European
Investment
Bank
•^,
Contents
Innovation 2000 Initiative
EU Finance Ministers discussed EIB's top priorities
Innovation and the Information Society: EU versus US and Japan
EIB venture capital operations in the EU
Improving the quality of schooling
across Europe
EIB tailors its oper ational structures to its new remits
The new ACP-EU Partnership Agreement
Focus on regional convergence "More is not always better"
EIB Forum 2000 in Bremen
,
2-?poO
rmation
2 - 2 0 0 0 · Ν ° 1 0 5 ISSN 0250-3891Thie European Investment Bank is to
place special emphasis on projects
that support innovation in the Euro
pean Union.
This reorientation of the Banlc's activ
ities is a f o l l o w - u p to the strategy
established by the Lisbon EU Summit
in iVIarch emphasising the need f o r
Europe to develop a more competi
tive a n d dynamic knowledge-based
economy.
The EIB Board o f Governors - the EU
Ministers o f Finance - at its annual
meeting in June endorsed the Bank's
" I n n o v a t i o n 2 0 0 0 I n i t i a t i v e " t o
support investments p r o m o t i n g the
i n f o r m a t i o n society, research a n d
development, innovation and competi
tiveness as well as human capital.
A lending programme of EUR 12 to 15
billion over the next three years will
be d e d i c a t e d to this p u r p o s e . The
Board o f Governors also decided to
double the scope o f the EIB's venture
capital operations for small and me
dium-sized companies to EUR 2 billion.
The "Innovation 2000 Initiative'
Under this initiative, the Governors a p p r o v e d a set o f o p e r a t i o n a l principles designed t o channel EIB f i n a n c i n g i n t o the f o l l o w i n g five areas:
• h u m a n capital f o r m a t i o n : by f i -nancing the provision of schools, colleges and universities with com-puting equipment and lending in support of IT training centres;
• research and development: by co-financing public or private-sector research programmes, corporate investment in R&D, research in-frastructure, centres of excellence and measures enabling SMEs t o o b t a i n .iccess t o research p r o -grammes;
• information and communications technology networks: by financing
Venture Capital and reform of the EIF
A key element of the "Innovation 2000 Initiative" is the expansion
of Bank activity in support
of
venture capital financing for SMEs.
The Governors have increased the reserve set up to hedge the risk
attaching to such operations from EUR 1 to 2 billion. Funded
from
the EIB's operating surpluses, this reserve
is
already endowed
with EUR 1 billion drawn from
the
profit for 1996,
1997
and 1998.
It
has
now
been allocated an
additional EUR 500 million
from
the
1999 surplus, and
the balance
will
be drawn from the profits
for
the
years 2000 to 2002 according to needs.
The Governors have also authorised the reform of the European
Investment Fund with a view to turning this institution into the
EIB Group's specialist venture capital arm. While
maintaining
the
tripartite nature of the Fund (whose capital is jointly owned by the
EIB,
the European Commission
and
commercial banks), the aim
of
this reform is to
make the
EIB
the
majority
shareholder, with
a stake
of
over 50%,
and
operator of
the
institution.
Concentrating all the
EIB
Group's venture
capital
ac-tivities (EUR
1
.2
billion
committed) in the hands of
the EIF will substantially enhance the Fund's financial
and
operational capacity and make
it possible
to target
operations in this highly specialised field more
effect-ively.
This
new form of relations between
the EIB and
the
EIF will
also encourage productive melding
of
ex-pertise between the Bank
and the
Fund
through
the
introduction ol additional financial instruments to
support SMEs
and
will boost
the
catalytic effect of the
EIB Group's actions
within
Europe's
banking and
fi-nancial community.
t r a n s - E u r o p e a n b r o a d b a n d a n d multimedia networks and physical or virtual infrastructure providing local access t o such n e t w o r k s , especially in the Union's less ad-vanced regions. The Bank will focus its lending in this field on innovative technology projects such as ASDSL, xDSL and UMTS;
• diffusion of innovation: by finan-cing "online healthcare" services and the use of information technologies t o b r i n g Europe's c i t i -zens closer t o local a u t h o r i t i e s and public services; by helping to equip companies, especially SMEs, w i t h advanced information tech-nologies;
• development of SMEs and entre-p r e n e u r s h i entre-p : by s t r e n g t h e n i n g v e n t u r e capital support f o r t h e development of innovative SMEs, fostering science parks and com-pany incubators and l a u n c h i n g n e w p r o d u c t s t a i l o r e d t o t h e business needs of very small en-terprises.
Support for these new areas of EIB activity will be provided under a dedicated lending programme of EUR 12 t o 15 billion over the next three years. More than simply an increase in t h e Bank's l e n d i n g volume, this will represent a quali-t a quali-t i v e r e o r i e n quali-t a quali-t i o n of quali-t h e EIB's traditional operations towards sec-tors w i t h high technological value added having a positive impact on t h e e c o n o m y . To t h i s e n d , t h e Bank will both broaden the range of its financial instruments and reach out t o new partners and cus-tomers, especially t o take account of t h e extension of its f i n a n c i n g operations t o include i n t a n g i b l e investment. •
ε υ Finance IVlinisters discussed EIB's t o p p r i o r i t i e s
In his Statement
to the EIB
Governors,
Philippe
Maystadt
h i g h l i g h t e d
the Innovation
2000 Initiative
a n d financing in
candidate
countries
as top priorities:
"The L i s b o n E u r o p e a n C o u n c i l conclusions include a clear endorse m e n t of t h e Bank's I n n o v a t i o n 2000 Initiative in the f o l l o w i n g five areas: h u m a n c a p i t a l , SMEs and entrepreneurship, research and de velopment, information and com m u n i c a t i o n technology networks and diffusion of innovation.
An essential c o m p o n e n t of t h e I n n o v a t i o n 2 0 0 0 I n i t i a t i v e concerns t h e p r o p o s a l t o make a v a i l a b l e a n o t h e r b i l l i o n e u r o , out of the Bank's surpluses for v e n t u r e c a p i t a l f o r SMEs. This p r o p o s a l is t i m e l y , as t h e Bank has already c o m m i t t e d , either di rectly or t h r o u g h the ETF man date given t o the EIF, the whole of the original billion you approved in 1997.
"Mini Marstiall plan "
The Bank's f i n a n c i n g in Central and Eastern Europe w i l l a m o u n t in t o t a l t o m o r e t h a n EUR 17 b i l l i o n o v e r t h e n e x t years t o p r e p a r e t h e s e c o u n t r i e s f o r accession t o the Union.
I w o u l d not like t o overstate the i m p o r t a n c e of this c o m m i t m e n t , b u t I n o t e t h a t some observers have a l r e a d y c o m p a r e d it t o a "mini Marshall Plan" for our Eas tern neighbours. I w o u l d also like t o p o i n t o u t t h a t h a l f of t h i s
amount, EUR 8.5 billion over the period 2000-2003 w i l l be advan ced at the Bank's own risk. The re mainder, i.e. EUR 8.7 b i l l i o n f o r the p e r i o d 2000-2007, w i l l come f r o m t h e new l e n d i n g m a n d a t e given t o the Bank by the Council. Of course, I am f u l l y aware t h a t good use of this huge amount of resources is one of t h e b i g g e s t challenges f o r t h e Bank f o r t h e years ahead and I can assure you t h a t t h e m o n i t o r i n g of this pro g r a m m e w i l l be one of our t o p priorities.
