Report from the Commission to the Council and to the European Parliament on the rate of utilization of European Investment Bank loans for projects in central and eastern European countries (Poland, Hungary, the Czech Republic, the Slovak Republic, Romania, Bulgaria, Latvia, Estonia, Lithuania and Albania) (from 1 July 1996 to 30 June 1997)
Date: 1998-01-13
Institutions: European Commission
Subjects: Central and Eastern Europe, EIB loan, cooperation agreement (EU), investment project, report

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

•tt 

& 

Brussels,  13.01.1998 
C()M(1998)  1 

final 

REPORTS FROM THE  COMMISSION 

TO THE COUNCIL AND TO THE EUROPEAN  PARLIAMENT 

•  on the implementation  of loans granted by the European Investment  Bank for  projects 
of mutual  interest  in countries of Latin America and Asia with which the  Community 
has concluded  cooperation agreements. Interim mandate (1996/1997) 

•  on  the  implementation  of  European  Investment  Bank  loans  for  projects  in  central 
and eastern  European  countries: Poland,  Hungary, the Czech  Republic, the  Slovak 
Republic, Romania, Bulgaria, Latvia, Estonia, Lithuania and Albania (1996/1997) 

•  on  the  implementation  of  loans  granted  by  the  European  Investment  Bank  in  the 

Republic of South Africa  (1995-96) 

and 

on  the  rate  of  utilization  of  European  Investment  Bank  loans  for  projects  in  the 
Republic  of  South  Africa  (from  1 January  1997 to 30 June  1997) 

on  the  rate  of  utilization  of  European  Investment  Bank  loans  for  projects  in  central 
and  eastern  European  countries  (Poland,  Hungary,  the  Czech  Republic,  the  Slovak 
Republic,  Romania,  Bulgaria,  Latvia,  Estonia,  Lithuania  and  Albania) 
(from 
1 Julv  1996 to 30 June  1997) 

REPORT  FROM  THE  COMMISSION 

TO THE  COUNCIL  AND TO THE  EUROPEAN  PARLIAMENT 

on the implementation  of loans granted by the 

European Investment Bank for projects of mutual interest in countries 

of Latin America and Asia with which the Community  has 

concluded cooperation  agreements. 

Interim mandate (1996/1997) 

1. 

Introduction 

CONTENTS 

2. 

3. 

4. 

5. 

Legal  framework 

The  European  Investment  Bank's mandate  in  Latin America  and  Asia  in  relation 
to its activities outside the Community 

Results of the interim mandate for Latin America and Asia 

General  comments  on  operations  and  assessment  of  the  European  Investment 
Bank's action under its interim mandate 

Annex  1: 

Summary table giving details of operations approved and signed under the 
interim mandate for  Latin America and Asia 

Annex 2: 

Mutual  interest  of  operations  approved  under  the  interim  mandate  for 
Latin America and Asia 

Annex 3: 

List  of  countries  in  Latin  America  and  Asia  with  which  the  Bank  has 
concluded  framework  agreements 

1. 

Introduction 

_ 4-

This report  on the activities  of the  European  Investment  Bank (EIB) in a number of 
Latin American  and  Asian  countries  has been  drawn up  in accordance  with  Council 
Decision  96/723/EC  of  12 December  1996 granting  a  Community  guarantee  to  the 
European  Investment  Bank against  losses under loans for projects  of mutual  interest 
in  Latin American  and  Asian  countries  with  which  the  Community  has  concluded 
cooperation  agreements  (Argentina,  Bolivia,  Brazil,  Chile,  Colombia,  Costa Rica, 
Ecuador,  Guatemala,  Honduras,  Mexico,  Nicaragua,  Panama,  Paraguay,  Peru, 
El Salvador,  Uruguay  and  Venezuela;  Bangladesh,  Brunei,  China,  India,  Indonesia, 
Macao,  Malaysia,  Pakistan,  Philippines,  Singapore,  Sri Lanka,  Thailand  and 
Vietnam). 

This  report  covers  operations  totalling  EiCU 275 million  which  were  approved  by 
the EIB Board  of Directors between  the end of the first mandate  (22 February  1996) 
and the end of the interim mandate (30 June  1997). 

The last of the three annual  reports concerning  the  first  mandate  (1993-96) was sent 
to 
in  September  1996  (COM(96) 429 final  of 
9September  1996). 

the  Council  and  Parliament 

2.  Legal  framework 

The  legal  framework  for  the  interim  mandate  in  Latin  America  and  Asia  is  laid 
down in the following  decisions and documents: 

-  Council  Decision  96/723/EC  of  12 December 1996 

the 
Official  Journal  of  19 December  1996)  granting  a  Community  guarantee  to  the 
European Investment  Bank  against  losses  under  loans  for  projects  of  mutual 
interest  in the above-mentioned  Latin American and Asian countries. 

(published 

in 

-  Decision  by the EIB Board of Governors  of  11 February  1997 authorising  the 
Bank to make loans of up to ECU 275 million from  its own resources for a period 
to  30 June  1997  in  order  to  finance  investment  projects  in  the  Latin  American 
and  Asian  countries  which  have  concluded  cooperation  agreements  with  the 
Community  and are listed in the Council Decision of  12 December  1996. 

-  Contract  of  guarantee  signed  by  the  European  Community  and  the  EIB  on 
18  and  26 March  1997.  Loans  totalling  ECU  153 million,  approved  by  the 
Board of Directors  of  the  Bank  under  the  above-mentioned  decisions  until 
publication 
19 April  1997  of  Council 
Journal 
Decision 97/256/EC  of  14 April  1997 relating  to  the  new  Community  guarantee 
system for the EIB, are fully  guaranteed  by the Community  in accordance with 

the  Official 

of 

in 

Council  Decision 96/723/EC of  12 December  1996. 

- 5-

19 April  1997) 

-  Council Decision 97/256/EC of  14 April  1997 (published in the Official  Journal 
the 
of 
a 
European Investment  Bank  against  losses  under  loans  for  projects  outside  the 
Community  (Central  and  Eastern Europe  countries,  Mediterranean  countries, 
Latin American and Asian countries and South  Africa). 

Community 

guarantee 

granting 

to 

-  Contract  of  guarantee  signed  by  the  Community  and  the  EIB  on  25  and 
29Julyl997.  Loans  totalling  ECU  122 million,  approved  by  the  Board  of 
Directors  of  the  Bank  between  the  publication  in  the  Official  Journal  of 
19 April  1997 of  Council  Decision  97/256/EC  and  30 June  1997, are  guaranteed 
by  the  Community  in  accordance  with  Council  Decision  97/256/EC  of  14 
April  1997  and  according  to  the  provisions  laid  down  in  the  above-mentioned 
contract of guarantee. 

3.  The  Bank's  mandate  in  Latin America  and  Asia  in  relation  to  its  activities 

outside the Community 

The  mandate  given  to  the  Bank  in  Latin America  and  Asia  confers  on  it  special 
responsibility  for  supporting  the  Community's  cooperation  policy.  Most  of  the 
Latin American  and  Asian  countries  concerned  by  the  Bank's  mandate  have 
historical,  cultural  and  economic  ties  with  the  countries  of  the  European Union. 
These  long-standing ties are reflected  in a cooperation  policy  which was  established 
by the Community  in  1976 with a number of these countries and broadened  over the 
years  up  to  the  Council  Decision  of  15 February  1993  concerning  Bank  operations 
under  the  first  mandate  (Council  Decision  93/115/EEC,  published  in  the  Official 
Journal of 23 February  1993). 

