1.2.1 Existence of country/region development needs analyses for the countries/regions of intervention (prepared by EIB or other authorities)

General These analyses should have been prepared in collaboration with stakeholders (e.g. national/regional authorities and private sector representative institutions).

“...the strategic orientations for financial sector operations must be developed at two levels: (i) some basic principles should apply to financial sector operations of the IF in general (keeping in mind the issue of flexibility mentioned above),

(ii) specific country circumstances should lead to the definition of country-specific strategic guidelines against which each specific operation should be assessed, recognising that financial sector development is not homogeneous across countries.”

“EIB strategic orientations for financial sector operations in ACP countries”, EIB, p5

A Commission representative notes that the EIB and EC are not that much coordinated for CSPs:

“EIB is understaffed”: probably it’s true. The EIB is a very lean & efficient institution, and the EU wants to keep it as it is. If we recommend that more staff is needed, we have to take into account that the EC is behind the EIB. The EIB might be more involved in CSP/RSP, etc., for instance with one paragraph dedicated to the EIB, but the EIB should rely on EC policies etc., not duplicating the work. EIB is not just another IFI; it is the bank for the EU. Normally the EC should conduct analysis. I acknowledge that the EIB is not really taken on board. But now EIB is much more on the spot in recent years. RELEX understands it better now. Normally the EC should prepare the strategy for the EIB; only the very end, which is deciding on projects, should be left to the EIB. In practice it depends actually on the geographical areas. Now under Community guarantee we have a structured dialogue (RELEX, ECFIN, etc. with EIB). Before that (and even now): lots of inputs; not streamlined for the time being. They talk to each other, but not streamlined. We started to change this situation.”

It appears also from that meeting that there is apparently little triangular coordination involving also EU MS.

Source: MN 020

An EIB staff member mentions that the EIB has increasingly had a strategic approach in the financial sector:

“Egalement dimension secteur financier, surtout au niveau opérationnel, un peu également au niveau stratégique (mais pas assez). Nos macro économistes participent directement aux équipes, intervenant avec plusieurs rôles (point de base : analyse du secteur financier – structure etc.- mais également pour évaluer la qualité de l’environnement et de

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2006-2007 : contribuons également à des stratégies dans le secteur financier. Increasingly une approche stratégique : ex. quelles peuvent –être des manques (gaps) ou des secteurs prioritaires. Ex. opérations de prêts globaux. Une des idées: Avec élément novateur en plus d’opérations standard. Ce sont des idées, ce n’est pas pour cela que cela marche dans la réalité (ambitieux).”

Source : MN 007

An EIB staff member noted that the EIB does not have a programmatic, money-spending approach, although this does not impede it from defining priorities:

“Remember that the Bank is not a promoter, but it tries to have priorities. Example: energy financing. EIB has clear priority to finance clean energy. This is an area where the Bank will place full priority. With additional instruments like TA etc… the Bank is also supporting technical advice and improving the preparation phase. The Bank is no a promoter but is strengthening the promoter. The Commission’s aid is programme aid, with grants. A totally different dymamic. It is giving away free money. The Bank is not giving away free money.”

Source: MN 024

An EIB source mentioned that the paradigm of the Cotonou Agreement shifted over the years, recognising that the private sector alone cannot save the world: “The Cotonou Agreement was negotiated at a time when the international financial community believed that private sector investment in infrastructure, notably in the form of PPPs, represented the solution to Africa’s woes. The Agreement was thus negotiated as an instrument primarily geared for the private sector. Concessionary funds, a regular feature under the former Lomé Conventions, generally had been judged a failure and were to a large extent phased out and the Bank found itself with financial resources, the IF and OR, both intended to meet the needs of the private sector. As subsequent events have

demonstrated, however, the increase in private sector interest and investment in the ACPs was short-lived, essentially because the fragile institutional framework, weak legal systems and excessive red tape did not offer sufficient guarantees to foreign investment. Soon the pendulum started swinging to the other side, as it became manifest to the international community that the public sector was going to have to remain an important player in economic development as a provider of basic infrastructure and, as a result, would require considerable concessionary financial resources. Because economic reality fell short of expectations, the Bank now finds itself not particularly well equipped (certainly compared to its main peers) in terms of financial instruments to face the new