This is w h y t h e M a n a g e m e n t C o m m i t t e e has j u s t d e c i d e d a major restructuring of the Bank's o p e r a t i o n a l services. The n e w structure, w i l l bring t o g e t h e r Ac cession C o u n t r i e s a n d M e m b e r States, making it easier t o trans pose procedures and practices, t o transfer k n o w - h o w and t o accele rate the linkage of the Accession Countries t o the European Union, (see also pages 16-19)
h l B m 1999
Loans signed
- within the EU
- outside the EU
Borrowings
Outstanding loans
Own funds
Net profit
Balance sheet total
Subscribed capital
(at 31 Dec.)
Philippe Maystadt on:
Lending
(EUR million)
1999
31
800
27 765
4 035
28
355
178 775
20
494
1 067
201 104
100 000
1998
29
526
25
116
4 4 1 0
30 098
155 333
19 306
1 195
176 544
62
013
^^^L^y^^^H
Our activity in the candidate coun-tries will follow the same eligibility criteria as in t h e Union and our aim is t o increase the p r o p o r t i o n of total lending for environmental projects to 25%.
To e n s u r e a m a x i m u m i m p a c t , close c o - o p e r a t i o n w i l l c o n t i n u e w i t h the Commission and its new ISPA p r o g r a m m e as well as w i t h the multilateral institutions opera-t i n g in opera-the region.
"Within the
EU,
I would like to point out the activity
in
support
of
SMEs, through global loans with otir
fi-nancial partners (EUR
2.8
billion) or through
partici-pations in
venture capital
funds (EUR
470
million
ap-proved
in 1999).
The
Bank has also stepped
up
its
ef-forts
in favour of
Trans-European
Networks in
trans-port,
energy transmission
and telecommunication
(with
more than
EUR 10 billion financing provided).
The
bulk of our activity outside the European Union
has
been
in the candidate countries of Central and Eastern Europe
and Cyprus. In Central and
Eastern
Europe, the Bank is by far the
foremost
multilateral
financial
institution".
Borrowings
"Our borrowings
in
euro
represented
4 l %
of
our total borrowings
in
1
999,
half
of
them falling within our EARN -Euro Area Reference
Note- programme. The aim of the Bank is to
provide
a first
class
complement to
sovereign borrowers,
and
we
believe that
we
have
made significant
progress
towards
this. Our issues in GBP and USD
represented approximately
half of our total borrowings last
year".
Balance sheet
"The gross
operating surplus last
year was
EUR
1 187
million,
repre-senting a
return on own funds of
5.8%.
The
decrease
in
gross
result
compared to 1998 (EUR 1 345 million)
can be explained
by
a
com-bination of reduced gross treasury
revenues
and reduced net interest
margin.
Gross administrative expenditure increased
by
12.4%
com-pared to 1998.
The
main reason behind this is the contribution of
EUR 10 million to the HIPC initiative
(see
page
22) and exceptional
contributions for earthquakes in Turkey and
Greece
as
well
as
a
donation for Kosovo
(EUR
2.6 million in
total)".
Finance Ministers at the EIB: Didier Reynders, Belgium (who now takes over Chairmanship of the EIB Board of Governors) and Laurent Fabius, France.
Following the decision at the Hel-sinki summit t o recognise Turkey as a country candidate f o r acces-sion, the Bank will naturally include Turkey in the list of countries under its Pre-Accession Facility.
As f o r all other candidate coun-tries, o p e r a t i o n s under t h e Pre-accession facility w i l l d e p e n d o n our usual criteria, in particular as far as security arrangements are concerned." •
I n n o v a t i o n and the I n f o r m a t i o n Society
EU versus US
and Japan :
catching up
- but still a
lot to do
Innovation and the
Information Society
The Lisbon EU Summit in IVIarch decided on action to ensure
that Europe should become a globally competitive and
dynamic knowledge-based economy. Where does the
European Union stand today with regard to innovation,
research and development and the information society
compared to the United States and Japan? Two
background papers produced by the EIB's Projects
Directorate elucidate the present situation.
EU private sector
must spend more
on R&D
Technological innovation is the en gine for g r o w t h and most innova tions are the outcome of deliberate economic decisions concerning re sources t o be devoted t o the pro duction of knowledge.
Europe devotes relatively little re sources to generation of knowledge,
in p a r t i c u l a r f o r research and development (R&D), compared to the main international competitors I. The R&D/GDP "
r a t i o (as a %)
across 3 EU countries
(US and Japan). The R&D expendi t u r e in Europe is e q u i v a l e n t t o
1.8% of GDP. This compares w i t h 2.8% for the US and 2.9% for Ja pan. There is little evidence t h a t Europe is catching up w i t h t h e m over t i m e . M o r e o v e r , t h e r e is a huge disparity (of the order of 7:1) in t h e R&D/GDP r a t i o across EU countries. (Fig. I)
Because of the combination of for ces intrinsic t o innovative activity (i.e. for this to be successful, both
Source. OECD S FIN D DK UK EU Β IRL I Ρ GR
II. N u m b e r o f researchers in t h e business sector as a % of t o t a l w o r k f o r c e
1.0
0.6
0,4
0.2
EU us Japan
Source: OECD
appropriate research infrastructure and other attractive incentives for t h o s e c o n d u c t i n g research are needed), there is a risk of increasing technological differences between regions across Europe. Counter-vailing policy measures are necessary t o raise the technology absorption capacity of less developed regions. Whereas the resources devoted t o basic research and that performed by g o v e r n m e n t a l i n s t i t u t i o n s in t h e EU are in line w i t h t h e US, there are large differences when it comes t o R&D carried o u t by the business sector.
European private industry performs much less R&D than US and Japan-ese industry. There are also fewer human resources devoted to R&D in Europe: 5 employees out of 1 000 are researchers in Europe, whereas the figures are 7 and 9 for the US and Japan. For the shift to a knowl-edge-based economy, Europe is thus less well endowed with human capi-tal than the US and Japan. (Fig. II) The issue is not so much t o increase f u n d i n g f o r research p e r f o r m e d by public institutions, but rather t o i n d u c e t h e p r i v a t e sector t o spend more on R&D. Nevertheless,
for raising the efficiency of public R&D in the EU, particularly by im-p r o v i n g c o o r d i n a t i o n of im-p u b l i c R&D e x p e n d i t u r e in M e m b e r C o u n t r i e s . This w o u l d h e l p t o avoid unnecessary duplication and t o enhance synergies.
Of privately funded R&D in Europe, a b o u t 8 0 % is p r o v i d e d by large companies and 2 0 % by SMEs. In comparison, the SME share is lower in the US (15%) and Japan (6%). Thus, innovation in the EU is pro-p o r t i o n a l l y more d e pro-p e n d e n t on SMEs than elsewhere. Innovation p e r f o r m a n c e of SMEs t h e r e f o r e becomes i m p o r t a n t . SMEs have less ready access t o g o v e r n m e n t funds than large companies, since only 9% of R&D spent by SMEs is f i n a n c e d by t h e g o v e r n m e n t , compared t o 13% of R&D spent by l a r g e c o m p a n i e s . M a k i n g it easier for SMEs t o gain access t o innovation financing w o u l d there-fore help t o increase significantly t h e i n n o v a t i o n p e r f o r m a n c e of European industry.
