COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT - EIB external mandate 2014-2020 Accompanying the document Proposal for a Decision of the European Parliament and of the Council on granting an EU guarantee to the European Investment Bank against losses under financing operations supporting investment projects outside the Union
Date: 2013-05-23
Institutions: European Commission
Subjects: EIB loan, climate change, economic reform, guarantee, investment abroad, small and medium-sized enterprises

EUROPEAN 
COMMISSION 

Brussels, 23.5.2013  
SWD(2013) 179 final 

COMMISSION STAFF WORKING DOCUMENT 

IMPACT ASSESSMENT - EIB external mandate 2014-2020 

Accompanying the document 

Proposal for a Decision of the European Parliament and of the Council 

on granting an EU guarantee to the European Investment Bank against losses under 
financing operations supporting investment projects outside the Union 

{COM(2013) 293 final} 
{SWD(2013) 178 final} 

EN 

   EN 

 
 
 
 
  
 
DG ECFIN - 2012/ECFIN/002 

May 2013 

Disclaimer:  This  report  commits  only  the  Commission's  services  involved  in  its  preparation 
and does not prejudge the final form of any decision to be taken by the Commission. 

 
 
 
 
 
 
 
TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

2. 

Section 1: Procedural issues and consultation of interested parties............................. 9 

Organisation and timing............................................................................................... 9 

Consultation and expertise (public and internal) ....................................................... 10 

Main outcome of the consultation and lessons .......................................................... 11 

Impact Assessment Board .......................................................................................... 15 

Section 2: Problem definition .................................................................................... 15 

2.1. 

Framework and legal constraints: .............................................................................. 15 

2.1.1.  Requirements of Decision 1080/2011/EU for a proposal for next MFF.................... 15 

2.1.2. 

2014-2020 MFF budgetary framework and ceilings.................................................. 16 

2.1.3.  The general environment in which the EIB operates ................................................. 18 

2.2. 

The problems requiring action ................................................................................... 19 

2.2.1.  The risk of sub-optimal use of the EU guarantee....................................................... 19 

2.2.2.  The impossibility for EIB to finance all type of microfinance operations with the EU 
guarantee .................................................................................................................... 21 

2.2.3.  The  insufficient  level  of  funding  for  climate  action  and  the  difficulty  for  EIB  to 
increase its lending in this area .................................................................................. 22 

2.2.4.  Unclear EIB positioning as a delivery tool of EU external financial support............ 23 

2.3. 

2.4. 

2.5. 

3. 

3.1. 

The underlying drivers of the problems ..................................................................... 24 

The consequences of the status quo – the base line scenario..................................... 25 

Analysis of subsidiarity and justification for EU action ............................................ 26 

Section 3: objectives: ................................................................................................. 26 

General policy objectives of the new EU guarantee EIB external operations and other 
specific objectives ...................................................................................................... 26 

3.2. 

Operational objectives of a new EU guarantee .......................................................... 27 

4. 

4.1. 

4.2. 

4.3. 

5. 

5.1. 

5.2. 

Section 4: Policy options............................................................................................ 28 

Description of policy options ..................................................................................... 28 

Discarded policy options at an early stage of the assessment.................................... 36 

Retained policy options.............................................................................................. 37 

Section 5: Analysis of impacts of retained policy options......................................... 38 

Definition of the criteria for main impact analysis .................................................... 38 

Main impact analysis of each retained policy option................................................. 40 

5.2.1.  Option 1 - baseline scenario (no change)................................................................... 40 

5.2.2.  Option CLOSE ........................................................................................................... 43 

5.2.3.  Option MICRO .......................................................................................................... 49 

5.2.4.  Option FOCUS........................................................................................................... 50 

6. 

Section 6: Comparing the retained options ................................................................ 50 

 
 
6.1.  Weighing of positive and negative impacts per option.............................................. 50 

6.2. 

Preferred option.......................................................................................................... 50 

7. 

7.1. 

7.2. 

8. 

9. 

9.1. 

9.2. 

9.3. 

9.4. 

10. 

11. 

12. 

Section 7: Monitoring and evaluation ........................................................................ 50 

Core indicators of progress towards objectives ......................................................... 50 

Monitoring ................................................................................................................. 50 

Annex 1: Development of EU budget guarantee to EIB loans in third countries ...... 50 

Annex 2: Stakeholders involved in the consultations on EIB external mandate ....... 50 

The Steering Committee of Wise Persons ................................................................. 50 

Stakeholders consulted by the external evaluator (COWI)........................................ 50 

The  Group  of  Experts  on  EU  Platform  for  External  Cooperation  and  Development 
and the stakeholders consulted................................................................................... 50 

Stakeholders  consulted  by  the  Commission  in  2012  during  the  preparation  of  the 
Impact Assessment..................................................................................................... 50 

Annex 3 – OECD list of ODA recipients................................................................... 50 

Annex 4 – Follow-up of recommendations of SCWP and external evaluator........... 50 

Annex 5: Background information on Myanmar ....................................................... 50 

12.1. 

Political Situation and bilateral relations with the EU ............................................... 50 

12.2.  Democracy, Human Rights and Fundamental Freedoms situation............................ 50 

12.3.  Macroeconomic situation and investment needs........................................................ 50 

12.4. 

Presence of other IFIs................................................................................................. 50 

13. 

Annex 6 – Guaranteed portfolio by country .............................................................. 50 

 
 
 
List of Acronyms  

ACP 

African, Caribbean and Pacific 

AECID 

Agencia Española de Cooperación Internacional para el Desarrollo 

AFD 

AIF 

ALA 

Agence Française de Développement 

Asian Investment Facility 

Asia and Latin America 

BRICs 

Brazil, Russia, India and China 

CEB 

Council of Europe Development Bank 

CGAP 

Consultative Group to Assist the Poor 

COFIDES 

Compañía Española de Financiación del Desarrollo 

COP 

CSP 

DCI 

EaP 

Corporate Operational Plan 

Country Strategic Paper 

Development Cooperation Instrument 

Eastern Partnership 

EaPIC 

Eastern Partnership Integration and Cooperation 

EFI 

European Financial Institution 

EBRD 

European Bank for Reconstruction and Development 

EC 

European Commission 

ECOFIN 

Economic and Financial Affairs Council 

EEAS 

European External Action Service 

EFSE 

European Fund for Southeast Europe 

EFTA 

European Free Trade Association 

EIB 

European Investment Bank 

EIDHR 

European Instrument for Democracy and Human Rights 

EIF 

EN 

European Investment Fund 

Eastern Neighbourhood  

1 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ENC 

ENP 

Eastern Neighbouring Countries 

European Neighbourhood Policy 

ENPI 

European Neighbourhood Policy Instrument 

EP 

ESF 

European Parliament 

Energy Stability and Security of Supply Facility 

ESIAF 

Economic and Social Impact Assessment Framework 

EU 

European Union 

EUBEC 

EU Platform for Blending in External Cooperation:   

EWBJF 

European Western Balkans Joint Fund 

FEMIP 

Facility for Euro-Mediterranean Investment and Partnership 

FINNFUND  Finnish Fund for Industrial Cooperation 

FYROM  

Former Yugoslav Republic of Macedonia 

GDP 

GF 

GFM 

GHG 

GoE 

IA 

Gross Domestic Product 

Guarantee Fund 

Green Financing Mechanism 

Green House Gas 

Group of Experts 

Impact Assessment 

IASG 

Impact Assessment Steering Group 

ICJ 

IFC 

International Court of Justice 

International Finance Corporation 

IFCA 

Investment Facility for Central Asia 

IFI 

IMF 

IPA 

International Financial Institution 

International Monetary Fund 

Instrument for Pre-Accession 

JASPERS 

Joint Assistance to Support Projects in European Regions 

2 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
KfW 

LAIF 

MDB 

MDG 

Kreditanstalt für Wiederaufbau 

Latin America Investment Facility 

Multilateral Development Bank 

Millennium Development Goal  

MENA 

Middle East and North Africa 

MFA 

Macro Financial Assistance 

MFF 

MIC 

MIP 

Multiannual Financial Framework 

Middle Income Country 

Multiannual Indicative Programme 

MIPD 

Multi-Annual Indicative Planning Document 

MIV 

MoU 

MRI 

MS 

Microfinance Investment Vehicle 

Memorandum of Understanding 

Mutual Reliance Initiative 

Member States 

MSME 

Micro, Small and Medium-sized Enterprise 

NGO 

Non-Governmental Organisation 

NIB 

NIF 

OCT 

ODA 

Nordic Investment Bank 

Neighbourhood Investment Facility 

Overseas countries and territories 

Official Development Assistance 

OeEB 

Oesterreichische Entwicklungsbank 

OECD 

Organisation for Economic Co-operation and Development 

PIDG 

Private Infrastructure Development Group 

PPP 

RCF 

ReM 

Public-Private Partnership 

Risk Capital Facility 

Results Measurement framework 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SCWP 

Steering Committee of Wise Persons 

SIMEST 

Società Italiana per le Imprese all'Estero 

SME 

S&P 

Small and Medium-sized Enterprise 

Standard & Poor's 

SOFID 

Sociedade para o Financiamento do Desenvolvimento  

TEN-T 

Trans-European Transport Network 

TEU 

Treaty on European Union 

TFEU 

Treaty on the Functioning of the European Union 

UfM 

Union for Mediterranean 

UfMS 

Secretariat of UfM 

UNSCR 

United Nations Security Council Resolution 

WB 

World Bank 

WBG 

World Bank Group 

WBIF 

Western Balkans Investment Framework 

WTO   

World Trade Organisation 

4 

 
 
 
 
 
 
 
 
 
 
 
 
Introduction 

Description of EIB external mandate and of the EU guarantee  

The  European  Investment  Bank  (EIB)  activities  outside  the  European  Union  (EU) 
traditionally  made  up  around  10%  of  its  total  activities.  The  Bank  undertakes  operations 
outside the EU in support of EU external policies partially on the basis of a mandate from the 
EU  with  an  EU  budgetary  guarantee  allocated  in  the  framework  of  each  Multi-annual 
Financial  Framework  (MFF),  referred  to  as  the  “(EIB)  external  mandate”.  This  activity  is 
complemented  by  activities  carried  out  at  EIB  own  risk  (limited  to  investment  grade 
operations), or under other specific mandates such as, in ACP countries, under the Cotonou 
Agreement  with  European  Development  Fund  resources  or  with  a  guarantee  of  Member 
States. On average, EIB activity under the external mandate accounted for 62% of total EIB 
activity outside the EU since 2007. This share has been gradually decreasing until the end of 
2011, although it is expected that it has increased in 2012. 

EIB Activities (*) - EUR mn

TOTAL Activities
EU Countries
Outside the EU (Mandate countries + ACP)

- of which loans under the external mandate
Share of external mandate in total external activities

Total external Activities in % of Total activity
(*) Loans on EIB own resources (no budget resources)

2007
47 447
41 431
6 016
3 723
62%
13%

2008
57 227
51 480
5 747
4 045
70%
10%

2009
78 625
70 505
8 120
5 969
74%
10%

2010
71 219
62 858
8 361
4 868
58%
12%

2011
59 930
53 015
6 915
3 050
44%
12%

The  EU  budgetary  guarantee  to  the  EIB  covers  risks  of  a  sovereign  and  political  nature  in 
connection  with  its  financing  operations  carried  out  outside  the  EU.  Over  the  years,  the 
external  mandate  has  been  granted  through  a  series  of  Decisions  of  the  Council  and,  since 
2009,  of  the  EP  and  the  Council.  The  overall  scope  and  general  conditions  of  the  EU 
guarantee  coverage  for  EIB  external  operations  are  set  out  currently  in  Decision 
1080/2011/EU (the "Decision" or the "mandate"). 

From an historical point of view, the need for an EU budget guarantee stemmed on the one 
side  from  EIB's  obligation  under  its  Statute  to  ensure  adequate  security  for  all  its  lending 
operations and, more broadly, from the need to safeguard EIB's creditworthiness in order not 
to compromise its task of contributing to the balanced and steady development of EU internal 
market in the interest of the Union. The EU guarantee has been the key instrument ensuring 
the compatibility between the EIB's highly leveraged financial structure (different from other 
International  Financial  Institutions  (IFIs)),  the  significant  highly  inherent  risk  of  lending  to 
third countries, the need to avoid a deterioration of the Bank's AAA rating whilst limiting the 
EIB capital consumption. The EIB does not remunerate the EU for this guarantee. According 
to  EIB  estimates1,  additional  regulatory  capital  would  be  consumed  by  the  EIB  to  support 
current  exposures  to  the  external  mandate  regions  without  EU  guarantees.  In  total,  capital 
absorption would increase by more than 140% (from a current capital use of around EUR 2bn 

1  

Based  on  simulated  capital  requirements  for  sovereign  borrowing  given  the  exposure  weighted 
sovereign credit rating of the respective regions. Values are estimated. 

5 

 
 
       
       
       
       
       
 
                                                            
to around EUR 5bn). Therefore, a loss of the mandates’ guarantees would either significantly 
reduce  the  EIB’s  capacity  to  lend  outside  the  Union  or  absorb  significant  capital  to  the 
detriment  of  EIB  financing  within  the  EU.  For  more  details  on  history  and  rationale  of  the 
mandate, see Annex 1. 

EIB operations eligible for EU guarantee are currently loans and loan guarantees within the 
eligible  countries  (as  defined  in  the  Decision  –  see  below)  in  the  support  of  any  of  the 
following objectives: (i) local private sector development, in particular support to SMEs; (ii) 
transport,  energy, 
development  of  social  and  economic 
environmental  infrastructure  and  information  and  communication  technology;  and  (iii) 
climate change mitigation and adaptation. 

infrastructure, 

including 

The  geographical  coverage  of  EIB  external  mandate  is  divided  into  various  regions:  Pre-
Accession  region  (Candidate  Countries  and  Potential  Candidates),  Neighbourhood  and 
Partnership  Countries  (with  Mediterranean  countries  on  the  one  side  and  Eastern  Europe, 
Southern  Caucasus  and  Russia  on  the  other),  ALA  region  (Asia  –  including  Central  Asia  – 
and Latin America) and South Africa (which includes only the Republic of South Africa2). 

Decision  1080/2011/EU  establishes  a  General  Mandate  ceiling  of  EUR  27.484  bn  and  a 
Climate  Change  Mandate  ceiling  of  EUR  2bn  for  EIB  loans  and  loans  guarantees  for  the 
period 2007-2013. The General Mandate ceiling is broken down into regional ceilings. Within 
these  ceilings  for  individual  regions,  the  EIB  shall  progressively  ensure  a  balanced  country 
distribution3.  The  current  breakdown  of  the  General  Mandate  into  regional  ceilings  is 
presented  in  the  table  below.  As  a  comparison,  the  amounts  allocated  to  the  EU  external 
financial instruments (Instrument for Pre-Accession – IPA, European Neighbourhood Policy 
Instrument – ENPI, and Development Cooperation Instrument – DCI) under the current MFF 
2007-2013 are also presented below. All figures are in EUR bn. 

2  
3 
regional ceilings (previously, it was only within them). 

The rest of the African continent except North Africa is covered by the ACP mandate. 
It should be noted here that the Decision also introduces the possibility for 10%-flexibility between the 

6 

 
 
                                                            
Regions 

Pre-Accession 

Neighbourhood and Partnership countries
Of which 

Ceilings

9.048

13.548 

 Mediterranean countries

9.7

Eastern Europe, Southern Caucasus and Russia

3.848

Asia and Latin America: 
Of which 

South Africa 

3.952

Latin America

2.912

Asia

1.04

0.936

EU instruments 

Pre-Accession - 
IPA 

Neighbourhood 
– ENPI 
Asia, Latin 
America, South 
Africa – DCI 

11.5

11.8

16.9

The  EUR  2bn  envelope  for  climate  action  was  one  of  the  novelties  introduced  by  Decision 
1080/2011/EU  following  the  mid-term  review  of  the  implementation  of  the  mandate. 
Operations in other sectors like e.g. environmental or biodiversity infrastructure were already 
eligible for EU guarantee coverage but, in light of the challenges of financing global climate 
action, the legislators decided to put a particular emphasis on climate change operations while 
maintaining a broad spectrum of eligibility for infrastructure financing. 

The climate change envelope is global and does not present any regional pre-allocation even 
if  the  EIB  is  requested  to  strive  to  ensure  a  balanced  distribution  across  regions  over  the 
mandate  period.  It  should  be  noted,  as  described  below  in  section  2.1.3,  that  there  is  an 
increasing uncertainty about the ability of the EIB to fully reach the ceilings established under 
the current mandate due to financial constraints that led its governing bodies to significantly 
reduce the Bank's external activity in the recent years and the limited absorption capacity in 
some key regions, such as the Mediterranean one. 

EIB external mandate, EU financing mechanism for external action and other actors: 

It  should  be  recalled  that  EIB  activity  in  the  regions  covered  by  the  mandate  is  also 
implemented in co-financing with other European Financial Institutions (EFIs) - notably the 
EBRD,  CEB,  and  other  national/bilateral  agencies4  –  or  other  IFIs.  Co-financing  also  takes 
place  with  EU  budgetary  funds  stemming  from  the  other  EU  external  financial  instruments 
mentioned above. In 2011, co-financing with EU budgetary contributions represented 26% of 
EIB  total  signatures  under  the  mandate.  This  co-financing  is  notably  implemented  in  the 
context  of  the  various  facilities  set-up  in  the  recent  years,  i.e.  mainly  the  Western  Balkans 
Investment  Framework  (WBIF), 
the 
Investment Facility for Central Asia (IFCA), the Asia Investment Facility (AIF), and the Latin 

the  Neighbourhood  Investment  Facility  (NIF), 

4  

Such as e.g. KfW or AFD. 

7 

 
 
   
 
 
 
 
                                                            
America  Investment  Facility  (LAIF)  which  also  involve  the  other  EFIs  and  IFIs.  The  table 
below illustrates the size of these facilities. 

Creation  

Financial 
contributions from 
EU budget, from 
MS 

WBIF 

2009 

NIF 

2008 

IFCA 

2010 

AIF 

2012 

LAIF 

2010 

€65m 
(2011-2013) 

€30m 
(2011-2012) 

€125m 
(2009-2012) 

€745m from 
ENPI and €70m 
from MS 
(2007-2013) 

€243.6m*  
(2008-2011) 

* incl. from the 
3 partner IFIs 
(EIB, EBRD, 
CEB) 

By the end of 2011, the NIF has supported 52 projects representing a total investment cost in 
excess of EUR14 billion. The total grant contribution awarded under the facility amounts to 
EUR 417.7m and the financial institutions' loan resources leveraged is EUR 6.3 billion. The 
EIB is the largest financier in terms of volumes lent for NIF projects. It has co-financed more 
than 2/3 of the projects (35 out of 52) approved by the NIF Board up to date. 

By the end of 2011, WBIF has supported 111 projects representing a total investment cost in 
excess of EUR10 billion. The total grant contribution awarded under the facility amounts to 
EUR 220m and the financial institutions' loan resources leveraged is EUR 5.5 billion. EIB co-
financed almost 47% of WBIF approved by the WBIF Steering Committee to date. 

While the external mandate is only open to EIB, in line with the new Financial Regulation, 
complementary  financial  instruments  under  other  EU  external  instruments  -  such  as  IPA  II, 
ENI or DCI – are also open to other EFIs alongside the EIB. In this context, the EU Platform 
for  Blending  in  External  Cooperation  (EUBEC)  has  recently  been  created  to  improve  the 
quality  and  efficiency  of  EU  development  and  external  cooperation  blending  mechanisms, 
taking  due  account  of  the  policy  frameworks  that  govern  EU  relations  with  the  different 
partner countries, notably EU Development, Neighbourhood and Enlargement policies. This 
includes promoting cooperation and coordination between relevant actors thereby increasing 
the impact and visibility of EU external cooperation. The launch of the EUBEC provides an 
opportunity  to  develop  a  deeper  partnership  with  European  Financial  Institutions,  including 
the EIB, and deepen cooperation with other international institutions. 

Improved  coordination  and  cooperation  between  EFIs  and  enhanced  efficiency  of  co-
financing  between  all  actors  of  external  funding  has  been  an  on-going  call  of  several  key 
stakeholders including the Council, the European Parliament and civil society. During the last 
years, the EIB and the Commission have put in place several mechanisms, notably in the form 
of Memoranda of Understanding (MoU), to facilitate cooperation, promote synergies, exploit 
comparative advantages and avoid duplication of efforts between the EIB and other financial 
institutions active in the external field (e.g. the tripartite MoU between the Commission, the 
EIB and the EBRD, or the Mutual reliance Initiative between the EIB, KfW and AFD). These 
issues,  however,  will  not  be  addressed  in  the  current  IA  report  as  not  strictly  (and  solely) 

8 

 
 
 
 
 
related  to  the  external  mandate  legislative  proposal  and  in  particular  are  not  related  to  the 
proposed  modifications  under  any  future  Decision  compared  to  the  current  mandate. 
Moreover,  these  questions  are  expected  to  be  tackled  under  a  separate  framework  as  the 
Commission  is  invited  by  the  Council  and  the  Parliament  to  submit  by  end  2015  a  report 
assessing  the  effectiveness  of  the  existing  system  of  European  public  financing  institutions 
promoting investment in Europe and its neighbourhood.5 

1. 

SECTION 1: PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

1.1. 

Organisation and timing 

The drafting of the Impact Assessment (IA) has been coordinated by an Impact Assessment 
Steering Group (IASG) composed of representatives of the relevant European Commission 
(EC)  Directorates  General  (ECFIN  (drafting  team),  DEVCO,  ELARG,  FPI,  BUDG,  ENTR, 
ENV,  CLIMA)  and  the  Secretariat  General  as  well  as  of  the  European  Action  External 
Service (EEAS). The EIB also attended the IASG meetings as observer. 

The  content  of  this  report  duly  takes  account  of  the  consultations,  reviews  and  studies 
mentioned in Section 1.2.  

The IASG was launched on 9 March 2012. Three meetings of the IASG were organised on 29 
March,  11  May  and  19  July  2012.  Between  each  meeting,  frequent  exchanges  occurred 
between the IASG members and the drafting team to provide written comments at the various 
stages of the drafting. The IA report was endorsed by the IASG following its meeting of 19 
July 2012. 

The  IA  was  submitted  to  the  IA  Board  on  27  July  2012.  The  review  of  this  Impact 
Assessment by the Impact Assessment Board took place on 5 September 2012. The positive 
opinion of the Impact Assessment Board was delivered on 29 January 2013. A more detailed 
discussion on the outcome of the Board is provided in point 1.4 below. 

In  line  with  Article  27  of  the  Financial  Regulation  (Council  Regulation  (EC,  Euratom)  No 
1605/2002)  and  Article  21  of  the  Implementing  Rules  of  the  Financial  Regulation 
(Commission Regulation (EC, Euratom) No 2342/2002), the present impact assessment is the 
ex-ante evaluation of the EU guarantee to EIB external operations. 

5  

According to recital (8) of Decision No 1219/2011/EU of the European Parliament and Council of 16 
November 2011 concerning the subscription by the European Union to additional shares in the capital 
of  the  European  Bank  for  Reconstruction  and  Development  (EBRD)  as  a  result  of  the  decision  to 
increase  this  capital,  the  Commission  is  required  to  "present  to  the  European  Parliament  and  the 
Council,  by  the  end  of  the  CRR4  period  (2015),  a  report  assessing  the  effectiveness  of  the  existing 
system  of  European  public  financing 
its 
neighbourhood.  That  report  should  include  recommendations  on  the  cooperation  between  the 
respective  banks  and  the  optimisation  and  coordination  of  their  activities  as  called  for  by  the 
European Parliament in its resolution of 25 March 2009 on the 2007 Annual Reports of the European 
Investment Bank and the European Bank for Reconstruction and Development."   

institutions  promoting 

in  Europe  and 

investment 

9 

 
 
                                                            
1.2. 

Consultation and expertise (public and internal) 

The mid-term review of the current EIB external mandate was completed with the adoption of 
Decision  1080/2011/EU  on  25/10/2011.  In  this  context,  an  evaluation  of  the  mandate  was 
carried  out  by  an  external  contractor  (COWI).  In  addition,  the  EIB  external  activity  was 
subject to a report of a Steering Committee of Wise Persons (SCWP). Both documents were 
concluded  in  2010  and  made  available  to  the  public6.  In  the  context  of  these  evaluations, 
several stakeholders were consulted including EU officials, Non-governmental Organisations 
(NGOs), other International Financial Institutions (IFIs), Member states (MS) representatives, 
EIB loan beneficiaries, etc. On the basis of these two reports and in line with the requirements 
of the mandate decision in place, the Commission also issued its own evaluation7 on which 
the proposal for the current mandate was based. 

This impact assessment draws on these consultations as well as on the outcome of the inter-
institutional  negotiations  that  led  to  the  adoption  of  Decision  1080/2011/EU.  Moreover,  the 
impact  assessment  takes  into  account  the  recent  reflections  on  the  EU  financial  architecture 
for  external  cooperation  and  development,  in  particular  in  the  context  of  the  Group  of 
experts  on  the  EU  Platform  for  Cooperation  and  Development8.  In  addition,  this  report 
also hinges on the implementation of the current and previous mandates as of mid-2012. Key 
figures  and  facts  regarding  the  implementation  of  the  current  mandate  are  available  in  the 
recently issued Commission Report to the European Parliament and Council on the Activity 
under the EIB External Mandate in 2011 and the accompanying Commission's staff working 
document9. 

Finally, informal exchanges of views with key external stakeholders including representatives 
of Member states and main relevant NGOs representatives were organised through meetings 
and seminars in June and October 2012 in order to take stock of the state of play of respective 
reflections. In particular, exchanges of views were undertaken on the problems identified in 
this report as well as on the options envisaged to address them. 

The  recent  widespread  consultations  of  key  stakeholders  (those  affected  by  the  Decision, 
those involved in its implementation and of the legislators) in the context of the revision of 
the  current  mandate  concluded  at  end-2011  and  the  recent  informal  exchanges  of  views 
provided sufficient ground to form a view on position of external stakeholders. Therefore, in 
view of the limited period by which a new Decision has to be adopted to avoid an interruption 
in EIB lending signatures, it was estimated that there was no need for a formal open 12-week 
internet public consultation. 