situation. Adaptations to the financial resources have been made, notably by making possible own resource lending for all public sector projects, including in the weaker countries. However, even this solution obviously does not have wholehearted shareholder support, as recently evidenced by the decision of the Board to split the financing of the Inga Rehabilitation project in the Democratic Republic of Congo on IF and OR respectively, contrary to the Bank proposal to finance the project entirely from its own resources, which was fully in line with the modalities approved in June 2007. It is indeed becoming evident that Member States are not at all comfortable with the idea of bearing the unpredictable political risk associated with lending in the weaker ACP countries through the OR guarantee

mechanism. They prefer by far the Bank to make use of the IF, i.e. budgetary funds for which they have the necessary procedural system in place, rather than the contingent liabilities inherent in their guarantee.”

Source: MN 027

An EIB source mentioned that there are incoherencies between initial mandates arrangements and geo-political evolution in the targeted regions (Africa / Caribbean / Pacific): “Recent

developments, notably in the context of the lengthy EC–ACP discussions on the trade-related Economic Partnership Agreements (EPAs), have clearly evidenced the emergence of regional interests - or sometimes even divergences - within the ACP group; the Caribbean and Pacific regions are in some way being marginalised vs. sub-Saharan Africa, while at the same time Africa (i.e. including Northern Africa and South Africa) is becoming more prominent on the international scene. In a way, the EU has already acknowledged this major geo-political change at the time of establishing the EU-Africa Partnership back in 2007, which was followed by separate declarations for the

Caribbean and Pacific regions. Africa as a whole, notably through the African Union, is now willing to be seen as a partner, while at the same time the more prominent and advanced African countries, such as South Africa or Libya, are playing an increasing role on the continent. Cooperation with institutions in these countries is being sought – e.g. with the Libya Africa Portfolio (LAP) – or reinforced, like with the Development Bank of Southern Africa or

South African financial institutions expanding regionally. In the latter case, however, the process is hampered by legalistic considerations related to the non-eligibility of South African institutions for Cotonou funding, an issue for which the Bank intends to approach the EC. This is probably the most

obvious illustration of currently prevailing incoherencies between the mandates arrangements and geo-political evolution in the targeted regions.”

Source: MN 027

2004-WAGP A short analytical description of Ghana’ situation is provided in D2. Assessment of the

environmental and social impact of the projects have reportedly been conducted, with consultation of stakeholders and local communities in the case of the environment impact Sources:

EIB, West African Gas Pipeline, Ghana, RM/CRD Opinion (Fact Sheet B Ops B/ACP-IF- 1/2004-0026/EW)

D6: EIB, Appraisal Report, West African Gas Pipeline, Ghana. Luxembourg, 02/10/2006

2004_LUMWANA The project has been the object and is the result of a full feasibility study that cost € 14 M, to which EIB contributed €7M under Lome IV.

Sources:

EIB PIN (Preliminary Information Note), Lumwana Copper Project, Luxembourg 15/3/2005. OPS B/ACPIF-3SouthAfrica,0.Ind/2004-0146/BrandSchmitzWaltraud

EIB Note to Ops B/ACP-IF-3 Opinion for Appraisal, Luxembourg 27/5/2005. PJ/I&S/2005- 598/GCE/MJ/aa

2001_MOMA

TITANIUM Annex G of EIB Appraisal Report Moma Titanium. Luxembourg 27, 2003. PJ/I&S/2003-259/GCE/MUG/ms. provides a succinct but up to the point analysis of the Mozambique situation and development strategy together with an analysis of the situation of educaton, health, water and sanitation, environment at the location of the project. Two points my be highlighted: “The current balance between meeting people’s survival needs and the sustainability of the natural resource base appears to be pivotally balanced”, and

“As part of the project's Environmental Management Programme (EMP), it is envisaged that a development fund will be set up with the financial support of the promoter. Its main task will be to assist the local population in coping with changes in the course of the project. Although being mainly sponsored by the promoter, ail stakeholder groups as weil as local administration will be represented in the development fund in an equitable manner.”