In  view  of  the  encouraging  results  of  this  first  mandate  which  expired  in 
February  1996, it was appropriate  to renew  it.  However,  the  Council  did  not  reach 
agreement  on  the  ceiling  of  the  1996  interim  mandate  until  12 December  1996 
(Council  Decision 96/723/EC  mentioned  in  point  2).  In  view  of  the  date  of  the 
Decision,  the  Bank  was  unable  to  attain  the  ceiling  of  ECU 275 million  by 
31 December  1996.  Consequently,  and  in  accordance  with  Article  1  of  the 
Decision,  the  period  during  which  it  was  to  remain  applicable  was  automatically 
extended until 30 June  1997. 

The  interim  mandate  enabled  the  Bank  to  consolidate  its  position  as  a  lender  in 
Latin American and Asian countries.  Under the Council  Decision  of  14 April  1997, 
the  Bank's  operations  in those  countries  will  continue  to  be  implemented  until  the 
year 2000 (see point 2 above). 

4.  Result of the interim  mandate 

The  Bank's  Board  of  Directors  approved  six  operations  totalling  ECU 275 million 
under  the  interim  mandate.  A  summary  table  giving  details  about  project 
commitments and signings (countries, sectors, loan amounts, share of the project 

5. 

5.1 

5.2 

5.3 

5.4 

5.5 

financed  by the EIB, co-lenders, etc.) is set out in Annex 1. 

General  comments  on operations  and  assessment  of the Bank's  action  under 
the interim  mandate 

As  in  the  case  of  the  first  mandate,  demand  substantially  exceeded  the  funds 
available  in  1996/97  owing  to  the  high  absorption  capacity  of  the  eligible 
countries.  As a result,  the ECU 275 million  of the interim  mandate  were  fully 
committed  (mostly in  1997).  In  1996, however, it was necessary to reject  several 
financing applications  from  European  Union  firms  because  of the  lateness  of  the 
Decision  introducing the interim mandate. 

In  accordance  with  the  Bank's  interim  mandate  and  as  in  the  case  of  the  first 
mandate,  all  projects  financed  will  benefit  both  the  Latin American  and  Asian 
countries concerned and the European  Union.  In line with this specific concept of 
mutual interest, operations  satisfy  one or more of the following  criteria:  transfer 
of  European  technologies  and  know-how,  cooperation  between  European  and 
local  firms,  cooperation  in the  fields  of  energy  and  environmental  improvement. 
A summary  of mutual  interest  for each of the six operations approved  is set out in 
Annex 2. 

The  build-up  of  projects  involving  European  private  partners  is  continuing. 
The  percentage  of  private  projects  approved  by  the  Bank  had  already  grown 
during  the  first  mandate  (1993:  20%;  1994:  42%;  1995/1996:  46%);  it  has 
increased to 78% under the interim mandate (see Annex  1).  The percentage could 
eventually  be  higher  because  it  is  envisaged  that  the  final  recipients  of  the 
Corporacion  Andina  de  Fomento  (CAF)  global  loan  will  include  private-sector 
promoters.  The  CAF  is  a  multilateral  regional  financial  institution  with  its 
registered  office 
in  Caracas,  whose  principal  shareholders  are  the  member 
countries  of the  Andean  Pact  (Bolivia,  Colombia,  Ecuador,  Peru  and  Venezuela) 
(see Annex  1).  This confirms  that  EIB financing  is particularly  well suited  to the 
needs  of  European  enterprises  in  their  investment  in  the  emerging  countries, 
which make up the majority  of the Latin American and Asian countries. 

The average size of operations  is ECU 47 million, disregarding  future,  distinctly 
smaller loans under the CAF global loan. 

The  sectoral  breakdown  (see  Annex  1) shows  activity  to be  concentrated  in  the 
industry  and energy  sectors.  The aim  is better  industrial  cooperation  between the 
Latin American  and  Asian  countries  and  the European  Union  and  the  breakdown 
is  consistent  with  the  objectives  of  the  cooperation  agreements  signed  between 
those  countries  and  the  European  Union,  which  frequently  stress  the  specific 
importance  of  cooperation  in  the  energy  field.  The  concentration  of  activity  in 
industry  can  also  be  explained  by  the  fact  that  European  industrial  enterprises 
which, in the past, borrowed  from  the Bank for their investment  within the Union, 
are now also 

5.6 

5.7 

- 7-

requesting  Bank  finance  for  their  projects  in  the  Latin American  and  Asian 
countries  (often  for  joint  ventures,  e.g. 
the  "Vidrio  Saint-Gobain"  project  in 
Mexico). 

As  far  as  the  geographical  breakdown  is  concerned,  the  Bank  endeavours  to 
maintain,  wherever  possible,  a  fair  balance  between  the  two  regions  concerned. 
However,  the operations approved  in Latin America  account  for  two thirds of the 
ECU 275 million  and  those  in  Asia  for  only  one third  (see  Annex  1).  This  is 
mainly  due  to  the  very  short  period  available  to  the  Bank  for  committing  the 
envelope. 

Cooperation  with  multilateral  and  bilateral  financial  institutions  in  the 
Latin American  and  Asian  countries  continues  to  be  good.  Three  of  the  six 
operations  undertaken  are  being  financed  jointly  with  multilateral  institutions 
(World  Bank,  Asian  Development  Bank)  and/or  with  bilateral 
financial 
institutions  (Kreditanstalt  fiir  Wiederaufbau,  Commonwealth  Development 
Corporation).  A  fourth  loan has  been  made directly  to the  CAF, the  multilateral 
institution  already  mentioned.  The  activities  of  the  Bank  and  the  other 
multilateral  and  bilateral  institutions  complement  each  other  at  project  level  and 
coordination  between  the  institutions  is  good.  Complementarity  offers  sufficient 
opportunities  for  action  in  the  Latin American  and  Asian  countries  to  all  the 
parties  engaged  in  multilateral  financial  aid,  favours  the  maintenance  of  good 
cooperative  relations  and  limits  the  risks  of  incompatibility.  The  Bank  is 
increasingly  centring  its  operations  on  private  projects  involving  European 
companies,  as partners  in joint  ventures  or  shareholders,  while  other  multilateral 
financial  institutions  are  better  placed  to  head  the  co-financing  of  large-scale 
projects  (often  public) in the infrastructure  field. 

5.8 

The  Bank's  cooperation  with  the  European  banking  sector,  in  particular  in 
respect  of  guarantees,  remains  good.  The  EIB  and  the  European  commercial 
banks  complement  each  other  in  that  the  latter  rarely  provide  the  same  type  of 
resource  as  the  EIB,  particularly  as  regards  duration  and  period  of  grace.  The 
combination of complementary  financial  instruments constitutes an added  beneflt. 

5.9 

It  should  be  noted  that  the  interim  mandate  falls  under  two  different  budget 
guarantee systems: 

•  ECU  153 million  of  the  operations  approved  will  be  covered  by  the  old  100% 
budget  guarantee  system  (same  system  as  for  the  first  mandate);  the  following 
this  guarantee:  Vidrio  Saint-Gobain/Mexico 
loans  will  be  covered  by 
(ECU  50 million),  Ghazy-Barotha/Pakistan 
Batangas 
I/Philippines (ECU 60 million) and Pirelli Optical Fibre/Brazil (ECU 22 million); 

(ECU 21 million), 

•  ECU  122 million  of the operations  approved  by the  EIB Board  of Directors  after 
the  publication  in  the  Official  Journal  of  Council  Decision 97/256/EC  of 
14 April  1997 (see 2 above) will be covered by the new 70% global budget 

guarantee  system  introducing  a  risk-sharing  element  between  the  EIB  and  the 
Community  in respect of a significant  proportion of the Bank's lending which the 
Council  has set at 25%.  For  loans where risks are shared, the Community  covers 
the political  risks arising  from  currency  non-transfer,  expropriation,  war and civil 
disturbance  within  the  limits laid down  in the contract  of guarantee  signed  on 25 
and  29 July  1997.  Out  of  the  envelope  of  ECU  122 million,  risks  are  shared  in 
two  projects  out  of  the  three  which  have  been  signed:  the  aggregate  amount 
involved  is  ECU 82 million,  which  represents  67%  of  the  proportion  of  the 
interim  mandate  falling  under the new budget guarantee system.  The projects  are 
the  following  (the  last  two  involve  risk  sharing):  CAF  global  loan, Andean  Pact 
(ECU 40 million  with  no  risk  sharing  between  the  Bank  and  the  Community 
budget),  Batangas  II/Philippines  (ECU  12 million  with  the  Bank  and  the 
Community  budget  sharing  the  risk)  and  Mercedes  Benz  A-Class  Mercosul 
(ECU 70 million with the risk being shared). 