EIB 

the 

"Mid-Term 

evaluation  of 

external  mandate 

6 
report  of  COWI":  
http://ec.europa.eu/economy_finance/evaluation/pdf/ecfin_eval_en.pdf  and  "Mid-Term  Review  of  EIB 
external  mandate  –  Report  of  the  Steering  Committee":  http://www.eib.org/about/documents/mtr-external-
mandate-report-steering-committee.htm 
7  
mid-term review of the external mandate of the EIB" 
8  
9 

COM(2010)173.  "Report  from  the  Commission  to  the  European  Parliament  and  the  Council  on  the 

See annex 2 for more details. 
COM(2012)637 and SWD(2012)358. 

Final 

– 

10 

 
 
                                                            
The list of stakeholders consulted for the Mid-Term evaluation, the informal consultation and 
the GoE are included in Annex 2. 

1.3.  Main outcome of the consultation and lessons 

The  SCWP  and  the  external  evaluation  showed  that  EIB  financing  under  the  mandate 
contributed  to  the  achievement  of  EU  policy  objectives.  The  EU  guarantee  proved  to  be  an 
essential  tool  allowing  the  EIB  to  intervene  in  the  countries  covered  by  the  mandate.  In 
particular, the SCWP underlined that "the EU guarantee enables the Bank to be involved in a 
wider range of countries and of borrowers within them than would otherwise be the case, both 
because it enables the Bank to intervene in higher risk countries and operations, and because 
it can make the financial conditions more attractive to borrowers. This is particularly valid for 
sub-investment  grade  sovereign  operations  under  the  comprehensive  guarantee  and  for  sub-
investment  grade  private  sector  operations  under  the  political  risk  guarantee.  In  such  cases, 
the guarantee adds significant value to what would be possible without it". 

However, the SWCP underlined that the objectives were broadly defined and diversified by 
region, which called for a streamlining/rationalisation of the objectives across regions and the 
link  with 
development  of  appropriate  operational  guidelines 
implementation. The SWCP also stressed that the additionality of EIB lending under the EU 
guarantee was less clear for operations in countries with well-developed banking markets and 
in support to FDI. 

to  ensure  a  suitable 

The  chart  below  illustrates  EIB  exposure  by  source  of  funds  and  income  groups  and  shows 
the  value-added  of  EIB  lending  under  mandate,  particularly  in  lower  and  upper  middle 
income countries according to the OECD list of ODA recipients (see table in Annex 3).  

11 

 
 
Source: EIB (excludes OCT, EFTA and EU). 

The  following  graph  shows  the  breakdown  of  2008-2011  EIB  total  activity  in  the  regions 
covered by the external mandate, including both operations at own risk and operations under 
guarantee, in relation to level of country income and rating (as at 31 December 2011). 

High Income

Upper Middle
Income

Lower Middle
Income

Other Low Income

   Caa

B 

  Ba

Baa      

         A

12 

 
 
 
  
Annex 4 details the main recommendations of the SCWP and of the external evaluator linked 
to  the  external  mandate  and  outlines  the  follow-up  in  the  implementation  of  the  current 
mandate, highlighting in particular what was realised in the current mandate and what remains 
to be done.  

The  key  elements  on  the  status  of  implementation  of  these  recommendations  are  the 
following: 

First,  as  mentioned,  the  current  decision  streamlined  EIB  intervention  in  all  regions  setting 
out three horizontal objectives: 

a)  Local private sector objectives, in particular support to SMEs; 

b)  Development  of  social  and  economic  infrastructure,  including  transport,  energy, 
environmental infrastructure10, and information and communication technology; 

c)  Climate change mitigation and adaptation. 

There are no sectoral ceilings as envelopes are determined on a regional basis. However, in 
order  to  reinforce  EIB  support  to  climate  change  activities,  Decision  1080/2011/EU 
introduced a specific cross-regional mandate dedicated to climate change activities, which can 
therefore be financed both under the dedicated envelope and under the regional ceilings. The 
weakness perceived under the current setup is that it does not provide sufficient incentives to 
EIB to step-up its climate change activity under the mandate, which was the ultimate aim of 
the creation of a dedicated climate change envelope while other sectors like environment or 
biodiversity seemed adequately covered. 

Second,  while  the  current  mandate  aims  to  enhance  EIB  contribution  to  development 
objectives, it is perceived that the development impact of EIB activity under mandate could be 
further  strengthened  by  focusing  it  on  poorer  countries  and  beneficiaries  which  are  most  in 
need of EIB financing. In addition, it does not provide the EIB with the possibility to support 
all type of microfinance operations which belong to the usual toolkit of instruments available 
to financial institutions active in third countries. The legislators recognised this weakness and 
requested  the  Commission  to  analyse  the  possibility  to  introduce  all  type  of  microfinance 
operations coverage in the future Decision.  

In  addition,  the  SCWP  and  the  external  evaluators  encouraged  the  EIB  to  pursue  own  risk 
activities,  limit  the  application  of  the  EU  guarantee  to  non-investment  grade  borrowers  and 
limit  concentration  risk  in  specific  countries/operations.  This  Recommendation  was  partly 
implemented in the current mandate by asking the EIB to prepare – in consultation with the 
Commission  -  an  allocation  policy.  The  latter  will  indicate  how  the  EIB  intends  to  allocate 
operations under EU guarantee or at its own risk activities. However, it is felt that a further 
step  is  needed  to  ensure  that  EIB  financing  under  mandate  focuses  on  less  creditworthy 

10  

Environmental  infrastructure  includes  e.g.  water  and  sanitation  infrastructure,  biodiversity  and 
forestry investment, waste and solid waste infrastructure. 

13 

 
 
                                                            
operations  in  a  transparent  and  orderly  manner,  whilst  respecting  concentration  risks  by 
country/beneficiary. 

Finally,  following  the  SCWP  and  external  evaluators'  recommendation,  under  the  current 
mandate,  the  Commission  and  the  EIB  are  asked  to  jointly  prepare  technical  regional 
operational  guidelines  and  the  EIB  is  requested  to  prepare,  in  consultation  with  the 
Commission,  a  climate  change  strategy  as  well  as  multiannual  financing  strategies.  These 
documents  have  been  finalised  respectively  on  7  November  2012  (guidelines)  or  and  on  12 
December 2012 (climate change strategy). However, the recommendation and the subsequent 
implementation  did  not  spell  out  a  process  to  update  these  documents  in  an  informed  and 
transparent manner, to take into account the evolution of the EU priorities and policies in the 
external field. 

As  regards  consultation  with  other  stakeholders  in  June  and  October  2012,  MS  and  NGOs 
representatives acknowledged the Commission's analysis of the problems to be addressed by 
the  new  legislation.  In  particular,  NGOs  representatives  found  legitimate  to  reconsider  the 
value  added  of  some  EIB  external  activity  under  the  EU  guarantee.  In  this  context,  they 
underlined  the  most  recent  changes  which  occurred  in  the  context  in  which  EIB  currently 
operates,  including  the  implications  of  the  economic  and  financial  crisis  both  on  the 
beneficiaries  and  the  Bank's  capacity  to  operate,  as  well  as  the  relative  limitations  of  EU 
budgetary grants. In this respect, they insisted on the need to ensure an adequate division of 
labour between all actors, including with other IFIs and on the need to focus the priorities of 
the mandate by setting clear guidelines for action.  

Other main points raised by NGOs during the two rounds of consultations: 

-  They  questioned  the  need  to  explicitly  expand  the  scope  of  the  EU  guarantee  to 
microfinance  given  the  existence  of  other  actors  in  the  field.  More  in  general,  they 
questioned  the  activity  in  support  of  the  private  sector  carried  out  through  financial 
intermediaries. 

-  The EIB should focus on neighbouring countries and the EU guarantee should be used 

for lower income countries rather than emerging middle income ones. 

-  While  expressing  concerns  on  some  energy  operations  (fossil  fuel  based),  they 
welcomed an increased support to certain climate change related action such as energy 
efficiency  and  renewable  energy.  Appropriate  parameters  to  define  climate  change 
action should be defined and methods to assess the carbon foot print of the overall EIB 
external activity notably under the mandate should be developed. 

-  They stressed the need for EIB to be closely aligned with EU priorities and suggested 
to  develop  coherent  (possibly  joint)  programming  between  EIB  activities  and 
Commission  managed  instruments.  The  development  of  regional  guidelines  is  a 
positive  step  forward.  As  regards  the  climate  change  strategy,  they  would  favour  an 
enhanced process including e.g. public consultation for the next Decision. 

-  The need to further enhance EIB transparency, due diligence on certain development 

aspects (e.g. human rights, conflict prevention) and results measurement. 

14 

 
 
1.4. 

Impact Assessment Board 

The draft Impact Assessment report has been discussed  at  the  IAB  meeting  of  5  September 
2012.  In  its  opinion  of  7  September  2012,  the  IAB  requested  a  resubmission  of  the  report, 
with  the  following  recommendations  for  improvements:  (1)  strengthen  the  context  and 
problem  definition,  (2)  widen  the  scope  of  the  analysis,  (3)  significantly  strengthen  the 
analysis of impacts and the comparison of options, and (4) better present stakeholders' view. 

The report was accordingly reorganised and a revised version was submitted on 20 December 
2012.  In  particular,  the  context  of  the  proposal  was  clarified  in  order  to  better  highlight  the 
strengths and weaknesses of the current mandate, by including further data and analysis, and 
the  problem  definition  was  fine-tuned  in  order  to  clarify  the  link  with  the  objectives  of  the 
proposal.  The  scope  of  the  analysis  was  widened  notably  to  cover  the  setting  of  regional 
ceilings.  The  analysis  of  impact  was  strengthened  through  the  integration  of  the  economic, 
social  and  environmental  impacts  into  the  main  impact  analysis  which  was  furthermore 
enriched  by  the  clarification  of  the  criteria  used  and  of  the  rating  applied.  Finally,  the 
stakeholders' view and consultation process was better presented throughout the report. 

The  IAB  delivered  a  positive  opinion  on  the  revised  draft  on  29  January  2013.  The  IAB 
requested further clarifications on the status of implementation of the recommendations of the 
mid-term  review  and  on  EIB's  role  within  EU  financing  for  external  action  and  in 
complementarity to other actors' activity, further improvements of the assessment of impacts 
and  comparison  of  options  sections,  as  well  as  more  details  on  the  stakeholders'  view 
presentation. The report was further improved accordingly and has been hereby finalised. 

2. 

SECTION 2: PROBLEM DEFINITION 

2.1. 

Framework and legal constraints: 

2.1.1. 

 Requirements of Decision 1080/2011/EU for a proposal for next MFF 

Article  16  of  Decision  1080/2011/EU  states  that  the  Commission  shall  present  to  the 
European Parliament and the Council a new proposal for the next MFF (2014-2020). It further 
foresees that, "when submitting the proposal on the EU guarantee under the next multiannual 
financial  framework,  the  Commission  should  be  invited  in  particular  to  examine,  in  close 
cooperation with the EIB and taking into account the implications of the provisioning of the 
Guarantee  Fund,  the  ceilings  covered  by  the  EU  guarantee,  the  list  of  potentially  eligible 
countries and the possibility for the EIB to provide micro-credit financing and other types of 
instruments. The Commission and the EIB should also examine the possibilities of enhancing 
in the future synergy between the financing through the Instrument for Pre-Accession (IPA), 
the  European  Neighbourhood  Policy  Instrument  (ENPI),  the  Development  Cooperation 
Instrument (DCI), the European Instrument for Democracy and Human Rights (EIDHR) and 
the Instrument for Stability and the external mandate of the EIB". 

Under  the  terms  of  Decision  1080/2011/EU,  the  EU  guarantee  covers  EIB  financing 
operations  signed  between  1  February  2007  and  31  December  2013.  Therefore,  a  new 

15 

 
 
Decision  has  to  be  adopted  under  the  ordinary  legislative  procedure  by  31  December  2013 
before the current mandate expires11. 

2.1.2. 

2014-2020 MFF budgetary framework and ceilings 

It is important to describe the budgetary mechanism underpinning the EU guarantee provided 
under  the  EIB  external  mandate,  as  this  has  implications  on  some  of  the  options  analysed 
further in this IA. 

A Guarantee Fund (GF) aims to shield the EU budget against shocks due to possible default 
from the lending activity under the EIB external mandate and other external action, i.e. Macro 
Financial Assistance and Euratom loans (the EIB mandate representing more than 90% of the 
portfolio covered by the GF). The GF must be maintained at a target level of 9% of the total 
outstanding  disbursements12  on  all  these  actions.  In  2010,  an  external  evaluation  of  the 
functioning  of  the  Guarantee  Fund  concluded  that  the  9%  provisioning  rate  was  deemed 
appropriate. 

to 

the 

the  negotiation  of 

the  European  Commission 

The GF is endowed by one annual payment from the EU budget. Based on the technical input 
individual  programmes 
from 
implementing  the  next  Multiannual  Financial  Framework  sent  by  the  Commission  on  27 
March 2013, the envisaged EU budget amount for the provisioning of the GF over the period 
2014-2020 will amount to EUR 1.193 bn (in current prices). The provisioning mechanism of 
the GF which aims at maintaining the GF at a level of 9% of outstanding loan disbursements 
creates  therefore  de  facto  a  limit  in  the  size  of  the  EIB  external  mandate  covered  by  EU 
budget guarantee. According to Decision 1080/2011/EU, the EU budget guarantee covers up 
to  65%  of  the  EIB  outstanding  loan  disbursements.  See  Annex  1  for  more  details  on  the 
evolution of the EU guarantee coverage over the years. 

For reference, the guarantee has been historically called only three times: Former Yugoslavia 
(amount fully recovered), Argentina (amount fully recovered), and recently Syria. 

Based  on  expected  patterns  of  disbursements  and  reimbursements  of  guaranteed  loans,  this 
assumption would allow for a fixed ceiling of around EUR 25 billion (vs. EUR 29.5 billion 
under  Decision  1080/2011/EU).  Possible  negative  developments  such  as  any  new  defaults 
leading to calls on the GF were not taken into consideration in this calculation. However, it 
accounts for the recent call on the Guarantee in the context of loans to Syria for an amount 
equivalent  to  approximately  EUR  21.5mn  in  2012  (which  will  affect  the  GF  provisioning 
needs in 2014 as the latter will have to be increased accordingly) as well as calls expected in 

11 
It should be noted that, if, on expiry of the current mandate, the European Parliament and the Council 
have not adopted a decision granting a new EU guarantee to the EIB for its financing operations outside the 
Union, Decision 1080/2011/EU foresees that that period shall be automatically extended by six months. 
12 
The  Guarantee  Fund  has  to  be  provisioned  according  to  the  Guarantee  Fund  Regulation  (Council 
Regulation (EC, Euratom) No 480/2009). In line with this Regulation, loans are provisioned on the basis of the 
total outstanding guaranteed amounts (i.e. disbursements minus reimbursements) plus accrued interest at the 
end  of  a  year  t0.  The  provisioning  amount  calculated  at  the  beginning  of  the  year  t1  is  introduced  in  the 
preliminary  budget  for  t2  and  inscribed  in  the  final  budget  for  t2.  Therefore,  the  Fund  is  provisioned  by  one 
single payment transaction at the beginning of the year t2 from budget line 01040114. 

16 

 
 
                                                            
the  coming  years  if  the  Syrian  default  situation  persists.  The  calculation  also  integrates 
assumptions  regarding  the  expected  activities  related  to  Macro  Financial  Assistance  and 
Euratom loans.  

As mentioned above, the Decision provides a breakdown of this General Mandate ceiling into 
regional  ceilings.  The  current  regional  ceilings  were  increased  by  Decision  1080/2011/EU 
compared  to  the  previous  Decision13.  The  legislators  decided  to  exceptionally  increase  the 
regional  ceiling  for  the  Mediterranean  region  by  EUR  1bn  and  to  increase  by  the  same 
proportion  (+4%)  all  other  ceilings.  The  legislators  clearly  stated  in  the  recitals  of  the 
Decision that these increases were temporary and exceptional with the view to deal with the 
Arab  Spring  and  account  for  EIB  increased  support  to  EU  partners  in  the  2009-10  crisis 
context. 

This shows their intention to maintain the overall regional balance that was negotiated with 
difficulty  in  2009  and  was  the  outcome  of  a  delicate  policy  compromise.  Hence,  since  the 
2009  overall  regional  balance  was  confirmed  during  the  mid-term  review  (beyond  these 
exceptional increases), it is assumed that the 2009 regional balance should form the basis for 
the new legislative proposal. The regional balance of the 2009 Decision was the following: 

Regions 

%-Ceilings

Pre-Accession 

Neighbourhood and Partnership countries
Of which 

Mediterranean countries

Eastern Europe, Southern Caucasus and Russia

Asia and Latin America: 
Of which 

Latin America

Asia

South Africa 

33.7

48.0

33.7

14.3

14.8 

10.9

3.9

3.5

The above approach would also be in line with the thrust of the Commission 2014-2020 MFF 
proposals  for  external  financial  instruments,  where  the  relative  percentage  of  DCI  -  which 
covers Asia/Latin America/South Africa - did not change compared to IPA II (Pre-Accession) 
and ENI (Neighbourhood). 

13  

Decision 633/2009/EC 

17 

 
 
 
                                                            
EU instruments

Pre-Accession
Neighbourhood
Asia, Latin America, South Africa
* as in COM proposal from Dec2011 (IPA II, ENI and DCI only)   

2007-2013 
MFF
29%
29%
42%

2014-2020 
MFF*
25%
33%
42%

2.1.3.  The general environment in which the EIB operates 

The context in which the Bank operates has significantly evolved and the legislative proposal 
for the EU guarantee under the next MFF has been drafted in a fundamentally more difficult 
context than the one prevailing e.g. at the time of the mid-term review of the mandate which 
preceded the Decision 1080/2011/EU, including the Wise Persons Steering Group reflections. 

In particular, the financial crisis had a significant impact on the funding conditions of EIB and 
entailed  possible  threats  to  the  EIB's  AAA  rating14.  Due  to  its  very  high  leverage,  the 
progressive  deterioration  of  its  asset  quality  (with  a  correspondingly  declining  capital 
adequacy ratio) and of the ratings of its shareholders, the EIB was rated by Standard & Poor's 
Moody's  and  Fitch  "AAA  with  negative  outlook"15.  Against  this  backdrop,  the  Corporate 
Operational  Plan  (COP)  2012-2014  endorsed  by  the  EIB  Board  of  Directors  end  2011 
envisaged a significant reduction in lending volumes back to pre-crisis levels in particular in 
the external field.  

Similarly, the current economic and financial context is also having an impact on the quality 
of the external lending portfolio. However, such impact was diverse by country/region. While 
the  credit  ratings  of  some  countries,  such  as  Turkey  which  represents  the  highest  exposure 
under the EIB external mandate, have recently been upgraded, other countries, particularly in 
the  Southern  Neighbourhood  region,  are  experiencing  difficulties.  Under  the  current 
circumstances, the EIB external mandate and the EU guarantee play a crucial role that allow 
the  EIB  to  operate  outside  the  EU  and  maintain  its  top  credit-rating  by  bringing  concrete 
benefits to the EIB capital adequacy through substantially lowering the risk weighting of EIB 
external operations, particularly for higher risk countries and borrowers. 

EIB Activities

2008

2009

2010

2011

2012

2013

2014

EU Countries
Outside the EU
TOTAL

(*) Loans on EIB own resources (no budget resources)

External activities (% of total activities)

51.5
5.7
57.2
10%

70.5
8.1
78.6
10%

62.9
8.4
71.2
12%

53.0
6.9
59.9
12%

44.0
6.0
50.0
12%

42.7
5.3
48.0
11%

41.4
4.6
46.0
10%

14 
All three major rating agencies (S&P, Moody's and Fitch) apply specific rating methodologies for the 
Supranational/Multilateral  Development  Bank  segment.  In  particular,  Standard  &  Poor's  issued  a  revised 
methodology on 26 November 2012. The main rating factors are the financial profile (asset quality, leverage, 
risk concentration, capitalization) and shareholder support. 
15 
At the end of 2011, the EIB Capital Adequacy Ratio decreased at around 24.9%. At the end of 2011, EIB 
leverage (ratio between total borrowings and shareholders' equity) was 985% while EBRD ratio stood at 192%, 
the African Development Bank at 252% and the World Bank at 342%. 

18 

 
 
            
            
            
            
            
            
            
              
              
              
              
              
              
              
            
            
            
            
            
            
            
 
                                                            
While the recently approved EIB capital increase would allow increasing EIB lending inside 
EU,  EIB  external  activity  should  not  be  affected.  Moreover,  the  EIB  Board  of  Governors' 
approval of the current external mandate stressed that the Bank should endeavour to mitigate 
the impact on human resources for its implementation. 

In this context, as a result of EIB governing body decisions and the lower absorption capacity 
of  beneficiaries  in  key  countries  of  operations,  it  is  anticipated  that  EIB  may  under-use  the 
amounts  available  under  the  current  mandate.  At  project  level,  the  EIB  activity  will 
particularly  depend  on  the  identification  of  sound  and  bankable  projects,  grants-loans 
blending  opportunities,  level  of  indebtedness  of  the  beneficiary  countries,  risk  analysis, 
economic  and  political  context,  quality  of  project  preparation,  capacity  of  the  project 
promoters, etc. 

Another  element  which  has  been  incorporated  in  the  reflections  on  the  proposal  for  a  new 
mandate  is  inter  alia  the  extension  of  European  Bank  of  Reconstruction  and  Development 
(EBRD)  geographical  scope  to  the  Southern  and  Eastern  Mediterranean.  While  EBRD's 
activity  in  four  countries  in  the  Mediterranean  region  was  initially  implemented  through 
cooperation  funds  (i.e.  mainly  technical  assistance  operations),  the  EBRD  is  now  able  to 
deploy  the  full  range  of  its  product  through  a  Special  Shareholders  Fund  and,  in  a  second 
stage, through its own resources, once the ratification process of the changes in its Articles of 
Agreement  Establishing  the  EBRD  is  implemented.  In  the  coming  years,  EBRD  could 
eventually reach an annual business activity of up to EUR 2.5 bn in the Southern and Eastern 
Mediterranean (which would be more than total combined EIB financing - under the mandate 
and at own risk). 

2.2. 

The problems requiring action 

Four problems have been identified: 

2.2.1.  The risk of sub-optimal use of the EU guarantee 

The chart below shows that although, on average, more than 60% of EIB external operations 
have been carried out with the EU guarantee in the regions covered by the mandate between 
2007 and 2011, this repartition differs significantly from one region to another.  

In  this  context,  there  are  creditworthy  countries/beneficiaries  notably  in  ALA  where  the 
additionality of EIB lending with the EU guarantee is less palpable than in others. For those 
operations,  EIB  financing  could  be  provided  at  own-risk  and  do  not  necessarily  require  an 
EU-budget guarantee as borrowers can more easily access commercial funding.  

For instance, it should be noted that, in 2011, investments in sub-investment grade countries 
under the guarantee in ALA represented less than half of the overall lending of 310 mn in the 
region. On the contrary, the remaining operations were carried out in creditworthy countries 
(Brazil and Mexico). This issue was identified in the context of the mid-term review and was 
also  raised  by  most  of  the  NGOs  consulted.  However,  other  stakeholders,  in  particular  the 
EEAS, stressed the need to maintain a broad eligibility to the guarantee coverage in order to 

19 

 
 
limit the risk of having some EU partners becoming "orphans" from EU financial assistance 
following the graduation of some countries from EU bilateral financial assistance in the future 
DCI. 

Repartition EU mandate/EIB own risk activity in the 
regions covered by the EU guarantee (2007-2011)

100%

80%

60%

40%

20%

0%

Pre Accession

Southern
Neighb.

East Neighb.
& Russia

ALA

South Africa

Total

Mandate with EU Guarantee

Own Risk Facility

Moreover, the general crisis context, in which the role of emerging market economies on the 
global  scene  has  significantly  increased,  including  as  fund  providers,  has  raised  questions 
from some stakeholders including Commission services, some MS and some NGOs on how to 
further  focus  EIB  resources  devoted  to  partner  countries  on  higher  value  added  and  result-
oriented  activity.  In  particular,  EU  taxpayers  have  become  more  sceptical  about  funding 
wealthier  Middle  Income  Countries  (MICs)  notably  the  BRICs  (Brazil,  Russia,  India  and 
China). In this context, it should be noted that almost half of EIB financing operations in the 
BRICs are already done at own-risk although this figure ranges from 95% for China to less 
than 20% in Russia. If EIB own-risk activity outside the Union were to be reduced (as it is 
currently foreseen by EIB governing bodies), there is therefore a risk that operations in these 
countries  will  compete  for  the  EU  guarantee  coverage  with  operations  in  less  creditworthy 
countries. 

The Decision on EIB external mandate provides the framework for EIB operations under the 
EU  budget  guarantee  while  it  does  not  frame  EIB  own-risk  facilities  which  are  decided  by 
EIB Board of Governors (which is the same as the ECOFIN). Nevertheless, given interactions 
and  complementarities  between  the  two  types  of  activities,  a  clearer  focus  of  the  mandate 
should  allow  a  better  use  of  the  mandate  and  influence  EIB  own-risk  activity,  thereby 
ensuring efficient use of the guarantee in terms of financial value added. 

The  following  graph  shows  the  breakdown  of  2008-2011  operations  at  own  risk  and  under 
guarantee in the regions covered by the mandate (EUR bn). 

20 

 
 
 
2.2.2.  The impossibility for EIB to finance all type of microfinance operations with the EU 

guarantee 

Decision 1080/2011/EU requests the Commission to assess whether the EIB Mandate should 
be extended to cover all type of microfinance operations.  