Source EIB Appraisal Report Moma Titanium. Luxembourg 27, 2003. PJ/I&S/2003- 259/GCE/MUG/ms.

The project is located in a remote area without significant economic activity and is therefore the only potential resource of development for a very large region.

Source: MN302

2003_MAURITIUS

CONTAINER The internal EIB documents describe the country situation, the trans-shipment sector and its importance for the Mauritius economy. The key role of the port is also identified to support the investment foreseen. The market (import and export) and the demand related are also examined in order to ensure the financial viability of the project. Figures are presented to support the facts described in the country analysis as well as in the trans-shipment sector.

“Fact sheet A: proposal to appraise a new operation”, EIB, p2

« Appraisal Report – Mauritius Container Terminal II – Mauritius », EIB, 2004

The CSPs always present the country situation and the development needs. However these papers are not designed in order to analyse a specific sector/project in which the EIB is implied.

« Mauritius – European Community. Country Strategy Paper and Indicative programme for the period 2001- 2007 », EC,

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2003_GILGEL

GIBE The internal EIB documents only present briefly the country’s situation but this presentation is not linked with the sector tackled by the project.

“Fact sheet A: proposal to appraise new operation”, EIB, 2004, p2

The CSPs always present the country situation and the development needs. However these papers are not designed in order to analyse a specific sector/project in which the EIB is implied.

“Ethiopia - Country strategy paper and indicative programme for the period 2002-2007”, European Community “Ethiopia - Country strategy paper and indicative programme for the period 2008-2013”, European Community, 2007

A study prepared by Counter Balance in 2008 described the Ethiopian energy sector. According to this paper, “Ethiopia has one of the world’s lowest levels of access to modern energy services, and relies primarily on traditional biomass”. This situation is established according to population statistics from the World Bank’s Little Data Book on Africa 2007.

Furthermore the electricity cost is relatively high in Ethiopia and the development of hydropower (as Gilgel Gibe II project) is a heavily politicised issue.

“The Gilgel Gibe Affair. An analysis of the Gilgel Gibe hydroelectric projects in Ethiopia.”, Counter Balance, 2008, p 4

According to a COUNTER BALANCE report, in the case of the Gilgel Gibe dam project (EIB loans of €41m for Gilgel Gibe I and €50m for Gilgel Gibe II), the EIB has not carried out an evaluation of the development impact. Gilgel Gibe I, operational since 2004, caused the

resettlements of almost half a million people. The agriculture of the area will also be damaged by the project while the impacts on the quality of the water and fisheries will be important. Neither the government nor the EIB have put in place measures to monitor the situation of the resettled people.

Source: Counter Balance, Challenging the EIB, “Corporate welfare and development deceptions : why the EIB is failing to deliver outside the EU?”, February 2010

2003_BOAD PG IV There is no evidence of a development needs analysis for the ECOWAS region (scope of this operation) specifically geared towards possible IF / OR operations.

2003_Dakar-

Ziguinchor There is no evidence of a development needs analysis for Senegal specifically geared towards possible IF / OR operations. The European Commission’s Country Strategy Paper for the period 2002-2007 provides general background information tackling country’s needs.

Its section describing coherence of Commission policies with EIB policies/operations (p23) remains broad on possible areas of EIB support:

“ L’appui aux investissements des entreprises privées constitue l’orientation prioritaire de la BEI dans le cadre de la mise en œuvre de l’Accord de Cotonou. Son action au Sénégal sera ciblée sur les secteurs industrie, mines, pêche, tourisme et services liés – tels que transports, génie civil ou services utilisant les nouvelles technologies – mais elle pourrait également étudier d’éventuels projets privés dans les secteurs de l’éducation et de la santé.