5.10  The  list  of  framework  agreements  establishing  the  general  legal  bases  for 
carrying  out  projects  in both  public  and  the private  sector  which  were  concluded 
between the EIB and the country concerned is given in Annex 3. 

PROJECT 

COUNTRY 

SECTOR 

ALA INTERIM MANDATE  1996 - JUNE  1997 

Annex 1 

EIB LOAN 

BORR  WER 

ZO  NE 

n.s.  =  not  yet  signed 

EIB  LOAN 
AS  %  OF 

DATE  OF 
APPROVAL 

FINANCE 

Bl-  AND  MULTI 

(M ECU) 

PUBLIC 

PRIVATE 

ASIA 

LATIN 
AMERIC 
A 

TOTAL 
PROJECT 
COST 

OF  BOARD  OF 
DIRECTORS 

CONTRACT 
SIGNATURE  3 

Vidrio  St-Gobain 

Mexico 

Industry 

Ghazy  Barotha -
second portion 

Pakistan 

Energy  (hydro 
power) 

Batangas Power Plant 

Philippines 

Energy  (combined 
cycle) 

Pirelli Optical Fibre 

Brazil 

Industry 

CAF Global loan 2 

Andean Pact 

Global Loan 

Mercedes-Benz A-
Class Mercosul 

Brazil 

Automotive 
industry 

50 

21 

60 

12 

22 

40 

70 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

4 1% 

1% 

12% 

50% 

20% 

12/11/96 

12/05/97 

10/12/96 

23/07/97 

29/01/97 

9/06/97 

25/02/97 

29/04/97 

20.10.97 

20.10.97 

n.s. 

16.10.97 

10% 

9/06/97 

n.s. 

KfW 

T O T AL 

I N% 

275 

61 

214 

93 

182 

8% 

100% 

22% 

78% 

34% 

66% 

1  Loan falling  under the risk-sharing agreement. 
2  Corporacion  Andina  de Fomento (CAF)  is a multilateral  institution  governed  by  public  international  law whose  principal  shareholders  are  the  member countries  of 

the Andean  Pact, the republics of Colombia, Bolivia, Ecuador,  Peru and Venezuela (collectively  over 97% of ownership). 

3  Situation at 4 November  1997. 

LATERAL 

CO-LENDERS 

Asian Development  Bank, 
World  Bank, 
Kreditanstalt fur 
Wiederaufbau  (KfW), 
Islamic Development  Bank 

KfW,  Commonwealth 
Development  Corporation 

-10 

Annex  2 

Project 

Country 

Vidrio St-Gobain  Mexico 

Ghazy Barotha 
Hydropower-Sec 
ond Portion 

Pakistan 

Mutual  interest  of operations  under  the  interim  ALA  mandate 

Mutual  interest 

the project  is a joint venture  in which  a European  enterprise  has a large stake; 
it helps to strengthen  Mexico as a bi. Jgehead  for  European  companies wishing to become established  on the American  market; 
the guarantee will  be provided  by the European  group which  is the majority  shareholder; 
the project  comprises a substantial  element of technology  transfer. 

• 
• 
• 
• 
The  project  comprises  a substantial  element  of transfer  of  European  technology  and  know-how.  The  concept  and  development  of 
the project  were carried out by a joint venture consisting mainly of Pakistani and  European consultants who will also be  responsible 
for  supervising  the  performance  of the  contract.  All  the  civil  engineering  contracts,  representing  some  USD 700 million  in  value, 
have  been  won  by  European  entrepreneurs.  The  project  also  represents  a major  increase  in the  country's  capacity  for  producing 
renewable  energy  from  national  resources. 
In  a  wider  context,  the  project  will  contribute  to  the  attainment  of  some  of  the 
objectives  of  the  cooperation  agreement  concluded  between  the  EC  and  Pakistan,  which  relates  in  particular  to cooperation  in  the 
energy  field. 

Bathangas Power  Philippines  The  borrower,  First  Philippine  Gas  Corporation,  is  a  wholly-owned  subsidiary  of  First  Gas  Holdings  Corporation,  itself  a joint 
venture  established  by British  and  Philippine companies.  The Malampaya  gas deposit,  which  will probably  supply the power  plant 
Plant 
with  fuel,  is  exploited  jointly  by  Shell  and  the  Occidental  Petroleum  Company,  while  the  turn-key  construction  contract  for  the 
power  plant  has  been  awarded  to  a  large  European  group.  In  a wider  context,  having  regard  in  particular  to the  important  role  it 
plays  in the  introduction  of natural gas to the Philippines, the project  will  favour  the attainment of certain  objectives  included  in the 
EU-ASEAN  cooperation  agreement,  which  mentions  in  particular  cooperation  in  the  fields  of  energy  and  environmental 
improvement. 

Pirelli Optical 
Fibre 

Brazil 

• 
• 
• 
• 
• 

the promoter  is the subsidiary of a European  enterprise; 
the project  will help to improve the promoter's position on a promising  market; 
the project  comprises a substantial  element of technology  transfer; 
the guarantee will be provided  by a European  bank; 
the project  will contribute to the modernisation  of the fibre  optic cable sector in Brazil and will assist  in the modernisation  of the 
country's telecommunications  networks (national and  international). 

Project 

Country 

11 

Mutual  interest 

Corporacion 
Andina 
Fomento 
global loan 

de 
(CAF) 

Five 
member 
countries  of 
the  Andean 
Pact 

The  proposed  projects  are  of  mutual  interest  and  are  likely  to  strengthen  cooperation  between  the  EU  and  the  Andean  group, 
through  private  investment  in the eligible  sectors.  The global  loan  will  enable  CAF to grant  loans of  up to  15 years, a new  feature 
in  the  region  which  should  favour  its  European  customers. 
It  should  also  partly  fill  the  gap  between  the  EC  International 
Investment  Partners  instrument  (ECIP)  managed  by  the  Commission,  the  credits  for  which  are  limited  to  ECU  1  million,  and  the 
It  will  permit  the  financing  of  beneficial  medium-size  European  Union/Latin America 
minimum  amount  of  EIB  direct  loans. 
initiatives, which have so far been  ineligible for a direct  Bank  loan because of their size. 

Benz  Brazil 

Mercedes 
A-Class 
Mercosul 

• 

• 

• 

the project  is essential  in order to strengthen  the position  of the promoter, which  is the subsidiary  of a large European  enterprise, 
on one of the leading emergent markets; 
it comprises a substantial  element  of technology  transfer  (equipment  during the  construction  phase  and  imports  of  components 
during the production phase); 
it will help to modernise the Brazilian  automobile  industry. 