The EU guarantee does not explicitly cover EIB lending for micro-credit financing operations. 
While the EU guarantee could cover microfinance operations linked to an economic/business 
activity  (supply  side),  i.e.  e.g.  micro-credit  to  small  producers/micro-enterprises  that  need 
access  to  financial  services  to  invest,  generate  income,  and  build  assets,  the  EU  guarantee 
does not cover operations  linked to consumption  behaviours  (demand side) or  other  type of 
financial services provided to micro-entities (see below point 2.4 for more details). With this 
type  of  operations,  EIB's  financing  could  potentially  have  a  substantial  impact  on  poverty 
alleviation and on economic and social development in partner countries.  

The  impact  of  microfinance  activity on poverty reduction is the subject  of  intense (and  still 
open) debate in the academic literature. Recent research identifies both positive and negative 
impacts  from  microcredit  within  a  heated  and  complex  debate  over  the  methodological 
reliability of the findings of many of the key studies involved16. 

At  the  same  time,  an  estimated  2.5  billion  working-age  adults  (more  than  half  of  the  total 
number of working-age adults in the world) remain without formal financial services such as 
a savings or check account. A growing body of empirical evidence shows that access to the 
right financial product at the right time helps poor households build assets, generate income, 
smooth consumption, and protect themselves from risks. An inclusive financial system allows 
for more effective and  efficient social policy interventions, for example through conditional 
payment  transfers  in  health  and  education.  And  at  the  macro  level,  deeper  financial 

For  instance:  "Helping  or  hurting:  What  role  for  microfinance  in  the  fight  against  poverty?" 

16 
http://www.appg-microfinance.org/files/APPG%20on%20Microfinance%20inquiry%20report%202011%20-
%20low%20res.pdf  

21 

 
 
 
                                                            
intermediation in an economy leads to more growth  and  less  inequality.  Access  to  financial 
services  is  an  important  element  for  the  success  of  an  economy  and  the  wellbeing  of  its 
citizens17. Moreover, anecdotal evidence and report from various NGOs underline significant 
market gaps for medium sized borrowers despite a reported oversupply in some regions. 

In  this  context,  the  EIB  has  been  one  of  the  latest  entrants  in  the  microfinance  business. 
Although  its  portfolio  still  represents  a  very  small  fraction  of  the  total  budget,  it  has  been 
growingly steadily through the years. Since the first operations in Morocco, back in 2003, the 
average deal size has been increasing constantly and is now expected to top 10 to 50 million 
euros.  It  is  therefore  legitimate  to  investigate  whether  EIB  external  mandate  should  be 
extended to cover all type of microfinance operations. 

2.2.3.  The  insufficient  level  of  funding  for  climate  action  and  the  difficulty  for  EIB  to 

increase its lending in this area 

In  the  current  economic  and  financial  environment,  there  is  a  risk  that  global  financing  for 
Climate Change operations will fall short of needs and expectations. The EU has committed 
to work with other developed countries in a constructive manner towards the identification of 
a  path  for  scaling  up  climate  finance  from  2013  to  2020  from  a  wide  variety  of  sources  of 
finance,  to  reach  the  international  long  term  committed  goal  of  mobilizing  jointly  US$100 
billion per year by 2020 in the context of meaningful mitigation actions and transparency on 
implementation  with  a  view  to  reducing  global  greenhouse  gas  emissions  so  as  to  keep  the 
increase  in  global  average  temperature  below  2°C  compared  to  preindustrial  levels.  In  this 
context, the Council recently "acknowledged the important role of Multilateral Development 
Banks and other public financial institutions, including the EIB in facilitating the mobilisation 
of these flows"18. 

EIB's climate action is carried out both under the EU mandate and at own risk. The focus on 
climate  action  has  been  introduced  by  Decision  1080/2011/EU  while  other  more  traditional 
sectors  like  support  to  environmental  or  biodiversity  infrastructure  were  maintained  as  they 
were. 

It  is  estimated  that  around  15%  of  EIB  operations  carried  out  since  2007  with  the  EU 
guarantee could be qualified as climate change operations. This global figures hides however 
disparities across regions/countries as it ranges from less than 5% in the Mediterranean region 
to  almost  a  third  of  operations  in  the  Eastern  Neighbourhood  and  around  20%  in  Pre-
Accession and ALA region as described in the chart below. 

"Advancing 

17 
http://www.cgap.org/gm/document-1.9.57930/CGAP_Brochure_May_2012.pdf  
18 
Council conclusions on climate finance - fast start finance, 15 May 2012. 

Financial  Access 

for 

the  World’s  Poor:  A  Brief  History  of  CGAP", 

22 

 
 
                                                            
Signatures under 2007-2013 External Lending Mandate (cumulative up to 15 May 2012)

m
R
U
E

14,000

12,000

10,000

8,000

6,000

4,000

2,000

-

62%

72%

 31% 

18%

34% 

4%

88%

74%

69% 

 33% 

32%

21%

Pre-Accession Mediterranean Eastern Neighb.

Russia

Asia and Latin
America

70%

39% 

15%

73%

54% 

12%

South Africa

Total 2007-2013
Mandate

Economic and social infrastructure

Private sector development (incl. SMEs) Climate action

Source: EIB 

Notes: 
•  The  volumes  per  objective  represent  the  cumulative  gross  signatures  over  the  period 
corresponding  to  the  actual  implementation  to-date  of  the  External  Mandate  (i.e. 
01/08/2007-14/05/2012). 

•  The  percentages  refer  to  the  objective’s  proportion  of  total  volume  in  each  region.  The 
objectives  are  not  mutually  exclusive  (one  operation  may  simultaneously  contribute  to 
more than one objective), therefore the volumes or percentages for a single region cannot 
be added. 

•  The  Climate  Action  indicator  was  defined  late  2009.  Volumes  relating  to  operations 

• 

signed prior to 2010 are indicative. 
In addition to the above volumes on EIB own  resources, private equity  was  provided in 
the Mediterranean in an amount of EUR 162m on EU budget resources. 

While EIB activity in support of climate action in the external field has proportionally grown 
in recent years, this is not yet matching the needs arising from EU and global commitments in 
this area. One of the reasons for this could be the necessary time-lag between the moment a 
project  is  being  identified  as  "bankable"  and  its  materialisation.  As  mentioned,  the  climate 
change  dimension  was  introduced  in  the  2011  Decision.  This  constitutes  a  significant 
evolution  of  EIB  activity  which  requires  times  for  implementation,  both  in  terms  of  client 
identification and project preparation. In addition, pipeline of projects tend to be "sticky" in 
some sectors as the Bank needs to gradually diversify its traditional client base. 

Nevertheless,  some  of  the  NGOs  consulted  questioned  whether  the  EIB  had  sufficient 
incentives to substantially step-up this activity under the current mandate despite the fact that 
the latter stated that: 

"in  line  with  EU  and  international  climate  change  objectives,  the  EIB  shall,  in  cooperation 
with the Commission, present by 2012 a strategy on how to gradually and steadily increase 
under  its  external  mandate  the  percentage  of  projects  promoting  the  reduction  of  CO2 
emissions and phase out financing projects detrimental to the achievement of the EU climate 

23 

 
 
 
 
objectives". In line with the Decision requirements, this strategy was presented by the Bank in 
December 2012. 

2.2.4.  Unclear EIB positioning as a delivery tool of EU external financial support 

EIB  external  activity  is  an  integral  part  of  EU  financial  support  to  third  countries.  As 
mentioned above, despite significant improvements introduced by Decision 1080/2011/EU to 
align  better  EIB  financing  with  EU  external  policy  objectives,  there  have  been  cases  in  the 
recent  years  where  it  has  proven  complex  to  translate  EU  policy  developments  into  EIB 
activity.  These  examples  include  EIB's  activity  in  Russia  where  a  series  of  trade  related 
questions prevented the Commission from providing a favourable opinion to EIB support to 
projects in a number of sectors in Russia which are eligible under the mandate (e.g. transport). 
Similarly, despite the increase of the ceiling for the Mediterranean region and a clear political 
call  to  step  up  its  support  to  the  region  in  the  aftermath  of  the  Arab  spring,  EIB  has 
encountered, as all other IFIs, difficulties to close deals in the region in the very short term.  

All  these  examples  illustrate  the  need  to  strike  a  balance  between  the  predictability  of  EIB 
activity in order for it to build a viable pipeline of bankable projects and the need to align with 
the latest policy developments.  

The  so-called  Article-19  procedure19,  whereby  the  EIB  submits  a  project  proposal  to  the 
Commission  for  an  opinion,  ensures  policy  coherence  by  preventing  any  inconsistencies 
between  EIB  activity  and  policy  developments.  Nevertheless,  the  submission  under  Article 
19-procedure  occurs  when  EIB  project  are  already  relatively  well  prepared  and  identified. 
Therefore a process for interaction between the EC/EEAS and the Bank at an earlier stage of 
the project cycle would allow to save resources.  

It  should  be  noted  that  this  problem  is  also  identified  by  the  stakeholders  consulted  (EP, 
NGOs)20  who  also  asked  for  increased  synergies  with  EU  budgetary  fund.  A  review  of  the 
latter was also requested in Decision 1080/2011/EU.  

More recently, the EP has also studied the implications of EIB and EBRD co-financing with 
EU budget notably in relation to the extent to which such activity helps delivering on of EU 
policy  objectives21.  In  this  context,  it  should  be  noted  that,  despite  the  introduction  in  the 
current  mandate  of  the  regional  technical  operational  guidelines,  the  alignment  with  EU 
policies  and  the  coherence  and  synergies  with  EU  instruments  within  the  timeframe  of  the 
new  mandate  could  be  further  improved.  In  this  respect,  the  recent  creation  of  the  EEAS 
should contribute to achieve this goal of overall policy orientation, coherence and synergies. 
Nevertheless,  there  is  not  yet  for  instance  any  mechanism  that  clarifies  how  to  ensure  the 
effective and timely mirroring of the differentiation principles (e.g. "more for more" whereby 

The consultation procedure is set out in Article 19 of EIB statute. 
E.g European Parliament Resolution of 25 March 2009 on the 2007 Annual Reports of the European 

19 
20 
Investment Bank and the European Bank for Reconstruction and Development, OJ C 117 E, 6.5.2010, p. 147. 
21  http://www.europarl.europa.eu/committees/en/studiesdownload.html?languageDocument=EN&file=37031 

(2011)  

24 

 
 
                                                            
incentives are provided to support more those partners who implement Action Plan priorities) 
established in e.g. the revised European Neighbourhood Policy. 

2.3. 

The underlying drivers of the problems 

The  following  underlying  drivers  to  the  problems  identified  in  section  2.2  have  been 
identified: 

•  The  problem  of  non-optimal  use  of  the  guarantee  which  would  not  be  reserved  for 
operations  with  most  value  added  is  due  to  unclear  criteria  in  the  current  mandate  to 
decide whether operations are to be financed or not with the support of the EU guarantee 
and  the  lack  of  process  to  review  them.  There  is  no  reason  for  any  evolution  of  this 
situation in the next MFF if no action is taken. 

•  EIB inability to support all type of microfinance operations is due to the current design of 
the EU guarantee as not all types of operations are currently eligible. This situation will 
not change in case of status quo. 

•  The  insufficient  level  of  funding  for  climate  action  and  the  difficulty  for  the  EIB  to 
increase its lending in this area are due to the lack of sufficient incentives in the mandate 
and/or provisions for enhanced and more efficient allocation of funds in this area. There is 
no particular reason to assume that this underlying driver and the resulting problem would 
evolve favourably in the next MFF in case of status quo. 

•  The problem of unclear positioning of EIB as a key delivery tool of EU external financial 
support is due to lack of a dynamic process to provide upstream political impetus to EIB 
project identification business with the view to allow continued alignment of EIB activity 
with EU policies and to capture for the evolving environment in which it operates. There 
is no reason for any particular positive evolution of this situation in the next MFF period if 
no action is taken. 

2.4. 

The consequences of the status quo – the base line scenario 

The  base  line  scenario  would  entail  the  replication  of  the  current  Decision  under  the  next 
MFF, i.e. from 01/01/2014 until 31/12/2020. 

the 

reduce 

impact  of 

•  Given  the  recent  strategic  shift  by  the  Bank  to  significantly  lower  own-risk  operations 
outside the EU to cater for the riskier environment in which it operates and maintain its 
top  credit  rating,  there  is  a  significant  risk  that  the  EU  Guarantee  will  be  increasingly 
reserved for creditworthy operations which have easier access to commercial funding and 
for which the value added of an EU budget guarantee is questionable. In particular, this 
may 
instrument  on  most  needful 
this  budgetary 
countries/beneficiaries  which  display  a  more  difficult  operating  environment  than  richer 
countries given e.g. their less developed financial infrastructure. Therefore, in the absence 
of a clearer method in the mandate to decide whether operations are to be financed or not 
with  the  EU  guarantee,  the  less  creditworthy  potential  beneficiaries,  in  particular  local 
private sector and sovereign beneficiaries in lower income countries, would be negatively 
affected.  
The following graph shows the breakdown of EIB 2008-2011 activity in regions covered 
by the mandate according to end of 2011 (groups of) rating levels split by operations at 
own  risk  and  operations  under  guarantee.  It  should  be  noted  that  the  vast  majority  of 
operations  at  own  risk  in  the  Ba  category  are  private  sector  operations  in  the  Pre-

25 

 
 
Accession  region,  and  in  particular  Turkey.  The  graph  shows  that  there  is  a  significant 
correlation between the level of creditworthiness of a country and the capacity of the Bank 
to  carry  out  operations  at  own  risk.  Moreover,  for  private  sector  operations  in  Pre-
Accession countries, the Bank is capable to bear the risk even when such country has not 
yet  reached  full  investment  grade.  However,  there  seems  to  be  still  scope  for 
rationalisation. 

92% to private sector in Pre-Accession countries 
79% to private sector in Turkey 

•  EIB  can  support  only  a  limited  type  of  operations  under  the  EU  guarantee  as  specified 
under Decision 1080/2011/EU. However, the EU guarantee does not cover microfinance 
operations  which  be  linked  to  consumption  behaviours  (demand  side).  These  refer  to 
households'  need  to  smooth  consumption  in  the  face  of  irregular  income  and  expense 
streams  and  manage  risks.  Moreover,  the  EU  guarantee  in  the  current  set-up  does  not 
cover  some  financial  services  provided  to  micro-entities/SMEs  other  than  micro-credit 
operations  but  often  also  referred  to  as  "microfinance  operations"  such  as  savings, 
insurance, and fund transfers. Finally, the EU guarantee could not cover the financing of 
activities  linked  to  the  development  of  an  inclusive  financial  system,  the  creation  of  an 
enabling  environment  and  the  capacity  building  of  regulatory  institutions  and  financial 
intermediaries. The continuation of the EU guarantee in the current set-up therefore entails 
the risk not to reach part of the most in need population in EU partner countries through 
the financing of these "demand side" microfinance operations. This could be detrimental 
for individuals which would not have access to a potential additional source of financing. 

•  Despite the presence of a specific envelope of EUR 2 billion (i.e. 7% of the total mandate) 
for  climate  action,  the  lack  of  sufficient  incentives  in  the  mandate  and/or  provisions  for 
enhanced and more efficient allocation of funds in this area does not guarantee that such a 
relatively small envelope will allow the EIB to sufficiently prioritise climate action in its 
external  activity.  Moreover,  the  presence  of  a  dedicated  amount  does  not  ensure  that  an 
adequate  climate  impact  is  achieved  in  particular  in  terms  of  GHG  emission  reduction. 
Therefore,  there  would  be  no  particular  incentive  for  EIB  to  increase  its  climate  action 
both in terms of financed volumes for climate specific projects (see chart in section 2.2.3) 
and in terms of mitigating the potentially negative climate impact of its activity. 

•  The  continuation  of  the  EU  guarantee  in  the  current  set-up  bears  risks  that  EIB  activity 
under the mandate is not fully integrated in the EU financial toolkit to support its external 
policy objectives due to unclear guidance provided to the Bank in the absence of lack of a 
dynamic process to provide upstream political impetus to EIB project identification and to 

26 

 
 
 
capture  for  the  evolving  environment  in  which  the  EIB  operates.  Moreover,  there  is  a 
reputational  risk  for  the  EU/EIB  if  EIB  support  is  granted  albeit  not  being  fully  in  line 
with EU policies or of waste of resources if after preparatory work, some projects are then 
objected under article 19 procedure.  

2.5. 

Analysis of subsidiarity and justification for EU action 

The  proposal  falls  under  the  exclusive  competence  of  the  EU.  The  subsidiarity  principle 
therefore does not apply. 

The specific legal bases for EU action in granting an EU guarantee to the EIB against losses 
under loans and loan guarantees for projects outside the EU are Articles 209 and 212 of the 
Treaty on the functioning of the EU. In particular Article 209(3), in conjunction with Article 
208,  provides  that  the  EIB  is  to  contribute,  under  the  terms  laid  down  in  its  Statute,  to  the 
implementation  of  the  measures  necessary  to  further  the  objectives  of  Union  development 
cooperation policy. 

The EIB is the Bank of the Union established under Article 309 of the Treaty. The Statute of 
the EIB is laid down in a Protocol annexed to the Treaties. Article 16  of EIB Statute states 
that the Board of Governors – consisting of Ministers from the Member states – may decide to 
grant  financing  for  investment  carried  out,  in  whole  or  in  part  outside  the  territories  of 
Member states. 

3. 

3.1. 

SECTION 3: OBJECTIVES: 

General policy objectives of the new EU guarantee EIB external operations and 
other specific objectives 

With  a  view  to  supporting  Union  external  action,  and  in  order  to  enable  the  EIB  to  finance 
investments  outside  the  Union  without  affecting  the  credit  standing  of  the  EIB,  part  of  its 
operations  in  external  regions  benefit  from  an  EU  budgetary  guarantee  under  the  external 
mandate.  

The objective of EIB activity outside the EU under the EU guarantee should be to support the 
Union's  external  policies  by  financing  relevant  projects  in  partner  countries  or  at  regional 
level through the combination of EU budgetary funds (via the provisioning of the Guarantee 
Fund for external action which backs the EU guarantee) with EIB own resources.  

Through  its  financing  operations  outside  the  EU  under  the  EU  guarantee,  the  EIB  should 
support  the  economic,  social  and  environmental  sustainable  development  of  EU  partner 
countries,  and  their  partnership  with  the  EU.  Moreover,  EIB  financing  operations  under  the 
EU  guarantee  shall  be  consistent  with  the  wider  Union  regional  policy  framework  e.g.  the 
Accession  and  European  Partnership  and  the  Stabilisation  and  Association  process,  the  new 
European Neighbourhood Policy, the Eastern Partnership and the Partnership for Democracy 

27 

 
 
and Shared Prosperity. The new mandate should also be consistent with the recent "Agenda 
for Change"22. 

Other specific objectives of the new EU guarantee should include to: 

•  Better exploit EIB expertise and resources (objective a). As mentioned, EIB governing 
bodies have recently expressed concerns regarding EIB activity outside the EU as opposed 
to  its  core  activity  inside  the  EU,  in  particular  in  terms  of  resources  allocated  to  this 
activity. In this context, ensuring that EB external activity builds upon EIB's existing and 
recognised  expertise  and  resources  should  ensure  that  EIB  has  the  capacity  to  fully 
implement the mandate in the most efficient manner. 

•  Improve the effectiveness of the EU guarantee whilst preserving a sound budgetary 
cover (objective b). One of the main conclusions of the recent World Bank Development 
challenge  series:  "The  Future  of  the  Global  Aid  Architecture  and  Europe’s  Role  in  It"23 
was that European aid must continue to be rooted in  democratic legitimacy, which (at a 
time of austerity) requires a focus on needs and results. This would also be coherent with 
relevant principles of the European Consensus on Development and the principles of aid 
effectiveness  outlined  in  the  Paris  Declaration  of  2005,  the  Accra  Agenda  for  Action  of 
2008 and the Busan Partnership Agreement of 2011. In a context of scarce EU budgetary 
resource, it is therefore important to ensure effectiveness of the mandate without exposing 
the EU budget to excessive risks. 

3.2. 

Operational objectives of a new EU guarantee 

In this context, the operational objectives of the new EU guarantee should be to: 

•  Focus  the  scope  of  the  EU  guarantee  on  beneficiaries  where  its  use  would  display 
highest value added (objective 1). Given the anticipated non-negligible reduction of EIB 
external activity carried out at own-risk, there is a potential risk that, without any specific 
incentives,  the  EU  guarantee  may  be  used  by  the  EIB  for  an  increased  number  of 
operations  with  most  creditworthy  beneficiaries  (which  were  previously  carried  out  at 
own-risk)  to  the  expense  of  less  creditworthy  potential  beneficiaries  (where  the  EU 
guarantee's value added would have been higher) with the view to preserve the EIB's good 
credit stance.  

•  Explicitly  extend  the  EU  guarantee  to  all  microfinance  operations  (objective  2)  to 

reach out the poorest. 

•  Reinforce the climate change dimension of the EU guarantee in order to incentivise 
EIB  operations  in  this  key  sector  of  EU  external  action  (objective  3)  to  meet  the 
international  commitments  while  maintaining  traditional  support  to  infrastructure 
development, including environmental. 

•  The core objective of the EIB external mandate is that EIB financing operations support 
EU external policies. In this context, the operational objective is to increase the impact 
of  EIB  financing  through  better  alignment  with  EU  policies  and  coherence  and 

22 
23

COM(2011)637 

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/WBEUROPEEXTN/0,,contentMDK:2322646

8~pagePK:64168445~piPK:64168309~theSitePK:268437,00.html 

28 

 
 
                                                            
 
synergies  with  EU  instruments  (objective  4)  to  more  satisfactorily  mirror  policy 
developments in a timely manner. 

The diagram below illustrates the link between the identified problems and the specific and 
operational objectives of the new legislative proposal. 

Problems 

Specific objectives

Operational objectives

The risk of sub-optimal  use of EU 
guarantee 

Focus on most  value  added countries/ 
operations (objective  1) 

Better exploit  EIB expertise  and resources 
(objective  a) 

The impossibility  for EIB to finance all type 
of microfinance operations with the EU 
guarantee 

Explicitly extend  the EU guarantee to all 
microfinance operations (objective 2) 

The insufficient level  of funding for climate 
action and the difficulty for EIB to increase 
its lending  in this area 

Improve  the financial effectiveness of the 
EU guarantee whilst  preserving a sound 
budgetary cover (objective  b) 

Reinforce the climate change dimension 
(objective  3) 

Unclear EIB positioning as a key delivery 
tool for EU external  financial support  

Increase the impact / policy coherence  
(objective  4) 

4. 

SECTION 4: POLICY OPTIONS 

4.1. 

Description of policy options 

Option  0:  no  new  decision  –  i.e.  no  new  EU  budget  guarantee  extended  to  any  new  EIB 
operations outside the EU. 

Under this option, EIB could potentially partly continue its activity at own risk, subject to EIB 
governing bodies' decision, in accordance with Article 16 of EIB Statute. Financing contracts 
signed under Decision 1080/2011/EU would continue to benefit from the EU Guarantee, but 
no new EIB activity would be carried out outside the EU with the EU Guarantee. As a result, 
EIB overall external activity would substantially decline from a current level of EUR 6bn a 
year to probably less than a third of it. 

Option 1: no change (as in Decision 1080/2011/EU but extended until 31/12/2020 and with 
an overall ceiling of EUR 25 bn) – base line scenario. 

Under  this  option,  the  geographical  scope  of  the  EU  guarantee  and  the  regional 
balance  would  remain  unchanged  compared  to  Decision  1080/2011/EU  (i.e.  covering  Pre-
Accession,  Neighbourhood,  Russia  and  Central  Asia,  Asia  and  Latin  America  and  South 
Africa) (objective 1). 

29 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Microfinance operations would not be explicitly eligible for benefitting from the EU 

budget guarantee under this option (objective 2). 

Under this option, climate action would remain one of the three general objectives of 
the  mandate  (alongside  the  development  of  social  and  economic  infrastructure  and  local 
private  sector  development,  in  particular  support  to  SMEs).  A  specific  EUR  2bn  global 
envelope  (without  any  particular  geographical  allocation)  would  remain  pre-allocated  for 
climate change operations (objective 3). 

The link of EIB external activity under the EU guarantee with EU policies would be 
principally  ensured  through  the  elaboration  of  the  regional  technical  operational  guidelines 
(although no regular revision is foreseen), the possibility for the Commission to amend the list 
of  eligible  countries  through  delegated  act  to  reflect  political  developments  and  the 
submission for an opinion to the Commission of EIB financing requests in accordance with 
Article 19 of EIB Statute (objective 4). 

Option 2: amend the existing guarantee, as follows: 

Acronyms were given to the 3 following sub-options according to their main feature. Each of 
the  three  sub-options  has  been  defined  as  an  articulated  combination  of  4  types  of 
amendments with the view to address in particular the 4 operational objectives identified in 
Section  3.2.  The  selection  of  the  various  combinations  has  been  widely  debated  within  the 
IASG and with the stakeholders consulted informally in order to ensure that each sub-option 
stands as a logical combination of amendments. The selection of the parameters under each 
sub-option  is  determined  on  the  basis  of  the  mutual  interaction  and  spillover  of  the 
modifications of such parameters. 

Sub-option 2.1 "CLOSE". 

Under  this  option,  the  geographical  scope  would  be  amended  to  exclude  all  ALA 
countries  and  South  Africa  in  order  to  focus  the  guarantee  on  regions  neighbouring 
(/CLOSEst  to)  the  EU  and  where  EIB  activity  provides  the  highest  impact.  Therefore  only 
Pre-Accession  and  Neighbourhood  would  remain  eligible  under  this  option.  This  option 
should be regarded as a step forward in the direction given by Council and the EP and more 
recently  stressed  by  the  EIB  Board  of  Directors  to  focus  external  activity  on  Pre-Accession 
countries and Neighbours in the East and the South. Under this option, a similar balance of 
the  regional  ceilings  distribution  as  in  the  2009  Decision  between  Pre-Accession  and 
Neighbourhood would lead to e.g. 42% of the general mandate for Pre-Accession and 58% for 
the Neighbourhood (42% for the South and 16% for the East) (objective 1). 