There is evidence that Europeans do not adequately protect the re-sults of t h e i r innovative activity t h r o u g h patents. European firms have a relatively low propensity
I. The technological balance of payments (in € bn)
t h e r e is also considerable scope t o p a t e n t c o m p a r e d t o f i r m s in
•'•·>'ΰ'
s/''- .'^
25 20 15 105
0
•5
•10 -15
Source:
-»1
1
1
EU
OECD
1
1 1985
• 1997
I
US Japan
the US and Japan. This results in a deteriorating technological balan ce of payments (which includes in c o m e f r o m l i c e n s i n g , p a t e n t s , k n o w - h o w etc.). The balance is positive for the US and Japan. To reverse this negative trend, Euro pean inventors (universities, com panies, p r i v a t e research i n s t i t u tions) should be e n c o u r a g e d t o patent more of t h e i r discoveries and intellectual property. (Fig. Ill) The venture capital industry is an increasingly important source of f i nance f o r i n n o v a t i o n and helps new ideas t o become a business success. This industry has got off to a later start in Europe compared w i t h the US and hence the Euro pean m a r k e t is less d e v e l o p e d . Venture capital in Europe is still strongly biased t o w a r d t h e later stage in the so-called venture ca pital cycle. Early stage and start up f i n a n c i n g account f o r only a tiny part of venture capital finan cing in Europe. It is this p o r t i o n that provides the bulk of innova tive business ideas and therefore needs t o be supported. •
Harald Gruber, Projects Directorate +352 4379 8606, E-mail: [email protected]
Innovation and the Information Society
Need for public
action within
the EU information
society
The Information Society (IS) is de-v e l o p i n g apace in t h e EU (1), as
shown, for instance, by the explo-sion in Internet subscribers since 1995. The EU seems t o be catch-ing up w i t h the United States in this f i e l d , a l t h o u g h the IS is still m u c h less d e v e l o p e d in t h e EU than in the US: total expenditure on I n f o r m a t i o n and Communica-t i o n Technologies (ICT) n o w re-present about 6% of GDP f o r the EU as a w h o l e , while this propor-t i o n is 7.5% in the US and 7.4% in Japan.
The expansion of ICT w i t h i n t h e market place is not proceeding at t h e same speed in t h e d i f f e r e n t countries or regions, in particular during the early phase of market p e n e t r a t i o n . In 1998 t h e r e were substantial d i f f e r e n c e s b e t w e e n
EU countries in the number of PCs per 100 inhabitants, ranging from 10 t o more than 50, and the same
happened w i t h Internet penetra-tion: the number of Internet hosts varied from fewer than 5 to more t h a n 90. The spread of ICTs also differs between social groups, de-pending mainly on their income le-vel, and between economic sectors inside the various countries.
There is a risk t h a t the lower in-come groups and t h e less devel-oped regions of the Union will fail
t o a d o p t t h e new t e c h n o l o g i e s , w i t h s e v e r e c o n s e q u e n c e s f o r t h e i r f u t u r e e c o n o m i c d e v e l o p -ment - or if they succeed in adop-t i n g adop-these adop-technologies, adop-t h a adop-t adop-they will be only passive actors in the process, w i t h the majority of be-n e f i t s harvested by i be-n d i v i d u a l s , firms and institutions in core
re-gions, in which the barriers to IS
Dramatic
change
participation could be lower. i n t e l e C O m S
In the EU, it is estimated that " i n -f o r m a t i o n society industries" al-ready c o n t r i b u t e around 15% t o GDP g r o w t h and create 2 5 % of new jobs in the European econo-my (2). Following t h e US experi-ence, it has become clear in t h e EU that the economy is experiencing a c c e l e r a t i o n in i n n o v a t i o n . This should increase p r o d u c t i v i t y and o u t p u t over the
l o n g t e r m , ac-c o m p a n i e d by an unpreceden-ted wave of re-s t r u c t u r i n g and e m e r g e n c e of new companies. Of course, inno v a t i o n is n o t c o n f i n e d t o in-f o r m a t i o n tech-n o l o g i e s , a tech-n d t e c h n i c a l a d
-vances are also f o u n d in many sec-tors, but i n f o r m a t i o n technology is a significant factor of this pro-d u c t i v i t y a n pro-d e c o n o m i c g r o w t h process. However, t h e impact of n e w t e c h n o l o g i e s o n e c o n o m i c performance depends substantial-ly on how flexible the economy is t o adapt to changes, and some of t h e EU e c o n o m i e s s t i l l p r e s e n t substantial rigidities.
The I n t e r n e t has r e i n f o r c e d the h i s t o r i c a l t r e n d t o w a r d s r a p i d expansion of data traffic over the t e l e c o m n e t w o r k . A t w o r l d w i d e level, the e v o l u t i o n of the Inter-net is driven by t w o main factors: a dramatic increase in t h e n u m -ber of users and an expansion in d a t a i n t e n s i v e i n t e r n e t a p p l i c a -tions. This implies that, increasing-ly, access t o high-speed services at a f f o r d a b l e prices ( f l a t t a r i f f s in particular) is a key issue f o r t h e d e v e l o p m e n t of the I n f o r m a t i o n Society.
Data w i l l very soon become t h e p r e d o m i n a n t t r a f f i c in t e l e c o m networks, marginalising voice traf-fic. Some analysts believe t h a t by 2005, as much as 90% of total traf-fic may be linked t o d a t a , w h i l e voice t r a f f i c may r e p r e s e n t just 10%. This implies a dramatic change in every aspect of t h e t e l e c o m business, from organisation of the
industry, pricing policy and net-work configuration t o investment strategies.
The e x p a n s i o n in I n t e r n e t a n d other data traffic is increasing the demand for high-speed transmis-sion or higher b a n d w i d t h . The li-mited capacity of the majority of the local loops of telecommunications networks is a major b o t t l e -neck t o expansion of data services. To contend w i t h this situation, t w o m a j o r i n i t i a t i v e s are u n d e r w a y w i t h a view, on the one hand, t o upgrading of existing conventional t e l e p h o n e lines a n d c a b l e n e t -works, and on the other, to
upgra-(1) The term "Information Society" here is defined as "the society currently being put in place, where low-cost in-formation and data-storage and trans-mission technologies are in general use" (ECDGV, 1997).
(2) European Commission, the 1999 Communications review
lower incomes and in the less de-veloped regions of the EU. In line w i t h this, the majority of the ten p r i o r i t y actions of t h e e-Europe i n i t i a t i v e are r e l a t e d t o similar measures, for instance the following: • Education and training has t o be
overhauled to match the ICT revo-lution, so that people are aware of t h e possibilities of t h e n e w technologies and are able t o use them. Learning institutions have to fulfil the ICT needs of business and industry.
n o v a t i v e services a n d g r e a t e r choices. Prices in the international and domestic long-distance mar-kets have gone d o w n substantial-ly: about 70% since liberalisation in some EU c o u n t r i e s . H o w e v e r competition on local markets has remained very limited in t h e EU. This is w h y c o m p e t i t i o n in t h e telecom sector needs t o be rein-forced, particularly at the local level. In this respect, the Commission is proposing t o use its powers t o en-c o u r a g e loen-cal l o o p u n b u n d l i n g t h r o u g h o u t the EU.
There is a risk
that the lower
income groups
and the less
developed
regions of the
Union will fail
to adopt
the new
technologies
ding of wireless networks, in parti-cular mobile cellular networks. These trends, combined w i t h t h e entry of new players into the mar-ket, are the driving force for an in-crease in investment in t h e tele-com sector. The new investment cycle will be driven by capital ne-cessary t o maintain, upgrade and expand t h e n e t w o r k s , as w e l l as meeting demand for higher speed. Capital investment related t o ac-c o m m o d a t i n g t h e f u t u r e expan-sion of data and high-speed servi-ces will represent the bulk of over-all f u t u r e investment. The devel-o p m e n t devel-of t h e IS is alsdevel-o d r i v i n g t h e r a p i d expansion of n e w ICT businesses, particularly those related t o Internet.
Transition to the IS
-a t o p p r i o r i t y
The expansion of the usage of ICTs o f t e n implies c h a n g i n g w o r k i n g practices, organisation of enterpri-ses and lifestyle. Although people's perception of the benefits of these technologies is changing very fast, still a large p r o p o r t i o n of consu-mers and small businesses cannot see the benefit of using ICT. Strong public action is needed t o face up to the barriers to the devel-opment of ICT, in particular for the
• Action has to be taken t o expand the adofjtion of Information and Communication Technologies in SMEs.