-  12-

Annex 3 

List of countries which have concluded a 
framework  agreement with the EIB 
(situation at  15 September  1997) 

1) 

Agreements  signed and presently valid for all the mandates 

ASIA 

LATIN AMERTCA 

China 
Indonesia 

06.12.95 
20.06.95 

First 
signature 

Extension 

16.03.97 

Argentina 
Brazil 
Bolivia 
Colombia 
El Salvador 
Honduras 
Mexico 
Panama 
Paraguay 
Peru 
Uruguay 

03.10.94 
19.12.94 
12.10.95 
13.03.95 
27.02.97 
27.02.97 
09.03.95 
10.04.96 
19.09.94 
02.10.94 
21.04.95 

2) 

Agreements  signed  for  the  ECU 750 million  mandate  (ongoing  negotiations 
for extension to new mandate) 

ASIA 

LATIN  AMERICA 

India 
Pakistan 
Philippines 
Thailand 

17/25.11.93 
25/28.02.94 
15.09.94 
10/17.01.94 

Chile 
Costa Rica 

07.10.94 
30.11.93 

3) 

New  framework  agreements  under  negotiation 
Bangladesh, Vietnam, Venezuela, Ecuador, Guatemala, Nicaragua. 

:  Sri  Lanka, 

Mongolia, 

13 

REPORT FROM THE  COMMISSION 

TO THE COUNCIL AND TO THE EUROPEAN PARLIAMENT 

on  the  implementation  of  European  Investment  Bank  loans  for  projects  in  central  and 
eastern  European  countries:  Poland,  Hungary,  the  Czech  Republic,  the  Slovak 
Republic, Romania, Bulgaria, Latvia, Estonia, Lithuania and Albania (1996/1997) 

- 14 

LIST OF CONTENTS 

1.  Introduction 

2.  Legal  framework 

3.  Activities of the European Investment  Bank in central and eastern Europe in 1996 

4.  The Bank's objectives  and priorities 

5.  Cooperation  with other  institutions 

Annex  1: 

Annex 2: 

Summary  table  of  the  financing  provided  on  the  basis  of  the  Council 
Decisions  of  15  March  1993  (93/166/EEC)  and  13  December  1993 
(93/696/EC).  Breakdown by country and sector 

Summary  table  of  the  financing  provided  on  the  basis  of  the  Council 
Decisions  of  15 March  1993  (93/166/EEC)  and  13 December  1993 
(93/696/EC).  List of projects by country 

-  15 

1. 

Introduction 

The present  annual report  on the activities of the European  Investment  Bank (EIB) 
in  central  and  eastern  Europe  has  been  drawn  up  in  accordance  with  Council 
Decision  93/696/EC  of  13 December  1993  (OJ  L  321  of  23  December  1993).  It 
relates  to  the  third  and  final  year  of  implementation  of  the  Council  Decision  and 
covers the period  from  1  January  1996 until June  1997, end of the mandate. 

The previous  annual  report  dealing  with  the Bank's  mandate  in central  and  eastern 
Europe was transmitted to Council and Parliament in October  1996 (COM(96)501). 

2. 

Legal  framework 

The  legal  and  institutional  framework  of  the  mandate  given  to  the  EIB  in  central 
and eastern Europe is laid down in the following  decisions and documents: 

-  Council  Decision  93/696/EC  of  13 December  1993 

of 
23 December  1993)  granting  a  Community  guarantee  to  the  Bank  against 
losses  under  loans for  projects  in central  and eastern  European  countries.  The 
guarantee  is  restricted  to  an  overall  loan  ceiling  of  ECU 3 000 million  over  a 
period  of  three  years,  beginning  on  the  date  the  Council  Decision  took  effect 
(23 December  1993)  subject  to an automatic  extension  of  six months  if,  at the 
end of the three years, the  loans granted  by the Bank  did not attain the overall 
amount referred  to above. 

(OJL321 

The  guarantee  covers  in  full  any  payments  not  received  by  the  Bank  but  due 
under  loans  granted,  in  accordance  with  the  usual  criteria,  in  respect  of 
investment projects carried out in the countries specified  in the Decision. 

(The  loan  guarantee  ceiling  includes  the  provisions  laid  down  in  respect  of 
investments  in Estonia,  Latvia and  Lithuania  in Council  Decision 93/166/EEC 
of  15Marchl993). 

-  Decision  by  the  EIB  Board  of  Governors  of  2 May 1994  authorising  the 

Bank to lend on the basis of the Council Decision of  13 December  1993. 

-  Contract  of  guarantee  signed  by  the  Community  and  the  EIB  on  22 July 
and  12 August  1994.  This  contract  supersedes  the  guarantee  contract  relating 
to the Council Decision of  15 March  1993 mentioned above. 

- 1 6-

3. 

Activities of the EIB in central and eastern Europe in 1996 

3.1 

In  1996  the  EIB  signed  21  loan  contracts  in  central  and  eastern  Europe  for  an 
aggregate amount of ECU  1 086 million, compared with  ECU 973 million  in  1995 
andECU921  million  in 1994. 

to  ECU 2 980 million, 

At  31  December  1996,  the  end  of  the  three-year  period  of  the  Council  mandate, 
total  loan  contracts  signed  by  the  bank  on  the  basis  of  the  1993-1996  mandate 
the  guarantee  ceiling  of 
amounted 
In  March  1997,  in 
ECU 3 000 million  granted  by  Council  Decision 93/696/EC. 
accordance  with  Article  1  of  the  Decision  which  automatically  extends  the 
guarantee  period  by  six months, the  Bank  signed  a final  loan  for  ECU 20 million, 
thus attaining the ceiling  granted. 

just  below 

Details  of  the  breakdown  per  country  and  sector  of  the  1993-1996  financial 
package as well as the list of projects are given in Annexes  1  and 2 respectively. 

3.2 

In  1996,  loans  in  Poland,  the  Czech  Republic  and  Hungary  accounted  for  almost 
71%  of the EIB  lending  in the region  during  1996.  The Bank  also signed  loans in 
support  of  projects  in  all  the  other  central  and  eastern  European  countries,  except 
Bulgaria (see table 1). 

Table  1.  Geographical  distribution of EIB lending in  1996/1997 
Council Decision  93/696/EC 

Country 

Number of loans 

Contracts signed 
(ECU m) 

Poland 
Czech  Republic 
Hungary 
Romania1 
Slovak  Republic 
Lithuania 
Latvia 
Estonia 
Albania 

3 
2 
2 
3 
2 
5 
3 
1 
1 

380 
255 
135 
110 
100 
72 
26 
16 
12 

(34.4%) 
(23.1%) 
(12.2%) 
(9.9%) 
(9.0%) 
(6.5%) 
(2.4%) 
(1.4%) 
(1.1%) 

TOTAL 

22 

1 106 

(100%) 

The  Bank's  activity  continues  to  support  the  development  of  the  economies  of 
central  and  eastern  European  countries  as  they  prepare  for  their  accession  to  the 
Community. 

Includes  loan of ECU 20m  signed  in March  1997. 

- 1 7-

As  in  previous  years,  financing  in  1996 centred  on  funding  strategic  infrastructure 
and strengthening the physical  links with the European  Union: 

• 

• 

• 

Half  the  total  financing,  ECU 563 million  (ECU 238 million  in  1995),  went 
to  finance  transport  infrastructure  projects,  most  of  which  form  part  of  the 
priority  transport  corridors  identified  by  the  Pan-European  Conference  in 
In  the  field  of  road  transport,  these  included  the  A4 
Crete  in  1994. 
Wroclaw-Gliwice  motorway 
the  M3  Budapest-Gyongyos 
in  Poland, 
motorway  in  Hungary  and  the  Via  Baltica  in  Lithuania;  in  the  field  of  rail 
transport,  they  included  the  modernisation  of  the  Warsaw-Ostrava-Vienna 
line  in  the  Czech  republic  and  the  rehabilitation  of  several  sections  of  the 
Tallinn-Narva railway  in Estonia. 

