9 European Investment Bank projects outside
the EU
| (34964)
10272/13
+ ADDs 1-2 COM(13) 293
| Draft Council Decision granting an EU guarantee to the European Investment Bank (EIB) against losses under financing operations supporting investment projects outside the Union
|
| Legal base | Articles 209 and 212 TFEU; co-decision; QMV
|
| Document originated
| 23 May 2013 |
| Deposited in Parliament
| 3 June 2013 |
| Department | International Development
|
| Basis of consideration
| Minister's letters of 8 and 31 October 2013
|
| Previous Committee Report
| HC 83-viii (2013-14), chapter 6 (3 July 2013)
|
| Discussion in Council
| To be determined |
| Committee's assessment
| Politically important
|
| Committee's decision
| Not cleared; further information requested
|
Background
9.1 The proposal is to update the current EU budgetary
guarantee to the European Investment Bank (EIB) that covers risks
of sovereign and political nature when financing operations outside
the EU. This External Lending Mandate (ELM) allows the EIB to
operate in more challenging investment climates outside the Union
in support of the EU's external policy objectives. The regions
covered are the Neighbourhood and Partnership Countries (including
the Mediterranean, Eastern Europe, Southern Caucasus and Russia);
Asia, Central Asia and Latin America, South Africa as well as
EU Pre-accession countries (the African, Caribbean and Pacific
(ACP) region is covered separately under the Cotonou Agreement
and funded through the European Development Fund, or EDF). The
Mandate provides both an overall ceiling to loans covered under
the Guarantee, as well as an opportunity to determine the strategic
direction of the EIB in its external operations.
9.2 The need for such an EU budget guarantee stems
from the Bank's obligation under its Statute to ensure adequate
security for all its lending operations and, more broadly, from
the need to safeguard its creditworthiness and triple-A rating,
so not as to compromise its principal task of contributing to
the development of EU Member States.
9.3 The "current Decision" covers the period
1 February 2007-31 December 2013. This proposed new Decision sets
out the overall scope and general conditions of the ELM for the
period starting 1 January 2014-31 December 2020, in line with
the Multiannual Financial Framework (MFF). In drawing it up,
the Commission examined several options and objectives (see our
previous Report for details). They chose the option called FOCUS:
this aims to focus the mandate on less credit-worthy beneficiaries
while implementing an overall signature target on climate change,
and is judged as having the most impact.
9.4 In her Explanatory Memorandum of 23 June 2013,
the Parliamentary Under-Secretary of State at the Department for
International Development (Lynne Featherstone) welcomed the overall
proposal and strongly endorsed the EIB's external role. As one
of the world's largest investors in climate finance, and with
the EIB's role and global reach in climate financing increasingly
important, the proposal to replace the current separate Climate
Change Mandate with an overall climate change investment target
made sense, thereby providing the EIB with greater flexibility
to allocate its climate investments and emphasising its importance
in external lending as a whole. She also welcomed the idea of
developing a method to establish the use of the EU budget guarantee
where it provided the highest value added, i.e. where it benefitted
less creditworthy clients and served harder-to-reach markets;
and accordingly also supported the Mandate continuing to cover
all geographical areas, including harder-to-reach markets in Asia
(such as Burma, Bangladesh) which were key DFID priorities. The
proposed regional division of sub-ceilings were balanced on the
whole and, with a slight increase for Asia and Central Asia, would
enable the EIB to have a high development impact for the poorest
(see paragraph 6.8-6.9 of our previous Report for greater detail).
9.5 Looking ahead, the Minister said that negotiations
in the Financial Counsellors (FINCO) working party in Brussels
would now centre on the regional sub-ceilings and broader strategic
directions of the EIB in its external lending; the draft proposal
would then move to the European Parliament in the autumn.
Our assessment
9.6 Given that the Minister would be seeking
at least some improvements to the draft mandate — establishing
a method to ensure that the guarantee was used where it added
most value and further clarification in terms of success criteria
with respect to the provision of a €3 billion "top up"
after a midterm review — we retained the Council Decision
under scrutiny, and asked the Minister to update the Committee
when discussions in the working party had been concluded.
9.7 We also drew this chapter of our Report to the
attention of the International Development Committee.[23]
The Minister's letter of 8 October 2013
9.8 The Minister says that the negotiations have
resulted in a number of improvements to the draft text, and continues
as follows:
"DFID has particularly
focussed on clarifying the assessment criteria with respect to
the provision of €3 billion (£2.5 billion) "top
up" after the mid-term review (MTR). We successfully pushed
to include specific criteria in the recitals of the Decision.
The criteria include the progress that the EIB will have made
at the time of the MTR, in particular taking into account information
from the Results Measurement (REM) Framework which includes development
impact. In addition, the level of signatures and disbursements
will be considered, as well as the macro-economic, financial and
political situation of the eligible countries and regions.
"The UK has also succeeded
in including the REM Framework as a component of the reporting
that the Commission undertakes on an annual basis. This was important
to ensure a results-based focus for EIB reporting. The REM Framework
includes the development impact of operations, but also the EIB's
coherence with EU policies and the financial added value of the
EIB's presence on each project.
"These improvements
contribute to ensuring that the guarantee is used where it adds
most value by linking the loans falling under the External Lending
Mandate (ELM) to their predicted results as measured by the REM.
