Trade finance essential to Euro-Med free trade area

THE creation of a free trade area in the Mediterranean embracing European Union member states and non-EU states may not happen in 2010, as originally planned by the Euro-Mediterranean Partners in the 1995 Barcelona Declaration, but it is bound to materialise sooner or later. However, for it to happen at all, availability of trade finance in various forms, especially for small and medium-sized companies, is essential.

This, according to Dr John C. Grech, chairman and managing director of EMCS Ltd, is why it is imperative for Malta and other Mediterranean states to ensure that trade finance becomes available if they want to exploit the boundless opportunities which a Euro-Med free trade area would create.

This thinking has led EMCS to organise, together with FIMBank, a two-day international conference on "Trade Finance in the Mediterranean: towards the 2010 Euro-Med Free Trade Area" at the Portomaso Suite of the Hilton Malta on January 26 and 27.

In an increasingly globalised world, closer trading relations between states and groups of states are inevitable. In the Mediterranean, for example, EU member states, which generally occupy the northern part of the region, are increasingly dependent on the energy supplied by the North African, non-EU states in the southern part. On the other hand, the non-EU states depend on the EU states for consumer goods, technical know-how and industrial equipment.

The European Union has long realised the importance of the Mediterranean, Dr Grech told The Sunday Times; however, while it has agreements with the ACP (African, Caribbean and Pacific) group of states, it has no such agreement with the non-EU Mediterranean states, but a series of individual agreements.

The absence of a comprehensive agreement is a disadvantage to such states, particularly when it comes to the free flow of goods from certain North African countries to Europe, in view of the rules of origin.

Political agreements between the EU and non-EU states are fine, but will trade follow? For this to happen the necessary infrastructure has to be in place, and trade finance is part and parcel of that infrastructure, Dr Grech continued. As long ago as 1995, when he was chairman of Bank of Valletta, Dr Grech had argued that there was no pan-Mediterranean financial infrastructure to finance trade and commercial initiatives in the area. This is why he had then come up with the idea of a Mediterranean Bank Network, which was successfully launched to promote cross-border business in the region.

The conference being held later this month will focus on the need to develop trade financing instruments in the Mediterranean, which is poised to become one of the fastest growing regional economies in the world. This explains why EMCS has teamed up with FIMBank, which has offices in Malta, the UK, the USA and several other countries, and which specialises in offering trade finance services to companies, banks and individuals.

The EU, it is true, has used the European Investment Bank to finance projects throughout the Mediterranean, but clearly something more suitable to meet the trade finance needs of small and medium-sized companies is needed.

FIMBank, the Commercial International Bank and the International Finance Corporation of the World Bank last year joined forces to promote trade and make finance more generally available to business in the region by setting up a joint venture in Egypt.

Malta, with its long history of trading and brokering, is well positioned to take advantage of greater intra-Mediterranean trade as a result of the creation of a free trade area. However, Maltese companies and entrepreneurs need to look beyond our shores to grasp the opportunities available and pursue trade with other Mediterranean countries. Dr Grech said he was sure that with the right trade financing instruments at their disposal, they can overcome their reluctance to take risks and embark on potentially very profitable exporting ventures.

According to Margrith Lutschg-Emmenegger, president of FIMBank plc, the recent CHOGM in Malta has already indicated the potential for trade growth in the Mediterranean; however, Malta is not focusing enough on these exchanges. Its financial services sector could adopt a more international outlook, she feels. FIMBank, she said, is here to support international trade and has new products designed for SMEs which have been used in Europe for years.

Ms Lutschg-Emmenegger says she plans to introduce two products at the conference: factoring, which is an open account for sales in Europe, and forfaiting, which provides long-term (five to seven years) financing for medium-sized companies for investment and capital goods and also larger amounts of commodities.

The Egyptian venture which FIMBank (which exclusively provides trade finance) had masterminded can be repeated in all the other North African countries, she said, adding that there is huge potential for increasing intra-North African trade. This can be developed through new financial products, and the right financial terms can clinch deals.

The conference, which is supported by Bank of Valletta - which has representative offices in Libya, Tunisia, Egypt, Canada and Australia - is already drawing considerable interest, with enquiries from as far as Pakistan. However, it should appeal particularly to Maltese traders and importers who carry out business with North African countries, manufacturers and exporters, bankers and insurers, business and financial advisers.

Dr Simon Busuttil, vice-chairman of the European Parliament's Committee for Maghreb (Morocco, Algeria, Tunisia, Libya and Mauritania), will be one of three speakers at the first discussion, on the state of development of the Euro-Med Free Trade Area. The other speakers are Jilani ben M'barek, president of the Association of the Mediterranean Chambers of Commerce and Industry, and a representative of the European Commission.

'Banking Environment in the Euro-Med' is the subject of the next discussion, at which the speakers will be Souleymane Traoré, a senior investment officer of the International Finance Corporation, and a representative of the European Investment Bank.

The panel discussing trade and trade finance in the Euro-Med will be made up of BoV chairman Roderick Chalmers, Ronald Theuma, senior vice-president of FIMBank, and Uwe Malezki, managing director of Malta Freeport Terminals Ltd.

After a lunch break, which will give participants an opportunity for networking, Joroen Kohnstamm, secretary-general of Factors Chain International, and Ms Lutschg-Emmenegger will talk on new trade finance products and new opportunities. Country presentations on new opportunities in the Euro-Med region by senior business officials from Egypt, Libya, Malta, Lebanon and Tunisia will conclude the first day of the conference.

The second day will open with a talk by Dr Grech on new models and new opportunities for sustainable trade in the region, followed by a panel discussion on 'Development, trade and trade finance in the Euro-Med region: where do we go from here?' and the presentation of the conference conclusions.

At lunchtime, a media launch of Egypt Factors, the joint venture already referred to, will be held.

The conference has three media partners - Global Trade Review, the world's leading international trade finance magazine; Africa Monitor, published by Business Monitor International; and the Malta Business Weekly.

The conference is supported by the European Commission representation in Malta, Factors Chain International, International Finance Corporation, the Association of the Mediterranean Chambers of Commerce and Industry, Malta Freeport Terminals Ltd, Mediterranean Bank Network, the Malta Chamber of Commerce and Enterprise, the Mediterranean Academy of Diplomatic Studies (MEDAC), London Forfaiting Company Ltd and the Banque Libano-Française.

Local participants in the conference are being offered a specially reduced rate. Applications should be made to EMCS Ltd, Level 3, Regional Business Centre, University Heights, Msida MSD 04, tel: 2134-1848/9; fax: 2131-8677; e-mail: adrian.said@emcs.com. mt or mariella.attard@ emcs.com.mt. Website: www.emcs.com.mt