EIB’s VP McDowell: No infrastructure funding issue in Romania, but rather a lack of viable, well-planned public projects

The situation of the infrastructure in Romania is not caused by a funding problem, but rather by a lack of viable, well-planned public projects, says in an interview with AGERPRES the Vice President of the European Investments Bank, Andrew McDowell.

Moreover, the EIB official says that other important factors include the development of the planning and projects’ implementation capacity, as well as an efficient control of fraud and corruption.

Andrew McDowell asserts that Romania faces an economic growth based on the private consumption, but in order to remain sustainable, it should be mainly determined by the investment activities.


What is the financing strategy of EIB in Romania for the next period?


The EIB lending commitment in Romania since the start of EIB lending operations in the country amounts to about EUR 13 bn. The EU Bank will remain Romania’s partner of reference for the financing of priority investments undertaken across the country.

The EIB’s successful approach to combine lending, blending (of grants and loans) and advising remains entirely relevant and valid for its future operations in Romania. Present in all major sectors of the Romanian economy we are actively cooperating with the government and other public authorities, the banking sector and corporate customers. In the public sector we will continue to support priority infrastructure investments, co-financing EU-funded projects, particularly in the areas of transport, environment, agriculture as well as in the health and education sectors. In the private sector we target investments requiring the support of EFSI (the European Fund for Strategic Investments) that forms part of the Investment Plan for Europe (Juncker Plan). EFSI backed financing is provided for a wide range of activities, including energy, industry, telecommunications or municipal infrastructure. As an example we can mention the BRUA gas pipeline project promoted by Transgaz. In cooperation with the banking sector we will further provide affordable financing to SMEs and Mid-cap companies, using risk sharing solutions like the SME initiative.


Regarding the infrastructure sector, the amount of one billion euros represents the entire funding which the institution will offer by 2020?


No, the Bank’s lending programme until 2020 is much more ambitious: the EUR 1bn loan you refer to concerns one Structural Programme Loan provided to Romania for the co-financing of EU-funded priority projects in the transport sector. It is part of a wider public financing programme of about EUR 2bn of sovereign loans deployed over 2016-2018 benefitting investments in environment, growth oriented activities, transport and agriculture. These loans ultimately support more than EUR 20bn of investments on the ground. As in the past, our financing of sovereign investments will be complemented by municipal and private sector projects increasing mobility, safety of energy, energy efficiency, interconnectivity, urban infrastructure or the quality of drinking water in Romania. On average, we expect to make available more than EUR 1bn of financing each year to the Romanian economy. By providing long-term affordable financing and advisory services to Romania the EIB contributes to accelerating the absorption of EU grants, creating growth and jobs and ultimately to improving the living conditions of Romanian citizens.


How many infrastructure projects are currently financed by the EIB in Romania? Could you name the biggest?


The Bank finances infrastructure projects either directly (eg. Energy Efficiency projects promoted by municipalities) or indirectly, through sovereign Structural Programme Loans, ie. financial envelopes made available to the Finance Ministry and administered by relevant Line Ministries. Structural Programme Loans support a large number of priority public sector infrastructure investments of any size and in different sectors, including transport, energy, agriculture, health or education. These projects contribute to a wide range of priority objectives, including improved connectivity, innovation, environmental protection, increased water supply quality or rural development. Having this in mind, there is a big number of infrastructure projects receiving EIB support in Romania, however, it is difficult to name an exact number.  For the purpose of naming a few examples we can refer to the financing of the car production facilities of Ford in Craiova, the windfarm in Fantanele or the metro in Bucharest.


How do you explain the situation of infrastructure in Romania, is there a funding issue?


There is no funding issue in Romania but rather a lack of well-planned viable public projects. It is obvious that there are gaps in the existing public infrastructure networks, particularly in of roads and rails. These gaps are not related to insufficient funding but require a transparent prioritization of public infrastructure projects, guided by a long term strategic vision aiming to genuinely improve the country’s infrastructure and the populations living conditions in a sustainable manner – beyond political cycles. Other important factors include the development of project planning and implementation capacity as well as an effective control of fraud and corruption.


How do you see the absorption of EU funds by Romania in the next financial period?


It is expected that the volume of EU funds available during the next Programming Period will remain below amounts available under the present (2014-2020) Programming Period. For an unchanged volume of investments this would (automatically) increase the absorption rate of funds. However, much of the answer depends on the composition of EU Funds: it can be expected that during 2021-2027 an increasing amount of pure grants will be replaced by Financial Instruments, ie. loans (or guarantees) blended with grants (as for example under EFSI or the SME Initiative). Hence, the EU Funds absorption capacity of a Member State  will (then) also depend on its capacity to successfully implement Financial Instruments.


How many projects have you rejected funding this year and what was the reason?


EIB supports projects that are technically sound and economically and financially viable. Such projects must be also eligible for EIB financing in terms of compliance with EU environmental and procurement legislation. If this is not the case, we can help to develop a project through various advisory services.


I have seen that in the past most of EIB funding went to the SME sector.


Indeed, for some time SME oriented activities absorbed an important share of EIB financing in Romania. The situation has however evolved in the meantime: with the return of public sector Structural Programme Loans and the progressive deployment of EFSI-backed financing to the private sector the EIB’s activities in Romania are more balanced across different sectors.


How do you see the development of Romania’s economy in the next period?


We are aware that the economic growth in Romania is currently driven by private consumption, benefitting primarily from tax reforms. In order to remain sustainable, economic growth should be mainly driven by investment activities. If the right economic choices are made, including a strong and sustainable development of the public infrastructure, Romania could enjoy continuous economic growth and employment and attract foreign investments.

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