Loans  for  projects  in  the  energy  sector  totalled  ECU 363 million  and 
accounted  for  one third  of  total  financing 
in  the  region  during  1996 
(ECU 290 million  in  1995).  Loans  were  signed  in  five  countries  in  support 
of  six projects  relating  to the construction,  rehabilitation,  modernisation,  and 
expansion of power plants and gas transmission. 

Loans  signed  in  the  telecommunications  sector  totalled  ECU  115 million 
(ECU  130 million  in  1995)  and  accounted  for  about  10%  of  the  total 
financing  during  the year.  Financing  provided  in the sector consisted  of two 
loans  for  the  extension  and  modernisation  of  the  network  (Poland)  and  the 
construction of a mobile telecommunications  network (Lithuania). 

Table 2.  Breakdown  by country and sector of EIB loans signed in  1996/1997 
Council Decision 93/696/EC 

Country 

Poland 
Czech Rep. 
Hungary 
Romaniaz 
Slovak Rep. 
Lithuania 
Latvia 
Estonia 
Albania 

TOTAL 

Total loan 
contracts 
signed 
(ECU m) 
380 
255 
135 
110 
100 
72 
26 
16 
12 

Transport 

of 
Energy 

ch 
i 
Telecoms 

100 

15 

100 
200 
95 
110 

42 

16 

180 
55 

100 
10 
6 

12 

Industry, 
other, 
mixed 

40 

5 
20 

1106 
(100%) 

563 
(50.9%) 

363 
(32.8%) 

115 
(10.4%) 

65 
(5.9%) 

Includes loan of ECU 20m signed  in March  1997. 

- 1 8-

In  addition  to  projects  in  infrastructure,  support  for  the  industrial  sector  during 
1996  amounted  to  ECU 65 million,  of  which  ECU 50 million  was  provided  by 
means of  global  loans for  small  and medium-sized  enterprises.  It should  be  borne 
in  mind  that  EIB  support  for  SMEs  is  channelled  through  appropriate  financial 
intermediaries  who  have  access  to  EIB  funds  either  in the  form  of  a global  loan -
line of credit contracted  between the Bank and a specific financial institution  - or in 
the form  of an APEXXoan - line of credit  open to a number of qualified  institutions 
within a particular country and usually channelled  via the central  bank. 

Table 3 below gives details of the loan contracts signed during the year. 

3.3  Monitoring 

The Bank monitors investment throughout the implementation  of the project  and up 
to the end of the loan period.  Disbursements are spread over rather long periods, a 
situation  which  is  usual  for  infrastructure  loans  with  long  maturity  periods  (12  to 
20  years)  and  is  typical  in  the  case  of  credit  lines,  where  the  disbursement  takes 
place  only  after  the  decision  to  support  the  implementation  of  an  individual 
investment has been taken. 

As to the servicing of the loans, repayments have been punctual. 

4. 

The Bank's objectives and priorities 

The  Bank  assists  those  central  and  eastern  European  countries  whose  long-term 
goal  is  to  prepare  themselves  for  EU  membership,  by  helping  them  create  the 
economic  framework  necessary  to qualify.  The  examples  of Greece,  Portugal  and 
In  their  case  too,  the  EIB  started  its  lending 
Spain  provide  a  historic  parallel. 
activity  many  yp^rs  before  those  countries  finally  joined  the  Community  and 
helped them to meet the conditions for adhesion. 

The  EIB  gives  absolute  priority  to  upgrading,  modernising  and  developing  the 
transport,  telecommunications and  energy  sectors, with  particular  emphasis  on  the 
Trans-European Networks on the basis of the road and rail corridors defined  by the 
Pan-European  Conference  of Transport  Ministers  as development  priorities  for  the 
medium term. 

Environmental issues related to EIB projects  are given  priority  in the framework  of 
the  gradual  adaptation  of  the  legislation  of  the  countries  concerned  to  that  of  the 
European  Union.  The  Bank also supports  SMEs and other  industrial  initiatives, in 
particular  where  they  involve  European  Union  partners  either  directly  or  through 
the Bank's global loan instrument. 

Table 3.  EIB 

loans 

signed 

in  1996/1997  pursuant 

to 

the  Council  Decision  of 

13 December  1993 (93/696/EC) 

- 1 9-

COUNTRY 

PROJECT 

DESCRIPTION 

Albania 

Czech 
Republic 

Estonia 

Hungary 

Latvia 

Power transmission 

Rehabilitation  and  upgrading  of  electricity 
grid 

CESKE  DRAHY  Rail corridor II 

SKO ENERGO 
FIN/VW-SKODA combined  heat 
and power plant 

Modernisation  of  Warsaw-Ostrava-Vienna 
railway  line 
Replacement  of  VW/Skoda's  lignite-fired 
combined  heat  and  power  plant  in  Mlada 
Boleslav  by coal-fired  plant of same type 

Railways 

M3 Toll  motorway 

sector-  Global 

Financial 
loan 
(Extension  to  the  original  loan  of 
ECU 150m) 

Investment  Bank of Latvia 
Global  loan B 
Riga water and  environment 

Daugava  Hydropower 

Lithuania 

Gas distribution 

Lithuanian  Development  Bank 
Global  loan B 
Via Baltica 

Telecommunications  (GSM) 

Railways 

Rehabilitation  of  several 
Tallinn-Narva  main railway  line 

sections  of 

Upgrading  of  M3  toll  motorway  linking 
Budapest  to Gyongyos 
Financing  for  small  and  medium-scale 
ventures 

Financing  of  small  and  medium-scale 
ventures 
Upgrading  and  rehabilitation  of  water 
supply  and  sewerage  systems 
in  and 
around  Riga 
Rehabilitation  works  and  dam 
improvements at hydroelectric  plants 

safety 

Construction  of  natural  gas  transmission 
and distribution  pipelines 
Financing  for  small  and  medium-scale 
ventures 
Upgrading  and  rehabilitation  of  selected 
sections of Via Baltica road  corridor 
Construction  and  operation  of  first  phase 
of mobile telecommunications  network 
Modernisation  of railway  infrastructure 

AMOUNT 
OF LOAN 
(ECU m) 

TOTAL 
COUNTRY 
(ECU m) 
12 

255 

16 

135 

26 

72 

12 

200 

55 

16 

95 

40 

5 

15 

6 

10 

5 

20 

15 

22 

-20 

COUNTRY 

PROJECT 

DESCRIPTION 

AMOUNT 
OF LOAN 
(ECU m) 

TOTAL 
COUNTRY 
(ECU) 

of 

and  modernisation 

Extension 
telecommunications  network 
Upgrading  to  motorway  standard  of  A4 
between 
and 
Nogawczyce (Gliwice) via Prady (Opole) 
Conversion  of depleted  Wierzchowice  gas 
field,  in west of country,  into underground 
storage  facility 

(Wroclaw) 

Bielany 

Rehabilitation  of  sections  of  E81  and  E60 
European  road corridors 
Renewal  of  rolling  stock  and  completion 
of  network  infrastructure  on  Bucharest 
metro 
Ditto. 

and 

Modernisation 
international  gas transit  network 
Rehabilitation  of  Vojany 
power station 

expansion 

of 

I  coal-fired 

380 

110 

100 

100 

100 

180 

70 

20 

20 

30 

70 

1 106 

1 106 

Poland 

Polish  Telecommunications  II  -
Tranche B 
Poland  Highways - Tranche B 

PGNG  II- Second gas 

Romania 

Roads rehabilitation  II 

Bucharest  Metro modernisation 

Bucharest  Metro  modernisation 
- Tranche B 

SPP Gas transmission  - B 
SE Thermal  Power  rehabilitation 

Slovak 
Republic 

TOTAL 

Signed  in March  1997. 

