2011 was marked by the revolutionary and social movements of the “Arab Spring”, which started in Tunisia and Egypt (January 2011) before spreading to Syria, Yemen and, to a lesser extent, Jordan and Morocco. In 2011, AFD worked intensively to provide a response to the development challenges facing Southern and Eastern Mediterranean countries, where the financial and economic situation sharply deteriorated within a profoundly changed political and social environment. One example is its contribution to the implementation of the “Deauville Partnership”, launched by the French President at the G8 Summit in Deauville on 26 and 27 May 2011, through both the implementation of the Recovery Support Plan (PAR) in Tunisia and the launch of new project appraisals in Egypt in the informal housing and agricultural SME sectors.
2011 was a positive year for AFD’s activity in Morocco, where its commitments rose to €541m, i.e. almost 50% of AFD’s total commitment authorizations in the region (€1,127m). The year was, however, marked by the suspension of our activities in Yemen and Syria.
Finally, 2011 provided the opportunit:
- to strengthen our relations with the European Union under the Neighbourhood Investment Facility (NIF)
- to pursue operational knowledge production on the topics of urban transport and water demand management with the Marseille Center for Mediterranean Integration (CMI).
2012 has begun with the adoption of a new strategy paper, the Regional Intervention Framework 2012-2014, which defines three objectives for AFD Group operations in the Mediterranean and Middle East:
- to create added value and quality jobs
- to reduce social and regional inequalities
- to improve the quality of life for communities, notably through the management of scarce natural capital (trees, land and water).
Youth employment is a key issue and a major challenge for countries in the troubled Mediterranean region. Yet it is difficult to come up with solutions, as the problems facing the governments in these countries are interlinked and the scope for action is often too limited, explains Emmanuel Comolet, an AFD economist specialized in the region.
What action can AFD take to improve the employment situation in the Mediterranean region?
Two years on from the beginning of the Arab revolutions, the employment situation continues to be a key issue. It is both a symptom and a result of the economic, social and political contract that is currently being overhauled in a number of Southern Mediterranean countries.
With its dual role as a bank and development agency, AFD works to meet these economic and social challenges by using all the instruments that it and its partners – especially European partners – have at their disposal.
AFD consequently finances projects that support employment (reintegration, employment aid, business start-ups) and vocational training projects to make young people more employable. It also takes part in reflection on public policies related to employment issues (particularly through partnerships, the organization of conferences, workshops, etc.).
It achieves this via loans and grants to governments, loans to vocational training centers, assistance to build its partners’ skills, support for NGOs who set up youth integration systems, etc..
Maroc, mechanical engineering formation
What are AFD’s main projects in terms of employment and/or training in the Mediterranean region?
Tunisia and Morocco have been implementing programs to upgrade training and employment for several years now. They have benefited from financial and technical assistance from AFD and other donors. These programs are systematically based on partnerships with professional sectors and have helped create or restructure a number of vocational training centers.
AFD is also supporting the private sector under the Palestinian National Development Plan via a grant that aims to make businesses more competitive and develop the local market.
Furthermore, AFD leads a series of workshops on employment and training policies with the Marseille Center for Mediterranean Integration (CMI), at the request of the authorities in the countries in question and in consultation with all the relevant stakeholders from the North and South. The first two meetings for this program were held in Tunisia (in 2011) and Egypt (in 2012) and two others have been scheduled in 2013 and 2014.
Egypte © Didier Gentilhomme
Do these projects pay off? What are the obstacles to the success of these projects?
We can only remain humble in the light of the results. Countries in the region need to come up with an economic future and continue their political transition. As both job creation and democracy are not like instant coffee, the transitions could still last several years. With an extremely low activity rate for people of working age (under 50%) and worsening economic situations, the return to strong and job-creating growth requires the involvement of international stakeholders. They are already numerous and France and AFD have a role to play with them.).
If the political spring seems achieved in some countries, in some others, the situation is still chaotic, resulting in a certain inertia in the decision making process, and procrastination in the stabilization of an economical perspective (especially about the government’s role and the use of subsidies, the fields to give a priority to, and the introduction into the global economy).
With the Palestinian Authority’s almost total dependence for its electricity and oil product supply, energy efficiency is seen as a source of energy alongside renewable energy. An initial program financed by AFD and the French GEF, which started in 2009, identified energy saving potential in several sectors. A workshop was organized in Ramallah to report on the conclusions of this program on 24 January 2013.
Striking a balance between financial issues and energy management
Energy efficiency has been a priority for the Palestinian Authority for several years now. It was initially perceived as being one of the main vehicles for energy conservation, but is now central to the energy policy conducted by the Palestinian Energy Authority (PEA).
Indeed, the Palestinian Authority has run up serious debt in the energy sector as it bears the debt of distribution companies and municipalities (due to their arrears) towards the Israeli supplier. This phenomenon, which is called net lending, is one of the major issues for the Palestinian Authority as it is estimated at some USD 300m for 2012, including at least 40% for the energy bill.
Beyond these economic aspects, PEA has become aware of the need to control Palestinian energy demand from outside and therefore to strengthen its own resources. Solar power is, of course, its main resource, particularly with private households (for example, solar water heaters).
Significant potential identified in various economic sectors
Demand management also requires energy efficiency measures.
