World Bank Forum: the Knowledge Economy in Accession Countries (Paris, 22nd February)

Stephen Wright

Projects Directorate

E-mail to s.wright@eib.org; www.eib.org

THE EIB

The European Union’slong term financing institution

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Created by the Treaty of Rome in 1958

Shareholders: the Member States ofthe European Union (15… but rising)

Subscribed capital: EUR 100 billion

LOANS AND BORROWINGS (1996-2000)

“AAA” borrower: non-profit loans5

1996 1997 1998 1999 2000

30

25

20

15

10

5

0

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Loans: EUR 147 billion

Outside the EU Within the EU

Borrowings: EUR 128 billion

Non-Union currencies

Union currencies EUR

EXTERNAL LENDING MANDATES(since February 2000)

Partner for economic development24

Mio EUR

Central and Eastern European countries 8 680 (2000-2006)

Pre-accession facility 8 500 (2000-2003)

Mediterranean countries 6 425 (2000-2006)

ACP countries 3 328 (1996-2001)

South Africa 825 (2000-2006)

Asia, Latin America 2 480 (2000-2006)

Regional development

European communicationsinfrastructure

Natural and urban environment

Energy

International competitiveness ofEuropean industry and support for SMEs

Human capital:education, health

EIB PROJECT ELIGIBILITY

Projects promoting Union objectives11

WHO CAN BORROW ?

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Regional or central government

Banks

Municipalities

Commercial companies

Public-Private Partnerships

Government agencies

Anybody, as long as there is a good project and they have good credit!

LISBON – THE PROCESS AND THE STRATEGY

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STRATEGY:Promoting the information society, R&D, innovation and competitiveness

Investing in human capital and modernising the European social model

Applying an appropriate macro-economic policy mix

« The Union has today set itself a new strategic goal for the next decade: to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion »

THE EIB’S RESPONSE: INNOVATION 2000 INITIATIVE (« i2i »)

Supporting Europe’s knowledge-based economy

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Human capital formation

Development of SMEs and entrepreneurship

Research and development

Information and Communications Technology networks

Audiovisual industry/diffusion of innovation

WHAT i2i MEANS…

i2i involves a shift of internal emphasis and a signal to our outside stakeholders (governments and borrowing clients)

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It recognises that sustained growth can no longer be achieved by increasing physical investments alone.And that growth is spurred by development of human capital and by process and product innovation:

…HUMAN CAPITAL

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Share of EIB turnover 2-3% p.a. till 2000, but 8.5% in 2001 and growing fast

Mostly public sector, recent concentration on PPP

eLearning and ICT in schools

Projects in Czech R. (Masaryk University) and Poland (Lodz Infrastructure) but more under way in Slovenia, Poland, Romania, Latvia…

Education and health were “schools and hospitals, for employment”; now accepted in Bank as “human capital, for employability”

New to the Bank – only since 1997 in EU and 1999 in Candidates

…RESEARCH AND DEVELOPMENT

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Care over whether debt is the right instrument to finance R&D – ex post R&D is easy!

EIB finance to ex ante commercial R&D, public research structures, science parks

15 projects in last year, €2.4 b. approved

EIB cooperates with Commission (Busquin-Maystadt memorandum)

EIF for venture capital seed/start-up equity

…ICT NETWORKS

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Key issues are access, competition and broadband technology

In EU, access is no longer an issue. In Accession, fixed line access lower

Bank’s role is supply of capital (€2.3 b. in 2001, 6% of turnover, doubling in 2002?) and catalytic effect on availability of other capital finance

Incumbents (DSL) versus entrants (cable systems) – but these may be either/or choices

UMTS licenses will make 3G mobile introduction problematic everywhere

…SMEs AND ENTREPRENEURSHIP

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« Global loans » are a major activity for the EIB – some may be risk-sharing

EIB Group contains European Investment Fund: venture capital equity ("fund of funds") and guarantee instruments to financial credit institutions

EIF support for high tech is of business angels, incubators, techno funds (biotech, internet convergence, content) and microcredit

SMEs do much innovation, but their access to finance is often inadequate (and Basel rules impact on commercial banks?)

…AUDIOVISUAL

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Working with Commission, EIB policy is to promote pan-European AV and strengthen stability of AV firms

Foster the adaptation of the industry to new technology (digitalisation, digital networks): overlap with funding of ICT networks

Encourage European content and European culture: financing of intangible investments

EIB AND THE i2i PROGRAMME – SUMMARY

2) i2i involves a shift of internal emphasis and a signal to outside stakeholders – i2i, as all our lending policies, applies in Candidates as in EU

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1) EIB is the biggest world IFI by turnover, the largest source of external capital for CEE, and the biggest single source of venture capital in Europe

3) EIB is not have an independent KE strategy for ourselves or for you, nor are we prescriptive to clients. We are not a prime mover for projects.

We simply release client funding constraints, in support of all wider EU innovation policies