- 2 1-

Following  the  signature  of  a  final  loan  early  in  1997,  the  Bank  has  now  fully 
discharged  its  responsibilities  under  the  lending  authorisation  based  on  Council 
Decision  93/696/EC.  The  Bank  intends  to  continue  to  pursue  its  objectives  in 
Central and Eastern Europe on the basis of its new lending authorisation decided by 
Council  on  14 April  1997 (Council  Decision  97/256/EC)  and  is already  appraising 
potential  investment projects in the countries concerned. 

5.  Cooperation with other institutions 

The  Bank's  activities  in  the  countries  of  central  and  eastern  Europe  are  conducted 
within the  framework  of the  EU programme  to help those  countries  to  prepare  for 
accession  to  the  Union,  in  particular  by  financing  investment  aimed  at  integrating 
the  infrastructure  (transport,  telecommunications,  energy,  environment)  of  the 
countries  concerned  with  that  of  the  EU  and  by  assisting  SMEs.  Whenever 
possible, co-financing  is established with other institutions, in particular to meet the 
above objectives.  The Bank's activities thus form part of a concerted approach that 
is  being  pursued  in  close  cooperation  with  the  Commission  and,  as  appropriate, 
with the international  financial  institutions working in the area. 

The  Bank  cooperates  closely  with  the  Commission,  in particular  with  the  PHARE 
programme.  In  addition  to  frequent  PHARE  assistance  during  the  pre-investment 
phase to ensure that the necessary  studies and technical  assistance are  implemented 
in support  of  EIB projects,  the  Bank  also cooperates  with  PHARE  in  co-financing 
infrastructure  projects, to which  up to 25% of PHARE  resources  may be  allocated. 
During  the  reference  period,  the  Bank  and  PHARE  have  co-fmanced  a rail  project 
in Estonia, a road project  in Romania and rail and road projects  in Lithuania. 

Of  the  international  financial  institutions,  the  EIB  works  closely  with  the  EBRD, 
of  which  the  EIB  is  a  shareholder,  and  the  World  Bank.  Together,  they  finance 
some  of  the  projects  that  have  been  undertaken  in  the  area,  with  a  view  to 
the  impact  of  their  activities  to  the  benefit  of  the  countries 
maximizing 
concerned.  During  the  reference  period,  the  Bank,  together  with  the  EBRD,  has 
co-fmanced  the  infrastructure  projects  in  Albania,  the  Czech  Republic,  Latvia, 
Lithuania  and  Romania  listed  in  Table  3.  The  World  Bank  has  also  co-financed 
the project  in Albania  and  is appraising  projects  for  co-financing  in Romania. 

The  share  of  the  different  financing  sources  in  projects  financed  by  the  EIB  is 
shown below. 

- 22 -

Table 4.  Share of PHARE and international  financial  institutions in projects 
financed  by the EIB during  1996/1997 (Council Decision 93/696/EC) 

Country 

EIB 

EBRD 

IBRD 

Other4 

PHARE 

TOTAL 

(ECU m) 

Albania 
Bulgaria 
Czech Rep. 
Estonia 
Hungary 
Latvia 
Lithuania 
Poland 
Romania5 
Slovak Rep. 

12 
0 
255 
16 
135 
26 
72 
380 
110 
100 

10 
— 
40 
0 
0 
47 
38 
0 
54 
0 

14 
— 
0 
0 
0 
0 
0 
0 
120  6 
0 

104 
— 
368 
11 
55 
19 
90 
3 732 
81 
320 

0 
— 
0 
5 
0 
0 
5 
0 
5 
0 

140 
~ 
663 
32 
190 
92 
205 
4 112 
370 
420 

TOTAL 

1 106 
(17.8%) 

189 
(3%) 

134 
(2.2%) 

4 780 
(76.8%) 

15 
(0.2%) 

6 224 
(100%) 

States, public bodies or other domestic financial  sources, including own  funds  of borrower/promoter. 

5  Includes  loan of ECU 20m  signed  in March  1997. 
6  Under appraisal. 

23 

Annex 1 

Financing provided on the basis of the Council Decisions of 
15 March  1993 (93/166/EEC) and 13 December 1993 (93/696/EC) 

Breakdown by country and sector 

SECTOR 

COUNTRY 

TOTAL 

Transport 

Telecoms 

Energy 

Industry, 
other, mixed 

Poland 
Czech Rep. 
Hungary 
Romania 
Slovak Rep. 
Bulgaria 
Lithuania 
Estonia 
Albania 
Latvia 

853 
770 
475 
351 
215 
90 
101 
68 
46 
31 

265 
385 
95 
161 
15 
90 
66 
51 
29 
-

TOTAL 

3 000 

1 157 

250 
30 
150 
80 
20 
-
15 
-
— 
-

545 

180 
355 
-
110 
130 
-
10 
7 
12 
6 

810 

158 
-
230 
— 
50 
— 
10 
10 
5 
25 

488 

(100%) 

(38.6%) 

(18.2%) 

(27%) 

(16.3%) 

24 

EIB loans signed on the basis of the Council Decisions of 
15 March  1993 (93/166/EEC) and 13 December 1993 (93/696/EC) 

Annex 2 

Year 
of 
signature 

COUNTRY 

Albania 

PROJECT 

Amount 
of loan 
(ECU m) 

COUNTRY 
TOTAL 
(ECU m) 

Bulgaria 

Czech 
Republic 

Estonia 

Hungary 

1995 
1995 
1995 
1996 

1994 
1995 

1994 
1994 
1994 
1995 
1995 
1995 
1996 
1996 

1993 ' 

1994 
1994 
1994 
1995 

1996 

1994 
1994 
1995 
1995 
1996 
1996 

East-West road corridor 
Ferry terminal at the Port of Durres 
APEX global loan 
Power transmission 

Air traffic  services - B 
Transit roads II 

Berlin-Vienna rail corridor 
Mero-IKL (D-CZ) pipeline 
Telecommunications  1  - B 
C'EZ I (power plant  improvements)-A 
C'EZ I (power plant improvements)- B 
Roads 
C'Eske Drahy Rail Corridor II 
Sko Energo FIN/VW-Skoda combined 
heat and power plant 

Estonian  Investment  Bank  global  loan -
Tranche A 
Upgrading air traffic  services 
Port of Muuga bulk terminal 
District heating  rehabilitation 
Estonian  Investment  Bank  global  loan -
Tranche B 
Railways  (Rehabilitation  Tallinn-Narva 
line) 

Telecommunications II 
Municipal  infrastructure  global  loan 
Financial  sector global loan 
Telecommunications  II - Tranche B 
M3 Toll motorway 
Financial  sector  global  loan  (Extension 
to  1995 ECU  150 million  loan) 

24 
5 
5 
12 

30 
60 

125 
100 
30 
100 
100 
60 
200 
55 

5 
20 
15 
7 

5 

16 

100 
40 
150 
50 
95 
40 

46 

90 

770 

68 

475 

-  T 

PROJECT 

Investment  Bank  of  Latvia  -  Global 
loan 
Investment  Bank of Latvia - Global 
Loan B 
Riga Water and  Environment 
Daugava Hydropower 

Vilnius Airport 
Port of Klaipeda 
Lithuanian  Development  Bank - Global 
loan 
Gas distribution 
Lithuanian  Development  Bank - Global 
loan  B 
Via Baltica 
Telecommunications  (GSM) 
Railways  (Modernisation) 