An initial program financed by AFD and the French GEF, which started in 2009 and is currently reaching completion, identified energy saving potential in several sectors (public buildings, industries…), thanks to the creation of a qualified entity at the PEA to conduct the series of audits required for this initial national diagnostic.
The Palestinian Territories are one of the most proactive Middle Eastern countries on these issues. Moreover, in 2012, they signed a national energy efficiency plan at the instigation of the Arab League, which sets the target of reducing energy consumption by 5% by 2020.
Quite substantial potential has been identified with an average of 18% for the public and industry sectors.
Training in Energy Efficiency
The savings made also make it possible to improve management in distribution companies, anticipate growth in demand in the coming years and thereby improve service quality.
A workshop was organized by the energy efficiency team in Ramallah to report on the conclusions of this program on 24 January 2013.
Innovative financial tools for sustainable implementation
Indeed, building on the results of the initial audits, the PEA energy efficiency team has defined new financing mechanisms along with the AFD Jerusalem Agency. These financial tools, in partnership with both the public and private sectors, aim to promote a long-term investment process to support energy efficiency.
This workshop gave the team the opportunity to present the methods for these financial tools, which provide incentives for investment, to a wide range of economic actors (ministries, universities, industries, banks, electricity distributors, public entities…).
In the public sector, the creation of a fund replenished by beneficiary institutions on the basis of part of the savings made (“revolving fund”) will give the Ministry of Finance both the initial investment needed (led by AFD) and the budgetary autonomy to continue to invest in the entire building stock. The primary target is hospitals and schools, where the most substantial sources of savings have been identified.
In the private sector, while companies are aware of the savings potential from energy efficiency, very few invest due to a lack of liquidity.
It has been suggested to set up investment subsidies to test the interest of companies for an amount equivalent to a reduction in the interest rate on a loan contracted by companies with partner banks (equivalent to an interest-free loan).
The methods for these two innovative financial mechanisms are currently being tested with two pilot projects, prior to being rolled out more extensively under the second program.
This project is expected to provide a model for further energy efficiency projects and encourage investment. It may even eventually create a new market, which would help the Palestinian Authority meet its national targets to reduce energy consumption.
Morocco has some of the most abundant solar resources on the planet and its desert areas are particularly suited to concentrated solar power plants. Clean and sustainable power generation using this type of facility is today regarded as a solution for the future. AFD is aware of the stakes and is financing the Moroccan Solar Plan, with the aim of contributing to Morocco’s economic and social development, while significantly reducing its carbon footprint.
Avoiding an energy deadlock
As Morocco only has limited energy resources, it is currently 97% reliant on an external supply. This strong dependence on energy imports, combined with the upward trend of oil prices, places a heavy burden on the trade balance and on the Government’s budget. This situation has prompted the Moroccan Government to establish a regulatory and institutional framework to promote renewable power generation.
In November 2009, the Moroccan Solar Plan was launched with the aim of developing an environmentally-sound power generation capacity, based on solar power of a minimum of 2,000 MW by 2020. AFD has allocated a EUR 100m loan to the Moroccan Agency for Solar Energy (MASEN) out of a total amount of EUR 630m lent by other co-financiers: European Investment Bank (EIB), KfW, European Commission (NIF), Clean Technology Fund (CTF) and African Development Bank (AfDB).
This financing will be used to install the Ouarzazate power plant, the first phase of the project to develop a solar power complex. It will have a capacity of 160 MW out of a total of 500 MW. It will be located roughly 10 km to the north-east of Ouarzazate and will be delivered in 2015. The green electricity produced will be for the local market.
Tapping into an exceptional sunshine rate
The first phase of the Ouarzazate program will comprise a parabolic trough power plant with a capacity of 160 MW and a 3-hour thermal storage system. The annual power generation for a 160 MW power plant with 3 hours of storage is estimated at 370 GWh, including 40% at peak times and 60% at off-peak times.
In short, this project will eventually reduce the Kingdom’s energy dependence and strengthen its power generation capacity. It will also reduce the negative impacts of fossil fuel imports on the budget and trade balance, manage a national resource with underexploited potential, promote the creation of a new solar power industry in Morocco and, finally, reduce greenhouse gas emissions. The Solar Plan (2 GW) will avoid the emission of roughly 3.7 million tons of CO2. The carbon balance for the first 160 MW phase can thus be estimated at roughly 270,000 tons of CO2 equivalent avoided every year.
Solar radiation map of Morocco: the main sites (source: MASEN)
Improving energy efficiency and developing low-carbon production industries
The project is in line with the second aspect of AFD’s “energy” strategy, which aims to decarbonize power generation and use it more efficiently.
In this context, AFD is continuing to support clean technologies, such as photovoltaics (PV) and Concentrated Solar Power (CSP), which are not yet financially competitive, although their cost has decreased significantly. These technologies need to benefit from an incentive-based institutional and regulatory framework.
AFD ensures that it structures appropriate financing to help close this financial gap, particularly under public initiatives, such as the Mediterranean Solar Plan, the Renewable Energy Cooperation Programme (RECP) supported by the European Union and the Paris-Nairobi Initiative. AFD’s aim is to support the emergence of these industries in countries which demonstrate a commitment to developing them, with a view to reaching cost parity, in the short or medium term, with conventional power generation industries. In addition, each sector has different specificities and potential depending on the region.