This policy option also entails that all type of microfinance operations would become 
eligible  under  the  general  mandate  as  one  of  the  main  objectives  of  the  EU  guarantee 
(objective 2). It should however be noted that the current structure of the EU guarantee may 
not  be  sufficient  to  allow  EIB  support  to  all  type  of  microfinance  operations  due  to  the 
presence  of  an  excessively  high  residual  commercial  risk.  Hence,  to  become  effective  this 

30 

 
 
option  would  require  reducing  the  risk  for  the  Bank  to  an  acceptable  level.  This  could  be 
achieved  either  by  (i)  providing  financing  through  a  public  entity  –  either  a  sovereign  or  a 
sub-sovereign  presenting  an  "appropriate  EIB  credit  risk  assessment"  in  line  with  Article 
10(1)  of  the  current  Decision  -,  which  intermediates  or  guarantees  microfinance  operations 
carried out by public or private operators (NB: in this specific case, and by extension of the 
EU budget guarantee, the EIB would be exposed only to the credit risk of the sovereign/sub-
sovereign  entity  and  not  to  the  risk  of  each  microfinance  intermediary  or  operation.  The 
application of the EU comprehensive guarantee to the sovereign/sub-sovereign entity would 
apply in line with current provisions set out in the current legal basis and in the corresponding 
guarantee agreement); or (ii) obtaining an accompanying grant component from EU budget or 
other  sources,  e.g.  to  fund  a  first  loss  guarantee  instrument  supporting  microfinance 
operations. However, the level of EU grants would ultimately depend on the means available 
under other external financial instruments for such purpose and on their respective underlying 
policy objectives. 

Under this option, the climate change dimension would be reinforced by a substantial 
increase  of  the  specific  global  envelope  reserved  for  climate  change  operations  (e.g.  from 
EUR  2bn  in  the  current  Decision  to  e.g.  4  bn24)  which  should  ensure  an  expansion  in  the 
amounts  financed  by  EIB  to  support  climate  action.  This  specific  envelope  would  still 
complement  the  general  mandate  for  which  climate  action  would  remain  one  of  the  general 
objectives (alongside the development of social and economic infrastructure and local private 
sector development, in particular support to SMEs and microfinance) (objective 3). 

Better alignment of EIB financing with EU policies and coherence and synergies with 
EU  instruments  would  be  ensured  under  this  policy  option  through  the  drafting  annual 
country strategy papers. This would in particular allow revisiting e.g. eligibility of countries 
on a yearly basis and thereby ensuring a strict alignment of EIB external lending activity with 
EU  external  policy  developments  and  ensuring  coherence  and  synergies  with  EU  financial 
instruments. Although this annual adjustment would require mobilising significant resources 
in the Commission and the Bank, this would be possible as the number of EIB countries of 
operation outside the EU would be significantly smaller under this option (25 countries) than 
when EIB could operate also in ALA and South Africa under the EU mandate (more than 65 
currently) (objective 4). 

It should be noted that the stakeholders consulted presented diverse views on this option. On 
the one hand, while some NGOs – in particular those mostly concerned on the development 
impact  of  EIB  activity  –  favoured  the  exclusion  from  the  guarantee  coverage  of  the  further 
regions, other stakeholders such as the member states, the EEAS or even other NGOs more 
focused on climate impact preferred maintaining the current regions of operation. Finally, as 

24 
As  mentioned  before,  it  is  currently  estimated  that  around  15%  of  EIB  operations  (i.e.  around  EUR 
4.15bn)  carried  out  with  the  EU  guarantee  are  climate  change  operations.  These  operations  can  be  funded 
either  from  the  specific  EUR  2bn  global  envelope  or  from  the  EUR  27.5bn  general  mandate  (climate  action 
being one of the three general objectives). 

31 

 
 
                                                            
mentioned, most of the NGOs expressed reservation on the explicit extension of the guarantee 
coverage to all type of microfinance operations. 

32 

 
 
Sub-option 2.2: "MICRO" 

Under  this  option,  all  MICRO-finance  operations  would  benefit  from  the  EU 
guarantee through the creation of a specific envelope pre-allocated for this type of operations 
(e.g.  EUR  2  bn).  This  specific  envelope  could  also  benefit  to  local  SMEs,  particularly  the 
smaller ones. The creation of a specific envelope should be accompanied by a modification of 
the current guarantee structure in order for the allocated amount to be actually invested by the 
EIB. As mentioned above, currently the EU guarantee provides a comprehensive coverage for 
sovereign/public operations while it only provides a political risk coverage for private sector 
ones. Given that microfinance operations undertaken by the private sector typically present an 
excessively high residual commercial risk for the EIB, in order for the allocated envelope to 
be deployed by the EIB, the latter would require that all microfinance operations benefit from 
a comprehensive guarantee from the EU budget to bring down the risk to an acceptable level 
for  the  EIB.  While  the  structure  of  the  guarantee would remain unchanged compared to the 
current set-up for other type of operations, this increased exposure of the EU budget to private 
sector risks would constitute a complete change of the nature of the EU Guarantee compared 
to the current model and would have implication for the provisioning of the GF (objective 2). 

The  geographical  scope  of  EU  guarantee  should  remain  unchanged  compared  to 
Decision  1080/2011/EU,  in  particular  as  potential  needs  from  this  type  of  operation  can  be 
significant  in  ALA  region,  which  in  turn  justifies  a  meaningful  size  of  the  envelope. 
(objective  1).  Under  this  decision,  the  regional  balance  should  be  similar  to  the  one  of  the 
2009 Decision as described in section 2.1.1, whereby the ceilings for Pre-Accession and the 
Neighbourhood account for more than 80% and ALA and South Africa for the rest. 

The  creation  of  the  specific  envelope  for  micro-finance  operations  would  entail  the 
emergence  of  a  specific  risk  profile  of  EIB  lending  portfolio  under  EU  guarantee.  In  this 
context,  in  order  not  to  over-expose  EU  budget  to  significant  additional  risks,  the  specific 
climate  change  envelope  which  existed  under  Decision  1080/2011/EU  would  have  to  be 
absorbed/integrated  into  general  mandate  (climate  change  remaining  one  of  the  three  high-
level horizontal objectives of the general mandate). The reinforcement of the climate change 
dimension  could  be  envisaged  through  the  introduction  of  targets  for  regional  envelopes 
which  would  imply  more  volumes  than  in  current  trends  (e.g.  50%  in  the  ALA  (and  South 
Africa) and 20% elsewhere) (objective 3). 

A  better  alignment  with  EU  policies  and  increased  coherence  and  synergies  with  EU 
instruments would be ensured under this policy option through: 

• 

• 

the  update  of  technical  operational  regional  guidelines  consistently  with  initial  and 
periodically  reviewed  multiannual  indicative  programming  (MIP)  of  the  EU  external 
financial instruments as simplified in the recent legislative proposals (e.g. in particular the 
Single Support Framework for neighbouring countries or multi-country strategy papers in 
Pre-Accession), 
the  suspension  of  a  country  eligibility  under  Delegated  Act,  which  is  already  foreseen 
under  the  current  mandate  and  already  applied  for  Syria,  would  affect  not  only  the 

33 

 
 
signature  of  new  operations  but  also  the  disbursements  on  existing  ones.  This  has  a 
particular  relevance  for  those  cases  where  the  suspension  is  caused  by  the  violation  of 
human rights. The EIB should include specific provisions in its financing contracts to this 
effect, and. 
the  application  of  the  differentiation  ("more  for  more")  principle  in  the  Neighbourhood 
through  periodical  reviews  by  the  Commission  services  and  the  EEAS  of  the  EIB 
countries/sectors  of  operations  and  at  the  project  level  during  Article  19  appraisal 
(objective 4). 

• 

As mentioned above, the legislators requested to assess the possibility for the EU guarantee to 
support  all  type  of  microfinance  operations.  However,  most  of  the  NGOs  expressed 
reservation  on  the  explicit  extension  of  the  guarantee  coverage  to  all  type  of  microfinance 
operations (including with a comprehensive coverage). Moreover, the stakeholders consulted 
mentioned the need not to focus only on the amounts invested in climate action but rather on 
the effectiveness of these investments, in particular in terms of CO2 emissions. 

in 

Sub-option 2.3: "FOCUS". As mentioned, the Commission's legislative proposal on 
the next generation of DCI25 foresees that several countries in ALA region will graduate from 
development  bilateral  assistance.  Under  this  sub-option,  the  proposal  is  to  maintain  all 
countries  in  principle  eligible  for  EIB  financing  operations  under  EU  budgetary  guarantee 
while introducing a mechanism to FOCUS the geographical scope in particular in the ALA 
region.  The  principle  could  also  be  considered 
the  Pre-Accession  region  and 
Neighbourhood  whilst  taking  into  account  EIB  exposure  limits  by  country.  A  mechanism 
would be defined in the legislative act whereby (i) the use of EU budget guarantee would be 
defined  on  the  basis  of  the  creditworthiness  of  the  beneficiaries  and  other  credit  related 
criteria  (in  order  to  focus  the  guarantee  on  operations  where  value  added  would  be  highest, 
while  ensuring  that  there  would  be  no  'orphan'  countries  from  EU  financial  support).  The 
mechanism would allow to review the concrete application of such criteria on a regular basis 
in  order  to  take  into  account  the  evolution  of  financial  creditworthiness  of  potential 
beneficiaries of EIB loans and of EIB balance sheet; (ii) differentiation could be introduced 
depending on the beneficiary/type of operations (sovereign/sub-sovereign or private) and on 
the region concerned (Pre-Accession vs. others). With such a mechanism, all countries would 
still  remain  "eligible"  for  own-risk  operations  (as  recommended  by  SCWP).  It  would  also 
allow  to  take  into  account  risk  implications  for  the  EIB  and  to  keep  eligible  under  the  EU 
guarantee the beneficiaries/countries not yet eligible for own-risk operations under EIB credit 
assessment rules. For instance, some operations with creditworthy beneficiaries (e.g. a loan to 
a well rated emerging economy public entity) would not benefit from the guarantee coverage 
unless specific justifications can be applied. On the contrary, the use of the guarantee would 
be reserved for operations with less creditworthy beneficiaries, in particular in LDCs. In this 
context, it should be noted that, in light of the recent developments which allowed the EU to 
open a new chapter in its relations with Myanmar and to support the on-going political and 
economic reforms in the country, the Commission should propose in the upcoming legislative 
proposal  to  extend  the  list  of  eligible  countries  in  Asia  to  Myanmar.  More  details  on  the 
rationale  for  this  is  provided  in  Annex  5.  (objective  1).  Under  this  option,  as  in  option 

25  

COM(2011)840 Final. 

34 

 
 
                                                            
MICRO, the regional balance should be similar to the one of the 2009 Decision as described 
above, whereby the ceilings for Pre-Accession and the Neighbourhood account for more than 
80%  and  ALA  and  South  Africa  for  the  rest.  A  specific  sub-regional  ceiling  should  be 
identified  for  Central  Asia  within  the  ALA  region  to  reflect  enhanced  EU  cooperation  with 
the  area.  Finally,  the  introduction  of  a  dynamic  mechanism  to  focus  the  use  of  the  EU 
guarantee  on  operations  where  it  displays  the  highest  value  added  may  potentially  lead  the 
EIB over the 7-year period of the Decision to reach certain sub-regional ceilings earlier than 
the  end  of  the  period  while  other  may  remain  underutilised.  Therefore,  to  cater  for  this 
potential  problem,  it  would  be  important  to  enhance  the  flexibility  to  re-allocate  amounts 
within sub-regions compared to the current Decision. 

Under  this  option,  microfinance  operations  would  continue  not  to  be  specifically 
eligible under the EU guarantee as the three general objectives would remain the same as in 
Decision 1080/2011/EU. The main underlying rationale of this option is to focus on key value 
added  activities  where  the  EIB  presents  a  significant  comparative  advantage  (including 
through  a  more  financially  targeted  scope).  In  this  context,  further  developing  microfinance 
support  seems  difficult  to  justify  given  the  fact  that  this  activity  would  be  significantly 
resource-intensive.  In  this  case,  resources  could  be  maintained  in  areas  of  strong  EIB 
expertise  (infrastructure,  SMEs,  climate  action)  whilst  enhancing  e.g.  its  climate  impact 
(objective 2). 

Under this policy option, the reinforcement of the climate change dimension of the EU 
guarantee  would  be  through  the  introduction  of  a  an  overall  target  (e.g.  of  25%  of  total 
lending which would represent a substantial increase in financing compared with the current 
level for climate change operations) with no specific regional differentiation. In addition, this 
overall  target  would  be  accompanied  by  the  introduction  of  a  tracking  system  allowing  to 
monitor absolute and relative GHG emission reduction of EIB significant projects supported 
under the EU guarantee throughout the project lifecycle and report accordingly (objective 3).  

Eligibility  for  climate  change  operations  would  be  clarified  against  agreed  criteria 
building  on  -  and  if  needed  tightening  -  existing  EIB  definitions  to  track  climate  change 
expenditure  (e.g.  introducing  benchmarks  related  with  Green-House  Gas  (GHG)  emission 
reduction,  improving  if  appropriate  the  definitions  for  energy  efficiency  and  adaptation), 
which would also be used in the monitoring phase.  

A better alignment with EU policies and increased coherence and synergies with EU 

instruments under this policy option would be ensured, as in option MICRO through:  

• 

• 

the  update  of  technical  operational  regional  guidelines  consistently  with  initial  and 
periodically  reviewed  multiannual  indicative  programming  (MIP)  of  the  EU  external 
financial instruments as simplified in the recent legislative proposals, 

the  suspension  of  a  country  eligibility  under  Delegated  Act,  which  is  already  foreseen 
under  the  current  mandate  and  already  applied  for  Syria,  would  affect  not  only  the 
signature  of  new  operations  but  also  the  disbursements  on  existing  ones.  This  has  a 
particular  relevance  for  those  cases  where  the  suspension  is  caused  by  the  violation  of 

35 

 
 
• 

human rights. The EIB should include specific provisions in its financing contracts to this 
effect, and 
the  application  of  the  differentiation  ("more  for  more")  principle  in  the  Neighbourhood 
through periodical reviews under the COM/EIB/EEAS MoU of the EIB countries/sectors 
of operations and at the project level during Article 19 appraisal (objective 4). 

Most of the stakeholders consulted expressed interest in this policy option allowing to focus 
the use of the EU guarantee on most value added operations. They also appreciated positively 
the  idea  to  further  incentivise  EIB  climate  action  support  albeit  not  at  the  expense  of  other 
more  traditional  sector  support.  This  option  would  probably  not  entirely  satisfy  certain 
stakeholders,  notably  some  members  of  the  European  Parliament,  which  seemed  to  be  in 
favour of extending the EU guarantee to all type of microfinance operations.  

Option 3: provide the guarantee to other financial institutions. 

This  option  would  entail  opening  the  coverage  of  the  EU  guarantee  to  other  European 
Financial  Institutions  eligible  in  the  various  blending  facilities  (such  as  WBIF,  NIF,  LAIF, 
IFCA, AIF etc.) to the extent that they promote projects supporting EU priorities. 

36 

 
 
4.2. 

Discarded policy options at an early stage of the assessment 

Option 0: no new decision – i.e. no guarantee 

In  light  of  the  crucial  role  played  by  the  EU  guarantee  to  EIB  external  operations  in 
supporting  EU  external  policy  objectives  and  in  light  of  the  global  economic  crisis  which 
emphasises  the  significant  investment  needs,  it  seems  essential  to  continue  preserving  an 
adequate  investment  flow  to  EU  partner  countries.  With  EIB  operations  outside  the  EU 
without the EU guarantee being more and more limited in the current risk environment, the 
discontinuation  of  the  EIB  external  mandate  under  the  EU  guarantee  would  lead  to  a 
withdrawal of the EIB from a number of countries and a significant increase in funding costs 
for  projects  located  in  these  countries.  This  is  deemed  not  to  be  politically  desirable  in 
particular in the closest regions outside the EU (i.e. Pre-Accession and Neighbourhood) where 
EU influence has to be preserved and EU policy objectives promoted.  

Moreover, as stated already, Article 16 of Decision 1080/2011/EU states that the Commission 
shall present to the European Parliament and the Council a new proposal for the next financial 
framework (2014-2020).  

Therefore, policy option 0 is disregarded without any further assessment. 

Option 3: provide the guarantee to other financial institutions. 

Option 3 could be attractive to enhance the outreach of EU guaranteed financing to a larger 
spectrum of projects/areas. In addition, given the current limitations on overall EIB external 
lending imposed by the EIB governing bodies, this would allow a potentially higher volume 
of lending to be achieved. However, there are a few potential drawbacks to this proposal.  

On the one side, the opening of the EU guarantee to other institutions would correspondingly 
decrease  the  share  of  EIB  guaranteed  lending,  which  could  have  a  negative  impact  on  the 
visibility of EU action, given the EIB EU institutional standing. Following the “graduation” 
of  the  middle-  income  and  emerging  countries out  of  most  of  the  EU bilateral development 
funding, it is all the more important to make sure that EIB lending operations carrying an EU 
flag can fill the void of largely reduced development aid budgets. 

A  generalised  opening  of  the  EU  guarantee  to  other  intermediaries  on  a  level  playing  field 
would strongly limit EIB external activity. In turn, a significant risk would arise that the EIB 
will not be able to reach the necessary critical mass for its external operations to justify their 
continuation. This is politically undesirable from an EU perspective, taking into account the 
long standing presence of EIB in the external field and above mentioned reduced aid budgets. 

In  addition,  the  EU  budget  would  assume  additional  contingent  liabilities  on  financing 
operations  conducted  by  financial  institutions  which  are  not  strictly  part  of  the  EU 
institutional constellation and do not have the same shareholders (as it is the case for the EIB), 
which  could  be  contested  by  the  budgetary  authority.  In  line  with  the  new  Financial 
Regulation,  other  multilateral  and  bilateral  financial  institutions  are  eligible  –  alongside  the 

37 

 
 
EIB - to implement complementary financial instruments under other EU programmes such as 
IPA  II,  ENI  or  DCI  (e.g.  EU  grants  may  cover  the  first  loss  piece  of  a  debt  instrument 
established by one or more financial institutions). 

Lastly, contrarily to the EIB, whose activity is politically and legally solely determined by and 
accountable to EU institutions (Council, EP, Commission with the involvement of the EEAS), 
the  other  institutions  have  their  own  strategies  agreed  by  the  respective  governing  bodies 
which  could  limit  the  influence  of  the  EU  through  its  guarantee.  In  this  context,  it  is  worth 
recalling that – according to Article 19 of the EIB Statute, which is part of the EU Treaty - all 
EIB  operations  are  submitted  to  the  Commission  for  an  opinion.  A  Commission  negative 
opinion  under  the  Article  19  consultation  would  require  an  unanimous  decision  by  the  EIB 
Board of Directors to be overruled and, in any case, such operation cannot benefit from the 
EU  guarantee.  Such  a  mechanism  would  not  be  in place if the external mandate were to be 
extended to non-EU institution(s). 

In  this  context,  if  should  be  mentioned  that  all  stakeholders  consulted  (including  potential 
beneficiaries of the mandate) did not show any interest for this option. 

Therefore, policy option 3 is disregarded without any further assessment. 

4.3. 

Retained policy options 

Following the disregard of these two policy options, option 1 (base line scenario –as specified 
in Decision 1080/2011/EU but extended until 31/12/2020), and sub-options CLOSE, MICRO 
and  FOCUS  of  option  2  will  be  analysed.  The  table  below  summarises  the  main  changes 
incorporated in options CLOSE, MICRO and FOCUS compared to the base line (no change) 
scenario. 

Main  differences  between  the  retained  policy  options  compared  to  the  "baseline  -  no 
change" policy option 

to 

the 

Responses 
operational 
objectives 
(i) focus on most value 
countries/ 
added 
operations 

Option CLOSE 

Option MICRO  Option FOCUS 

Exclusion 
of 
ALA  and  South 
Africa 

No change 

on 

less 

Focus 
creditworthy 
beneficiaries (in a 
dynamic way) 

(ii)  provide  explicit 
guarantee 
all 
microfinance 
operations 

for 

All  microfinance 
operations 
specifically 
eligible  but  no 
commercial  risk 
borne  by  the  EU 
guarantee 

Pre-allocated 
envelope  of  EUR 
2bn 
for 
microfinance 
operations  with 
comprehensive 
EU guarantee 
the  Increase  of  the  Setting  up 

No change 

(iii) 

reinforce 

of  Overall 

lending 

38 

 
 
climate 
dimension 

change 

Increase 
/ 

(iv) 
impact 
coherence  

the 
policy 

pre-allocated 
envelope 
Climate 
operations 
EUR 4bn 

for 
change 
to 

Drafting 
annual 
strategy papers 

of 
country 

of 

regional 
targets 
and absorption of 
the  pre-allocated  
envelope  into  the 
overall ceiling 
Update 
technical 
operational 
regional 
guidelines  in  line 
with  MIP  of  EU 
external  financial 
instruments 

volume  target  + 
tracking  GHG 
emission 
reduction 

of 

Update 
technical 
operational 
regional 
guidelines  in  line 
with  MIP  of  EU 
external  financial 
instruments 

5. 

SECTION 5: ANALYSIS OF IMPACTS OF RETAINED POLICY OPTIONS 

It  should  be  noted  that  it  is  not  possible  to  provide  throughout  quantitative  estimates  of  the 
impacts of each option as the latter will depend on the implementation of the Decision by the 
EIB and in particular on the selection and implementation of each project benefiting from the 
EU guarantee. Indeed, as stated in the legal basis, the regional ceilings mentioned in section 4 
are  indicative.  They  do  not  represent  target  volume.  While,  as  mentioned  in  section  2,  the 
implementation of the Decision heavily depends on EIB governing bodies decision and on the 
absorption  capacity  of  the  beneficiaries,  at  project  level,  EIB  activity  will  also  particularly 
depend  on  the  identification  of  sound  and  bankable  projects,  grants-loans  blending 
opportunities, level of indebtedness of the beneficiary countries, risk analysis, economic and 
political  context,  quality  of  project  preparation,  capacity  of  the  project  promoters,  etc. 
Nevertheless, a qualitative analysis has been carried out while references to data and figures 
have been provided where possible. 

In  agreement  with  the  IASG,  it  has  therefore  been  decided  that  the  core  of  the  assessment 
would be based on a qualitative analysis of the main impact of each option.   

5.1. 

Definition of the criteria for main impact analysis 

A  list  of  criteria  has  been  established  by  the  IASG  to  assess  each  option  with  the  view  to 
highlighting their main impacts.  

The  impacts  highlighted  below  have  been  defined  in  relation  to  operational  and  specific 
objectives highlighted in Section 3. 

•  Support  priority  policy  areas  of  the  EU,  including  enlargement,  neighbourhood  and  the 

development of third countries and political impact (objectives a, b and 4). 

•  Coherence and complementarity with EU external financial instruments and need for co-

financing (objectives a and 4). 

•  Leverage of EIB experience and expertise (objective a). 

39 

 
 
•  Social  impact,  support  to  SMEs,  local  private  sector  development  and  microfinance  in 

partner countries (objectives a, 2 and 4). 

•  Support EU climate action and environmental impact (objectives a, 3 and 4). 

• 

• 

Impact on the Guarantee Fund and on EU budget (objective b). 

Impact on EIB credit risk stance/rating and resources (objectives a, b and 1). 

It should be noted that the last two criteria (Impact on the GF and on EU Budget and Impact 
on EIB credit risk stance and resources) are probably the most important ones as they de-facto 
set the boundaries within which the Decision can be implemented. 

The diagram below summarises le link between these criteria and the specific and operational 
objectives set out in section 3. 

Specific Objectives 

Criteria 

Operational Objectives

Objective a – better 
exploit EIB expertise 
and resources 

Objective b – 
improve  financial 
effectiveness 
whilst  preserving 
a sound 
budgetary cover

Social impact,  support 
SMEs,  local private 
sector development  and 
microfinance

Support  EU climate 
action and 
environmental  impact 

Coherence and 
complementarity  with 
EU external financial 
instruments  and need 
of co-financing

Support  EU priority 
policy areas and 
political impact 

Leverage of EIB 
experience  and 
expertise 

Impact on EIB credit 
stance and resources

Impact on GF and EU 
budget 

Objective 2 – explicitly 
extend  the EU guarantee 
to all microfinance 
operations 

Objective 3 – 
reinforce climate 
change dimension 

Objective 4 –
increase the impact  / 
policy coherence

Objective 1 – focus 
on most value added 
operations

On the basis of the analysis below, the report provides an assessment of the impact of each 
option  in  terms  of  effectiveness,  efficiency  and  coherence  in  comparison  with  the  baseline 
scenario.  The  different  options  have  been  qualitatively  assessed  based  on  the  Commission 
Services' qualitative appreciations of the likely impact. 

Effectiveness means doing the right things, that is setting the right goals and objectives and 
making sure they are accomplished. 

Efficiency means doing things right, in other words it is getting the most from EU resources, 
taking into account EIB constraints. This encompasses organisational aspects. 

40 

 
 
 
 
 
 
Coherence  means  possibilities  to  exploit  complementarities  and  synergies  in  terms  of 
delivery  towards  achieving  the  agreed  objectives  and  to  avoid  negative  consequences  and 
overlaps which would adversely affect the implementation of policies. 

From the Commission's side, the administrative cost of implementing the options analysed in 
this section should be equivalent to that of implementing the baseline scenario. 

5.2.  Main impact analysis of each retained policy option 

5.2.1.  Option 1 - baseline scenario (no change) 

Analysis and Assessment  

Support 
priority 
policy  areas  of  the 
EU, 
including 
enlargement, 
neighbourhood and 
the development of 
third  countries  and 
political impact 

Following a mid-term review, Decision 1080/2011/EU already enhances 
the  coherence  of  the  EU  guarantee  and  the  link  with  EU  policies  by 
notably  establishing  horizontal  high-level  objectives,  a  wider  Regional 
Policy  Framework  (Annex  4  of  the  Decision)  and  technical  regional 
operational guidelines. 

In addition, Decision 1080/2011/EU mentions that EIB should strive to 
support  indirectly  the  achievement  of  the  Millennium  Development 
Goals  (MDGs)  and  that  an  EIB  financing  objective  in  developing 
countries  shall  be  to  contribute  indirectly  to  development  objectives 
such  as  reducing  poverty  through  inclusive  growth  and  sustainable 
economic and social development. 

