KUWAIT: The Arab Fund for Economic and Social Development (AFESD) signed on Tuesday the International Finance Corporation’s Master Cooperation Agreement on Monday, becoming the third signatory from the Arab region to join the MCA. The partnership, signed during a ceremony held at the AFESD headquarters during the Kuwait edition of the Arab-DAC Dialogue on Development, underscores the shared commitment of both organizations to enhancing economic and social development, particularly the private sector, through collaborative efforts. The agreement was signed by Bader Al-Saad, AFESD’s Director General and Chairman of the Board of Directors and Hela Cheikhrouhou, IFC’s Regional Vice President.

“We are pleased to join the IFC’s Master Cooperation Agreement and actively contribute to shaping the future of development financing across Arab nations. Through transparent and effective partnerships like this, we not only leverage our collective strengths but also enable transformative projects that are economically viable and socially imperative,” commented Al-Saad. He said AFESD is looking forward to advancing projects that foster sustainable development and reinforce its commitment to regional integration. As part of the agreement, AFESD will mobilize $500 million to support impactful projects that catalyze private sector growth and job creation across the fund’s member states.

Hela Cheikhrouhou during the interview.

Private sector holds the key

“We are proud to partner with AFESD,” said Hela Cheikhrouhou in an exclusive interview with Kuwait Times following the signing of the agreement on the sidelines of the conference. Cheikhrouhou, who oversees the IFC’s operations in the Middle East, Central Asia, Turkey, Afghanistan and Pakistan, congratulated AFESD for adopting the new strategy for invigorating private sector operations in the region. “It is clearer today than ever before that in order to achieve the sustainable development goals (SDGs), the Arab world, which has the mandate of the AFESD, must develop its private sector,” she said.

The MCA serves as a co-financing cooperation approach that brings together over 35 multilateral and bilateral development banks. The platform is designed to streamline and standardize loan documentation processes, thereby enhancing operational efficiency for both borrowers and lenders. The partnership aligns with IFC’s mission to source unique impact investing opportunities across its extensive network, benefiting private sector partners.

“There is a general observation that the private sector in the Arab world is undersized and underdeveloped and there is dominance by the state and state-owned entities. This development model has failed to fuel the type of economic growth, productivity, prosperity and jobs for all that one can aspire to,” she pointed out.

“In order to respond to the hopes and dreams of our young, educated and capable population in the Arab world, it is important to also invest in developing the private sector as part of the solution providers for sustainable development goals. That is why Arab Fund has adopted the new strategy and it plans to dedicate gradually up to $500 million in private sector investment in the first phase,” said Cheikhrouhou. She said IFC’s mobilization team would be closely working with AFESD to show it the opportunity to co-finance private sector initiatives with IFC in the Arab countries.

The Arab-DAC Dialogue 2024 took place amidst a period of global uncertainty, with multiple conflicts, climate change and scarcity, threatening the progress made towards achieving the SDGs and the 2030 Agenda for Sustainable Development. Quoting an OECD assessment that sustainable development goals (SDGs) 2030 are not achievable, Cheikhrouhou said, “As a matter of fact, for significant part of developing world, we are observing a greater divergence in trends between them and most advanced economies and the least advanced economies. OECD team that works on tracking the flows of official development assistance shows some of the stark trends of the last few years,” she pointed out.

Global interest rates are on the rise, prompting the developed and industrialized countries to focus on investing in their own recovery. There has been an outflow of funds from the developing world to the developed world. At the same time, official development assistance trends are more stagnant or rather decelerating,” she mentioned.

Green energy initiatives

“One thing in common in the GCC countries is that they are fully cognizant of the importance of diversifying their economies away from an excessive reliance on the revenues from the fossil fuel industry. Each of the GCC countries is at a different rhythm of adopting a vision and implementing it,” Cheikhrouhou stated, talking about the green energy initiatives in the region.

“Saudi Arabia, for instance, showed its leadership when it led the G20 summit in 2020 and to lead the bloc to adopt the concept of a circular carbon economy which will have a far-reaching impact on the green energy endeavors. The second positive step came when the UAE chaired the COP28, marking the beginning of a transition of the world’s energy system away from fossil fuel,” she mentioned.

Talking about gender equality, she said: “We at IFC see that the path to eradicating poverty on a livable planet goes necessarily through giving women the opportunity to reach their potential. There is a common narrative that the agenda for women is making progress. But globally we are not there. There are positive trends in some of the countries in the Arab world. But we need to be cognizant that positive progress is fragile and we have to build on it, encourage it and recognize it, so that we can keep going.”

Since its establishment in 2010, the MCA program has successfully syndicated over $10 billion to more than 30 firms in developing countries over the past decade, showcasing the effectiveness of collaborative action in development finance. IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets.

The two-day Arab-DAC Dialogue featured remarkable participation from the Arab Coordination Group institutions, which include four Gulf national development funds: the Kuwait Fund for Arab Economic Development, the Saudi Development Fund, the Abu Dhabi Development Fund and the Qatar Development Fund. In addition to AFESD, the Islamic Development Bank, the OPEC Fund for International Development (OFID), the Arab Bank for Economic Development in Africa, the Arab Gulf Programme for Development (AGFUND), and the Arab Monetary Fund also participated in the conference.

The conference also saw participation from the European Union, the United States Agency for International Development (USAID), the International Finance Corporation, the United Nations Development Programme, the Swedish International Development Cooperation Agency (SIDA), the African Development Bank Group, the Middle East Council on Global Affairs, the Camoes Institute for Cooperation and Language, among other institutions.