The European Commission’s investment plan has been one of its biggest priorities this year. Now that the legal skeleton is in place, its political pilot, Vice-President Jyrki Katainen, recognised that he has to redouble efforts to ‘sell’ the package.
Jyrki Katainen is Commission Vice-President for Jobs, Growth and Investment. He is Finland´s former prime minister and former minister of finance.
Katainen spoke to Jorge Valero.
Now that the European Fund for Strategic Investments (EFSI) has been in place for half a year, it seems the right time for some fine-tuning. Which areas would you improve?
The investment plan has taken off very positively. When you look at the EFSI, I must say it has started surprisingly well, in the sense that if you look at the current state of play, there is now more than 30 projects which have got financing from it, using a bit more than €5 billion which is expecting to mobilise €23 billion of investment in the real economy. Meanwhile, EFSI’s small and medium-sized window has already signed 66 agreements with intermediary banks, both commercial banks or national promotional banks. Together, these agreements are worth €1.5 billion, and this will trigger a bit less than €20 billion. We are expecting that around 71,000 SMEs will benefit from this financing. So, overall, we will moblise around €43 billion.
Do you still expect to meet the initial target of attracting €300 billion in investments over the three year period?
Yes, I think so. Because we have just started.
But what would you improve?
From now on, the biggest challenge is to raise awareness among the private investors that EFSI is up and running, and what it means in practice. We have to use the examples, the projects that have been financed by EFSI, and spread the examples to show what can be done. We regularly hear feedback from private equity funds that they have not heard about EFSI. And many regional leaders also heard about it for the first time when we met with them. There is plenty of work to be done next year to raise awareness.
What other changes would you do?
Another one would be to help member states and the private sector to establish investment platforms. For instance, in some southern countries, there may be demand for relatively small size tourism infrastructure investment. Because of the situation in a specific country, banks could not afford to finance those projects because the banks have to deleverage.
The EFSI could come into the picture if there is a platform bringing together rather small investments. Another challenge is to build up the online portal of the investment plan. If there are hundreds of projects online, investors can choose and pick the project they want to cheap in. This could boost investment next year, and the following one.
The final challenge is to channel third country contributions to the plan. China has been interested in it. Some countries from the Gulf region have contacted us. We have a working group in which the Commission, the EIB and the Chinese authorities are involved and we are trying to find the way for Chinese contribution to the European real economy. Right now, China is investing in existing assets, like energy networks or real state, but our aim is to provide more opportunities, for example investments in platforms. instead of just buying assets.
According to some people, the Chinese contribution could be up to ten billion euros. Could you confirm that at this stage?
It is very difficult to say. They have not announced anything. I could imagine they will add something between five and ten billion euros. We are very open towards Chinese investors. We are trying to find the right instruments to offer to China to invest.
Some weeks ago you said that if member states don’t want to participate, they should not block private sector involvement. Is that the case?
We didn’t know what to expect in terms of member states’ contributions to the EFSI. But anyway it was very good. Even the UK announced they will allocate some €8.5 billion to the plan. The total contribution of member states is €42.5 billion. It is quite a significant number. There are some member states where the central government has not dedicated any resources to the plan, for example The Netherlands. There are two or three region in The Netherlands that have privatized public assets like energy and electricity companies. They contacted us, because they are interested in establishing an investment platform for SMEs for Research and Development financing. They don’t have any need of infrastructure, but they want financing for innovative SMEs.
One of the remarks heard also from the private sector is that there is a risk of spreading resources too thinly over a large number of goals and projects. Is the plan enough focused?
The EFSI finance projects according to the demand. Moreover, a bit more than half of the projects are from the energy efficiency, renewal energy and innovation areas.
If you could identify one sector due to its horizontal impact and huge potential, which one would you pick?
It is easy to pick research and development related investment, maybe in digital and energy areas. For example, it could be the combination of digital and environmental investments to strengthen the circular economy.
If I am not wrong, only nine EU member states have contributed to EFSI, less than the number of EU governments supporting the Asian Infrastructure Investment Bank. Did you expect more support from member states, since they called for an investment plan many times brgotr? Are you frustrated with it?
Not really. The difference between the EFSI and the AIIB is that the former is part of the European Investment Bank, and member states have already capitalized the EIB, while the AIIB is a new creation. So it is understandable that more countries are contributing directly to AIIB.