As  experience  of  implementation  of  the  previous  decisions  has 
witnessed, this option would however not allow sufficient flexibility to 
adequately/satisfactorily  mirror  recent  policy  developments  in  a  timely 
manner  for  instance  to  align  with  differentiation  policy  in  the 
Neighbourhood  ("more  for  more").  Further  alignment  with  EU  policy 
orientations  under  next  MFF  could  be  developed,  including  through 
more regular updating of the guidelines in line with the evolution of EU 
policies throughout the Decision period. 

The continuation of the EU guarantee as under Decision 1080/2011/EU 
would  not  allow  for  any  focus  on  most  value  added  or  less  developed 
countries/regions.  The  advantage  would  however  be  the  continuity  in 
EU relations with its external partners and the preservation and support 
of investment flow to these countries. 

Finally,  the  Decision  foresees  a  significantly  enhanced  reporting  and 
monitoring of development impact, including through the establishment 
of appropriate performance indicators. 

and 

Coherence 
complementarity 
with  EU  external 

Following  the  mid-term  review,  Decision  1080/2011/EU  emphasised 
the  need  to  enhance  complementarity  and  coherence  of  EIB  activity 
under  the  EU  guarantee  with  EU  external  instruments.  Moreover,  it 

41 

 
 
 
financial 
instruments 
need 
for 
financing 

mentions  the  need  to  complement  the  resources  of  the  EIB,  where 
possible,  and  appropriate,  with  concessional  funds  available  under  the 
EU budget, both for climate change and development financing. 

and 
co-

Leverage  of  EIB 
experience 
and 
expertise 

It should be noted that Decision 1080/2011/EU provides the legal basis 
for  the  EU  guarantee  underpinning  EIB  external  financing.  However, 
EU  grants  which  can  be  combined  with  EIB  financing  originate  from 
other legal bases (external instruments such as IPA II, ENI or DCI). In 
this  context,  the  EU  has  devoted  resources  to  various  facilities  in  the 
regions covered by the Decision, such as the WBIF, the NIF, the LAIF, 
the IFCA and the AIF, where it cooperates with the EIB and other IFIs 
to  promote  investments  supporting  EU  policy  objectives.  The  grant 
resources  available  under  these  facilities  may  be  used  to  leverage  EIB 
loan resources. 

The mid-term review of the EIB external mandate, including the report 
of  the  SCWP  and  the  external  evaluation,  concluded  that  the  EIB 
provides  financial  value-added  mainly  through  offering  large  lending 
amounts  with  longer  maturities  and  grace  periods  at  attractive 
conditions which are not available in the market. The additionality was 
found  by  the  evaluation  to  be  particularly  high  in  public  sector 
operations, notably for infrastructure investments. In the private sector, 
the longer maturities of EIB loans make them additional particularly in 
countries with less developed financial markets. Beyond the significant 
financial  contribution  provided  to  borrowers,  the  EIB  contributes 
positively  through  its  appraisal  process,  which  is  based  on  compliance 
with  EU  standards  (notably  environment  and  procurement)  and  the 
technical and economic expertise of the EIB project staff. 

However,  Decision  1080/2011/EU  does  not  cover  potentially  relevant 
areas, where the EIB has some experience, particularly within the EU or 
in  ACP  countries,  such  as  explicit  support  to  microfinance.  Moreover, 
the  implementation  of  the  mandate  shows  that  particularly  in  the 
Neighbourhood,  the  support  to  local  private  sector  development  and 
PPPs  is  challenging  due  to  insufficient  creditworthiness  of  potential 
beneficiaries.  On  the  latter,  several  joint  Commission-EIB  risk  sharing 
initiatives have been developed recently within the EU. 

Social 
impact, 
support  to  SMEs, 
local  private  sector 
and 
development 
in 
microfinance 

In line with the objectives of the Decision, EIB external activity under 
the  guarantee  has  historically  mainly  provided  support  to  basic 
transport,  energy  and  water 
infrastructure 
sanitation  –  sectors  that  are  key  for  promoting  economic  growth  and 
poverty  reduction.  More  recently,  support  to  local  private  sector 
development,  including  SMEs  has  become  one  of  the  three  high-level 

investments,  such  as 

42 

 
 
partner countries 

Support 
EU 
climate  action  and 
environmental 
impact 

on 

Impact 
Guarantee 
and on EU budget 

the 
Fund 

horizontal objectives of Decision 1080/2011/EU, whereas before 2011 it 
was  an  explicit  priority  only  for  the  Southern  Neighbourhood  region. 
This sector is key to alleviate unemployment and contribute to a more 
equal  income  distribution.  Moreover,  EIB  financing  helps  attracting 
increased foreign direct investment, research, innovation and technology 
transfer, stimulating innovation and job creation in partner countries. 

Maintaining  the  status  quo  does  not  alleviate  the  risk  of  under-
development  of  support  to  new  innovative  investment  schemes  and  to 
micro-SMEs  which  are  a  significant  source  of  job  creation  in  Partner 
countries.  Moreover,  the  current  Decision  does  not  envisage  any 
provision  for  the  explicit  support  to  microfinance  operations  which 
could support improve households' living standards and conditions and 
help protect themselves from risks. 

Climate change mitigation and adaptation is among the three high-level 
horizontal  objectives  of  Decision  1080/2011/EU.  The  release  of  the 
EUR  2bn  global  envelope  for  climate  change  activity  in  the  Decision 
constituted  an  additional  visible  strengthening  of  EIB  support  to  EU 
climate  action  in  this  regard.  EIB  activity  is  key  in  promoting 
environmental  sustainability  in  partner  countries,  including  through 
projects  in  the  areas  of  renewable  energy,  environmentally  friendly 
transport  systems,  water  management  and  biodiversity.  Enhanced 
support  to  environment  related  infrastructure  in  the  current  Decision 
allows more inclusive and sustainable economic development. 

Moreover,  when  implementing  the  Decision,  including  for  projects 
other than climate changes ones such as transport or energy projects, the 
EIB ensures that EU environmental principles and standards are applied 
as  far  as  possible  thereby  avoiding  potential  negative  impacts  on  the 
environment. 

The  presence  of  a  specific  envelope of  EUR  2  bn  (i.e.  7%  of  the  total 
mandate)  does  not  however  ensure  that  EIB  sufficiently  prioritise 
climate action, given its relatively limited size. Moreover, the presence 
of a dedicated amount does not ensure that an adequate climate impact 
is achieved for instance in terms of GHG emission reduction. 

According  to  the  current  Regulation,  the  Guarantee  Fund  for  external 
action must be maintained at a target level of 9% of the total outstanding 
disbursements. The 9% target level was confirmed as an appropriate rate 
in light of the risk profile of the loan and guarantee portfolio covered by 
a recent external evaluation. 

Under  the  present  option,  there  is  no  need  to  revisit  the  level  of  the 

43 

 
 
Impact  on  EIB 
risk 
credit 
and 
stance/rating 
resources 

target  rate.  However,  the  evolution  of  the  environment  in  which  EIB's 
external  activity  is  delivered  in  the  post-2014  period  may  impact  the 
quality  of  the  external  lending  portfolio  in  particular  for  Southern 
Neighbourhood  countries,  which  may  in  turn  entail  an  impact  on  the 
Guarantee Fund and on the EU budget (the risk has already materialised 
for  Syria  –  see  section  2.1.2).  The  final  impact  on  the  EU  budget  will 
depend  on  various  factors,  such  as  the  speed  of  signatures  and 
disbursements as well as the actual default rates and severity of default 
on both existing and new loans, which in turn depend on the evolution 
of  the  economic  and  political  context,  on  the  quality  of  project 
preparation and implementation, etc. 

the  guarantee  as  specified 

The  continuation  of 
in  Decision 
1080/2011/EU  implies  that  the  EIB  would  continue  to  operate  in  the 
same  geographical  areas.  At  the  time  of  the  writing  of  the  report,  EIB 
governing  bodies  have  decided  to  reduce  the  overall  EIB  external 
activity and in particular the complementary external activity carried out 
at own risk. Were this trend to continue, this would mean that the bulk 
of EIB external activity under the next MFF would be carried out under 
the EU guarantee. 

Before  the  crisis,  the  EIB  set  aside  some  own  resources  to  be  used  as 
provisions for riskier private sector operations outside the EU including 
under the mandate (e.g. the Special FEMIP Envelope). However, in the 
current context where the EIB is expected to focus on EU activity and to 
preserve  its  credit  standing,  the  development/continuation  of  such 
riskier  external  facilities  is  expected  to  be  limited.  This  may  entail 
limitations on local private sector development support.  

The strengthened policy setting, reporting and monitoring requirements 
set  out  in  Decision  1080/2011/EU  present  a  non-negligible  impact  on 
EIB  resources.  This  was  mentioned  as  a  potential  concern  by  the  EIB 
Board  of  Governors  when  they  endorsed  the  mandate  in  November 
2011, given the necessity to focus the resources of the Bank on activity 
within  the  EU  and  the  limited  scope  for  expanding  staff  resources  for 
the external field. 

5.2.2.  Option CLOSE 

Analysis and Assessment 

priority 
Support 
policy areas of the 
EU, 
including 
enlargement, 

The  reduction  of  the  geographical  scope  of  the  EU  guarantee  will  be 
perceived  as  a  disengagement  of  the  EU  vis-à-vis  its  partners  in  the 
regions  concerned  as  some  partners  in  ALA  and  South  Africa  would 
become  orphans  from  almost  all  type  of  EU  funding  (bilateral 

44 

 
 
 
neighbourhood 
the 
and 
development 
of 
third countries and 
political impact 

and 

Coherence 
complementarity 
with  EU  external 
financial 
instruments 
for 
need 

and 
co-

assistance from DCI and EIB lending). Moreover, it is not evident that 
this disengagement will go hands-in-hands with better / more efficient 
support to the Pre-Accession and Neighbourhood regions. At the same 
time,  the  negative  impact  on  borrowers  in  these  regions  should  be 
limited,  given  the  small  size  of  EIB  activity  in  these  countries 
compared  to  other  IFIs.  While  the  EIB's  signed  contracts  in  the  ALA 
region amounted to EUR 1.2bn in 2010, the Asian Development Bank 
(ADB) and the Inter-American Development Bank (IADB) committed 
USD  17.5bn  and  USD  12.1bn,  respectively,  in  these  same  period. 
Besides,  the  World  Bank  is  also  active  in  both  regions.  EU  countries 
are  among  the  major  shareholders  of  the  ADB  and  World  Bank,  and 
they  also  hold  shares  in  the  IADB.  The  EU  could  thus  continue  to 
influence IFI lending in these regions after an EIB withdrawal. A better 
EU coordination in the governance of such institutions would reinforce 
the EU voice in the region. 

On  the  other  hand,  the  explicit  inclusion  of  micro-finance  operations 
under  the  high-level  objectives  of  the  EU  guarantee  would  allow  the 
EIB to contribute more to poverty reduction and/or MDGs achievement 
in the countries covered than in the baseline scenario, albeit to a lesser 
extent than in the MICRO option (see below).  

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  lower  than  in  the  baseline  scenario  as  the  potentially 
wider  support  to  EU  sectoral  policies  (such  as  climate  action,  SMEs 
support)  is  not  sufficient  to  counterbalance  the  severe  impact  on 
relations  with  Partner  countries  caused  by  the  reduction  of  the 
geographical scope. 

Efficiency:  equivalent  to  the  baseline  scenario  as  the  disengagement 
from  some  regions  does  not  automatically  imply  more  efficient 
assistance in the closest regions. 

Coherence: better than in the baseline scenario due to the drafting of 
country  annual  strategies  which  should  ensure  better  support  to  EU 
policies through better alignment. 

Complementarity and coherence would be enhanced by the drafting of 
annual country strategy papers. This allows revisiting e.g. eligibility of 
countries  on  a  yearly  basis  and  thereby  ensuring  a  strict  alignment  of 
EIB  external  lending  activity  with  EU  external  policy  developments 
and  ensuring  coherence  and  synergies  with  EU  financial  instruments. 
However,  these  annual  adjustments  would  limit  the  medium-term 

45 

 
 
financing 

predictability of EIB lending in partner countries/regions. 

As  mentioned  in  Section  4,  given  the  riskier  nature  of  microfinance 
operations and the fact that the EU guarantee is technically not the best 
instrument  to  provide  a  comprehensive  risk  coverage  for  them,  a 
significant  amount  of  accompanying  grants  would  be  required  to 
implement  microfinance  operations  on  a  wider  scale.  Additional 
accompanying  grants  would  also  be  needed  to  able  to  implement  the 
EUR  4bn  specific  envelope  for  climate  change  action.  Such  higher 
demand for grants may not be matched by a sufficient supply given the 
relatively  limited  grant  resources  available  through  the  external 
instruments under next MFF. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  equivalent  to  the  baseline  scenario  as  the  stronger 
coherence  entailed  by  an  annual  review  of  country  strategy  papers  is 
compensated  by  the  significant  risk  of  under-utilisation  caused  by  the 
potential mismatch between grant resources demand and availability. 

Efficiency:  lower  than  in  the  baseline  scenario  as  the  preparation  of 
annual  strategy  papers  would  require  mobilising  resources  from  the 
Commission/EEAS/EIB for a relatively limited impact. In addition, the 
implementation  of  the  Decision  depends  on  the  availability  of  grant 
resources. 

Coherence:  better  than  in  the  baseline  scenario  as  the  approach  is 
closely aligned to the one used for external instruments. 

Leverage  of  EIB 
experience 
and 
expertise 

The  sole  focus  on  Pre-Accession  and  Neighbourhood  regions  would 
allow  the  EIB  to  more  efficiently  deploy  its  capacity  to  support  the 
implementation of EU standards and principles which is a core area of 
expertise acquired in EU activity. 

As regards microfinance operations, EIB should draw on its experience 
within  the  EU  (through  the  Progress  Microfinance  Facility)  and  in 
ACP. It remains however to be seen whether the EIB has the necessary 
staff  resources  to  widely  develop  this  activity,  as  these  operations  are 
very  resource  intensive  (smaller  amounts  per  operation  compared  to 
typical EIB loans, specific skills required, etc.). 

On  the  other  hand,  compared  to  the  MICRO  option  (see  below), 
provided  that  grant  resources  are  available,  the  EIB  would  be  able  to 
leverage  its  financial  capacity  through  joint  Commission-EIB  risk-
sharing  instruments  to  support  local  private  sector  development,  in 

46 

 
 
Social 
impact, 
support  to  SMEs, 
local 
private 
sector 
development  and 
microfinance 
in 
partner countries 

particular  SMEs  and  microfinance  operations.  The  absence  of  a 
dedicated comprehensively guaranteed envelope should indeed allow a 
more market-driven selection of investments. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  lower  than  in  the  baseline  scenario  as  EIB  expertise 
would not be leveraged on a global basis. 

Efficiency:  better  than  in  the  baseline  scenario  as  the  more  limited 
geographical  coverage  should  allow  EIB  to  further  develop  its 
expertise. 

Coherence:  better  than  in  the  baseline  scenario  as  the  more  focused 
guarantee  should  allow  improving  the  coherence  with  EU  policy 
objectives. 

All  type  of  microfinance  activity  would  become  eligible  under  this 
option which should imply higher economic and social impact than in 
the baseline scenario. There might however be uncertainties on the EIB 
capacity  to  implement  such  a  mandate  to  the  same  extent  as  in  the 
MICRO option (see below), given the need for the EIB to bring down 
the risk to an acceptable level. This could be achieved either by: 

1.  providing  financing  through  a  sovereign/public  entity,  which 
intermediates or  guarantees microfinance operations carried out 
by public or private operators (NB: in this specific case, the EIB, 
and  by  extension  the  EU  budget  guarantee,  would  be  exposed 
only to the credit risk of the sovereign/sub-sovereign entity and 
not to the risk of each microfinance intermediary or operation); 
or 

2.  obtaining an accompanying grant component from EU budget or 
other  sources,  e.g.  to  fund  a  first  loss  guarantee  instrument 
supporting microfinance operations. However, the amount of EU 
grants  would  ultimately  depend  on  the  means  available  under 
other external financial instruments for such purpose. 

On the other hand, the reduction of the geographical scope will prevent 
EIB  to  provide  financial  support  to  ALA  region  and  South  Africa 
which  display  a  significant  number  of  poorer  countries  (even  if  EIB 
activity  in  these  countries  has  been  relatively  limited  up-to-date). 
Therefore,  on  balance,  the  indirect  contribution  to  the  reduction  of 
MDGs  and  hence  the  economic  and  social  impact  should  be  similar 
than in the baseline scenario.  

47 

 
 
Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness: lower on balance than in the baseline scenario given the 
uncertainty to finance microfinance operations and the impossibility to 
support  private  sector  in  less  prosperous  countries  in  Asia,  Latin 
America and South Africa.  

Efficiency: equivalent to the baseline scenario as the benefits provided 
by  a  more  focused  geographical  scope  should  offset  the  uncertainty 
linked to the financing of microfinance operations. 

Coherence: lower than in the baseline scenario as the reduction of the 
geographical coverage does not allow EIB support to the private sector 
at the global level. 

Support 
EU 
climate action and 
environmental 
impact 

The increase to EUR 4bn of the specific dedicated envelope for climate 
change  operations  would  be  seen  as  a  visible  political  decision  and 
would  represent  a  significant  incentive  for  EIB  to  expand  its  climate 
related activity. 

There might however be doubts on the ability of the EIB to implement 
it,  notably  if  the  geographical  scope  is  significantly  reduced.  In 
addition,  as  in  the  baseline  scenario,  the  presence  of  a  dedicated 
amount does not ensure that an adequate climate impact is achieved for 
instance  in  terms  of  GHG  emission  reduction.  Nevertheless,  on 
balance, the environmental impact should be higher than in the baseline 
scenario. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  better  than  in  the  baseline  scenario  as  EIB  support  to 
EU climate action should be further improved. 

Efficiency:  lower  than  in  the  baseline  scenario  given  the  uncertainty 
regarding  EIB  ability  to  implement  the  increased  mandate  in  a  more 
limited  geographical  area  and  regarding  the  overall  climate  impact  of 
the Decision. 

Coherence: equivalent to the baseline scenario as the reinforcement of 
the  climate  dimension  would  be  offset  by  the  exclusion  of  big  CO2 
emitters  from  the  eligible  countries  under  the  mandate.  It  would 
contradict  commitment  from  EU  for  climate  change  long  term 
financing  benefiting  developing  countries,  since  some  of  them  are  in 
the ALA region. 

48 

 
 
on 

Impact 
the 
Guarantee  Fund 
and on EU budget 

The reduction of the geographical scope will imply more geographical 
concentration  of  the  Bank's  guaranteed  portfolio  quality.  The  reduced 
diversification  and  the  concurrent  focus  on  certain  regions  (e.g. 
Mediterranean  countries)  where  recent  political  events  affected  the 
creditworthiness  of  some  countries/beneficiaries  may  potentially  put 
pressure on the Guarantee Fund provisioning requirements. 

With  the  EU  guarantee  continuing  to  be  limited  to  only  cover 
sovereign/sub-sovereign  risks  (with  EIB  appropriate  credit  risk 
assessment)  and  political  risk  events  as  in  the  current  mandate,  the 
possible  explicit  inclusion  of  microfinance  operations  is  expected  to 
have a marginal impact on the risk born by the EU budget.  

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  lower  than  in  the  baseline  scenario  as  on  balance,  the 
risk born by the EU budget would be higher. 

Efficiency:  lower  than  in  the  baseline  scenario  as  the  EU  budgetary 
guarantee  does  not  seem  to  be  the  appropriate  instrument  to  cover  all 
type of EIB microfinance operations outside the EU. 

Coherence:  lower  than  in  the  baseline  scenario  as  an  increased  risk 
would not be coherent with the specific objective of shielding the EU 
budget from excessive risks. 

Impact  on  EIB 
credit 
risk 
stance/rating  and 
resources 

The geographical reduction of the guarantee coverage may also imply a 
disengagement  of  the  Bank  from  its  own-risk  activity  in  the  regions 
concerned. It is however not possible to infer the overall impact of this 
withdrawal on the rating / risk stance of the Bank.  

At the same time, the reduction of the geographical scope can be seen 
as  better  allocation  of  scarce  budgetary  resources  and  EIB  staff 
resources to EU priority regions. The cost of monitoring and reporting 
on the activity would be lower given the geographical concentration. 

While  this  would  release  additional  resources  for  Pre-Accession  and 
Neighbourhood,  the  drafting  of  the  annual  strategies  would  require 
the  development  of 
significant  new  staff  resources.  Moreover, 
microfinance activity would also require additional resources.  

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  equivalent  to  the  baseline  scenario  as  the  resources 
freed by the reduced geographical scope would have to be directed to 

49 

 
 
additional tasks. 

Efficiency:  slightly  better  than  in  the  baseline  scenario  as  the  option 
would allow optimising the use of scares resources, despite the need to 
reallocate part of them to the preparation of annual strategies. 

Coherence: N.A. 

5.2.3.  Option MICRO 

Analysis and Assessment 

Support  priority 
policy  areas  of 
the 
EU, 
including 
enlargement, 
neighbourhood 
the 
and 
development  of 
countries 
third 
political 
and 
impact 

Providing  a  comprehensive  guarantee  to  micro-finance  operations 
constitutes  an  additional  tool  to  support  economic  and  social 
development  outside  the  EU,  thereby  providing  a  more  significant 
contribution to poverty reduction and MDGs achievement than in the 
baseline  scenario.  However,  this  option  bears  the  risk  of  a  reduced 
overall volume of the guarantee (see below – impact on the Guarantee 
Fund and EU budget). 

The possibility to update the technical regional operational guidelines 
and  the  application  of  differentiation  provides  for  a  better  alignment 
of  EIB  financing  with  EU  policy  developments  and  therefore  should 
enhance  the  efficiency  of  the  guarantee  in  supporting  EU  policies, 
while  preserving  the  necessary  medium-term  predictability  of  EIB 
financing.  

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  lower  than  in  the  baseline  scenario  due  to  the 
combined risk of an overall reduced guaranteed amount and the lack 
of resources available in EIB to implement the microfinance mandate. 
This  is  partly  mitigated  by  the  fact  that  this  option  should  allow  a 
more  targeted  response to  economic and social challenges and better 
support to EU policy objectives.  

Efficiency:  lower  than  in  the  baseline  scenario  as  the  increase  in 
microfinance  activity  would  come  at  the  expense  of  other  important 
priorities where EIB has a comparative advantage. 

Coherence:  better  than  in  the  baseline  scenario  due  to  the  better 
alignment  with  EU  policy  objectives  provided  by  the  possibility  to 
revise the guidelines and the application of the differentiation. 

Coherence 
and 
complementarity 

The  use  of  the  EU  comprehensive  guarantee  to  support  such 
operations  bears  a  significant  cost  for  the  EU  budget  (see  below). 

50 

 
 
 
with  EU  external 
financial 
instruments  and 
need 
co-
for 
financing 

Given  that  microfinance  operations  can  also  be  supported  under  the 
regional  investment  facilities  (WBIF  ,NIF,  IFCA,  LAIF,  AIF)  in  the 
context of the objective to support local private sector development, a 
question arises on whether providing a comprehensive guarantee is the 
most efficient and coherent means to support such operations. 

As regards climate change support, setting regional targets rather than 
dedicating  a  specific  envelope  is  coherent  with  the  EU  approach  in 
other  internal  and  external  instruments  where  climate  change  is 
considered  as  an  horizontal  objective  across  instruments  without  any 
specific  climate  change  instrument.  At  the  same  time,  the  expected 
increase  in  the  climate  change  operations  entailed  by  the  setting  of 
regional targets might require additional accompanying grants. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  lower  than  in  the  baseline  scenario  as  microfinance 
operations  under  the  guarantee  would  directly  compete  with  those 
undertaken under other external instruments. 

Efficiency:  lower  than  in  the  baseline  scenario  as  other  instruments 
are more appropriate to cover all type of microfinance operations. 

Coherence: lower than in the baseline scenario as the fact that other 
instruments than the EU guarantee would be more adequate to cover 
all type of microfinance operations is not sufficiently compensated by 
the increased coherence on climate change operations. 

Leverage  of  EIB 
experience 
and 
expertise 

The  reservation  of  a  specific  envelope  for  microfinance  operations 
should allow the EIB to develop this activity in the regions covered by 
the EU guarantee. This development will draw on EIB's experience in 
particular within the EU (through the Progress Microfinance Facility) 
and in ACP. 

As for option CLOSE, it remains to be seen whether the EIB has the 
necessary  staff  resources  to  implement  such  a  Decision,  as  these 
operations are very resource intensive (smaller amounts per operation 
compared to typical EIB loans, specific skills required, etc.). 

In  addition,  the  presence  of  a  comprehensive  guarantee  could  be  a 
counter-incentive  for  the  EIB  to  leverage  its  financial  capacity  to 
better support private sector under joint Commission-EIB risk-sharing 
instruments, which  have been developed  mostly  in  the  EU  and  more 
recently in the Balkans (EFSE) and the Neighbourhood region (SME 

51 

 
 
impact, 
Social 
support to SMEs, 
local 
private 
sector 
development  and 
microfinance 
in 
partner countries 

Guarantees). 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness: equivalent to the baseline scenario as the uncertainty to 
implement  the  microfinance  mandate  should  be  offset  by  better 
incentives to further support EU climate action. 

Efficiency: lower than in the baseline scenario due to the uncertainty 
about  the  availability  of  resources  within  the  EIB  to  implement 
globally the microfinance mandate in a satisfactory manner. 

Coherence:  lower  than  in  the  baseline  scenario  as  EIB  resources 
dedicated  to  areas  where  the  EIB  has  a  comparative  advantage 
(infrastructure,  climate  change,  private  sector  development)  would 
have  to  be  diverted  to  implement  the  microfinance  mandate  in  a 
satisfactory manner. 