Compte tenu de la dimension souvent réduite des investissements des entreprises privées, la BEI cherchera à renforcer sa collaboration avec les banques du pays qui possèdent l’avantage de la proximité, par la mise en place de

mécanismes financiers, tels que les lignes de crédit, les garanties et prises de participation.. Elle se propose d’optimiser les instruments de cette collaboration de façon à limiter l’appui aux projets d’investissement de petite et très petite dimension. Pour les investissements privés de taille importante, elle pourra intervenir en direct, en cherchant à exploiter le potentiel de participation des banques locales sous forme de cofinancements ou de schémas de partage de risque.

interventions de la BEI ne seront pas déterminés d’avance, mais résulteront des demandes de financement, approuvées en fonction de la qualité des dossiers. Le niveau d’intervention sera tributaire du rythme global de l’investissement privé au Sénégal, conditionné par la stabilité du cadre macro-économique et politique et par

l’aboutissement des réformes gouvernementales entreprises pour créer un climat favorable à l’investissement national et étranger.

Par ailleurs, la Banque reste disposée à participer au financement des infrastructures de base vitales pour l’économie dans les secteurs électricité, télécommunications et eau potable, réalisées par des promoteurs privés ou dont la réalisation s’inscrit dans un contexte de partenariat public-privé ou de privatisation. Elle participera aux côtés d’autres bailleurs de fonds à l’instruction du projet de réhabilitation, dans le cadre d’une privatisation, du chemin de fer Dakar-Bamako, voie capitale pour les échanges du pays avec la sous-région et pour les perspectives de croissance de son activité économique.»

Source : « Sénégal-Communauté européenne – Document de stratégie de coopération et programme indicatif pour la période 2002-2007 », European Commission, 2002

The EIB provides with a country analysis which explains how this sea link Dakar-Ziguinchor is important for the people who would like to travel between these two important cities. It appears that the air transport is too expensive for the local population and the three roads linking these two cities are subject to corruption by the custom officers and the roads are in poor condition.

Consequently, the sae link is necessary to ensure a more safety liaison between the cities available for the all population and to ensure the merchandise transportation.

Source : Operation’s « Conseil d’administration. Prêt sur les ressources de la FI. Projet Liaison maritime

Dakar-Ziguinchor (Sénégal) », EIB, 2004, p5

2004_OLKARIA Analysis of country situation is briefly reported in D2. There are no indication that it has been conducted with others, notably the Commission.

The EC-Kenya CSP for the tenth EDF includes a description of the EIB’s response strategy to the needs of the country. For infrastructure, it states among the following objectives:

 Financing infrastructure projects in the energy, water and sewerage, transport and

telecommunication sectors, where the emphasis will be to help increase the efficiency of public utilities and encourage participation of the private sector if appropriate.

Source: Republic of Kenya - European Community, Country Strategy Paper and National Indicative Programme for the period 2008-2013, 9th _{December 2007., p. 164}

2005_ACPGLOB

ADEMI There is a Country Financial Sector Strategy for the Dominican Republic and this analysis was used to select this operation

2005_ACPGLOB CA2004

Madagascar

No Country Financial Sector Strategy was obtained for Madagascar

2005_ACPGLOB

CA2006 Kenya No Country Financial Sector Strategy was obtained for Kenya BOAD

Microfinance Enh

Fac No relating Country Financial Sector Strategies were obtained 2005_ACPGLOB

CA2006 The CSP/NIP 2003-2007 for Kenya, in a section devoted to PSD, refers to:  Kenya’s privatization strategy (“EIB will follow the privatisation process to identify opportunities”, with emphasis on infrastructure

 The Micro-enterprises support programme (MESP) and the establishment of a Micro- credit Trust Fund. However, there is no clear connection between such effort and EIB’s effort to reach micro-enterprises under this Project. It is not clear if EIB could utilize this Trust Fund in relation to its operations in this field.

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 The Private-Sector Development Strategy is anchored in five strategic goals, all related to the business environment

 PSD medium-term policy objectives of a general nature (competitiveness of SMEs, infrastructure development, capacity building, Kenyan ownership, reposition the PS to contribute substantially to employment and GDP, developing entrepreneurship)

 The EC financed Micro-Enterprises Support Programme Trust Fund (MESPT), but the link with EIB operations in this field is not made.

 A Technical Cooperation Facility (TCF) of € 4.6 m to implement EC assistance, “notably covering technical studies, project formulation, implementation, monitoring and

evaluation”, but seemingly without a connection with EIB operations.

A two page Annex on EIB FINANCING OPERATIONS IN KENYA lists EIB targeted activities