• T h e public sector, in general, has t o be supported t o enable it t o adopt ICTs swiftly and t o adapt t o the new re-organised working methods.
Market liberalisation is the main policy measure t o develop t h e telecom and related sectors in Europe and thus facilitate t h e expansion of the IS. However, the transition to competition is far from complete. The established o p e r a t o r s w i l l retain a dominant position in the c o m m u n i c a t i o n market f o r many years to come. Therefore, regulation m u s t e n s u r e t h a t d o m i n a n t players do not abuse their market p o w e r , a n d s h o u l d e n c o u r a g e c o m p e t i t i o n . R e g u l a t i o n w i l l be reduced as markets become more competitive.
The liberalisation of t h e EU tele-c o m m u n i tele-c a t i o n s m a r k e t sintele-ce 1 J a n u a r y 1998 has d r a m a t i c a l l y t r a n s f o r m e d t h e t r a d i t i o n a l tele-com sector i n t o a dynamic o n e , able t o «idapt quickly t o the new challenges at national and global level. The rapid d e v e l o p m e n t of competition can be illusttated by f a l l i n g prices, g r o w t h of new
in-New players and innovative/broband service providers will first ad-dress t h e o p t i m u m segments of the market. These segments are es-sentially in the most developed re-gions and in the clusters of high telecom consumers. Deployment in the less attractive segments of the market will follow later. This puts small businesses, low-income resi-dential consumers and, in general, less developed regions at a dis-advantage. Therefore the issue of providing equal access t o b r o a d -band services needs to be ad-dressed (as, f o r instance, t h r o u g h the recent Swedish initiative). Public action related t o new ICT business has t o be seen in t h e context of the strategy to support the development of innovation in general.
The previous points illustrate t h e significant economic and social im-pacts of the IS. It stands as an op-p o r t u n i t y t o imop-prove living stan-dards, but could threaten progress, if t h e Union does not succeed in adopting the new technologies in a timely manner. •
Juan Alario, Projects Directorate -\-352 4379 8629, E-mail: [email protected]
EIB v e n t u r e c a p i t a l o p e r a t i o n s in t h e EU
Within three
years the EIB
has become
a key
public-sector player
in the
European
venture
capital
market
It is generally acknowledged t h a t jobs in t o m o r r o w ' s w o r l d will be generated among recently created small and medium-sized enterpr ses in new, technology-driven in-dustrial and service sectors. Alert t o this situation, the EIB has taken f o r w a r d its initiative t o p r o m o t e high-growth SMEs, largely depen-dent on injections of equity capital for their development.
Since this initiative was endorsed by t h e A m s t e r d a m E u r o p e a n C o u n c i l , in its R e s o l u t i o n o n G r o w t h and E m p l o y m e n t , on 16 June 1997, the EIB has channelled either directly or under mandate via its sister institution - the Euro-pean Investment Fund (EIF) - more than one billion euro into a broad range of venture capital funds, be-coming in the process a major pub-lic-sector player on this market in Europe.
On the basis of these very encoura-ging results, the special European Council in Lisbon, in March 2000, invited the Bank t o expand its
ven-EUR 50 million f o r pan-European
biosciences f u n d
r h e E^IB has concluded a EUR 50 million (CiB£ 33 million) agree-ment with Merlin European Biosciences Fund to provide equity ca-pital for leading European bioscience companies.
The Merlin Fund will be managed and advised by Cambridge-based Merlin Bio.sciences, a leading European venture capital group speciali-sing in investing in bioscience enterprises.
T h e EIB sees the bioscience sector as of strategic importance in helping to u n d e r p i n European competitiveness. T h e new bio-technology industry is growing rapidly in Europe and has great potential for creating growth and employment.
The EIB and Westdeutsche Landesbank (WestLB) are cornerstone in-vestors in the Fund, which has a funding target of EUR 250 million
( G ß P 160 million). The Fund will focus on taking minority equity or equity-related stakes in some 20-35 unlisted ventures with proven track records in pharmaceutical, healthcare, food, beverage and che-mical process industries.
t u r e capital operations, emphasi-sing t h e positive role played by this instrument in "preparing t h e transition t o a competitive, dyna-mic and knowledge-based econo-my".
A dynamic market
Europe's venture capital industry experienced soaring g r o w t h in the period 1998-1999, years in which funds raised climbed t o record le-vels (close o n EUR 21 b i l l i o n in
1998). This s w i f t rise has g o n e hand in hand w i t h development of t h e " n e w markets" emerging on European stock exchanges in re-cent years and o f f e r i n g investors a d v a n t a g e o u s exit c o n d i t i o n s as well as t h e possibility t o reinvest gains generated.
Nonetheless, t h e industry remains f o c u s e d o n large-scale transac-tions, especially management buy-outs (MBOs). The share of invest-ment in technology, although on a constant u p w a r d curve, remains modest in Europe at about a third of t h e t o t a l c o m p a r e d w i t h t h e
United States, where it stands at t w o thirds Moreover, t h e level of d e v e l o p m e n t o f t h e major Euro-pean venture capital markets va-ries enormously from one country t o a n o t h e r : in terms o f v o l u m e , Germany, Italy and France together combined have a market only half t h e size o f t h a t i n t h e U n i t e d Kingdom <ilone. But here the ac-cent is on large transactions, chiefly MBOs, w i t h only very small sums g o i n g t o h i g h - t e c h i n v e s t m e n t (less t h a n 5% o f t h e t o t a l ) . In contrast, investment in technology-o r i e n t e d s t a r t - u p s is a t t r a c t i n g c o n s i d e r a b l e sums in G e r m a n y , Scandinavia and Finland.
The relatively less developed mar-kets in Greece, Portugal and Spain, for example, are displaying encour-aging signs of taking off and new f u n d management talent is emer-g i n emer-g . A n o t h e r positive aspect is the appearance of an ever-grow-i n g n u m b e r o f p a n - E u r o p e a n funds, frequently targeting invest-ment in technology-based SMEs; they are aiming t o achieve a criti-cal mass comparable w i t h the
ma-jor American funds. The latter are becoming increasingly active in Eu-rope, t h e r e b y m a k i n g beneficial contributions in terms of co-invest-ment or transfer of expertise. The main bottleneck in t h e Euro-pean market remains the shortage of investment professionals w i t h relevant experience. Their scarcity relative t o investment o p p o r t u n i -ties - in this very new area - justi-fies support f o r d e v e l o p m e n t o f high-quality teams or a transfer of know-how between foreign mana-gers and newly-established Euro-pean teams.
EIB strategy
The EIB is seeking t o impact as ef-fectively as possible on this con-stantly changing market, directing its activity as best it can towards those segments where it can bring the most value added. The Bank is looking t o act as a catalyst in its f i -nancing o p e r a t i o n s , by b a c k i n g funds which, w i t h o u t it, would not have b e e n a b l e t o g e t u p a n d going so rapidly, on the same scale
ElB-financed broadband network
to connect Nordic countries
The Swedish data and télécoms operator Utfors is setting up a Nordic Internet Proto-col- based broadband network. T h e broadband network will provide high-speed communications services to companies and private customers.
In 2001, Utfors will be completing the 6 000 km broadband network for data and telephony connecting "^5 of the largest cities in .Sweden as well as Oslo, Copenhagen
and Helsinki.
T h e EIB is s u p p o r t i n g t h e financing of this b r o a d b a n d network t h r o u g h its participations in rwo Nordic venture capital funds, which have invested in the company.
These funds are managed by Swedish Litorina Capital Management and the Helsinki-based CapMan Capital Management. EIB investments in the funds total EUR 11
million and EUR 64 million, respectively.
