Scannapieco, D. Building resilience, creating new opportunities in the EU neighbourhood. GREAT Insights Magazine - Volume 7, Issue 1. Winter 2018.
As part of the EU response to migration, the European Investment Bank (EIB) is stepping up its investment support, including a new Economic Resilience Initiative (ERI) to enhance growth prospects and create opportunities in neighbouring countries.
The refugee crisis and migration are among the greatest challenges of our time. The EIB is particularly well placed to implement long-term development solutions that tackle both the effects of migration and its root causes. We help the countries where migration starts, but also assist the transit nations and those where migrants settle.
The Syrian refugee crisis is a stark example of how a shock emanating from forced migration can have a destabilising effect, not only in the immediate vicinity, but also across Europe. The scale of migration and consequent severity of the crisis since it began demonstrate the need to move beyond humanitarian support, to improve countries’ abilities to adapt to new populations and to address some of the causes of migration. EIB financing and support improves prospects for everyone, not just migrants.
When well managed, migration can benefit both countries of origin and countries of destination. For example, it can increase the labour supply and boost remittances sent back to the home countries. However, an influx of migrants can have negative impacts, at least in the short term, if for example, receiving countries’ schools, hospitals, or labour markets cannot cope, or if falling wages for local low-skilled workers kindles social tension.
Preparedness is critical to cope effectively with shocks, such as the Syrian refugee crisis. To be better prepared when shocks do occur and to mitigate their impact, it is important to strengthen vital social and economic infrastructure and support private sector-led growth and job creation. Sustainable employment opportunities, particularly for young people and women, are crucial to improve living standards, maintain stability, and preserve social cohesion. Economic growth directly addresses one of the primary drivers of migration: the search for economic opportunities not available in the countries of origin.
This is where the EIB’s new Economic Resilience Initiative (ERI) plays a role: helping to reduce the vulnerability of economies to crises and enhancing their capacity to absorb and overcome shocks. The ERI aims to promote economic growth and private-sector development, generating jobs that provide prospects for a better future. The ERI was introduced at the request of EU member states to assist the Southern Neighbourhood and Western Balkans. It is a comprehensive support package not only for dealing with the aftermath of the Syrian refugee crisis, but also to prepare better for other shocks, such as economic downturn, political crisis, drought, flooding, or earthquake.
The EIB, as the EU bank, follows the policies outlined by the European Union, such as the European Agenda on Migration and the new European Consensus on Development. In support of these policies, the EIB’s goal is to improve infrastructure while making countries better prepared and more resilient to shocks. As part of a joint EU approach, we aim to provide new opportunities for development that will build and sustain our partner countries, just like we do in countries across the Union.
Decades of experience in financing investment across the world have given the EIB a solid understanding of the needs of specific regions and the actions required to address investment challenges. We have developed an efficient and effective set of products for clients and policymakers. We can apply, for example, the risk-sharing knowhow gained under the Investment Plan for Europe to projects outside the EU. Similarly, we can use the insights we have gathered on impact financing in Africa, from project profile through to evolving results measurement methods, to strengthen operations in the EU Neighbourhood. One of the EIB’s mandates is to act as a financing agent to support the medium and long-term development of regions in the EU Neighbourhood and to address other economic and growth challenges in these countries.
Over the last few years, the EIB as part of the group of multilateral development banks has suggested viewing development more broadly, expanding beyond traditional aid to the public sector. This implies shifting the debate from “billions to trillions”. Recognition of the private sector’s key role implies shifting from grants to loans and guarantees. This is another area where EIB can make a big difference.
We are injecting new rigour and effectiveness into the way we operate and the way we work with partners. We are striving to deploy the full range of EU tools, expertise, and resources, with a strong focus on impact and efficiency. In doing so, we are increasing Europe’s ability to deploy financial instruments capable of increasing private investment. This is essential to achieve the Sustainable Development Goals (SDGs). But it is also important for meeting the objectives of key EU policy frameworks, such as the European Consensus on Development and European economic diplomacy strategy.