Even  if  there  might  be  concerns  on  the  ability  of  the  Bank  to 
implement the microfinance mandate (see description of the option in 
Section  4),  the  presence  of  a  specific  envelope  for  microfinance 
operation  benefitting  from  a  comprehensive  guarantee  is  a  clear 
support to this sector. However, according to the Microrate 6th Annual 
survey  and  analysis  of  Microfinance  Investment  Vehicles  (MIVs)26, 
the effects of the global financial crisis of 2008 led the microfinance 
sector  to  experience  an  oversupply  of  capital  as  demonstrated  by  an 
excess  liquidity  on  the  balance  sheets  of  many  MIVs.  This  slowed 
significantly their funding activities and led to a flight to quality and 
intense competition among funders in certain markets. This view was 
also shared by several NGOs consulted that did not really favour any 
substantial increase in EIB activity in this area under the EU guarantee 
given the plethora of actors in the sector.  

Therefore,  the  potential  contribution  of  EIB  funding  to  this  sector 
under the EU budgetary guarantee remains to be seen. Moreover, the 
extent to which the presence of such dedicated envelope would limit 
the  EIB  support  to  other  forms  of  support  to  local  private  sector 
development remains to be seen. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness: higher than in the base line scenario as the provision of 

26 
MicroRate.pdf  

http://www.microrate.com/media/downloads/2012/04/The-State-of-Microfinance-Investment-2011-

52 

 
 
                                                            
EU 
action 

Support 
climate 
and 
environmental 
impact 

a  comprehensive  guarantee  to  microfinance  operations  has  the 
potential  to  allow  the  EIB  to  develop  this  activity  on  a  global  basis, 
providing it allocates sufficient resources to this activity. At the same 
time,  there  is  uncertainty  linked  to  the  EIB  ability  to  implement  the 
microfinance mandate. 

Efficiency:  lower  than  in  the  baseline  scenario  due  to  the  larger 
presence  of  other  actors  in  the  microfinance  field,  the  uncertainty 
linked to EIB ability to implement the microfinance mandate and the 
potential impact on other funding to private sector operations.  

Coherence: equivalent to the baseline scenario. 

The  introduction  of  targets  per  region  should  be  seen  as  a  visible 
political decision to reinforce the climate change dimension of the EU 
guarantee compared to Decision 1080/2011/EU. 

Setting differentiated target for ALA (and South Africa) than for Pre-
Accession  and  Neighbourhood  would  moreover  give  a  strong  signal 
that  EIB  lending  in  the  former  is  geared  on  a  priority  strongly 
advocated by the EU in all international fora. Nevertheless, as in the 
baseline  scenario,  the  reinforcement  of  the  lending  volume  does  not 
ensure that an adequate climate impact is achieved.  

On  balance,  the  environmental  impact  should  be  higher  than  in  the 
baseline scenario. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  higher  than  in  the  baseline  scenario  due  to  the 
introduction of the regional targets for climate action. 

Efficiency: equivalent to the baseline scenario as the reinforcement of 
the  climate  change  dimension  would  be  offset  by  the  absence  of 
incentives  to  ensure  adequate  climate  action  support  in  "non-climate 
change" projects. 

Coherence:  better 
than 
reinforcement of the climate change dimension. 

in 

the  baseline  scenario  due 

to 

the 

Impact  on 
the 
Guarantee  Fund 
EU 
on 
and 

Microfinance operations are considered as risky financing operations. 
Moreover, contrary to what was believed prior to the global financial 
crisis,  the  links  of  the  microfinance  industry  with  both  domestic 

53 

 
 
budget 

economic conditions and changes in international capital markets have 
grown stronger27. 

The  recourse 
to  a  comprehensive  guarantee  for  microfinance 
operations – hence fully exposing the EU budget to commercial risks 
(which is not possible under the current decision) -  for an envelope of 
EUR  1.5  billion  would  necessarily  impact  the  risk  of  the  guaranteed 
portfolio  and  hence  require  an  adaptation  of  the  Regulation  of  the 
Guarantee  Fund  for  external  action  (GF).  In  particular,  this  would 
necessitate an increase of the target provisioning rate, currently set at 
9%,  in  order  to  preserve  an  adequate  cushion  to  absorb  a  sufficient 
portion of the additional risk borne by the budget. 

Given the functioning  of the GF regulation,  an  increase of  the target 
rate by e.g. 1% to cover for the overall increased risk would require an 
additional budget for provisioning the GF in the order of magnitude of 
EUR  400mn  over  the  next  MFF.  Alternatively,  if  an  increase  of  the 
budget  for  provisioning  the  GF  is  not  feasible,  the  maximum  size  of 
the overall mandate would have to be more than halved compared to 
the baseline.28  

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness: lower than in the baseline scenario due to the potential 
need to more than halve the size of the mandate to account for higher 
risks. 

Efficiency: lower than is the baseline scenario due to increasing risks 
to be borne by the EU budget. 

Coherence:  lower  than  in  the  baseline  scenario  as  an  increased  risk 
would not be coherent with the specific objective of shielding the EU 
budget from excessive risks. 

Impact  on  EIB 
credit 
risk 
stance/rating  and 
resources 

Given the presence of the comprehensive guarantee for microfinance 
operations, there is no impact on the credit risk borne by the EIB. The 
EIB  would  need  to  significantly  reinforce  its  staff  dedicated  to 
microfinance operations which are more resource intensive in terms of 
due diligence, implementation and monitoring. 

IMF working paper, The Impact of the Global Financial Crisis on Microfinance and Policy Implications, 

27 
Gabriella Di Bella (2011) WP /11/117. 
28 
It  should  be  noted  that,  in  accordance  with  Regulation  governing  the  functioning  of  the  GF,  a 
significant  share  of  the  provisioning  needs  in  the  next  MFF  stems  from  net-disbursements  on  loans  signed 
under the current 2007-2013 mandate. 

54 

 
 
                                                            
Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  equivalent  to  the  baseline  scenario  as  there  is  no 
impact  on  EIB  credit  stance.  Additional  resources  for  microfinance 
would  be  found  through  redeployment  of  staff  currently  working  on 
more  traditional  EIB  lending  (this  would  be  possible  as  the  overall 
mandate volume would be reduced). 

lower 

Efficiency: 
the  baseline  scenario  as  resources 
specialised  in  areas  where  EIB  has  a  comparative  advantage  would 
have to be diverted to microfinance operations. 

than 

in 

Coherence: N.A. 

5.2.4.  Option FOCUS 

Analysis and Assessment 

Support  priority 
policy  areas  of 
the 
EU, 
including 
enlargement, 
neighbourhood 
and 
the 
development  of 
countries 
third 
and 
political 
impact 

This  option  would  allow  better  defining  EIB  activity  under  the 
mandate to focus on Pre-Accession and Neighbourhood regions while 
providing  support  to  most  needful  beneficiaries  in  other  regions.  All 
countries  would  remain  "eligible"  in  order  to  politically  allow  EIB 
own-risk  activity,  allowing  continuation  of  EIB  presence  in  these 
countries. 

As  for  the  MICRO  option,  the  possibility  to  update  the  technical 
regional  operational  guidelines  and  the  application  of  differentiation 
provides  for  a  better  alignment  of  EIB  financing  with  EU  policy 
developments  and  therefore  should  enhance  the  efficiency  of  the 
mandate  in  supporting  EU  policies,  while  preserving  the  necessary 
medium-term predictability of EIB financing. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  better  than  in  the  baseline  scenario  as  this  option 
should  allow  a  more  targeted  response  to  economic  and  social 
challenges and better support to EU policy objectives. 

Efficiency:  better  than  in  the  baseline  scenario  as  this  option  should 
prevent  that  some  countries  remain  orphans  from  EIB  funding  while 
avoiding a sub-optimal use of the guarantee. 

Coherence:  better  than  in  the  baseline  scenario  due  to  the  better 
alignment  with  EU  policy  objectives  provided  by  the  possibility  to 
revise the guidelines and the application of the differentiation. 

55 

 
 
 
Coherence 
and 
complementarity 
with  EU  external 
financial 
instruments  and 
need 
co-
for 
financing 

Leverage  of  EIB 
experience 
and 
expertise 

The "graduation" of some beneficiaries for eligibility to EU guarantee 
coupled  with  the  application  of  the  differentiated  approach  principle 
will  allow  closer  alignment  of  the  EIB  mandate  with  EU  external 
instruments (in particular DCI and ENI).  

The  EIB  activity  under  the  EU  guarantee  would  focus  on  less 
creditworthy beneficiaries, which are more likely to be subject to IMF 
concessionality  requirements.  This  may  increase  the  need  for  co-
financing  with  EU  external  instruments,  particularly  through  the 
LAIF, the IFCA and the AIF as well as the WBIF and the NIF. 

As  regards  climate  change  support,  setting  an  overall  target  across 
regions rather than dedicating a specific envelope is coherent with the 
EU approach in other internal and external instruments where climate 
change  is  considered  an  horizontal  objective  across  instruments 
without any specific climate change instrument. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  better  than  in  the  baseline  scenario  due  to  the  closer 
alignment  and  coherence  between  EIB  activity  and  EU  external 
instruments. 

Efficiency:  equivalent  to  the  baseline  scenario  as  better  expected 
results  are  compensated  by  higher  opportunity  costs  in  terms  of  co-
financing needs. 

Coherence: higher than in the baseline scenario. 

The  non-explicit  inclusion  of  all  microfinance  operations  under  the 
guarantee  coverage  does  not  mean  that  the  EIB  would  not  have  the 
possibility  to  develop  such  activity  under  other  facilities  or  support 
certain  type  of  microfinance  operations  such  as  e.g.  microcredit  to 
micro-SMEs.  On  the  other  hand,  the  reinforced  climate  change 
dimension  would  allow  the  EIB  to  focus  on  areas  where  it  has  a 
comparative  advantage  (infrastructure,  private  sector  development, 
climate action). In particular, a stepped-up approach in climate change 
area  would  reinforce  the  catalytic  role  of  the  EIB,  thereby  enhance 
synergies with the activities of other institutions.  

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness: equivalent to the baseline scenario as this option would 
incentivise  the  EIB  to  capitalise  on  specific  current  strengths,  in 

56 

 
 
particular for climate funding, instead of developing several ones. 

Efficiency:  higher  than  in  the  baseline  scenario  as  the  focus 
mechanism should ensure that this leveraged expertise would benefit 
to the most needful beneficiaries. 

Coherence:  equivalent  to  the  baseline  scenario  as  the  EIB  will 
continue to focus on areas where it has a comparative advantage. 

Social 
impact, 
support to SMEs, 
private 
local 
sector 
development  and 
microfinance 
in 
partner countries 

By  focusing  the  use  of  the  EU  guarantee  more  on  less  credit-worthy 
beneficiaries it would be possible to increase the economic and social 
value-added of the operations carried out under the EU guarantee. 

Moreover, streamlined policy coherence should enhance the relevance 
of EIB financing which would allow  for a more targeted response to 
economic and social challenges.  

Finally,  the  focus  mechanism  should  allow  a  better  use  of  the 
guarantee  than  in  the  baseline  scenario,  thereby  ensuring  higher 
impact than in the baseline scenario, in particular on the private sector 
actors.  This  should  offset  the  negative  opportunity  cost  of  the  still 
non-explicit  inclusion  of  all  microfinance  operations  under  the 
guarantee (as in the baseline scenario). 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness: slightly higher than in the baseline scenario due to the 
possibility to better target beneficiaries.  

Efficiency:  similar  to  in  the  baseline  scenario  as  in  both  cases 
microfinance operations would not be explicitly eligible. 

Coherence: similar to the baseline scenario. 

The  introduction  of  an  overall  target  for  climate  change  operations 
should be seen as a  visible political decision  to reinforce the climate 
change  dimension  of  the  EU  guarantee  compared  to  Decision 
1080/2011/EU. 

In addition, the introduction of an obligation for the EIB to track and 
monitor  absolute  and  relative  emissions  reduction  throughout  the 
mandate would further strengthen the achievement of climate impact. 
Such  requirements  would  allow  not  only  to  increase  the  level  of 
climate friendly investments but also to limit carbon intensive ones. 

Under this option, the EIB should keep developing methodologies to 
assess  climate  risk  in  order  to  reinforce  the  climate  resilience  for  all 

57 

EU 
action 

Support 
climate 
and 
environmental 
impact 

 
 
relevant  operations,  and  integrate  carbon  pricing  in  economic  cost 
benefit  analysis.  Restrictive  eligibility  and  criteria  for  carbon-
intensive projects should also be improved in relevant sector policies. 

This option would ensure that EIB lending operations (at own risk for 
creditworthy  beneficiaries  and  under  guarantee  for  less  creditworthy 
ones)  can  fill  the  void  of  largely  reduced  development  aid  budgets. 
This  is  particularly  relevant  in  the  field  of  climate  change  where  the 
EU  strongly  advocates  more  ambitious  climate  action  by  middle 
income  and  emerging  countries  whose  voice  in  the  international 
climate negotiations is key.  

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  better  than  in  the  baseline  scenario  as  this  option 
provides  a  combination  of  elements  that  should  ensure  reinforced 
climate impact. 

Efficiency: better than in the baseline scenario as this option ensures 
that  EIB's  stepped-up  activity  on  climate  action  under  the  EU 
guarantee would be targeted towards less credit-worthy beneficiaries. 

Coherence: higher than in the baseline scenario as the design of the 
option  would  allow  more  efficient  and  better  targeted  funding  for 
climate  action,  coherently  with  the  approach  retained  in  other  EU 
internal  and  external  instruments  (climate  action  and  environment 
streamlined in all instruments). 

Under  this  option,  the  guarantee  continues  to  cover  sovereign  and 
political risk as in the base line scenario.  

The  graduation  of  most  creditworthy  beneficiaries  could  lead  to  a 
gradual increase in the overall risk of the guaranteed portfolio of EIB 
loans  as  the  relative  share  of  the  loans  to  less  creditworthy 
beneficiaries  will  become  relatively  higher  than  in  the  baseline 
scenario.  

However, the risk increase is expected to be marginal as creditworthy 
countries  currently  only  represent  less  than  12%  of  the  guaranteed 
portfolio  and  the  operations  in  these  countries  represent  a  similar 
share of the activity under the current mandate. (See table in annex 6). 

The review of the functioning of the guarantee fund, already foreseen 
in  2016,  will  allow  assessing  inter  alia  the  impact  of  the  focus 
mechanism on the overall risk of the guaranteed portfolio. 

58 

the 
Impact  on 
Guarantee  Fund 
and 
EU 
on 
budget 

 
 
Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness: equivalent to the baseline scenario as the increased of 
the risk is expected to be marginal and the functioning of the GF will 
be reviewed at mid-term. 

Efficiency: equivalent to the baseline scenario. 

Coherence: equivalent to the  baseline scenario as the  functioning  of 
the guarantee would not be altered compared to the existing Decision 
and Guarantee Fund Regulation. 

Impact  on  EIB 
credit 
risk 
stance/rating  and 
resources 

As  mentioned,  following  the  graduation  of  some  beneficiaries  from 
the  EU  guarantee,  EIB  operation  in  most  creditworthy  countries 
notably in Asia and Latin America should be increasingly carried out 
at own risk. This should allow a further diversification of EIB overall 
balance  sheet.  The  overall  impact  of  this  option  should  therefore  be 
overall neutral, if not positive. 

Overall,  the  impact  of  this  option  on  administrative  costs  and 
resources  utilisation  in  the  EIB  should  be  neutral  as  the  relative 
increase  in  needs  to  implement  the  focus  mechanism  should  be 
roughly balanced by the more focused country/beneficiary coverage. 

Assessment of Effectiveness, Efficiency and Coherence: 

Effectiveness:  equivalent  to  the  baseline  scenario  if  not  slightly 
positive. 

Efficiency:  equivalent  to  the  baseline  scenario  as  the  impact  on  EIB 
resources is neutral while overall impact on the rating is too difficult 
to predict. 

Coherence: N.A. 

6. 

SECTION 6: COMPARING THE RETAINED OPTIONS 

In  this  section,  qualitative  ratings  have  been  provided  on  the  basis  of  the  assessment  of  the 
main impacts of each retained option. The magnitude of the impact is estimated in comparison 
to the baseline scenario which cannot be the preferred option as demonstrated by the analysis 
above.  

The  following  qualitative  rating  of  the  impacts  is  applied  based  on  the  likelihood  of  the 
options being more or less effective (Efv), efficient (Efc) and coherent (C) than the baseline 
scenario: 

59 

 
 
"0":  no  change/neutral  –  equivalent  to  baseline  scenario;  "+"  positive  –  better  than  baseline 
scenario; "-" negative – lower than baseline scenario. 

60 

 
 
6.1.  Weighing of positive and negative impacts per option 

BASE 
LINE 

0 

0 

Support priority policy areas of the EU, 
including  enlargement,  neighbourhood 
and  the  development  of  third  countries 
and political impact 

Coherence  and  complementarity  with 
EU  external  financial  instruments  and 
need for co-financing 

Leverage  of  EIB  experience  and 
expertise 

0 

Social  impact,  support  to  SMEs,  local 
and 
development 
private 
microfinance in partner countries 

sector 

0 

Support  EU 
environmental impact 

climate 

action 

and 

0 

Impact  on  the  Guarantee  Fund  and  on 
EU budget 

0 

Impact  on  EIB  credit  risk  stance/rating 
and resources 

0 

CLOSE  MICRO 

FOCUS 

Efv: - 

Efc: 0 

C: + 

Efv: 0 

Efc: - 

C: + 

Efv: - 

Efc: + 

C: + 

Efv: - 

Efc: 0 

C: - 

Efv: + 

Efc: - 

C: 0 

Efv: - 

Efc: - 

C: - 

Efv: 0 

Efc: + 

Efv: - 

Efc: - 

C: + 

Efv: - 

Efc: - 

C:- 

Efv: 0 

Efc: - 

C: - 

Efv: + 

Efc: - 

C: 0 

Efv: + 

Efc: 0 

C: + 

Efv: - 

Efc: - 

C: - 

Efv: 0 

Efc: - 

Efv: + 

Efc: + 

C: + 

Efv: + 

Efc: 0 

C: + 

Efv: + 

Efc: + 

C: + 

Efv: + 

Efc: 0 

C: 0 

Efv: + 

Efc: + 

C: + 

Efv: 0 

Efc: 0 

C: 0. 

Efv: 0 

Efc: 0 

Overall average impact 

0 

- 

- 

+ 

C: n.a. 

C: n.a. 

C: n.a. 

"+": 6 
"0": 5 
"-": 9 

"+":4 
"0": 4 
"-": 12 

"+": 10 
"0": 10 
"-":0 

6.2. 

Preferred option 

On  balance,  Sub-option  2.3  FOCUS  emerges  clearly  as  the  preferred  option.  It  should  be 
noted  that  under  the  option,  the  objective  3  would  not  be  achieved  as  the  assessment  has 
shown  that  the  EU  budgetary  guarantee  is  not  the  appropriate  instrument  to  cover  EIB 
financing of all type of microfinance operations in the regions covered by the Decision.  

No  stakeholder  expressed  any  opposition  to  the  option  retained.  Notably,  sub-option  2.3 
seems  to  reflect  the  opinion  expressed  by  most  of  the  stakeholders  consulted  as  outlined 

61 

 
 
 
earlier in the report and in the Annexes. In particular, the NGOs consulted, the EP and the MS 
as well as the SWCP pointed out to the need to clarify when the value added of EIB financing 
under the EU guarantee was the highest and to find ways to incentivise the EIB to focus the 
use of the guarantee on those situation. The NGOs consulted questioned the need to expand 
the  scope  of  the  EIB  mandate  to  all  type  of  microfinance  operations  given  the  existence  of 
several other actors in the field, while this was a request from some MEPs. In addition, the 
NGOs consulted were requesting for a mechanism for EIB to track carbon emission of EIB 
financing operations. 

7. 

SECTION 7: MONITORING AND EVALUATION 

7.1. 

Core indicators of progress towards objectives 

The  new  Decision  shall  constitute  the  legal  basis  to  provide  an  EU  guarantee  to  the  EIB 
against  losses  under  loans  and  loan  guarantees  for  project  outside  the  Union.  The  details  of 
each  project  are  defined  on  a  case  by  case  basis  through  each  loan  contracts  signed  by  the 
Bank and the loan beneficiary.  

In line with the requirements of Decision 1080/2011/EU which required the Bank to further 
strengthen  its  assessment,  measurement  and  reporting  on  the  results  and  impacts  of  its 
operations29,  operational  monitoring  indicators  have  been  developed  by  the  EIB  and  shall 
remain  in  place  under  the  next  Decision.  The  REsults  Measurement  framework  (REM)30, 
gradually implemented in 2012, improves the ex-ante assessment of expected project results 
and  enhances  the  Bank’s  ability  to  report  on  actual  results  achieved.  The  new  framework 
replaces the existing Economic and Social Impact Assessment Framework (ESIAF).  

Being  gradually  implemented  in  the  course  of  2012,  the  records  of  the  REM  were  not 
available  at  the  time  of  the  drafting  of  this  report.  The  EIB  should  report  according  to  the 
REM as of its annual report on 2012 activity in the course of 2013. 

Progress  towards  the  specific  objectives  (see  section  4.2)  will  be  monitored  in  the  new 
legislative proposal through core indicators covering the following areas: 

1) amount signed by region  

2) amount disbursed by region 

3) progress in achieving a balanced distribution of activity by country 

4) breakdown of activity across the various objectives of the guarantee. 

5)  Volume  of  climate  change  lending  against  targets,  financing  and  impact  on  absolute  and 
relative GHG emission reduction 

6) number of projects assessed against the climate risk 

29  
30 

This was also a recommendation of the Mid-Term evaluation. 
http://www.eib.org/projects/cycle/monitoring/rem.htm  

62 

 
 
                                                            
7) number and amount of operations blended with EU grants 

8) number and amount of operations co-financed with other IFIs. 

The EIB already reports in the areas 1, 2, 4, 7 and 8. It does not yet report on the indicators in 
areas 3, 5 and 6 but either is in the process of developing these indicators or should be able to 
develop those indicators at relatively low cost. Indicators in areas 1, 2, and 3 can be seen as 
proxy  towards  reaching  the  objective  1.  Indicators  in  areas  5  and  6  can  be  seen  as  proxy 
towards reaching the objective 3. Indicators in areas 1, 2, and 4 can be seen as proxy towards 
reaching the objective 4. Indicators in areas 1, 2, 4, 6, 7 and 8 can be seen as proxy towards 
reaching  the  objective  a.  Indicators  in  areas  1,  2,  7  and  8  can  be  seen  as  proxy  towards 
reaching the objective b.  

In addition, a more detailed set of performance indicators will be drawn from the three-pillar 
methodology developed by the EIB under the REM framework and can be seen as additional 
proxy  towards  achieving  objective  1  and  4.  The  REM  framework  serves  to  show  how  EIB 
loans generate outputs, which enable outcomes and, over time lead to impacts, which are in 
line with the objectives of the Decision.  

Pillar  1  includes  an  assessment  of  a  project’s  consistency  with  objectives  of  EIB  external 
operations  under  the  EU  guarantee  as  well  as  its  contribution  to  EU  priorities  and  country 
development objectives, going beyond the current focus on eligibility alone. Pillar 2 consists 
in  a  series  of  sector-specific  standardized 
to  capture  economic,  social, 
environmental  and  institutional  outcomes  of  the  project.  It  will  also  continue  to  measure 
project quality and its ability to achieve the expected results. Pillar 3 focuses on an assessment 
of  the  EIB  additionality  over  market  alternatives  in  terms  of  financial  product,  technical, 
structuring and sector contribution and standards and assurance. 

indicators 

The three pillars address three separate project dimensions, which cannot be compared with 
one another. They will be rated independently, and no overall aggregated project rating will 
be  given.  Pillar  ratings  will  be  based  on  a  qualitative  4-point  scale.  Ratings  are  based  on  a 
series  of  objectively  measurable  indicators  and  guidelines.  Moreover,  a  process  of  quality 
control will ensure that all ratings are checked for consistency across operations 

The aim is to better assess and be able to report on the Bank’s contribution to objectives of the 
Decision by focusing on concrete results. This should allow to:  

•  make the most of limited resources; 

• 

improve support to EU policies; 

•  achieve transparency and accountability. 

As regard the financing for projects that promote climate action, eligibility for climate change 
operations would be clarified against agreed criteria building on - and if needed tightening - 
existing  EIB  definitions  to  track  climate  change  expenditure  (e.g.  introducing  benchmarks 
related  with  GHG  emission  reduction,  improving  if  appropriate  the  definitions  for  energy 
efficiency  and  adaptation),  which  would  also  be  used  in  the  monitoring  phase  to 

63 

 
 
'operationalise' the Rio Marker or equivalent system as proposed by the Commission to track 
the  EU  budget  under  the  next  MFF31.  The  EIB  will  explore  reinforced  methodologies  to 
include carbon and to improve climate resilience of its investments, as well as climate risk in 
project appraisal. 

In  parallel  the  EIB  should  keep  developing  methodologies to assess climate risk in order to 
reinforce  the  climate  resilience  for  all  relevant  operations,  and  integrate  carbon  pricing  in 
economic cost benefit analysis. Restrictive eligibility and criteria for carbon-intensive projects 
should also be improved in relevant sector policies. 

7.2.  Monitoring 

Regular  reports  will  be  envisaged  in  the  legislative  act  as  in  Decision  1080/2011/EU.  The 
Commission  will  annually  report  on  the  implementation  of  the  Decision  by  the  EIB  to  the 
European Parliament and the Council. This report will also be published on the Commission's 
website.  

Reporting  on  results  will  be  based  on  an  appropriate  aggregation  of  indicators  across  the 
entire  portfolio  where  this  is  possible,  or  across  a  given  sector.  These  indicators  will  be 
measured throughout the project cycle at appraisal and during monitoring until the project is 
fully implemented, operational and the first development outcomes are measurable - typically 
up to three years after project completion. They will, to the extent possible, also be used for 
ex-post evaluation. 

Finally,  a  mid-term  evaluation  will  be  carried  out  after  three  years  from  the  start  of  the 
Decision. 