Utfors is also taking part in the construction of a 1 100 km broadband network along
the coast of northern Sweden. In addition, the company is planning to connect the Swedish optical fibre network with other European and American networks.
EIB venture capital operations in the EU
or w i t h t h e same degree of suc-cess. In the light of its remit, the EIB also seeks t o anticipate market d e v e l o p m e n t s : it endeavours t o
operate in areas where a dearth of equity is hampering the establish-ment of an efficient and balanced European venture capital market. Such s h o r t c o m i n g s may s h o w through in the scale of investment schemes, their location or the sec-t o r in question. EIB f i n a n c i n g is designed t o counteract these weak points. This calls f o r i n n o v a t i v e and attractive instruments likely t o encourage private investment.
The Bank must t h e r e f o r e remain extremely flexible, since the market is constantly evolving. E-commerce,
for example, which as little as three years ago was not being sufficiently funded, has recently seen a massive surge in investor interest. The EIB, which was actively investing in this sector t w o or three years ago, has quickly adapted its strategy to take account of this shift. Conversely, a sector of such strategic importance t o Europe as biotechnology is still n o t a t t r a c t i n g e n o u g h s u p p o r t from investors, who consider it too risky: so the EIB has stepped up its involvement in this area.
Hence, for its investment strategy to have a multiplier effect in keeping with its role as the Union's financing institution, the Bank must remain both highly versatile and adaptable.
Financing in
excess
o f
one
billion
euro by
end-T999
The table on page 12 details ope-rations launched by the Bank and its sister i n s t i t u t i o n the EIF since the introduction of the "SME Win-d o w " in m i Win-d - 1 9 9 7 . These w e r e concluded either directly by t h e EIB w i t h funds or financial intermediaries or indirectly via m a n -dates entrusted t o the EIF in the
f o r m o f t w o t r a n c h e s of 125 million euro each for f u n d i n g the European Technology Facility (ETF). Since the end of 1997, the Bank has m o u n t e d 30 equity or quasi-equity operations t o t a l l i n g more than 600 million euro, plus the 250 million c o n t r i b u t i o n t o the Euro-pean Technology Facility (ETF) man-aged by t h e EIF. A f u r t h e r 257 million under 12 other operations has been approved and is awaiting signature. Thus, less t h a n three years after the EIB commenced its activity in this f i e l d , t o t a l equity a n d q u a s i - e q u i t y c o m m i t m e n t s t h r o u g h o u t the Member States ex-ceed 1.1 billion euro.
These o p e r a t i o n s have p r e d o m i -n a -n t l y ce-ntred o-n t h e lau-nch or j o i n t financing of venture capital companies chiefly geared t o ma-k i n g e q u i t y c a p i t a l a v a i l a b l e t o high-tech SMEs. The EIB has placed the accent on promoting regional f u n d s , especially in t h e U n i t e d K i n g d o m ( t h e HSBC E n t e r p r i s e Funds channel resources into 10 re-gional funds) and Germany (inclu-ding the new Länder).
Another objective has been to set up new venture capital facilities in countries in w h i c h the market is less developed than in the rest of the Union, such as Greece, Spain, Portugal and Ireland. The Bank has p r o v i d e d substantial support (to the tune of a total 152 million) for
development of the Italian market, participating in 1999 in 5 funds new-ly created by banks and v e n t u r e capital companies.
In France, the Bank has been in-volved in State efforts t o promote innovative SMEs. It has also made a highly important contribution in F i n l a n d by b a c k i n g t w o f u n d s d o i n g m a j o r business f i n a n c i n g SMEs in the IT and télécoms sectors. Finally, the EIB has likewise helped t o create a number of pan-Euro-pean funds and lent its support to the f o r m a t i o n of new f u n d man-agement teams. It has also made available its financial know-how for the establishment of regional funds. The EIF, for its part, has so far signed 20 operations under the European Technology Facility (ETF) f o r an a g g r e g a t e a m o u n t of 98 m i l l i o n euro, in addition to which a further 35 million euro has been approved for operations awaiting signature. In keeping w i t h the guidelines of t h e m a n d a t e f r a m e d by t h e EIB, the EIF has focused ETF support on the venture capital segment provi-ding equity for fledgling high-tech companies. Partly thanks t o this successful s t a r t , t h e EIF, w h i c h manages a cocktail of its own re-sources and f u n d s f r o m t h e ETF and the "ETF-Start-Up Facility" (an i n s t r u m e n t m a n a g e d by t h e EIF and financed f r o m EU budgetary resources) has established itself as
Resources deployed by the Bank
urred under the "SME Window"
is covered by scoring against the Bank's operating surpluses
built up from the EIB's standard long-term lending operations.
In 1997, the Governors approved the assignment of one billion
euro to guarantee investment up to 2000. They recently
autho-rised a further one billion to be drawn from the operating
sur-pluses for 1999 to 2002, 500 million euro having been set aside
in 1999.
SME W I N D O W - risk-sharing operations managed by the EIB (situation as at 31 March 2000)
Title of operation
IMI Risk Sharing
ICO-Axis Risk Sharing Loan Sofiiris fechnological Devclopnicni SNC'l SMF^ Developmem
LTH-SMF^ Venture C^apit.ii l u m i ABN A M R O Causew.u' Mezzanine P. BPI Venture Capital
Allied C'apital G e r m a n y Fund Litorina Development Capital Caja.s/ING Barings Risk Sharing H S B C Enterprise Funds C D C Fonds Capital-RLsque A C T 99 Venture Capital Fund I C C 9 8 Venture Capital Fund T h e Baring G r o w t h Funds F^S Venture Capital
C a p M a n Finnmezzanine Fund D V C G Venture Capital Fund Innov.-fonds Schlesw-Flolst./Hamb. Invest Equity Beteiligungs-AG Area Venture Capital Fund Euromobiliare Venture Capital Fimd Retevisiòn Venture Capital
Retevisiòn Venture Capital Funds Mediobanca Venture Capital Fund Dre.sdner KB Venture Capital Fund Eqvitec Technology Mezzanine Fund
Fhe M e d i n European Biosciences Fund C a p M a n Finnventure V Fund T h e I C C Privte Equity Fund II
Amount signed (EUR million) 26 9 15 9 20 25 10 51 11 30 18 34 15 13 46 2 17 15 7 15 21.8 15 8 20 40 25 17 37.5 17 13 Location of managers I Ι Ε L D UK Ρ D S E UK F IRL IRL LIK Ρ FIN D D A 1 I E E I I FIN UK FIN IRL
T O T A L (excl. E T F managed by t h e EIF : 2 5 0 M ) 6 0 1 . 3
European Technology Facility (managed by the EIF) (situation as at 31 March 2000)
Fund
Advent Private Equity F u n d A n n d c u s
Auriga Ventures Banexi Ventures
Baring F^uropean Private Equity Fund L.P. Elderstreet Capital Partners
Enabling Technology Limited Partnership Eqvitec Technology Fund 1 L.P. Galileo
Horizonte lechnologiclonds (Österreich B.V. I T Partners N . V .
Kennet 1 Limited Partnership Kiwi Venture Partners N e S B I C C F E Fund B.V. SFK99 Technolog)' Fund Ky Sofinnova Capital
SPEF Pre I P O European Investiiieni Fund T E C Plus HI
Technostart
Trinity Venture Fund 1A Vision Capital L.P.
