The main challenges faced in the Western Balkan countries are fiscal imbalances, low levels of investment and suboptimal project preparation and implementation capacity, economic migration and substantial gaps in economic and social infrastructure
“EIB contribution to the economic growth of the region is twofold. On one side, EIB is supporting the public sector through investments in various sectors such as roads, motorways, railway, water, sanitation, electricity, health, education. On the other side, EIB large-ly finances the SME sector through loans and guarantees to local banks. Both sectors generate the creation of jobs and enhance the economy of the countries and hence its growth, “says the start of the DC conversation Vice-President, European Investment Bank (EIB) Dario Scannapieco.
EIB is enhancing its local presence in the Western Balkans by opening desk offices in Saraje-vo and Tirana. What is the EIB’s strategy for our region?
— The opening of two desk offices in Sarajevo and in Tirana in the premises of EU Delegationsby the EIB, reinforces the regional presence of the EU Bank, besides already active Regional Office for the Western Balkans based in Bel-grade. These two new desk offices will bring the region closer to the European Union while supporting countries’ economic and social development. The Bank’s presence in those countries is especially important now when the Euro-pean Union is strengthening its assistance in light with flagship initiatives set out by the Western Balkans Strategy. The more active presence of EIB will make it easier for all levels of authorities to have access to EIB’s assistance whether financial or expert advice in the public and private sector. It will strengthen EIB’s commitment to those countries by being closer to the projects and citizens.
What are the biggest challenges for our region?
— The main challenges faced in the Western Balkan countries are fiscal imbalances, low levels of investment and suboptimal project preparation and implementation capacity, economic migration and substantial gaps in economic and social infrastructure. Access to finance requires special attention as well, especially for micro and start-up companies. In addition, strengthening the rule of law, fight against corruption and increase efficiency in the public institutions are priorities, which governments in the region should address. There is still an urgent need to rehabilitate and modernize the infrastructure of the region in order to improve the investment climate and to foster a sustainable and steady economic growth.
How is EIB contributing to address these challenges?
— The EIB is financing projects in four priority areas: innovation, SMEs, Infrastructure and the environment. The EIB seeks to promote sustainable and inclusive growth while protecting the natural and social environments in a holistic manner, thereby ensuring that requirements relating to the protection of the environment and human well-being are integrated into the definition, preparation and implementation of all projects financed by the EIB. By financing infrastructure projects and applying its environmental and social standards, the EIB is contributing to promoting sustainable development for the region, and hence has a considerable impact on the integration process with the European Union. Finally, the EIB lending conditions to SMEs through financial institutions contribute to improving access to finance. Indeed, EIB loans are flexible in terms of size, duration, structure. Lending decisions to SMEs remain with the intermediary institutions, which also retain the financial risk of the on-lending. The intermediary transfers the EIB financial advantage reflecting the positive impact of EIB funding to the final beneficiary and hence positively affecting the economic development.
How important is transnational cooperation and interoperability of energy, transport and infrastructure systems?
— Successful economic integration within the region and with the EU will only be possible with enhanced connectivity, especially in terms of energy and transport sectors. Improving transport and energy links within the Western Balkans, as well as between Western Balkans and the European Union, is a key factor for growth and jobs and will bring clear benefits for the economies and citizens of the region. The EIB has been very active in this context and I can mention for example successful financing of the Corridor Vc in Bosnia Herzegovina or the Corridor X in Serbia and North Macedonia. The countries of the region should also continue to focus on existing commitments and agreements, in particular, the development of a Regional Economic Area, which was agreed by the leaders of the Western Balkans in 2017. Regional Economic Area will further strengthen trade, investment and mobility within the region and between the region and the EU and will promote the digitization of the region’s economies. Regional cooperation and good neighborly relations are essential for progress on the respective European pathways.
What are the current tasks of the EIB and what are the tasks assigned by the European Commission to the EIB?