In Africa, the EIB’s ACP Migration Package offers high-impact financing to help poorer communities advance more rapidly and deal with a range of challenges, with migration among them. Economic and social impact is achieved through investments like the construction of 1,000 new solar-powered communication towers that provide mobile signal to 4 almost million people in rural Africa. The EIB is increasing the capacity of the ACP Impact Financing Envelope and turning it into a revolving fund, with €300 million dedicated to dealing with migration directly by supporting private-sector initiatives – higher risks for higher impacts and engaging in new regions and with new project promoters in fields such as microfinance, and private equity. The EIB will also make €500 million available under the ACP Investment Facility to target public sector projects with a migration focus.
By partnering with the European Commission and member states on targeted initiatives like this, the EIB provides a comprehensive toolkit to support public and private counterparts, utilising grants and interest subsidies, high-impact risk-sharing instruments, and technical assistance.
The ERI aims to rapidly mobilise additional EIB financing in support of growth, vital infrastructure, and social cohesion in the Southern Neighbourhood and Western Balkans regions. Under the ERI, the EIB is increasing financing in these two regions by €6 billion during the 2016-2020 period. As the EU bank, our financial and technical involvement often helps attract a significant multiple of third-party project level co-investment. Therefore, the additional ERI financing is expected to mobilise total investment in the order of €15 billion. The EIB financing under ERI comes on top of the €7.5 billion already planned under the previously existing framework of the EU External Lending Mandate and other mandates and facilities the EIB works with in the two regions.
The ERI maximises development impact by mobilising additional funds from donors and the private sector, next to an EIB own contribution. To underline its commitment, the EIB is leading the way with a substantial own contribution of €90 million for technical assistance and a targeted contribution of over €100 million in impact investments, as well as in staffing, including an expansion of its local presence. Poland, Italy, Slovakia, Slovenia, and Luxembourg became the first EU member states to pledge contributions for the ERI trust fund set up by the EIB worth €98 million. The next round of donor contributions is under way and others are expected to follow. Naturally, greater availability of grant resources also increases the scale and scope of our activities.
One year into ERI implementation, over 20 projects have been approved, representing financing of some €1.5 billion. Lending through partner banks alone is set to benefit more than 600 smaller businesses and midcaps, helping to sustain more than 40,000 jobs. Other operations include water, sewerage, transport, and energy infrastructure, as well as health and industry projects. These span from Jordan, Lebanon, Egypt, Morocco, Tunisia, and Palestine [this designation shall not be construed as recognition of a State of Palestine and is without prejudice to the individual positions of the member states on this issue] to Serbia, Montenegro, and Bosnia and Herzegovina.
Among the operations being appraised are vital infrastructure support efforts, such as in Jordan, where a project will help provide households running water three days per week, instead of the current eight hours every two weeks. Others are an equity support programme for start-ups and high-growth innovative firms, regional microfinance in the Southern Mediterranean countries, and upgrading healthcare services and rehabilitating urban infrastructures impacted by the consequences of the refugee crisis in the Western Balkans. Other products to foster private sector development and mobilise additional funds are being developed.
More needs to be done to address root causes of migration and achieve the SDGs. The population in partner countries needs economic opportunities, clean water, better health services, and functioning infrastructure, alongside improved framework conditions for economic activities. The EIB is therefore in discussions with EU member states and development institutions on how to further improve the delivery and bundle activities to boost impact. Productive investments and private sector mobilisation are at the core of the EU bank’s mission. Together with our partners, we make innovative solutions work to address global challenges.
About the author
Dario Scannapieco is Vice-President at the European Investment Bank, responsible for operations in Italy, Malta, and the Western Balkans, as well as for the Economic Resilience Initiative. He is also Chairman of the European Investment Fund. www.eib.org. E-mail: email@example.com
Photo: EIB is the EU’s key instrument for development banking. Credit: copyright EIB
This article was published in Great Insights Volume 7, Issue 1. Winter 2018