T O T A L
Amount of ETE participation (EUR million) 29.2 I'S.O 14.7 24.6 9.5 4.5 4.9 3.0 24.6 2.2 4.5 5.0 17.0 2.3 5.5 34.6 2.0 5.5 2.6 1.9 5.2 Location of managers UK UK F F UK UK D FIN F A Β UK 1 Nl. FIN F F E D IRL UK 98.1
a major European institutional in vestor in this sector. It plays an im p o r t a n t catalytic r o l e in raising start-up funds, and its input speeds up and lends weight t o the launch of venture capital companies oper ating in leading-edge sectors such as IT, télécoms and biotechnology.
The way f o r w a r d
To meet the Lisbon objectives and keep pace with market trends, the EIB and EIF will continue to concen-trate their activity on funds speciali-sing in s t a r t - u p and early-stage companies, preferably w i t h a high technology content. As in the past, priority w i l l be given t o backing pan-European and regional funds. Under the "Innovation 2000 Initia-tive", moreover, the accent should in future be placed on developing synergies b e t w e e n research, t h e diffusion of innovation and enter-prise creation. In this connection, productive links between univer-sities and new companies will be explored and particular attention will be paid to fostering structures such as "company incubators" and "science p a r k s " . These d e v e l o p -ments are likely t o result in t h e Bank and the EIF providing sup-port for new management teams. In organisational terms, strengthen-ing the operational ties between the EIB and EIF (by establishing a u n i f i e d s t r u c t u r e specialising in e q u i t y a n d q u a s i e q u i t y o p e r a -tions) will make it possible t o en-hance the interaction between the range of v e n t u r e capital i n s t r u -ments available in t h e European Union w i t h the aim of g r o w t h and job c r e a t i o n . ·
Marc Schublin Information and Communications Department
-i-352 4 3 7 9 3 1 1 9 ,
E-mail: [email protected]
I m p r o v i n g the q u a l i t y of s c h o o l i n g across Europe
Improving the quality
of schooling across Europe
In the European Union there is a serious backlog in the
maintenance and refurbishment o f school buildings and an
urgent need for new educational facilities. More
wide-spread development o f the knowledge society needs
addi-tional investment to bring school/university buildings up to
standard in terms o f computer facilities and Internet access.
A t the same time, many European countries have reduced
public expenditure and their scope for injecting new funds
into their education systems.
EIB
involve-m e n t in the
education
sector is n o w
a core
activity a n d
is being
extended to
the
candidate
countries
The EIB's activities in the education sector significantly expanded un-der a mandate called f o r by the A m s t e r d a m Summit of Heads of State in June 1997. Following the recommendations of the Cologne Summit in July 1999, t h e Bank's e d u c a t i o n a l m a n d a t e was made p e r m a n e n t and extended t o the c a n d i d a t e countries. The Lisbon Summit in March 2000 further em-phasised this remit, h i g h l i g h t i n g education, along w i t h information and communications technologies, as tools for creating a society based on innovation and knowledge. As a result, the EIB is now prepared t o finance a wide range of
educa-tion infrastructure and investment, f r o m m o d e r n i s a t i o n or construc-t i o n of schools and universiconstruc-ties (general or vocational), t o more f u n d a m e n t a l educational invest-ment, including the i n t r o d u c t i o n
of i n f o r m a t i o n and c o m m u n i c a t i o n s t e c h n o l o g y , t r a i n i n g p r o -grammes and support for research and development.
Facilities and student
performance
The benefits of education are well known. Higher levels of education-al attainment are associated w i t h better labour market i n t e g r a t i o n and higher revenues over the work-ing life. In a d d i t i o n , the creation
of k n o w l e d g e , skills and abilities affects not only p e r f o r m a n c e at w o r k but also social b e h a v i o u r , such as for example, better health, l o w e r c r i m e , increased e n v i r o n -m e n t a l consciousness, i -m p r o v e d parenting, and higher political and community participation. Access t o l i f e - l o n g l e a r n i n g and an active
participation in the labour market are thus important conditions for a
coherent social fabric and econo-mic development.
But what are the factors which de-t e r m i n e de-t h e effecde-tiveness of an e d u c a t i o n a l system, and w h a t is the contribution of investment in educational facilities t o delivering these benefits?
The link between the level of edu-cation and income is w e l l estab-lished. However, the main factors
a f f e c t i n g p u p i l a c h i e v e m e n t at schools are less w e l l u n d e r s t o o d but crucially important.
There is evidence that the perfor- m i n o r i t y or poor socio-economic mance of students is affected by b a c k g r o u n d s . In France, studies the quality of the schooling envi- have d e m o n s t r a t e d t h e negative
Some 90 %
ofthe
educational
projects
financed
by the EIB
are situated
in assisted
areas
r o n m e n t . Indeed, inves-t i n g in school resources (e.g., school s p e n d i n g , teacher-pupil ratio), t h e q u a l i t y o f e d u c a t i o n a l buildings and school de-s i g n ( e . g . , clade-sde-s de-size, conditions of t h e b u i l d
-effects i n a p p r o p r i a t e de-sign o f t h e e d u c a t i o n a l buildings can have on pupil performance.
There is
evidence that
student
performance Q^^^^ overcrowding affects is affected t h e ability of teachers t o
by the quality provide q u a l i t y t e a c h i n g , ings) have an impact on nf the académie ^'"^ correspondingly reduc-the performance of pu- . tions in class sizes allow
im-I ^ . ..J .
environment
^. ^, ,.^ ,
pils and students. provement m the quality of classroom activities. Hence, The effect t h a t buildings can have the buildings by their appearance on e d u c a t i o n a l performance has
been researched. There are t w o major routes through which there can be an impact. One is through additional and improved facilities, including for example the labora-tories and modern teaching tools such as information and communi-cations technology. And the other is t h r o u g h t h e learning e n v i r o n -ment t o ensure the best surround-ings t o enhance pupil and student aspirations.
Improvement in buildings affects positively pupil achievement (mea-sured by test scores) and student behaviour (measured by attendance and exclusion). As regards school design, a t t e n d i n g a small class in the early grades is associated w i t h somewhat higher performance on tests, in particular for pupils from
and t h r o u g h t h e school teaching e n v i r o n m e n t can a f f e c t b o t h teacher .ind pupil behaviour and consequently educational a t t a i n -ment.
School size may also play a role, as well as class size. In the UK, studies o n t h e r e l a t i o n s h i p b e t w e e n school size and examination per-f o r m a n c e in s e c o n d a r y schools have shown that exam performance increases w i t h school size but at a decreasing rate. As a consequence, school reorganisation is important. Hence tr) raise education perfor-mance there is a need both for la-bour input, t h a t is, teaching and management ability, proper curri-cula etc., and also for the provision of good capital input. Taking also i n t o a c f o u n t t h e r a p i d pace of technological innovations and the growing impact of the knowledge society, thete is a role for the EIB in helping t o meet these growing educational needs.
Project appraisal
The Bank evaluates e d u c a t i o n a l projects from a system- or country-wide perspective. Projects have to demonstrate economic value if they are t o be considered for financing. An essential part of the analysis of an investment is to consider its
im-plication for the functioning of the education system and its appropri-ateness in terms of the priorities or objectives defined at national or re-gional level. Because education is an intangible asset, there are great challenges in the appraisal of edu-cational projects. (1)
T h e r e f o r e an a p p r o p r i a t e " r o a d map" t o decide whether a project is economically and socially accep-table or not is crucial.(2) Recourse t o the private sector has recently been considered in some countries as a means of alleviating the con-straint on allocating available pub-lic f u n d s t o f i n a n c e n e w invest-ment in educational facilities. The involvment of private partners al-lows risk-sharing between the diff e r e n t players and t h e d e v e l o p -ment of innovative solutions in the construction or renovation of edu-cational buildings.