In addition, the draft ELM includes the establishment of a policy
to ensure the most effective use of the guarantee. The Commission
and the EIB will jointly work on establishing this policy and
it will be part of the formal guarantee agreement between the
Commission and the EIB. We support the idea of having such a policy,
as it will include a broader consideration of effectiveness beyond
simple return on investment. For example, we would expect this
to include consideration of the creditworthiness of the EIB financing
operations, the nature of the counterparts and the EIB's risk
absorption capacity."
9.9 With regard to the state of negotiations, the
Minister says:
"Agreement has been
reached on most of the text and the main outstanding discussion
is regarding the regional division of the overall ceiling. The
Council is split along traditional geographical lines between
those that favour a more generous allocation to the Eastern Neighbourhood
and those that favour a larger allocation to the Southern Neighbourhood.
Our aim in these negotiations remains for the EIB to have a broad
geographical reach and to avoid a protracted debate between the
Eastern and Southern neighbourhood. The Presidency would like
to aim for a first reading deal between the Council and the European
Parliament, but no date for a vote has been agreed. The next Coreper[24]
discussion is set for 10 October. We will continue
to push for final agreement by the end of the year when the current
mandate expires."
The Minister's letter of 31 October 2013
9.10 The Minister says that at the 10 October COREPER
meeting:
"the Presidency presented
a proposal which increased the allocations for both the Eastern
and Mediterranean Neighbourhoods from €8.4bn and €4bn
to €8.6bn and €4.325bn respectively. The Latin America
ceiling was also raised by €50m to €2.2bn Euros. This
increase was funded by decreases to the smaller allocations for
Asia, Central Asia and South Africa. Asia saw a reduction from
€1.2bn to €0.9bn and Central Asia from €250m to
€175m. South Africa also saw a cut from €600m to €400m.
This proposal will receive enough support to secure the Presidency
a Qualified Majority when a vote is eventually held.
"The UK did not offer
its support for this proposal on regional allocations. As detailed
in my previous letter, the UK had been looking for an allocation
which better reflected the development needs of the three main
areas of the External Lending Mandate: Pre-Accession, the Neighbourhood,
and the wider world. The cuts to Asia, Central Asia and South
Africa are not fully consistent with the global balance the UK
has sought.
"There were, however,
positive elements of the Presidency proposal. The UK supports
the allocation for pre-accession countries and considers a 2:1
split between the Southern and Eastern Neighbourhood as broadly
appropriate and a pragmatic way to avoid protracted debates over
allocations to the Neighbourhood. The Presidency proposal also
increases the amount in absolute terms to Asia from €1.04bn
under the current mandate to €1.075bn. This is important
as Asia is the only geographical grouping under the ELM that contains
Least Developed Countries.
"Together with the previously
agreed text of the draft Council Decision, this proposal will
be the basis for the Council position in informal trialogues with
the European Parliament."
9.11 The Minister also reiterates her view that
clarifying the assessment criteria with respect to the provision
of the €3 billion (£2.5 billion) "top up"
after the mid-term review (MTR) and ensuring that the Results
Measurement (REM) Framework is now part of the Commission's annual
reporting are important improvements that will contribute to ensuring
that the Guarantee is used where it adds most value, by making
a clear link between the loans falling under the External Lending
Mandate (ELM) and their results and development impact.
9.12 The Minister concludes by noting that informal
trialogues with the EP will begin in November and are expected
to continue into December, and that she expects the EP to negotiate
for an increase in the overall budget for EIB External Lending
operations:
"This would be contrary
to our position of budgetary restraint on the Multiannual Financial
Framework. We will also resist any attempt to retain reflows
of profits and returned capital from previous EIB activities in
order to increase the overall size of the ELM. The EP's position
on regional ceilings will become clearer on 5 November when the
Budget Committee is due to vote on the External Lending Mandate.
If there is the opportunity to support an improved regional allocation
we will do so."
Conclusion
9.13 The outcome thus far is very much what might
be expected in this type of negotiation: the Minister has not
achieved all her objectives, but notes that the proposal that
has emerged from the Member State negotiations nonetheless contains
a number of elements that should lead to more effective spending.
9.14 We would like the Minister to write to us
again once the negotiations with the EP have made some progress,
and in any event no later than 28 November.
9.15 In the meantime, we shall retain the Council
Decision under scrutiny.
- We are also drawing this chapter of our Report
to the attention of the International Development Committee.
23 See headnote: HC 83-viii (2013-14), chapter 6 (3
July 2013). Back
24
COREPER, from French Comité
des représentants permanents, is the
Committee of Permanent Representatives in the European Union,
made up of the head or deputy head of mission from the EU member
states in Brussels. Its job is to prepare the agenda for the
ministerial Council meetings; it may also take some procedural
decisions. It oversees and coordinates the work of some 250 committees
and working parties made up of civil servants from the member
states who work on issues at the technical level to be discussed
later by COREPER and the Council. It is chaired by the Presidency of the Council of the European Union.
There are in fact two committees: COREPER I consists of deputy
heads of mission and deals largely with social and economic issues;
COREPER II consists of heads of mission (Ambassador Extraordinary
and Plenipotentiary) and deals largely with political, financial
and foreign policy issues. Back
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