European funding opportunities for collaborations with North Africa

Times of Malta, 1st June 2014

The Economic Update, May/June 2014 edition

Malta’s geo-strategic position in the Mediterranean, our long-standing tradition of good relations with North African countries, together with our cultural affinities both to them as well as to continental Europe, have indeed given us the opportunity to act as a bridge and facilitator for collaborations and exchanges between these two large markets.

This was once again evident in the large audience gathered by the recent B2B networking event focused on Malta – Tunisia – Libya business relations that I also attended. The huge potential of the emerging markets and strong development needs that these countries and their neighbours represent is attracting keen interest from both indigenous Maltese organisations as well as the international ones setting-up and using Malta as a stepping stone to the Continent.

There is definitely a huge demand for investments in these countries, from various sorts of infrastructure, technology transfer to human resources training, business community development and provision of consumer goods. And we – Malta, Europe – are well placed to provide such, not just geographically but also in terms of abilities. One issue sticks out like a sore thumb however – the challenge of access to finance. Whilst we are slowly recovering from the recent economic crisis, accessing finance – particularly for investments or trade in regions still relatively unstable, is not easy. The political risk is typically translating into a financial risk and as such private capital is not flowing smoothly.

This is where the international institutions’ intervention comes into play, making available various financing support programmes to encourage and facilitate the transformation of numerous collaboration ideas and opportunities into common projects and joint ventures that will ultimately lead to socio-economic stability, development and growth in North Africa.  As a clearly interested neighbour in this sense, the European Union is structuring and allocating various financial instruments – grants, loans and guarantees, equity – aimed to act as a conduit for attracting and leveraging further private capital.

This is being done in the context of the Union of the Mediterranean focused on promoting economic integration and democratic reform across the 15 members neighbouring the EU at the south and eastern part of the Mediterranean, namely: Albania, Algeria, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Mauritania, Monaco, Montenegro, Morocco, Palestine, Tunisia and Turkey, with Syria being currently suspended and Libya having an observer status.

The different strands of the European Neighbourhood Policy – trade and economic development between the two blocs, the need for political reform, advancing the peace process and increasing regional security (particularly controlling migration), are being implemented through various programmes supported by the European Neighbourhood and Partnership Instrument.

Particularly relevant to highlight are its contributions to the Neighbourhood Investment Facility (NIF), the Erasmus+ and the Cross-Border Cooperation in the Med Programme.

Under the Neighbourhood Investment Facility (NIF) assistance for the countries in the south and east of the Mediterranean Sea (Libya also soon to be covered) is being provided with a view to create a business-friendly environment and to kick-start key infrastructure improvements in sectors like:

  • Energy: power generation, transmission and distribution, renewable energies
  • Transport and telecoms: airports, air transport, roads and motorways, bridges, railways, telecoms
  • Environment: water and sanitation, solid waste disposal and treatment, pollution abatement, irrigation
  • Human and social capital: construction and refurbishment of hospitals, schools, social housing.

Direct support for the private sector is also available, particularly targeting SMEs in tourism, services, but also the industrial sector in general (e.g. cement & steel works, chemical & metallurgical plants, high-tech, automotives, agro-food).

The type of support provided can take the form of grants to cover expenditure for technical assistance, interest subsidies, direct or intermediated loans and even direct equity investments, the latter particularly used for strengthening the capital base of productive businesses established in partnership with EU-based companies.

The NIF assistance is undertaken by the European Investment Bank working in conjunction with a number of other European Public Finance Institutions like the European Bank for Reconstruction and Development, Council of Europe Bank, French Agency of Development, Nordic Investment Bank, Spanish Agency for International Cooperation and Development. Kreditanstalt fur Wiederaufbau, Societa Italiana per le Impresse all’Estero, and a few others. To benefit from the NIF, a project has to be submitted by one such financial institution. Bearing in mind Malta’s positioning and the strength of its banking and financial sector, it might be opportune to have a Neighbourhood Investment Facility “eligible” bank also in Malta.

The Mediterranean neighbouring countries of Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestine, Syria, Tunisia can also participate as partner countries in the Erasmus+, particularly in its higher education and youth mobility actions.

Moreover, these MENA countries have also been Associated Countries to the FP7 Framework Programme, hence being expected to continue their involvement in the current Horizon 2020 Framework Programme for Research & Innovation. This can surely serve as an excellent platform for technology transfer, further product development and innovation across Europe and North Africa. And this not just through the collaborative projects that can now benefit of up to 100% EU funding for research and innovation or coordination and support actions, but also by applying under the brand new instrument aimed at supporting SMEs to develop viable innovative products and services with a truly international commercialisation potential. A significant 70% EU co-financing rate is being offered to such SMEs whilst the budget of such projects is envisaged to be in the order of EUR 1-3 million.

Furthermore, a number of European business angel networks and venture capital funds are looking towards increasing their cross-border activities, and Malta could serve as an excellent home jurisdiction. Ofcourse, more needs to be done to improve the framework conditions for the establishment, operation and development of such risk-capital investment services in Malta. However, we definitely have a solid base to work upon, so let’s do it!

Let’s deliver on our potential as the stepping stone to North Africa and the bridge to Europe!

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