31 
Regarding instruments under the EU budget, in order to reach the Europe 2020 objectives and to help 
other parts of the world to step up their efforts to combat climate change, the Commission has stated in the 
June 2011 Communication on “A Budget for Europe 2020” that it intends to increase the proportion of climate 
related expenditure across the EU budget to at least 20%, with contribution from different policies, subject to 
impact assessment evidence. 

64 

 
 
                                                            
8. 

ANNEX  1:  DEVELOPMENT  OF  EU  BUDGET  GUARANTEE  TO  EIB  LOANS  IN  THIRD 
COUNTRIES 

The core mission of the EIB, as established under the Treaty of Rome in 1958, is to support 
the balanced and steady development of the EU Member States. 

In addition to its core activity within the EU, the EIB has been increasingly active in support 
of EU external policies since 1963 covering progressively most of the regions of the world. 
However, as compared to other IFIs, the EIB does not have a general mission outside the EU 
under its Statute but operates under specific mandates by the Parliament and Council or by its 
Board of Governors to act in support of EU policy objectives. The main structural differences 
between the EIB and other Multilateral or Bilateral Development Banks can be summarised as 
follows: 

-  The EIB has no statutory mission for its operations in third countries, which is the raison 
d'être  notably  for  Multilateral  Development  Banks  (MDBs).  It  operates  outside  the  EU 
under mandates from the EP and Council or from its Board of Governors. 

-  Both EIB and other MDBs or bilaterals carry out activities on their own resources or are 
entrusted  with  the  management  of  resources  granted  from  the  budgets  of  one  or  more 
States  (e.g.  International  Development  Association  (IDA)  for  the  World  Bank,  ACP-
Investment Facility for EIB or certain loans for KfW). 

-  However, the EIB is the only institutions for which a significant part of its activity on own 

resources is carried out under guarantee of the EU or Member States. 

-  MDBs  present  a  different  capital  structure  than  the  EIB  both  in  terms  of  gearing  (other 
MDB present roughly a 1 to 1 leverage compared to subscribed capital while the EIB has 
2.5 gearing) and leverage (other MDB have a leverage between borrowing/own funds of 
200/300%  while  EIB  presents  historically  a  leverage  of  700/800%).  KfW  and  AFD 
borrowings on the market benefit from an implicit guarantee respectively by the German 
and French States. 

- 

In  MDBs,  beneficiary  countries  are  also  shareholders  of  the  MDB  itself  with  positive 
consequences  in  terms  of  Preferred  Creditor  Status,  which  is  not  the  case  for  EIB.  The 
Framework Agreement concluded by the EIB with third countries includes systematically 
a  clause  according  to  which  operations  financed  by  the  Bank  and  related  financial 
agreements benefit from treatment no less favourable than that which is accorded to those 
financed by any IFI. This grants the EIB a de jure privileged creditor status. 

Until  the  EIB  Statute  revision  under  the  TFEU  entered  into  force  in  December  2009,  EIB 
loans  outside  the  Union  could  only  be  carried  out  by  way  of  'derogation'  following  an 
unanimous approval of its Board of Governors. From December 2009 onwards, EIB financing 
outside  the  Union  can  be  carried  out  by  qualified  majority  decision  of  the  Governors  (no 
derogation). 

Rationale for the EU guarantee 

From  1963  (first  protocol  with  Greece),  EIB  loans  on  own  resources  outside  the 
Union/Community had been carried out under mandates decided by the Council in support of 
Union  cooperation  policy  and  were  covered,  from  the  beginning,  either  by  the  joint  and 

65 

 
 
several  comprehensive  guarantee  of  Member  States  (ACP/OCT  countries)  or  by  a 
comprehensive  guarantee  provided  by  the  EU  budget  (rest  of  the  world).  Beyond  loans  on 
EIB own resources, the EIB has been entrusted with the management of budgetary funds to be 
on-lent to beneficiaries in third countries (e.g. EDF resources for ACP/OCT countries and EU 
budget resources for Special Loans in MED countries). 

The need for an EU (or MS) budget guarantee stemmed on the one side from EIB's obligation 
under its Statute to ensure adequate security for all its lending operations and, more broadly, 
from  the  need  to  safeguard  EIB's  creditworthiness  in  order  not  to  compromise  its  task  to 
contribute  to  the  steady  development  of  EU  Member  States.  For  example,  the  1996  EIB-
Commission  report  on  Community  budget  guarantees  in  respect  of  EIB  lending  outside  the 
Community  also  highlighted  the  necessity  of  the  EU  guarantee  to  ensure  the  compatibility 
between  the  EIB's  highly  leveraged  financial  structure  (different  from  other  IFIs),  the 
significantly  higher  inherent  risk  of  lending  to  third  countries,  and  the  need  to  avoid  a 
deterioration of the Bank's AAA rating. 

The  same  rationale  was  at  the  basis  of  subsequent  mandates.  For  example,  Recital  4  of  the 
current Decision states that "with a view to supporting Union external action, and in order to 
enable the EIB to finance investments outside the Union without affecting the credit standing 
of  the  EIB,  the  majority  of  its  operations  in  external  regions  have  benefited  from  an  EU 
budgetary guarantee  administered by the Commission". 

The structure of the mandate evolved over the years: initially the mandates were granted on a 
country basis (country protocols). Afterwards, on a regional basis, and then since 2007 there 
is  a  general  mandate  covering  all  regions  (except  ACP/OCT  which  is  covered  under  a 
separate framework-Cotonou Agreement). 

Development of EIB own risk activities 

Until  1997,  EIB  external  lending  was  always  either  benefitting  from  a  comprehensive 
guarantee by EU or MS budget or carried out with MS or EU budget resources. 

In  1997,  the  EIB  started  taking  some  risk  on  its  own  books  under  two  strands:  a)  the  EIB 
Pre-Accession  Facility  where  EIB  granted  loans  in  certain  creditworthy  Pre-Accession 
countries at its own risk; b) the risk sharing scheme introduced in the 1997 Council decision 
on  the  external  mandate  where  the  risk  on  EIB  loans  was  shared  between  the  EU  budget 
(covering  political  risks)  and  the  EIB  (commercial  risks;  EIB  was  covering  itself  with  third 
party guarantees). 

Since  1997,  the  Pre-Accession  Facility  has  been  systematically  renewed  and  extended. 
Moreover,  other  own  risk  facilities  have  been  established  either  on  a  regional  basis 
(Mediterranean  Partnership  Facility  I  and  II,  Eastern  Partnership  Facility)  or  on  a  thematic 
basis with a global reach (Energy Sustainability & Security of Supply Facility). In 2007, the 
risk  sharing  scheme  became  compulsory  for  all  EIB  operations  with  the  private  sector 
(renamed political risk guarantee). 

66 

 
 
The following  graph shows that EIB lending at own  risk or under risk sharing  with the EU 
budget increased substantially over the years. In 2011, for the first time, the volume of EIB 
own-risk operations was higher than the one relating to operations under EU guarantee. 

In  line  with  the  Wise  Persons'  report  and  the  external  evaluation,  the  current  Decision 
encourages  the  EIB  to  increase  amounts  lent  at  own-risk  and  develop  a  policy  for  deciding 
between  the  allocation  of  operations  under  the  EU  guarantee  and  at  the  Bank's  own  risk. 
According to Recital 32 of the Council and EP decision " The EIB should be encouraged to 
increase  its  operations  and  to  diversify  its  financial  instruments  outside  the  Union  without 
recourse to the EU guarantee so that use of the guarantee can be encouraged for countries 
and  projects  with  poor  access  to  the  market,  taking  into  account  debt  sustainability 
considerations,  and  where 
therefore  provides  greater  added  value. 
Consequently,  and  always  with  the  aim  of  supporting  the  objectives  of  the  Union  external 
relations policy, the EIB, while taking into account its own risk absorption capacity, should 
be encouraged to increase the amounts it lends at its own risk, including through the support 
of  Union  economic  interests,  particularly  in  pre-accession  countries  and  neighbourhood 
countries and in investment grade countries in other regions, but also in sub-investment grade 
countries when the EIB has the appropriate third party guarantees. In consultation with the 
Commission, the EIB should develop a policy for deciding between the allocation of projects 
to either the mandate under EU guarantee or to EIB own-risk financing. Such a policy would 
in particular take into account the creditworthiness of the countries and projects concerned". 

the  guarantee 

Blanket Guarantee coverage 

The  blanket  guarantee  coverage  -  i.e.  the  upper  global  ceiling  of  credits  to  which  the  EU 
guarantee  is  exposed  -  declined  progressively  from  100%  in  1963  to  75%  in  1977,  70%  in 

67 

 
 
 
199732  and  65%  in  2000  (in  some  exceptional  cases  the  coverage  was  set  at  100%  also  in 
more recent years, such as in the case of the specific Russia/WNIS mandate which ended mid-
2007). The percentage has remained stable since then. 

Under  all  previous  mandates,  the  blanket  guarantee  coverage  applied  to  credits  opened  (i.e. 
loans signed), while in the current mandate the coverage applies to credits disbursed and not 
reimbursed. 

Guarantee Fund provisioning 

In  1994,  the  Guarantee  Fund  for  External  Action  was  established  to  shield  the  EU  budget 
against  shocks  due  to  possible  default  from  the  lending  activity  under  the  EIB  external 
mandate and other external action, i.e. Macro Financial Assistance  and  Euratom loans (EIB 
loans with EU guarantee representing more than 90% of the portfolio covered by the GF). 

Originally, the Guarantee Fund target provisioning rate was set at 15% of the overall amounts 
forecast to be signed the next year. Through successive Council decisions, taking into account 
the building up of the Fund itself and the expansion and diversification of the external lending 
portfolio, the target rate progressively declined to 9%. Moreover, the last amendment of the 
Guarantee  Fund  regulation  in  2009  established  that  provisioning  should  be  based  on  total 
outstanding disbursements rather than forecast signatures33. In 2010, an external evaluation of 
the functioning of the Guarantee Fund concluded that the 9% provisioning rate was deemed 
appropriate. 

32  

33 

It  should  be  noted  that  the  1996  Commission  proposal  on  the  mandate  stressed  that  a  50%  blanket 
guarantee would be sufficient to safeguard the creditworthiness of the cover risks for the EIB. However, 
the ECOFIN Council opposed this view and eventually set the blanket guarantee at 70%. 
The  Guarantee  Fund  has  to  be  provisioned  according  to  the  Guarantee  Fund  Regulation  (Council 
Regulation  (EC,  Euratom)  No  480/2009).  In  line  with  this  Regulation,  loans  are  provisioned  on  the 
basis  of  the  total  outstanding  guaranteed  amounts  (i.e.  disbursements  minus  reimbursements)  plus 
accrued interest at the end of a year t0. The provisioning amount calculated at the beginning of the year 
t1 is introduced in the preliminary budget for t2 and inscribed in the final budget for t2. Therefore, the 
Fund is provisioned by one single payment transaction at the beginning of the year t2 from budget line 
01040114. 

68 

 
 
                                                            
9. 

ANNEX  2:  STAKEHOLDERS  INVOLVED  IN  THE  CONSULTATIONS  ON  EIB  EXTERNAL 
MANDATE 

9.1. 

The Steering Committee of Wise Persons 

Decision 633/2009/EC of 13 July 2009 on EIB external mandate foresaw a mid-term review 
of this mandate to be carried out, drawing on an independent external evaluation of the EIB 
external operations. The primary objective of the review was to provide the basis for Decision 
1080/2011/EU  on  the  revision  of  the  guarantee  by  drawing  recommendations  on  how  to 
amend it and how to ensure maximum added value and efficiency in EIB's operations. 
In this context, the independent external evaluation was supervised by a Steering Committee 
of “wise persons” (SCWP) appointed by the EIB Board of Governors and composed of with 
in-depth  experience  of  international  financial  institutions  as  well  as  a  representative  of 
Europe’s civil society organisations. The members of the SCWP included: 
Mr  Michel  Camdessus  (chair),  Former  Managing  Director  of  the  International  Monetary 
Fund 
Mr Kemal Dervis, former Minister of Economic Affairs of Turkey (2001-2002), 
Mr Norbert Kloppenburg, Member of the Executive Board of KfW since 2007, 
Ms  Manana  Kochladze,  Regional  coordinator  of  the  Caucasus  and  Central  and  Eastern 
Europe Bankwatch Network, 
Mr Richard Manning, independent consultant on international development 
Mr  Luis  Martí  Espluga  (vicechair),  former  Vice-President  of  the  EIB  and  former  Executive 
Director of the IMF and of the World Bank. 
Mr  Sauli  Niinisto,  former  Vice-President  of  the  EIB,  Honorary  Chair  of  the  European 
People's Party EPP, President of Finland. 

Ms Ewa Osniecka‐Tamecka, vice-rector of the College of Europe Natolin campus in Poland, 

Former Secretary of State for European Affairs  
Mr  Mario  Sarcinelli,  former  Deputy  General  Manager  of  Banca  d'Italia,  former  Director 
General of the Italian Treasury, Chairman of Dexia Crediop since 2007. 

Mr Jean‐Louis Biancarelli (EIB representative),  

Mr David McGlue (Commission representative). 
In accordance with the terms of reference of the Group, the scope of the evaluation included 
the EIB previous mandates (from 2000 to 2006) and the first years of the 2007-2013 mandate, 
up to end 2009. The report covered the EIB operations under the external mandate with the 
EU  guarantee,  external  operations  at  EIB  own  risk  as  well  as  risk  capital  and  technical 
assistance activities managed by the EIB. 

69 

 
 
The Steering Committee has worked from October 2008 until February 2010, with the support 
of the independent external experts contracted by the Commission (COWI) and supported by 
a Reference Group including representatives of Commission and EIB services, as well as by 
the  EIB's  evaluation  department.  Moreover,  the  Steering  Committee  organised  hearing 
sessions with the Commission and EIB’s Senior Management as well as with representatives 
of  the  Civil  Society  (Eurodad,  CounterBalance  coalition,  Amnesty  International,  European 
Peacebuilding  Liaison  Office,  Campagna  Riforma  Banca  Mondiale,  Brettonwood,  CEE 
Bankwatch  Network),  European  Parliament  (several  MEPs),  International  and  European 
bilateral Financial Institutions (World Bank, IFC, EBRD, KfW, AFD, FMO,) and think-tanks 
(CEPS,  Bruegel).  Individual  members  of  the  Steering  Committee  have  visited  a  sample  of 
beneficiary countries that benefited from EIB financing support (Poland as a former candidate 
country,  Morocco,  Turkey,  Senegal,  and  Russia)  where  they  held  meetings  with  key 
government officials, representative of the financial sector and of the private sector and EU 
Delegations. Finally, the Steering Committee drew on background material from the EIB and 
by the Commission. 

9.2. 

Stakeholders consulted by the external evaluator (COWI) 

Head offices of IFIs/DFIs 

EBRD 

Alain Pilloux 

KfW Entwicklungsbank 

Claudia Arce 

World Bank 

Peter D. Thomson 

Business  Group  Director,  Russia, 
Agribusiness, Property & Tourism 

First  Vice  President,  North  Africa  & 
Middel East Department 

Director,  Sustainable  Development 
Department,  Europe  and  Central  Asia 
Region 

Business Group Director, Infrastructure 
and BG and Front Office 

Thomas Maier 

Anna Roggenbuck 

EIB coordinator 

EBRD 

NGOs 

Bankwatch 

Romania 

EBRD 

European Investment Bank, Bucharest 

Milena Missori 

Mihail Scvortov 

Principal Banker 

Head of Office 

JASPERS (former Ministry of Transport) 

Alexandra Stan 

Transport sector specialist 

Ministry of Finance 

Ministry of Finance 

Boni Cucu  

Deputy General Director 

Rodica Buzdugan 

Ministry of Transport, Romanian Company of 
Motorways and National Roads 

Elena Dan 

Director of Project Department 

Technical Assistance to Ministry of Transport  Andrew Nesbitt 

Road Engineer 

Serbia 

Banca Intesa ad Beograd 

Banca Intesa ad Beograd 

Banca Intesa ad Beograd 

City of Pancevo 

EBRD 

EBRD 

Dušan Petrović 

Project and Structured Finance 

Radovanka Perović 

Business Banking Regional Director 

Slađana Jelić 

Deputy Head of the Corporate Division 

Zoran Jovanovic 

Member of the City Council 

Mirjana Milovanovic 

Senior Analyst 

Meran Lukic 

Analyst 

70 

 
 
  
European Union, Delegation of the European 
Commission to the Republic of Serbia 

Danka Bogotić 

Project Manager - Operations 

KfW Entwicklungsbank 

Elke Hellstern 

Director, KfW Office Belgrade 

Municipal  Infrastructure  Support  Programme 
of the EU  

Municipal  Infrastructure  Investment  Support 
Programme  (Belgrade)  of  the  EAR/City  of 
Belgrade 

Republic  of  Serbia,  City  of  Belgrade, 
Investment Agency 

Republic  of  Serbia,  City  of  Belgrade, 
Investment Agency 

Republic  of  Serbia,  City  of  Belgrade, 
Investment Agency 

Republic  of  Serbia,  Ministry  for  National 
Investment Plan 

Cok van Schooten 

Team Leader 

Erling Hvid 

Project Director 

Maša Ćeranić 

Assistant Director 

Radovan Drca 

Head of PIU 

Marko Blagojevic 

Assistant Director 

Zoran Cekic 

State Secretary 

Republic  of  Serbia,  Ministry  for  National 
Investment Plan 

Branislav Pejic 

Republic  of  Serbia,  Ministry  of  Finance, 
International Financial Relations Department 

Aleksandar Kovacevic 

Head  of  Department  for  International 
Affairs 

Junior  Adviser,  Unit  for  Cooperation 
with 
Financial 
Organizations 

Multilateral 

Republic  of  Serbia,  Ministry  of  Finance, 
International Financial Relations Department 

Zoran Ćirović 

Assistant Minister 

Sida/Embassy of Sweden 

Björn Mossberg 

Sida/Embassy of Sweden 

Nela Jovic 

Counsellor,  Development  Cooperation 
Section 

Programme  Officer,  Development 
Cooperation Section 

WYG  International,  Infrastructure  Projects 
Facility in the Western Balkans 

WYG  International,  Infrastructure  Projects 
Facility in the Western Balkans 

Jeremy Lazenby 

Team Leader 

Nicolas Sinclair 

Deputy Team Leader 

Turkey 

Antalya Municipality 

DG ENLARG 

EBRD  Istanbul Office 

European Investment Bank 

European Investment Bank 

State Planning Organisation 

Haluk Bayrakdar 

Holger Schröder 

Mike Davey 

Alain Terraillon 

Kadir Bahcecik 

Yilmaz Tuna 

Consultant of Mayor 

Former head of EU delegation 

Head of office 

Loan officer 

Director General 

State Planning Organisation 

M. Cüneyd Düzyol 

Director General 

Undersecretariat of Treasury 

Undersecretariat of Treasury 

Undersecretariat of Treasury 

World Bank, Ankara office 

Egypt  

ôzgür Pehlivan 

Nurhan Karaca 

ôzkan Isil 

Keiko Sato 

Deputy General Director 

Division Head 

Junior Treasury Expert 

African Development Bank/Fund 

Almaz Amine 

Country Operations Officer 

71 

 
 
  
  
African Development Bank/Fund 

Khaled El-Askari 

Infrastructure Specialist 

Agence Française de Développement (AfD) 

Camille Naudet 

Agence Française de Développement (AfD) 

Ola El Wakil 

Projects Officer 

Projects Officer 

Egyptian Electricity Holding Company 

Mohamed M. Awad 

Chairman 

Egyptian Electricity Holding Company 

Yaser Mohammad 

Engineer, Projects Department 

Export  Development  Bank 
(E.D.B.E) 

of  Egypt 

Mohamed Moussa 

General 
Department 

Manager, 

Investment 

European Investment Bank 

Jane Macpherson 

Head of Regional Office 

KfW Bankengruppe 

Detlef Geilow 

Programme Manager, Water and Waste 
Water Sector 

KfW Bankengruppe 

Andreas Holtekotte 

Programme Manager, Energy Sector 

KfW Bankengruppe 

Walid M. Abdel-Rehim 

Ministry of International Cooperation 

Zahir M. Abu Zied 

Ministry of International Cooperation 

Mervat Naguib 

Senior  Programme  Officer,  Water  and 
Environment 

Assistant  to  the  Minister  for  European 
Affairs 

General Director - European Investment 
Bank Department 

Upper Egypt Electricity Production Company  Reda Kisno 

Financial Manager 

Upper Egypt Electricity Production Company  Bassem Shawky 

Technical Manager 

Upper Egypt Electricity Production Company  Essaw Rajah 

Project Accountant, El Kureimat Power 
Plant 

Upper Egypt Electricity Production Company 

Satly Elsayed 

Project director 

Upper Egypt Electricity Production Company  Mohamed Naguib 

Technical Affairs Director 

Power  Generation  Engineering  and  Services 
Company 

Ali Mussawi 

Operations  Manager,  El  Kureimat 
Power Plant 

Power  Generation  Engineering  and  Services 
Company  

Khalil Hakim 

Electrical  Construction  Manager,  El 
Kureimat Power Plant 

Tunisia 

of 
Ministry 
and Development (MDCI) 

International  Cooperation 

Nawele Ben Romdhane 

General 
international cooperation 

Director 

for 

regional 

Ministry 
of 
and Development (MDCI) 

International  Cooperation 

Zahia Abu Zaid 

Assistant  to  the  Minister  for  European 
Affairs 

Ministry 
of 
and Development (MDCI) 

International  Cooperation 

Raja Jabri Halouani 

Deputy 
Mediterranean cooperation 

Director 

for 

Euro 

TAV Tunisie SA 

TAV Tunisie SA 

TAV Tunisie SA 

TAV Tunisie SA 

TAV Tunisie SA 

Africinvest 

Africinvest 

Tuninvest 

Tuninvest 

Tunisacier SA 

Haluk Bilgi 

General director 

Kahena Mamlouk Ferchichi  Director - Legal Department 

Project Monitoring 

Director Infrastructure and Buildings 

Technical Director 

Investment officer 

Investment officer 

Investment officer 

Founding Partner 

Director 

Bahadir Atalay 

Fourat Binous 

Akram Ayara 

Hichem Ghanmi 

Samia Ghorbel 

Anis Fathallah 

Aziz Mevarak 

Alberto Galli 

72 

 
 
Tunisacier SA 

Boussabat Mondher 

Administration and Finance 

Lebanon 

Bank Audi 

Bank Audi 

Bank Audi 

Bank Audi 

Bank Audi 

Bank Audi 

Bellevue Medical Center 

Bellevue Medical Center 

Capital Trust Group 

Euromena FMC  

Capital Trust Group 

Euromena FMC  

Karim Dagher 

- 

Khalill Geagea 

Noel Hakim 

Ibrahim Salibi 

Nabil Haddad 

Geroges Ziade 

Ali Elhaj 

Group  Head  -  Financial  institutions  & 
correspondent Banking 

Manager - Corporate Banking 

Assistant General Manager 

Senior Relationship Manager 

Senior 
Management 

Coordinator 

Chief executive officer 

- 

Portfolio 

Nayef Maalouf 

Director of Business Development 

Romen Mathieu 

Managing Director 

Gilles de Clerk 

Director 

Council for Development and Reconstruction  Wafaa Charafeddine 

Funding Division Director 

Council for Development and Reconstruction  Roger Maalouf 

Funding Division 

Lebanese roasting company 

Sodamco 

Brazil  

Elias Daniel 

Hady Nassif 

Chief Executive Officer  

Executive Director 

Delegation  of  the  European  Commission  to 
Brazil 

Paulo Lopes 

Counsellor for Information Society and 
Media 

Secretariat  of  International  Affairs  (SEAIN), 
Ministry of Planning 

Carlos  Eduardo  Lampert 
Costa 

Joint Secretary 

Secretariat  of  International  Affairs  (SEAIN), 
Ministry of Planning 

Secretariat  of  International  Affairs  (SEAIN), 
Ministry of Planning 

Claudia Veiga de Silva 

Coordinator for Public Sector Projects 

Cadmo Soares Gomes 

General coordinator 

VIVO Participações S/A 

Luis André Blanco,  

Director of Finance 

VIVO Participações S/A 

Alexandre Cruz Alves 

Division  Manager 
Planning 

for 

Financial 

South Africa 

Amalgamated Healthcare 

Amalgamated Pharmacy Group 

Suhail Gani 

William Butler 

Chief Executive Officer 

Chief Financial Officer 

Booysens Hotel and Conference Centre 

Ishmael Ndlovo 

Managing Director 

Booysens Hotel and Conference Centre 

Jonathan Segel 

Director  of  Charter  Financing  & 
Auditing 

Primolitos Ltd. 

Paul Vasconcelos 

Managing Director 

European Investment Bank 

David White 

Head of Regional Office 

European Investment Bank 

Svetla Stoeva 

Resident  Finance  Office  of  Southern 
Africa & Indian Ocean 

73 

 
 
European Union, Delegation of the European 
Commission to South Africa 

European Union, Delegation of the European 
Commission to South Africa 

Gerry McGovern 

First Counsellor 

Konstantinos Berdos 

First Secretary 

European Union, Delegation of the European 
Commission to South Africa 

Milly Chesire 

Project  Officer 
Development 

Private 

Sector 

Industrial Development Corporation (IDC) 

Jeremy Pos 

Account Manager: Risk Capital Facility 

Industrial Development Corporation (IDC) 

Meryl Mamathuba 

SBU Head: Risk Capital Facility 

Industrial Development Corporation (IDC) 

Shekeel Meer 

Divisional Executive: Industrial Sectors 

Industrial Development Corporation (IDC) 

Vusi Mashicila 

Republic of South Africa, National Treasury 

Robin Tholi 

Republic of South Africa, National Treasury 

Thulani Mabaso 

Senior  Account  Manager:  Corporate 
Funding 

Head,  International  Development  Co-
Operation 

Senior  Policy  Analyst:  International 
Development Co-Operation 

Group Chief Technical Officer 

Technical Manager 

Finance Manager 

Chief Operating Officer 

Sales & Marketing Manager 

General Manager: Operations 

Arup Ghoshal 

Ashutosh Datta 

Guy du Plessis 

Chris O'Neill 

Philip Truebody 

S Saryanarayana 

MP Maguya Kasango 

Chairman 

Giles Douglas 

Director 

Natasha Khanjekova 

Director,  Infrastructure  and  Energy, 
Russia Business Group 

Safal Steel (PTY) LTD 

Safal Steel (PTY) LTD 

Safal Steel (PTY) LTD 

Safal Steel (PTY) LTD 

Safal Steel (PTY) LTD 

Safal Steel (PTY) LTD 

Saicom 

TEIM/Saicom 

Russia 

EBRD 

St.  Petersburg  Foundation  for  Investment 
Projects (FISP) 

St.  Petersburg  Foundation  for  Investment 
Projects (FISP) 

St.  Petersburg  Foundation  for  Investment 
Projects (FISP) 

Alexei Vasilev 

General Director 

Viktor A. Shilov 

Senior Expert 

A.D. Grigorov 

Senior Expert 

Halcrow 

Ministry of Finance 

Ministry of Finance 

David Edwards 

Maria Smirnova 

V. Mizin 

Ministry of Regional Development 

Dmitry V. Savin  

Head of Representation 

Senior Expert, International Department 

Senior Expert, International Department 

Deputy  Director,  Department 
Capital Investments 

on 

9.3. 

