?s presence at local level, the facility could better identify the needs of Mediterranean countries and maximise its potential in the private sector.