EIB education
operations
So f a r c u m u l a t i v e d i r e c t invest-ment in educational projects finan-ced by t h e EIB has t o t a l l e d some EUR 2.3 billion. Projects in educa-tion are relatively small compared t o other infrastructure projects. Of the projects financed since 1997, around 90 % are situated in assis-ted areas. Hence there is a combi-nation of regional, urban and skill development taking place as a re-sult of the Bank's intervention. (1) The major economic evaluation routes are through cost-benefit or cost effective-ness analysis. In its appraisal, the Bank identifies the benefits and costs associa-ted with the project and separates those that can be valued in monetary terms. Data do not always allow estimation of an Economic Rate of Return (ERR). (2) The appraisal of an educational pro-ject has also to consider the different fi-nancing options available. Fifi-nancing options might Include: public budget, loans, finance leases, operational lea-ses, contracting out or private finance initiatives.
Improving the quality of schooling across Europe
In terms of the breakdown between t h e d i f f e r e n t levels of education, a b o u t t w o thirds o f t h e projects financed have been in higher edu-cation, f o r example universities in Spain, Italy a n d Greece. In fact, they embrace both universities and vocational higher education insti-tutions.
Recently, the Bank has begun t o f i -nance an increasing number of pri-mary a n d secondary school pro-jects. These have included schemes t o reduce maintenance backlogs, m o d e r n i s e school i n f r a s t r u c t u r e and bring i n t o schools t h e latest i n f o r m a t i o n and communications t e c h n o l o g y (ICT) t o o l s . Some o f t h e s e p r o j e c t s a r e b e i n g i m p l e m e n t e d via p u b l i c - p r i v a t e p a r t n e r s h i p a g r e e m e n t s w h i c h seek t o harness the abilities of the private sector t o contribute t o rai-sing design, suitability and flexibili-ty standards in response t o chang-ing curriculum a n d social needs. Projects f o r d e v e l o p i n g libraries and academies of art are also cur-rently under appraisal.
It should not be forgotten that in a life-long learning society there is also scope t o support training f o r teachers, managers, employees, etc., inside and outside t h e t r a d i -tional teaching institutions. The link between the education and the la-bour market can be f u r t h e r fos-tered by investment in research and
development, along w i t h comple-m e n t a r y d e v e l o p comple-m e n t in areas which support private sector inno-vation, such as in technology-based small and medium-sized enterpri-ses, science parks, and so on. Hence, i m p r o v e m e n t in education levels will have a wider knock-on effect.
Conclusion
The " N e w economy" has genera-ted new expectations for the edu-cational system, requiring innova-t i v e i n v e s innova-t m e n innova-t in f a c i l i innova-t i e s a n d services and t h e development of new teaching practices. The delivery of high-quality educational standards by schools and universities remains a cause of concern for public authori-ties, parents and their children. Capital investment has a role t o play w i t h regard t o education i n -f r a s t r u c t u r e , such as b u i l d i n g s e q u i p m e n t and tools needed f o r running and managing schools, uni-versities and other educational faci-lities. Under its extended education mandate, the EIB can make a signi-ficant contribution t o building new educational facilities for Europe. •
Olivier Debande & Eugenia Kazamaki Ottersten
Projects Directorate tel: +352 4379 8562 •i-352 4379 8558 E-mail:[email protected]
e. kazamaki@eib. org
The Appraisal of Investments In Educational Facilities
f^^
" T h e Appraisal of Investments in Educational
Facilities", a book recently published by the
EIB and the O E C D , investigates in particular
the impact of investment in school facilities on
pupil performance and the economic rate of
return of educational investment.
In addition, there are a number of other iactors
which affect educational performance including
social factors, of which family background, traditions and
aspirations all play an important role.
L o a n s for t h e e d u c a -t i o n s e c -t o r in S p a i n
Spain provides three good examples of EIB-financed educational projects, total-ling EUR .314 million, ad-dressing clearly defined edu-cational problems. In a de-centralised educational system, regional authorities Comunidades Autonomas -are particularly aw-are of the crucial role that education has to play in the develop-ment of their region. Invest-ment projects form part of multi-annual comprehensive programmes, within a long-term strateg}'.
In Galicia, a disadvantaged region in n o r t h - w e s t e r n Spain, some 160 secondary education institutes are be-nefiting ftom investment to modernise facilities, reduce class size, cater for the intro-duction of new subjects and train schoolteachers. Im-provements will affect around 250 000 pupils ranging from
10 to 16 years of age.
Capital investment in higher education will improve facil-ities in the Universfacil-ities ot Alicante, Castellón, Elche, Valencia, Almeria, Cadiz, Granada, Huelva, Malaga and Seville, in the regions of Valencia and A n d a l u c i a . Both technical colleges and u n i v e r s i t i e s will benefit from new or upgraded build-ings, including lecture halls, l i b r a r i e s , a d m i n i s t r a t i v e buildings and laboratories, as well as the acquisition of e q u i p m e n t . P r i o r i t y has been given to a c a d e m i c areas focusing on training professionals for industry and to catering for R & D re-quirements within industry.
W e s t e r n Europe UK
Ireland
Scandinavia/Finland Spain
Portugal France Benelux
C e n t r a l E u r o p e Germany
A u s t r i a ' "
Central and Eastern Europe & t h e Baltic States Italy
Greece/Malta/Cyprus
P a r t n e r C o u n t r i e s M a g h r e b - M a s h r e q M i d d l e East, t h e Balkans Turkey
A f r i c a , Caribbean a n d Pacific / S o u t h Africa
Asia and Latin America
EIB tailors its operational structures
to its new remits
As the Union's financing institution, the Bank regularly adjusts its modus operandi a n d departmental
organisation w i t h a view to pursuing its economic a n d lending priorities to maximum effect in furtherance o f t h e Union's objectives.
The Bank has just restructured its d e p a r t m e n t s t o t a k e account o f t h e g u i d e l i n e s handed d o w n by the Helsinki (December 1999) and L i s b o n ( M a r c h 2000) E u r o p e a n Councils, w h i c h place t h e empha-sis o n preparing f o r enlargement a n d d e v e l o p i n g a k n o w l e d g e -b a s e d , i n n o v a t i o n - l e d s o c i e t y , t h e d r i v i n g f o r c e f o r g r o w t h in Europe. These changes are reflec-ted in t h e EIB's new organisation chart, which is regularly updated o n t h e B a n k ' s w e b s i t e a t w w w . e i b . o r g
R e o r g a n i s a t i o n
o f l e n d i n g a c t i v i t y
In order t o pave t h e way f o r t h e candidate countries' accession t o the Union and, by amalgamating operational procedures, meet t h e
d e m a n d o f t h e Bank's p a r t n e r s a n d c u s t o m e r s f o r s i m i l a r l o a n products both w i t h i n and outside t h e Union, t h e EIB's lending de-partments have been r e g r o u p e d u n d e r a single " D i r e c t o r a t e f o r Lending Operations", a t r i p a r t i t e structure f o u n d e d on t h e pillars
of t h e f o l l o w i n g c o m p l e m e n t a r y operational zones:
• " W e s t e r n E u r o p e " ( t h e Nordic countries, t h e United Kingdom, Ireland, t h e Benelux countries, France, Spain and Portugal); • " C e n t r a l E u r o p e " ( G e r m a n y ,
Austria, Greece, Italy, the candi-d a t e c o u n t r i e s o f C e n t r a l a n candi-d Eastern Europe, Cyprus and Malta); • t h e M e d i t e r r a n e a n " P a r t n e r
Countries", t h e Balkans (recon-struction aid), Africa, t h e Carib-bean a n d t h e Pacific, Asia a n d Latin America.
