US embassy cable - 05PARIS7737

UNCLAS SECTION 01 OF 03 PARIS 007737 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA/CAR, EB/IFD/ODF, NEA,  AND EUR/WE 
 
STATE PASS USAID FOR LAC 
 
BRUSSELS FOR USEU 
 
BRUSSELS FOR USEU 
 
GENEVA FOR TEHRAN 
 
E.O.  12958: N/A 
TAGS: EAID, ECON, PREL, HA, FR 
SUBJECT: PEP-MENA DONOR MEETING OCTOBER 20 2005 
 
 
NOT FOR INTERNET DISTRIBUTION 
 
SUMMARY 
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1.   (U) At the The annual PEP-MENA (Private Enterprise 
Partnership for the Middle East and North Africa) meeting 
was held in Paris October 20.  , bBoard members outlined to 
donor countries the progress of the first year of the PEP- 
MENA program, and presented success stories from each of the 
program's four pillars.  Though initially funded for a three- 
year period, participants were clearly thinking about the 
need for longer-term funding to meet the program's ambitious 
goals. END SUMMARY 
 
Background and Purposes 
----------------------- 
 
2.   (U) Econ Assistant and intern attended the annual PEP- 
MENA (Private Enterprise Partnership for the Middle East and 
North Africa) Donor's Meeting October 20 at the World Bank 
in Paris.  The meeting was sponsored by board members of PEP- 
MENA, which was organized in October 2004 by the 
International Finance Corporation (IFC), a branch of the 
World Bank. 
 
3.   (SBU) PEP-MENA is a technical assistance program, with 
a specialist staff of 40, operating across 18 countries in 
the region (Egypt, Jordan, Oman, Morocco, Algeria, Tunisia, 
Lebanon, Syria, Bahrain, Kuwait, Saudi Arabia, United Arab 
Emirates, Afghanistan, Iran, Iraq, West Bank, the Gaza 
Strip, Yemen).  Its budget is $100 million, and it is the 
largest program yet of its kind.    The  donors are Japan, 
the US, Canada, the UK, France, and Holland as well as the 
Islamic Development Bank and the Government of Kuwait. 
France signed a donor agreement implementing its pledge of 
$2.6 Million on the occasion of the conference.  The IFC has 
invested $20 million of its own funds, and has currently 
mobilized 65% of the target funding. 
 
4.  (SBU) The program aims to use the IFC's proven 
experience in providing technical assistance to address 
regional issues such as very low levels of FDI due to narrow 
domestic industries, the prevalence of state-run industries, 
expensive and uncompetitive exports, poor infrastructure, 
political instability and religious fundamentalism.  The PEP- 
MENA program seeks to encourage private enterprise and 
business entrepreneurship in order to strengthen the 
private sector, to attract more FDI and to create economic 
growth and employment. 
 
The Four Pillars 
---------------- 
 
5.  (SBU) Pillar I provides assistance to small and medium 
enterprises (SMEs) to enhance their competitiveness and 
improve their access to domestic and international markets. 
Five different programs are currently running 18 projects. 
For example, the Entrepreneurship Institutional Development 
program is running a project in Afghanistan in partnership 
with Kabul University, which seeks to strengthen 
entrepreneurship through curriculum development and capacity 
building for education and training institutions.  With a 
budget of $25,000 the sustainable business Skills Training 
Initiative will prepare students to embark on SME 
entrepreneurship.  Similar projects are planned in other PEP- 
MENA countries in the upcoming year. 
 
6.  (SBU) Pillar II is designed to build Financial Markets' 
institutional capacity through strengthening the region's 
banks, fostering the development of specialized lending 
institutions and improving their capacity to do leasing. 
There are 7 programs with a total of 29 projects, including 
the Egyptian Microfinance Project, which provided $64,000 
over 12 months to the Bank Misr in Cairo.  The project 
conducted loan officer training and successfully disbursed 
13,000 loans for a total of $6 million, with nearly full 
repayment.  The bank used a local consulting company to 
demonstrate the capabilities of Egyptian businessmen. 
 
7.  (SBU) Pillar III aims to provide technical assistance to 
MENA country governments seeking to increase efficiency and 
discourage corruption.  In collaboration with the Foreign 
Investment Advisory Service, PEP-MENA surveys and provides 
solutions to reduce regulatory, legislative and 
administrative barriers to business and investment.  It 
sponsors 5 programs, including the $900,000 Alexandria Start- 
Up Simplification project.  The IFC worked with Egyptian 
government over 18 months to facilitate new business start- 
ups, job creation and capital investment. 
 
8.  (SBU) Pillar IV provides advisory, technical assistance 
and capacity building services to governments to encourage 
private sector participation in services that were thus far 
handled by the state itself.  Current privatization projects 
currently underway are the Algiers Airport in Algeria, the 
privatization of the National Electric Company in Lebanon 
and Pakistan, as well as seminars in Jordan and Algeria to 
inform the public and private sectors on how to successfully 
complete privatization. 
 
9.  (SBU) PEP-MENA addresses also the issue of gender 
equality, particularly through its SME Pillar.  Despite high 
levels of women's education in the MENA region, women have 
very low employment levels.  PEP-MENA, through its Gender 
Entrepreneurship Markets (GEM) Program seeks to encourage 
women's participation in the private sector by providing 
support to women entrepreneurs, women-owned SMEs and 
financial institutions.  GEM currently has a budget of US 
$2.7M within PEP-MENA. 
 
The Future of PEP-MENA? 
----------------------- 
 
10.  (SBU) Several participants commented that three years 
was not sufficient to have a lasting, positive impact on the 
region.  It is clear that the PEP-MENA Board is going to 
push for an extension of this program in the future. 
The long-term issue of recruitment was also raised. They 
need more able, experienced businessmen and women with 
regional expertise in the Middle East and North Africa. 
 
COMMENTS 
--------- 
 
11.  (SBU) PEP-MENA is a highly ambitious project with 
potential to aid the Middle East and North African.    Its 
emphasis on private enterprise, privatization reform, 
creating entrepreneurial culture, and improving corporate 
governance appears to appears be a step in the right 
direction.  The board is excited about the progress that has 
been made thus far in the first year, but is concerned that 
that more than three years will be needed to make a lasting 
impact. Whether donors will be willing to continue to 
contribute to the program over the longer term is still 
unclear. 
 
HOFMANN