Telecommunications II 
Highways 
Warsaw sewerage treatment plant 
Export Development Bank glob^1 loan 
Financial  sector global loan 
Railways III 
Polish  Telecommunications 
Tranche 
(Extension 
B 
modernisation) 
Poland Highways - Tranche B 
PGNG II - Second Gas 

II 

and 

and 

rehabilitation 

Romgaz 
modernisation 
Air traffic  services - B 
Telecommunications 
Heat and power  rehabilitation 
Constanta port  rehabilitation 
Roads Rehabilitation II 
Bucharest Metro modernisation 
Bucharest  Metro 
Tranche B 

modernisation-

Amount 
of loan 
(ECU m) 

COUNTRY 
TOTAL 
(ECU m) 

31 

101 

853 

351 

5 

5 

15 
6 

10 
14 

5 
10 
5 

20 
15 
22 

150 
125 
45 
13 
100 
40 
100 

100 
180 

50 

16 
80 
60 
35 
70 
20 
20 

COUNTRY 

Latvia 

Year 
of 
signature 

1993 ' 

Lithuania 

Poland 

Romania 

1996 

1996 
1996 

1994 
1995 
1995 

1996 
1996 

1996 
1996 
1996 

1994 
1994 
1994 
1994 
1995 
1995 
1996 

1996 
1996 

1994 

1994 
1995 
1995 
1995 
1996 
1996 
1997 2 

-  26  -

COUNTRY 

PROJECT 

Year 
of 
signature 

Slovak 
Republic 

Amount 
of loan 
(ECU m) 

COUNTRY 
TOTAL 
(ECU m) 

215 

1994 
1994 
1995 
1995 
1996 
1996 

Telecommunications  1  -B 
Air traffic  services 
State Bank and global  loan II 
SPP Gas transmission 
SPP Gas transmission  - B 
SE Thermal  Power - rehabilitation 

20 
15 
50 
30 
30 
70 

TOTAL 

3000 

3000 

Signed on the basis of Council  Decision  93/166/EEC. 
Signed on 27 March  1997. 

- 2 7-

REPORT FROM THE COMMISSION 

TO THE COUNCIL AND TO THE EUROPEAN  PARLIAMENT 

on the implementation of loans granted by 
the European Investment Bank in the 
Republic of South Africa 
(1995-96) 

28 

CONTENTS 

1. 

Introduction 

2. 

3. 

4. 

Results of the mandate for  South  Africa 

Assessment of the system's operation 

Coordination between the financial  institutions operating in the country 

1. 

Introduction 

- 2 9-

This report on the activities of the European  Investment  Bank (EIB) in South Africa  has been 
drawn  up  in  accordance  with  Council  Decision 95/207/EC  of  1  June  1995  (OJ No L  131  of 
15 June  1995) granting  a full  Community  guarantee to the EIB against  losses under  loans  for 
projects  in  South Africa.  This  guarantee  is  restricted  to  an  overall  loan  ceiling  of 
ECU 300 million  over  a  period  of  two  years  beginning  on  the  date  on  which  the  Decision 
takes  effect. 

Since  this  report  is  the  first  of  its  kind,  it  exceptionally  covers  the  period  to  31 December 
1996. 

2. 

Results of the mandate for South Africa 

During  the  reference  period,  the  EIB  made  from  its  own  resources  three  loans  totalling 
ECU  101 million  in  South  Africa.  A  summary  table  giving  details  about  signings  (sector, 
loan amounts, etc.) is set out below. 

3. 

Assessment of the system's operation 

All the operations mentioned above have been carried out under a specially adapted  financing 
In  accordance  with  the  Council  Directives,  they  are  to  assist  the  transition  to 
system. 
democratic  rule  initiated  by  South Africa  and  contribute  to  the  successful  completion  of  the 
country's  reconstruction  and  development  programme.  For  example,  the  loan  to  the 
Industrial  Development  Corporation  (IDC) has been  used  to  finance  a total of  30  operations 
in the industry, agro-industry  and tourism sectors, helping to create more than  1  500 jobs. 

The  loan  to  the  Development  Bank  of  Southern  Africa  (DBSA)  has  been  allocated  to  27 
projects,  most  of  which  relate  to  water  and  wastewater  treatment  schemes.  They  thus  were 
responding to the evident urgent needs in many of the country's regions. 

-30 

Table 1.  EIB loans signed on the basis of the Council Decision of 
1 June  1995 (95/207/EC) 

Date of 
signature 

21.12.1995 

28.12.1995 

22.05.1996 

Project 

Industrial 
Development 
Corporation 

Development 
Bank 
of 
Southern 
Africa 
ESKOM 

Amount of 
loan 
(ECU million) 
15 

30 

56 

Description 

Comments 

to 

loans 

Global  loan  to  finance  small 
and  medium-sized  projects  in 
manufacturing, 
the 
agri-foodstuffs, 
tourism, 
transport and mining sectors 
Global 
finance 
infrastructure  projects  in  the 
wastewater 
water 
treatment  sectors 
Partial 
the 
financing 
upgrading  and  extension  of 
the  power  grid 
three 
in 
regions of the country 

and 

of 

The loan has been 
fully 
allocated 
and disbursed 

Two thirds  of  the 
loan  have  been 
disbursed; 
satisfactory 
progress  is  being 
made  in  carrying 
various 
out 
aspects 
the 
of 
project 

TOTAL 

101 

4. 

Coordination  between the financial  institutions operating in the country 

The Bank cooperates closely  with the Commission  and their financing  activities  complement 
each  other.  For example, the  Commission  provides  assistance  for  water  supply  programmes 
whereas  the  EIB  grants  loans  for  water  and  wastewater  treatment  and  purification;  the 
Commission  assists in guarantee programmes for small and medium-sized  enterprises, 

-31 -

financed  through the commercial  banking  sector, whereas the EIB finances loans through the 
commercial banks and SMEs through the Industrial  Development  Corporation. 

The  EIB  maintains  close  contact  with  the  World  Bank  office,  and  discussions  on  specific 
projects  have  been  initiated  with  national  organisations,  for  example  the  Societe  de 
Promotion  et  de  la  Participation  pour  la  Cooperation  Economique  (PROPARCO)  in  France 
and  the  Commonwealth  Development  Corporation  in  the  United Kingdom,  both  of  which 
have a local  office. 

-32 

REPORT FROM THE COMMISSION TO THE COUNCIL 
AND TO THE EUROPEAN PARLIAMENT 

on the rate  of utilization of European  Investment  Bank 
loans for  projects  in the Republic  of South  Africa 

(from  1 January  1997 to 30 June  1997) 

1. 

Introduction 

Council Decision 95/207/EC  of  1 June  1995 (OJ No L  131 of  15 June  1995) grants in 
full  the  Community  guarantee  to  the  European  Investment  Bank  (EIB)  against  losses 
under  loans  for  investment  projects  in  the  Republic  of  South  Africa  for  a  maximum 
loan ceiling of ECU  300 million over an indicative two-year  period. 

It  requires  the Commission  to draw  up  a six-monthly  report  on the  rate  of  utilization 
of  EIB  loans  signed  under  the  guarantee.  The  present  report  covers  the period  from 
1 January  to  30 June  1997.  The  previous  report  covered  the  period  1 January  to  30 
June  1996 and  was  transmitted  to Council  on  6 December  1996  (COM(96)688).  No 
loans were signed  in the second half of  1996. 

2. 