— As the EU Bank, the mission of the EIB is to help countries of the Western Balkans develop their infrastructure while utilizing best banking practices in the co-financing of viable projects, which promote growth and employment. We are ready to support and continue supporting much-needed investments in the transport, but also the energy sector, which is important for reaching climate action targets with a particular accent on renewable energy and energy efficiency. We are also supporting the digital infrastructure, as well as investments in health, education and R&D and bringing the experience we have gained in these sectors in the EU to the Western Balkans. As an EU institution, we wish our Group to be the natural and primary partner that will help the countries on their paths towards the EU, and our activities will only increase, as that process becomes firm. We are here to stay as the EU Bank. This differentiates EIB from other financing institutions with whom we greatly cooperate.
What are the EIB’s further plans for this region and Europe?
— We have long-standing relations with all the countries of this region. EIB is ready to continue acting as the key partner to boost the development of the public and private sectors. In addition to financing investments, EIB also provides advisory and technical support to prepare projects and implement them, working closely with the Government, municipalities, local banks and companies, as well as with the European Commission and other financing partners, developing strong ties with all the countries of the region. Last year was the record year of the EIB Group in the Western Balkans as we signed over EUR 1 billion new financings. It will be important to ensure that disbursement of funds progresses as planned in order for projects to be realized and citizens of the countries to feel the benefits of the EIB support, and to that end, we will continue working closely with all our partners. As far as Eu-rope, the EIB Group, as the EU’s investment vehicle, plays an integral part in addressing market failures and investment gaps through the creation of impact and additionality in the European economy. Overall, in 2019, it is expected our new financing to exceed EUR 50 billion (in the EU and outside the EU) with a continued substantial role in implementing EU policy initiatives.
Can you tell us more about the Economic Resilience Initiative (ERI)?
— The Economic Resilience Initiative (ERI) has been developed by the EIB in cooperation with the European Commission in response to a request by the European Council for a specific initiative aimed at rapidly mobilizing additional financing in support of growth, vital infrastructure and social cohesion in the Southern Neighbourhood and Western Balkans regions. Economic resilience refers to the capacity of economies to absorb and respond to crises and shocks while maintaining strong growth. As at the end of April 2019, 46 ERI EIB projects have been approved for EUR 4.5bn, of which 36 are fully or partly signed (EUR 3.4bn). Within the 46 projects approved across both regions, 57% finance credit lines for SMEs, followed by water and sewerage with 17% and by transport sector with 14%. I can mention the recent signature of the EUR 40 million loans for the Municipal Infrastructure Resilience initiative in Serbia, which will be soon followed by the signature of EUR 10 million investment grant for helping to modernize and rehabilitate water, sanitation and wastewater infrastructure across many municipalities in Serbia.
Serbia has withdrawn close to 90% of the signed financing with EIB, observing the statistics in the past ten years. In what period and on what will the remaining funds be used?
— Currently, under implementation are around 18 investment projects for a value of roughly 1 bn euros. The main projects under implementation include: Corridor X motorway (E-80, EUR 265m), Public Sector Research and Development (EUR 200m), Clinical Centres (EUR 200m), Municipal Infrastructure (EUR 75m), School Modernisation programme (EUR 50m), Apex loan for SMEs (EUR 150m), as well as the support channelled to financing of SMEs through credit lines in place with commercial banks such as Banca Intesa, Societe Generale, Erste Bank, Procredit and Raiffeisen leasing. In Serbia, we are financing the construction of motorways and by-passes, rehabilitating the national road and railway networks, refurbishing and building of new schools, hospitals, judiciary facilities, municipal infrastructure, as well as providing support to the scientific community. In the future, we intend to widen further our lending activities to sectors such as energy and energy efficiency and environmental protection, which have a positive impact on climate change. This year and beyond we also envisage support for Serbia’s water sector, sanitation, wastewater as well as for the improvement of municipal infrastructure in general, all with the aim of supporting the creation of a resilient economy, ready to absorb shocks as and when they occur.
The EIB has been active in the Western Balkans since 1977. „Looking back, since 1977, I can proudly say that every significant motorway and road in Serbia has the stamp of EIB, starting from the Brotherhood and Unity highway in the early 70s, through bypass around the City of Bel-grade as part of the Pan European Corridor X that connects Salzburg in Austria with Veles in North Macedonia, to highway through Grdel-ica Gorge, the most difficult and demanding part of Corridor X. All financed by EIB,” said Dubravka Negre, Head of the EIB Regional Representation for the Western Balkans, at a reception Europe Day, celebrated by the Bank as a financial lever of the Union.