EIC Webinar on EU External Financial Instruments

The EIC Autumn Workshop 2020 „The Role of Infrastructure Investments in the EU-Africa and EU-Asia Strategies and related EU External Financing Instruments“ took place in form of a Webinar on 02 October 2020.

EIC welcomed renowned representatives from the European Commission, such as the Deputy Director-General of DG MOVE, Maja Bakran, the Head of the Infrastructure Unit of DG DEVCO, Paolo Ciccarelli, the Team Leader of the Investment and Innovative Financing Unit at DG DEVCO, Paulus Geraedts, and the Head of Unit for Public Sector Operations in Eastern and Southern Africa at the European Investment Bank. All EU presenters shared valuable insights about the EU’s infrastructure agenda outside the European borders with the EIC audience.

Session summary

SESSION 1: DG MOVE AND DG DEVCO OUTLINED THE EU-ASIA CONNECTIVITY STRATEGY AND THE EU-AFRICA STRATEGY

Ms. Bakran emphasised that the EU-Asia Connectivity Strategy seeks to enlarge TEN-T operations to match Asia’s annual need for 1.3 trillion EUR in infrastructure investments. While (the mobilisation of private investment for) transport and connectivity are incorporated in the first of four pillars, the strategy has not yet established a detailed investment plan and instead defines policy goals vital to creating synergies with other international initiatives like China’s Belt and Road programme. Ms. Bakran stressed that such synergies should be strictly vetted by a set of conditions linked to ensure sustainability, transparency, reciprocity, and a levelled playing field.

Mr. Ciccarelli stressed that transport and connectivity also play a prominent role in the new EU Africa Strategy. Under the EU Multiannual Financial Framework 2021-2027, the principal EU External Financing Instrument will be a new Neighbourhood, Development and International Cooperation Instrument (NDICI). Merging the European Development Fund (EDF) as well as the European Neighbourhood (ENI) and Development Cooperation (DCI) Instruments, a simplified architecture based on blending finances, providing guarantees via the External Action guarantee (60bn EUR) and technical assistance as well as improving investment climates should further promote European (industry) interests and enhance cooperation between all relevant EU stakeholders in a “Team Europe” approach.

Both speakers highlighted the need to change from a cost-saving paradigm to integrating the aspects connected with the EU Commission’s Green Deal Agenda and promoted a quality-driven instead of quantity-centred approach dedicated to developing sustainable infrastructure.

SESSION 2: EIB AND DG DEVCO ELABORATED ON THE LESSONS-LEARNED FROM THE EU EXTERNAL INVESTMENT PLAN

Mr. Elias introduced the EIB’s activities and latest policy priorities covering a total of 16 bn EUR EIB investments in infrastructure related projects in 2019. In line with the European Commission’s Green Deal Agenda, the EIB has published and committed itself to an ambitious Climate Strategy, phasing out fossil fuel energy projects by the end of 2021. Issuing a Global Climate Awareness Bond, the EIB is restructuring their investment priorities with water, sanitation, energy, ICT and transport marked as “foundations for sustainable development”. Nurtured also by new considerations of eligible sectors and eligibility criteria, existing and future projects must be technically viable and economically profitable as well as compliant with international standards. He further outlined that the EIB will finance up to 50 % of the project costs with a minimum EIB loan of 25 m EUR.

Mr. Geraedts emphasised that while global infrastructure investment is increasing, infrastructure related investments remain comparably low in the Sub-Saharan Africa region. While Development Financing Institutions (DFIs) play an important role in realising projects, commercial loans contribute the largest part in the realisation of an infrastructure project. Among different stakeholders, government agencies have largest investment appetite, especially originating from the US. The current amount, however, is not matching Africa’s overall infrastructure needs amounting to 130 USD and 170 USD billion per year. The donor community must overcome the challenge to direct a larger share of overall spending to developing countries and to replicate and scape up guarantees under the new European Fund for Sustainable Development (‘EFSD+’). Of special concern is the low rate of realised projects, of which a high percentage drop out during the feasibility studies, which according to a study by McKinsey, have the root in the low technical capability and weak country balance sheets.

Conclusion

The EIC Webinar highlighted that the transport sector is still a priority for the EU Commission in its EU-Asia Connectivity Strategy and EU-Africa Strategy. The upcoming NDICI will provide a comprehensive investment framework for external action to raise additional financial resources for the implementation of the Sustainable Development Goals (SDGs) and the EU Green Deal Agenda, including strengthening public and private infrastructure.

All presentations can be retrieved here