Lending during the reference  period 

2.1 

During  the  first  half  of  1997  the  EIB  Board  of  Directors  approved  two  loans  out  of 
own resources  for  a total of ECU  90 million  in the Republic  of South  Africa.  Loans 
were  signed  during  the  reference  period  except  for  ECU  15 million  corresponding  to 
the second  tranche of one of the loans.  Details of the operations  are given  in the table 
below. 

2.2 

At  30 June  1997  the  loan contracts  signed  by  the  Bank under  the  mandate  amounted 
to ECU  176 million.  Additionally,  the  loan  for  ECU  15 million  mentioned  above  is 
expected  to be signed  shortly. 

- 3 3-

Operations signed in the period  1 January to 30 June  1997 on the basis of 
Council  Decision of  1 June  1995 (95/207/EC) 

Project name 

Date of 
Signature 

Amount signed 
(ECU mio) 

Description 

Central  Energy  Fund 

30.06.1997 

45 

Part-funding  of  the  cost  of  exploiting 
adjacent 
the 
installation  of  associated  compression 
facilities  of Mossgas 

deposits 

and 

gas 

Commercial  Bank 
Infrastructure-  credit 
line 

Commercial  Bank 
Infrastructure  - credit 
line - Tranche B 

06.03.1997 

30 

loan 

Global 
medium-scale  infrastructure  projects 

financing  of 

the 

for 

(1) 

15 

Ditto 

TOTAL 

90 

(1)  Signature expected  shortly. 

-34-

REPORT FROM THE COMMISSION TO THE COUNCIL 

AND TO THE EUROPEAN PARLIAMENT 

on the rate of utilization of European Investment Bank loans for  projects 
in central and eastern European countries  (Poland,  Hungary, 
the Czech Republic,  the Slovak Republic,  Romania,  Bulgaria,  Latvia, 
Estonia,  Lithuania and Albania) 

(from  1  July  1996 to 30 June  1997) 

1. 

Introduction 

, 

of 

13 December  1993 

Decision 93/696/EC 

Council 
of 
23 December  1993) grants  in full  the Community  guarantee to the European  Investment 
Bank  (EIB)  against  losses  under  loans  for  projects  in central  and  eastern  Europe  for  a 
maximum loan ceiling  of ECU 3 000 million over  an indicative three-year  period.  The 
loan  guarantee  ceiling  includes  the  provisions  laid  down  in  respect  of  investments  in 
Estonia,  Latvia  and Lithuania by Council  Decision 93/166/EEC of  15 March 1993. 

(OJ No L 321 

Council  Decision 93/696/EC  requires  the Commission to draw up  a six-monthly  report 
on the  situation regarding  loans signed  under  the guarantee.  The present  report  covers 
the  period  from  1 July  1996  to  the  end  of  the  1993-96  mandate.  In  December  1996, 
the end of the indicative three-year period referred  to in the Decision, Bank lending had 
not  attained  the  guarantee  ceiling  granted  and  therefore,  in  accordance  with  Article 1, 
the guarantee period was automatically extended by six months. 

2. 

Lending during the reference  period 

2.1  During  the second half of  1996 the Bank signed  18 loans financed  out of own resources 

for  a total of ECU 965 million in 8 countries of central and eastern Europe. 

At  31 December  1996,  total  loan contracts  signed  by the Bank amounted  to ECU  2980 
million.  In  accordance  with  Article  1  of  the  Council  Decision,  which  extends  the 
guarantee  period  by  six months,  the  Bank  in  March  1997  signed  a  final  loan  for 
ECU 20 million, thus attaining  the guarantee ceiling  of ECU 3 000 million.  The Bank 
has  now  fully  discharged  its  responsibilities  under  the  lending  authorisation  based  on 
Council  Decision 93/696/EC. 

2.2  The  list  of  operations  signed  during  the  period  and  the  description  of  the  projects  are 

given in the table below. 

Operations  signed  in  1996/1997 on the basis of the  Council  Decision  of  13 December  1993  (93/696/EC) 

35 

COUNTRY 

PROJECT NAME 

ALBANIA 

Power  transmission 

DATE OF 
SIGNATURE 

15.11.1996 

AMOUNT 
SIGNED 
(ECU  m) 
12 

HUNGARY 

Financial  sector global loan 

15.12.1996 

LATVIA 

Riga Water and  Environment 

06.08.1996 

Daugava  Hydropower 

Investment  Bank of Latvia -
Global  loan B 

29.10.1996 

13.11.1996 

LITHUANIA 

Via  Baltica 

12.08.1996 

Telecommunications  (GSM) 

04.11.1996 

Lithuanian  Development  Bank 
Global  loan - B 

05.11.1996 

40 

15 

6 

20 

15 

5 

Railways 

20.12.1996 

22 

DESCRIPTION 

the  power 

improvement  of 

and 
Rehabilitation 
transmission  and distribution networks. 
For  financing  SMEs  in  industry,  tourism  and  related 
services. 
Upgrading  and  rehabilitation  of  water  and  wastewater 
systems in and around the city of Riga. 
Rehabilitation  works and dam safety  improvements. 

For  financing  SMEs  in  industry,  tourism  and  related 
services,  and  environmental  protection  and  energy-
saving projects. 

the  Lithuanian 

Upgrading  of  selected  sections  of 
component of the Via Baltica North-South  corridor. 
Construction  and operation of the first phase of a mobile 
(GSM) telecommunications  system. 
For  financing  SMEs  in  industry,  tourism  and  related 
services. 

renewal,  modernisation  of  signalling  and 
of 

purchase 

network, 

and 

Track 
telecommunications 
locomotives. 

COUNTRY 

PROJECT NAME 

DATE OF 
SIGNATURE 

POLAND 

Poland  Highways - Tranche B 

19.07.1996 

PGNG  II-Second  Gas 

30.09.1996 

telecommunications 

Polish 
Tranche B 

II-

16.12.1996 

SLOVAKIA 

SE Thermal  Power  rehabilitation 

08.11.1996 

SPP GAS Transmission  - B 

21.11.1996 

- 3 6-

AMOUNT 
SIGNED 
(ECU  m) 
100 

180 

100 

70 

30 

C'Eske Drahy Rail Corridor II 

04.12.1996 

200 

CZECH 
REPUBLIC 

ROMANIA 

TOTAL 

Signed in March  1997 

SKO  Energo  FIN/VW-Skoda 
Combined  heat and power plant 
Roads Rehabilitation II 

05.12.1996 

25.10.1996 

Bucharest  metro  modernisation 

20.12.1996 

Bucharest  metro  modernisation  -
Tranche  B• 

27.03.1997 

55 

70 

20 

20 

985 

DESCRIPTION 

Upgrading  to  motorway  standards  of  the  A4  highway 
between  Bielany and Nogawczyce. 
Conversion  of  the  Wierzchowice  gas  field 
underground  storage  facility. 
Expansion 
telecommunications  network. 

and  modernisation 

into  an 

Polish 

the 

of 

Rehabilitation  of the Vojany  I coal-fired  power station. 

line 

the  Warsaw-Ostrava-Vienna 

Modernisation  and extension  of the Slovak  international 
gas transit and domestic networks. 
Modernisation  of 
(Corridor 2). 
Replacement  of VW/Skoda's  combined  heat  and  power 
plant in the city of Mlada Boleslav. 
Rehabilitation  of key  sections of the European  corridors 
E81 andE60. 
Renewal  of  rolling  stock  and  network 
completion. 
Ditto 

infrastructure 

ISSN 0254-1475 

COM(98)  1 final 

DOCUMENTS 

EN 

09  01  11 

Catalogue  number  :  CB-CO-98-001-EN-C 

ISBN  92-78-30004-7 

Office  for  Official  Publications of the European  Communities 

L-2985  Luxembourg 

%