EIB t a i l o r s its o p e r a t i o n a l s t r u c t u r e s to its new remits
This new distribution of activity re flects the Bank's strong desire t o integrate the candidate countries swiftly by adopting uniform opera t i n g procedures f o r m a i n s t r e a m lending and project selection. In deed, one of the EIB's principal ob jectives in these countries is to pro m o t e the transfer of Community regulatory practices t h r o u g h Bank o p e r a t i o n s n o t o n l y u n d e r EU mandate but also under the "Pre Accession Facility", set up at t h e EIB's o w n risk f o r an i n d i c a t i v e amount of EUR 8.5 billion for the period 2000-2003. The new struc ture likewise testifies t o the steady g r o w t h in operations in non-mem ber countries w i t h the support of European i n d u s t r i a l or b a n k i n g partners.
This restructuring will also facilitate exchange of k n o w - h o w between integrated expert teams combining d i s c i p l i n e s a n d r e s p o n s i b i l i t i e s covering every area of EIB lending, e.g. introduction of new products, project finance, loan m o n i t o r i n g , etc.
A single Coordination Department for all three pillars of the Directo rate f o r Lending Operations w i l l m a n a g e c o m m o n f u n c t i o n s in terms of o p e r a t i o n a l support for the Bank's customers, coordination w i t h other directorates, loan mon itoring and deployment of bud getary and human resources. In c o o p e r a t i o n w i t h t h e e x i s t i n g C o o r d i n a t i o n D e p a r t m e n t in t h e Projects D i r e c t o r a t e , t h e n e w Coordination Department under t h e D i r e c t o r a t e f o r L e n d i n g Operations will also liaise w i t h the European Commission and interna tional financial institutions. Hence, the new structures underscore the f i r m wish t o engage in c o m p r e hensive d i a l o g u e at a p r a c t i c a l day-to-day level w i t h t h e Bank's European and international institu
tional partners in order to achieve m a x i m u m synergy b e t w e e n t h e EIB's operations and those of the U n i o n and o t h e r players in t h e international community.
The Projects Directorate:
project appraisal
expertise
The Projects Directorate is respon sible for economic, technical and e n v i r o n m e n t a l appraisal of pro jects submitted for Bank financing. It employs some 75 engineers and economists w o r k i n g in close co operation w i t h the Lending Direc torate's teams.
The D i r e c t o r a t e is d i v i d e d i n t o three departments dealing respec tively w i t h the f o l l o w i n g sectors: transport, water supply, sewerage and sewage disposal i n f r a s t r u c ture; energy, telecommunications and solid waste processing; and in dustry and services. This sectoral a p p r o a c h , d o v e t a i l i n g w i t h t h e geographical approach adopted by the Directorate for Lending Opera tions, facilitates the exchange of k n o w - h o w b e t w e e n economists and engineers responsible in their respective f i e l d s f o r a p p r a i s i n g
projects b o t h w i t h i n and outside the Union.
T h r o u g h its f i n a n c i n g decisions, the EIB contributes t o t u r n i n g EU policies into economic reality. The Directorate is t h e r e f o r e also re sponsible for cross-sectoral consis tency, a task which it entrusts t o a C o o r d i n a t i o n D e p a r t m e n t under the direct authority of the Director General. The focus, in particular, is on environmental and regional de v e l o p m e n t policies as w e l l as on methodological issues. This depart ment is also responsible for coordi n a t i n g t h e Bank's a c t i o n s w i t h t h o s e of t h e Commission a n d national authorities in implemen t i n g EU policies.
The new structure places particular emphasis on the form and manner of project appraisal in relation t o the environment. An environmen tal coordinator reporting directly t o the Director General is charged w i t h defining corresponding stra tegy, criteria and methods, as well as w i t h ensuring that these factors are duly taken into account, dur ing project appraisal, by engineers and economists in t h e d i f f e r e n t sectoral departments. The
nator and his assistant have link persons in t h e v a r i o u s d e p a r t -ments, w h o ensure that the latter are e q u i p p e d w i t h the necessary state-of-the-art analytical, design and technical tools. The coordina-tor also briefs the Bank's manage-ment on environmanage-mental issues. The c o m b i n e d k n o w - h o w of t h e Projects D i r e c t o r a t e enables t h e EIB t o maximise its s u p p o r t f o r project promoters in defining, im-plementing and monitoring invest-ment projects, notably in the Uni-on's less d e v e l o p e d regions and the candidate countries.
Strengthened control
structures
In parallel t o reform of the EIB's p r o j e c t f i n a n c e a n d a p p r a i s a l structures, the Bank's internal f i -n a -n c i a l a -n d a u d i t c o -n t r o l s are constantly adapted t o mirror best banking practice.
The EIB's i n d e p e n d e n t Financial Comptroller reports directly t o the President of the Bank. Assisted by services w i t h f u l l access t o infor-m a t i o n o n t h e EIB's f i n a n c i a l flows, he is responsible for draw-ing up and v e t t i n g t h e financial statements, as well as for keeping the Bank's general accounts and sustaininc) a n a l y t i c a l d e v e l o p -ment. On this basis, he analyses t h e Bank's p e r f o r m a n c e in relat i o n relat o objecrelatives and purelats f o r w a r d recommendations for o p t i -mising results. He also helps t o monitor the Bank's financial mana g e m e n t manand t o f o r m u l mana t e f i -nancial policies by expressing rea-soned o p i n i o n s on strategic op-tions in areas such as lending, cre-dit risk, treasury operations, bor-r o w i n g s , asset/liability manage-ment and the budget.
The Financial Comptroller coordi-nates his activities w i t h those of t h e e x t e r n a l a u d i t o r s ( c u r r e n t l y
Ernst & Young) in order to submit t o the Bank's Audit Committee f i -nancial statements drawn up and a u d i t e d in accordance w i t h t h e highest standards of transparency. He therefore acts as a key liaison officer vis-à-vis the Audit Commit-tee, which is composed of three in-dependent persons a p p o i n t e d by the Board of Governors.
The Financial Comptroller's activi-ties complement the work carried out by the Internal Audit Unit en-trusted w i t h conducting objective and i n d e p e n d e n t assessments of the EIB's control systems and pro-cedures. This unit adheres strictly to the standards laid down by the International Institute of Internal Auditors and is answerable directly to the President. •
Appointments
As part of the restructuring of operational departments described above and the renewal of certain Senior Cadre posts, the f o l l o w i n g appointments have been made: • The three pillars of the
Director-a t e f o r L e n d i n g O p e r Director-a t i o n s have been placed under the au-t h o r i au-t y of M r M i c h e l D e l e a u ("Western Europe"), Mr Terence B r o w n ("Central Europe") and M r J e a n - L o u i s B i a n c a r e l l l ("Partner Countries"), Directors General. M r Jos van Kaam, Di-rector, is t o be responsible for t h e j o i n t C o o r d i n a t i o n Depart-m e n t , u n d e r t h e a u t h o r i t y of Mr Deleau.
• Mr Eberhard Uhlmann has been a p p o i n t e d General Counsel of the Legal Affairs Directorate. • Mr Walter Cernoia has been
ap-p o i n t e d Chief Executive of t h e European Investment Fund (EIF), the EIB Group's specialist vehicle for venture capital operations. • Mr Emanuel Maravic has been
a p p o i n t e d Director of t h e De-partment for Lending Operations in Central and Eastern Europe. • Mr Dominique de Crayencour has
been a p p o i n t e d Director of the EIB's R e p r e s e n t a t i v e O f f i c e in Brussels.
Mr C o n s t a n t i n Christofidis has been appointed Director of the Industry and Services Department within the Projects Directorate. Mr Patrice Géraud is to head the Coordination Department of the Projects Directorate w i t h the title of Deputy Director.
' Mr Andreas Verykios has been appointed Director of the Human Resources Department.
Mr Per Jedefors has t a k e n u p t h e duties of Deputy Director, Operations and Infrastructure in the Credit Risk Department.