The  Group  of  Experts  on  EU  Platform  for  External  Cooperation  and 
Development and the stakeholders consulted  

In the framework of the mid-term review of the EIB external mandate 2007-2013, the SCWP 
recommended  to  study  the  possibility  to  establish  an  EU  Platform  for  External  Cooperation 
and Development. In the context, Decision 1080/2011/EU requested the Commission to study 
the  development  of  an  "EU  platform  for  cooperation  and  development"  with  a  view  to 

74 

 
 
 
optimising the functioning of mechanisms for the blending of grants and loans in the field of 
external action. 
For this purpose, the Commission created and chaired a Group of Experts (GoE)34 of Member 
States, the European External Action Service, the European Investment Bank, the European 
Parliament  and  Croatia  (as  observers)  which  assessed  the  costs  and  benefits  of  such  a 
platform. This included clarification and agreement on the objectives, tasks and structure of 
the  Platform.  In  its  reflections  the  GoE  has  consulted  bilateral  and  multilateral  finance 
institutions and other stakeholders. The list of organisations consulted is provided below. 

The Group of Experts has concluded its work and the Commission will report to the European 
Parliament  and  Council  on  the  conclusions  of  the  Group  and  put  forward  a  proposal  to 
establish  such  Platform  by  the  end  of  2012.  The  EU  Platform  for  Blending  in  External 
Cooperation (EUBEC) was launched at the end of 2012. 

Consulted Organisations 

European Bank for Reconstruction and Development (EBRD) 

Council of Europe Development Bank (CEB) 

Nordic Investment Bank (NIB) 

African Development Bank (AfDB) 

World Bank Group (WBG) and International Finance Corporation (IFC) 

Agence Française de Développment (AFD) 

Kreditanstalt für Wiederaufbau (KfW) Bankengruppe 

Agencia Española de Cooperación Internacional para el Desarrollo (AECID) 

Società Italiana per le Imprese all'Estero (SIMEST) 

Sociedade para o Financiamento do Desenvolvimento (SOFID) 

Oesterreichische Entwicklungsbank (OeEB) 

Compañía Española de Financiación del Desarrollo (COFIDES) 

Finnish Fund for Industrial Cooperation (FINNFUND) 

Private Infrastructure Development Group (PIDG) 

9.4. 

Stakeholders  consulted  by  the  Commission  in  2012  during  the  preparation  of 
the Impact Assessment 

Informal  exchanges  of  views  took  place  with  representatives  of  Member  states  (Working 
Group of Financial Counsellors). Two meetings with main relevant NGOs took place in June 
and  October  2012  (CounterBalance  coalition,  CEE  Bankwatch  Network,  Amnesty 

34 

Established  in  line  with  the  Framework  for  Commission  Expert  Groups  C(2010)  7649  final  –  GoE 
number E02694. 

75 

 
 
 
 
 
                                                            
International,  European  Peacebuilding  Liaison  Office,  CEE  Bankwatch  Network,  Oxfam 
International, ICCO, and Concord).  

76 

 
 
10. 

ANNEX 3 – OECD LIST OF ODA RECIPIENTS 

The following table shows the repartition of eligible countries under the mandate under these 
categories according to the most recent OECD List of ODA Recipients35: 

Least 
Developed 
Countries 

Other Low 
Income 
Countries 

Lower Middle 
Income 
Countries 

Upper Middle 
Income 
Countries  

High Income 
Countries 

A. Pre-accession  

- Kosovo* 

B. Neighbourhood  
and Partnership  
countries  

C. Asia and Latin 
America 

- Kyrgyz 
Republic  
- Tajikistan 

- Bangladesh 
- Cambodia 
- Laos 
- Nepal 
- Yemen 

D. South Africa 

- Egypt 
- West Bank and 
Gaza Strip 
- Morocco 

- Republic of 
Moldova 
- Ukraine 
- Armenia 
- Georgia 

- Bolivia 
- El Salvador 
- Guatemala 
- Honduras 
- Nicaragua 
- Paraguay  

- India 
- Indonesia 
- Iraq 
- Mongolia 
- Pakistan 
- Philippines 
- Sri Lanka 
- Turkmenistan 
- Uzbekistan 
- Vietnam 

- Croatia 
- Iceland 

- Israel 

- Russia 

-Brunei 
-Singapore 
-South Korea 

- FYROM 
- Montenegro 
- Turkey 
- Albania 
- Bosnia and 
Herzegovina 
- Serbia 
- Algeria 
- Jordan 
- Lebanon 
- Libya 
- Tunisia 

- Azerbaijan 

- Argentina 
- Brazil 
- Chile 
- Colombia 
- Costa Rica 
- Ecuador 
- Mexico 
- Panama 
- Peru 
- Uruguay 
- Venezuela  

- China  
- Kazakhstan 
- Malaysia 
- Maldives 
- Thailand 

- South Africa 

* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo 
declaration of independence. 

35  

http://www.oecd.org/dac/aidstatistics/48858205.pdf  

77 

 
 
  
 
 
 
 
 
 
 
 
                                                            
11. 

ANNEX  4  –  FOLLOW-UP  OF  RECOMMENDATIONS  OF  SCWP  AND  EXTERNAL 
EVALUATOR 

Recommendation 

Implementation  in  the  current  mandate  /  what 
remains to be done or could be improved 

taking 

To streamline the objectives of 
the  mandate, 
into 
account  EIB  expertise  and  the 
relative  sizes  of  the  regional 
envelopes. 

Before  the  mid-term  review,  the  EIB  external  mandate 
decision  set  as  a  general  objective  for  EIB  activity  the 
some 
to  EU  policy  whilst  providing 
support 
differentiated guidance in specific regional Recitals. The 
Recommendation  has  been  integrated  in  the  current 
decision which sets three horizontal objectives: 

a)  Local  private  sector  objectives,  in  particular 

support to SMEs; 

social 

b)  Development 
economic 
infrastructure, 
energy, 
environmental  infrastructure,  and  information 
and communication technology; 

and 
transport, 

of 
including 

c)  Climate change mitigation and adaptation. 

There  are  no  sectoral  ceilings  as  envelopes  are 
determined  on  a  regional  basis.  However,  the  Decision 
introduces  a  specific  cross-regional  envelope  dedicated 
to climate change activities, which can be financed both 
under  the  dedicated  envelope  and  under  the  regional 
ceilings. 

to 

objectives 

While  the  current  Decision  aims  to  enhance  EIB 
contribution 
(see 
development 
recommendation  below),  it  does  not  explicitly  provide 
the  EIB  with  the  possibility  to  support  microfinance 
operations  which  belong 
toolkit  of 
instruments  available  to  financial  institutions  active  in 
third  countries  (although  the  EIB  could  support  e.g. 
microcredit to micro-entities). The legislator recognised 
this weakness and requested the Commission to analyse 
the  possibility  to  introduce  microfinance  operations  in 
the future Decision. 

the  usual 

to 

enhance 

To 
contribution 
development objectives 

the 
to 

EIB 
EU 

This recommendation has been integrated in the current 
Decision  notably  by  enhancing  EIB  reporting  and 
monitoring requirements. In addition, the EIB was asked 
to  develop  adequate  performance  indicators  to  measure 
the development impact of its activities. As a result, the 

78 

 
 
EIB  implemented  as  of  January  2012  the  so  called 
Results Measurement Framework (REM). 

It is perceived, however, that the development impact of 
EIB  activity  under  EU  guarantee  could  be  further 
strengthened  by  focusing  it  in  poorer  countries  and 
beneficiaries  which  are  most  in  need  of  EIB  financing. 
In  addition,  as  mentioned  above,  the  EIB  financial 
toolkit under the  mandate could be explicitly expanded 
to include support to microfinance operations. 

This  Recommendation  was  integrated  in  the  current 
Decision. 

The weakness perceived under the current setup is that it 
does not provide sufficient incentives to EIB to step up 
its  climate  change  activity  under  the  mandate,  which 
was the ultimate aim of the Recommendation. 

This  Recommendation  was  partly  implemented  in  the 
current  Decision  by  maintaining  the  EU  guarantee 
whilst asking the EIB to prepare – in consultation with 
the  Commission  -  an  allocation  policy.  The  latter  will 
indicate  how  the  EIB  intends  to  allocate  operations 
under EU guarantee or at its own risk activities. 

The  current  setup  represents  a  significant  improvement 
compared  to  the  previous  situation.  However,  a  further 
step  is  needed  to  ensure  that  EIB  financing  under 
mandate  focuses  on  less  creditworthy  operations  in  a 
transparent  and  orderly  manner,  whilst  respecting 
concentration risks by country/beneficiary. 

This  Recommendation  was  implemented  in  the  current 
Decision. 

To  activate  a  EUR  2bn 
optional  envelope  for  climate 
action 

To maintain the EU guarantee 
as a key tool enabling the EIB 
to  intervene  in  third  countries 
whilst  encouraging  the  EIB  to 
pursue  own  risk  activities  and 
expand  the  range  of  financial 
instruments. 

to 

guarantee 

To  limit  the  application  of  the 
non-
EU 
investment  grade  borrowers. 
The 
limit 
concentration  risk  in  specific 
countries/operations 

should 

EIB 

to  enhance 
with 

the 
In  order 
cooperation 
the 
Commission and other IFIs, to 
study  the  development  of  EU 
external 
for 
platform 
cooperation and development 

define 

operational 
To 
guidelines to provide guidance 
to the EIB on the activity in the 
regions  and  on 
different 

This  Recommendation  was  implemented  in  the  current 
Decision  by  asking  the  Commission  and  the  EIB  to 
jointly prepare technical regional operational guidelines 
and  requesting  the  EIB  to  prepare, in consultation with 

79 

 
 
environmental/climate  change 
the  EIB  should 
operations; 
also 
prepare  multiannual 
financing strategies. 

the  Commission,  a  climate  change  strategy  as  well  as 
multiannual financing strategies. 

These  documents  were  finalised  at  the  end  of  2012. 
However,  the  recommendation  and  the  subsequent 
implementation  did  not  spell  out  a  fuller  process  to 
update these documents in an informed and transparent 
manner,  to  take  into  account  the  evolution  of  the  EU 
priorities and policies in the external field. 

strengthen 

To 
dialogue 
between  the  Commission  and 
the EIB including on the field 

This  Recommendation  is  currently  being  implemented 
the  Memorandum  of 
through 
Understanding between the Commission and the EIB to 
strengthen dialogue and cooperation. 

revision  of 

the 

The  impact  of  EIB  financing 
would  be  enhanced  if  the  EIB 
were  devoting  more  staff  to 
external activities, inter alia to 
ensure 
local 
presence 

stronger 

a 

While  the  SCWP  and  the  evaluator  suggested  that  EIB 
financing  would  be  enhanced  if  the  EIB  were  devoting 
more  staff  to  external  activities,  the  EIB  Board  of 
Governors'  approval  of  the  current  external  Decision 
stressed that the Bank should endeavour to mitigate the 
impact on human resources for its implementation. 

Therefore, the implementation of this Recommendation 
could only be very limited. As decisions on EIB human 
resources  fall  under  the  remit  of  the  EIB  governing 
bodies, it is not possible to impose any obligation on the 
EIB in this respect. 

80 

 
 
 
12. 

ANNEX 5: BACKGROUND INFORMATION ON MYANMAR 

The Commission proposes to activate the EU guarantee to EIB operations in Myanmar. The 
current  relations  of  the  EU  with  this  country  and  the  rationale  for  the  activation  of  the 
mandate are explained below. 

12.1. 

Political Situation and bilateral relations with the EU 

Under  the  civilian  government  headed  by  President  U  Thein  Sein  (since  March  2011), 
Myanmar’s  credible  and  comprehensive  reform  agenda  has  taken  shape.  It  covers  political, 
economic and social issues, thus ending the former dictatorial rule, overcoming the country’s 
isolation from the wider world and reviving its stagnant economy. Myanmar is faced with the 
twin  challenges  of  democratisation  and  of  securing  domestic  peace.    The  legacy  of  the  past 
comprises deep-rooted structural poverty, fragile state institutions, a weak democratic culture, 
and  a  severe  lack  of  capacity  at  all  levels  of  Government.  The  complex  conflict  resolution 
challenges  relate  to  accumulated  grievances  of  Myanmar's  ethnic  minorities.  A  most 
remarkable development is the rapprochement between the Government and the leader of the 
former opposition. President U Thein Sein reached out to Daw Aung San Suu Kyi, and she 
and  her  party,  the  National  League  for  Democracy  (NLD),  modified  their  views  and  joined 
the  by-elections  in  April  2012.  These  reconciliatory  steps  boosted  confidence  in  the 
Government's commitment to political reform. 

The  EU’s  declared  goal  is  to  accompany  the  country’s  transition  and  help  a  legitimate, 
civilian  government  pursue  the  social  and  economic  development  of  the  country,  respect 
human  rights  and  rebuild  relations  with  the  international  community.  In  response  to  the 
positive  developments,  the  EU  suspended  the  political  sanctions  (visa  ban,  asset  freeze, 
import-export-investment  ban  in  timber,  gems  and  metals)  and  launched  the  process  of  re-
instating  the  GSP,  thus  giving  Myanmar  soon  unrestricted  market  access.  The  political 
dialogue  been  stepped  up  (official  visits  by  Commissioners  Georgieva  and  Piebalgs,  HRVP 
Ashton and President Barroso). The EU opened a diplomatic mission in Yangon (April 2012) 
which  is  to  be  upgraded  to  a  full  Delegation  shortly.  Aid  has  been  significantly  increased, 
expanding  the  portfolio  from  health,  education  and  agriculture/livelihoods  to  strengthening 
the public administration, electoral support and helping to secure ethnic peace. 

EU Financial Assistance 

The  European  Commission  has  been  providing  development  assistance  to  Burma/Myanmar 
since 1996, since when over €174 million has been committed. 126 projects have been signed 
since 1996, with 53 on-going programmes worth €104 million mainly covering Livelihoods 
and  food  security  (46%);  Health  (22%)  and  Education  (10%)  and  delivered  via  UN 
organisations and NGOs. Broadly 19% of EU assistance also provides support to civil society 
capacity  building,  governance  and  human  rights,  gender  and  environment,  to  a  large  extent 
through NGOs, local and international.  

In January 2012, Commissioner Piebalgs announced a package of €150 million for 2012 and 
2013 to support the reform process. The Commission will commit €100 million in 2012 and 

81 

 
 
the remaining €50 million in 2013. This includes €80 million in 'new' funds and represents a 
big  increase  in  annual  envelopes  from  previous  years.  Development  cooperation  is 
complemented and supported by humanitarian actions as well as actions under the Instrument 
for Stability (IfS). 

Trade relations 

In  March  1997,  the  EU  temporarily  withdrew  the  trade  preferences  under  the  Generalised 
System of Preferences (GSP) from Myanmar (Council Regulation 552/97) due to routine and 
widespread  practice  of  forced  labour,  confirmed  by  the  International  Labour  Organisation 
(ILO),  in  a  special  procedure  of  its  Commission  of  Inquiry.  In  June  2012,  in  light  of 
significant  progress  in  Myanmar  to  eradicate  forced  labour,  the  ILO  Conference  suspended 
this resolution. This now allows the EU to reinstate GSP preferences.  

Due to the EU sanctions in place for almost two decades, bilateral trade between the EU and 
Myanmar has been severely limited, at least in terms of official trade flows. A major problem 
in the case of Myanmar is the unreliability of data and statistics, as a large share of trade and 
investments takes place through informal channels, and often via third countries in the region. 
It is noteworthy that Myanmar is actually a long-standing WTO member.  

EU investment in Myanmar has also been limited as a result of EU sanctions. Indeed the EU 
sanctions  included  an  investment  ban  in  state-owned  enterprises  as  well  as  additional 
investment  ban  on  enterprises  in  the  timber,  gems  and  precious  metals  sectors.  These 
sanctions have de facto discouraged investment in the country.  

12.2.  Democracy, Human Rights and Fundamental Freedoms situation 

The  political  will  to  improve  the  human  rights  situation  in  Myanmar  is  strong.  Since  the 
elections  in  November  2010  –  the  first  in  twenty  years  –  several  positive  developments  as 
regards human rights and fundamental freedoms are to be noted. The overwhelming majority 
of  political  prisoners  have  been  released.  Progress  has  been  made  in  areas  of  the  EU's 
concern,  such  as  freedom  of  assembly,  association  and  expression,  forced  labour,  and  child 
soldiers.  A  National  Human  Rights  Commission  has  been  established.  Several  dozen  trade 
unions  have  been  formed.  Human  rights  violations  still  occur,  most  notably  in  ethnic  areas 
affected  by  armed  conflict.  Discrimination  against  the  Muslim  population  continues  in 
Rakhine State. 

The legislatures have become drivers of the democratization process, with the cooperation of 
the  25%  of  the  seats  reserved  for  military  representatives.  Debates  in  both  Houses  of 
Parliament are dynamic, and Ministers have been subject to robust scrutiny. Members of the 
Union  Parliament  not  belonging  to  the  majority  USDP  are  still  given  a  voice.  Their  policy 
suggestions  are  being  listened  to  and  their  representation  in  the  permanent  parliamentary 
committees is disproportionately strong. 

82 

 
 
12.3.  Macroeconomic situation and investment needs 

Despite significant natural resources, a large labour force and proximity to some of the most 
dynamic  economies,  Myanmar  is  one  of  the  poorest  countries  in  Asia.  In  2011,  it  ranked 
149th out of 187 states in the Human Development Index, lagging behind all of its ASEAN 
neighbours  in  indicators  for  poverty,  health  and  education.  Sizing  Myanmar's  economic 
performance  is  a  difficult  task  due  to  the  scarcity  of  quantitative  data.  According  to  IMF 
estimates, GDP growth picked up in 2011 to 5.5% from 5.3% in the previous year. Inflation 
declined  to  4%  from  8.2%  a  year  earlier  mainly  due  to  lower  food  prices  and  less  deficit 
monetisation. The General Government deficit in 2011 amounted to 5.9% of GDP, reflecting 
heavy spending on major projects, given the government's small revenue base and weak tax-
collection capacity.  

A well-targeted tax reform and enforcing mechanisms are required to increase government's 
revenues and redress the fiscal balance, which has been mostly negative for the past 20 years. 
Transparency  of  revenues  could  be  improved  as  well,  especially  revenues  from  natural 
resource  exports,  which  may  generate  more  hard  currency  earnings  than  the  country  can 
absorb  efficiently  (due  to  capacity  constraints),  leading  to  unproductive  investments  and 
inflation. Additionally, the government could seek more efficient spending on education and 
health, and adjusting allocations in the budget between agriculture and defence.  

In April 2012 the Government abandoned the overvalued official exchange rate and moved to 
a  managed  float,  as  one  of  the  steps  required  to  have  a  unified  exchange  rate  and  achieve 
Article VIII status in the IMF36. Population has little faith in the Kyat and the banking system 
due  to  past  demonetisations,  high  inflation  rates  and  a  banking  crisis  in  2003.  Moreover, 
Myanmar  has  no  independent  monetary  policy  because  the  Central  Bank  of  Myanmar  is 
currently a department within the Ministry of Finance. The banking system, which could play 
a  major  role  in  the  country's  development,  is  by  far  the  weakest  and  least  developed  in 
Southeast Asia, due to restrictive regulations and external financial sanctions. 

Myanmar’s  international  trade  and  investment  has  been  highly  restricted  for  decades  by  a 
wide  range  of  administrative  measures.  The  government  has  been  gradually  adopting  a 
number  of  measures  to  eliminate  or  reduce  trade  restrictions,  but  these  have  not  yet  had  a 
macroeconomic impact. 70% of Myanmar’s population lives in rural areas where livelihoods 
depend greatly on agricultural production. Within Asia it has a distinct comparative advantage 
in agriculture production  because its soil has been least damaged and it has the  potential of 
being  the  main  source  of  organic  food  for  Asia.  Exploiting  this  potential,  however,  will 
require exceptionally disciplined policies by the government in the face of powerful  market 
pressures as the country opens up to foreign trade and investment.  

The “resource curse” in the case of Myanmar has been most visible in connection with oil and 
gas production, mineral and gem mining and timber extraction. Despite the severe shortage of 
electric power across the country, less than 15% of extracted gas was consumed domestically. 

36  

This status means that all restrictions on the purchase and sale of foreign exchange for the export and 
import of goods and services have been removed. 

83 

 
 
                                                            
With foreign exchange reserves already above a comfortable level, the benefits of exporting 
more power appear low relative to the benefits of exploiting the country’s natural sources of 
energy  to  provide  a  sufficient  and  reliable  supply  of  electricity  to  most  of  the  country’s 
households and industry.  

Myanmar is unconnected to any of its five neighbours by a railroad or highway. The policy 
challenge here is how to finance construction of the basic transportation network required to 
connecting  Myanmar  efficiently  to  its  natural  markets  in  Asia.  The  communications  sector 
offers one of the biggest opportunities to Myanmar, since telephone and Internet penetration 
are  among  the  lowest  in  the  world.  Finally,  Myanmar  has  been  rated  as  having  one  of  the 
worst  business  climates  in  the  world  because  of  administrative  obstacles  that  contribute  to 
high  transaction  costs.  Steps  need  to  be  taken  to  improve  the  business  climate  and  enhance 
private sector job creation. 

The new Government's ambitious agenda for economic reform faces many challenges which 
deserve special attention, in particular the strong need for capacity building. Delivering on the 
country potential with inclusive and sustainable growth would foster economic development 
and poverty reduction.  

12.4. 

Presence of other IFIs 

International Monetary Fund (IMF)  

The IMF has recently opened an office in Bangkok which provides technical assistance and 
will have IMF oversight on Myanmar in collaboration with the Bank of Thailand. Cambodia. 
The  IMF  has  been  conducting  Article  IV  Missions  Myanmar  for  several  years.  The  most 
recent  mission  to  the  country  reported  that  ‘broad-based  sustainable  growth  and  poverty 
reduction  require  structural  reforms  to  remove  barriers  to  trade  and  foreign  investment, 
enhance the business climate, and improve agricultural productivity’. The IMF will assist the 
Myanmar  Government  to  complete  the  process  of  exchange  rate  unification  before  the 
government’s target date of end 2013. The IMF does not have outstanding arrears to be repaid 
by Myanmar, but until recently was more constrained in its relationship with Myanmar due to 
US  sanctions  and  US  influence  over  the  IMF.  The  institution  is  committed  to  capacity 
building of government but has not yet placed long-term advisors with the government.  

The World Bank (WB) 

The World Bank (also with IFC) is at the early stages of re-engagement with Myanmar after 
several  years  of  disengagement  after  1987.  It  opened  an  office  in  Myanmar  in  June  2012. 
Country  Director  arrived  in  September  2012.  Current  activities  include  technical  assistance, 
covering analysis (PEFA; PER; ICA); monitoring etc.; looking to support the peace process 
and  community  development.  The  Bank  is  engaging  with  civil  society  to  encourage  social 
accountability, transparency and open communications in Myanmar. 

The World Bank is preparing two grants, totalling $85 million, to benefit poor rural areas in 
Myanmar  through  community-driven  development  (CDD).  CDD  is  an  approach  to  local 

84 

 
 
development  in  which  control  over  decision-making  and  resources  for  local  infrastructure, 
service  delivery,  and  livelihood  support  is  transferred  to  communities.  The  grants  will  also 
support  community  programs  in  border  conflict  areas.  A  recent  Bank  report  on  fragile  and 
conflict affected countries stresses the importance of generating real economic benefits for all 
people to increase the prospects for peace. 

Interim strategy note guides work with the government. Areas of possible engagement include 
job  creation  in  the  agricultural  sector,  small  and  medium  sized  enterprise  development,  and 
access  to  finance  for  rural  farmers.  The  Bank  is  now  working  on  a  new  “Interim  Strategy” 
with  the  government  and  development  partners,  which  will  underpin  the  Bank’s  work  as  it 
prepares for a full country program. Financing for new projects can only be extended by the 
World  Bank  once  the  country’s  arrears  have  been  cleared.  The  World  Bank  is  engaged  in 
discussion with the Myanmar Government and development partners on arrears issue, plan to 
be cleared in final quarter of 2012.  

The Asian Development Bank (ADB) 

In  response  to  on-going  major  reform  moves  by  the  Government  of  Myanmar,  the  Asian 
Development Bank (ADB) adopted in early 2012 a phased approach to re-engagement with 
Myanmar, involving significant preparatory analytical work and country dialogue in the first 
half  of  2012.  The  Asian  Development  Bank  (ADB)  and  the  Government  of  Myanmar  have 
agreed  on  a  new  Interim  Country  Partnership  Strategy  (2012-2014)  that  sets  the  stage  for 
ADB’s re-engagement in the country. 

ADB  Strategy  will  guide  the  re-engagement  of  the  Bank  with  Myanmar  promoting 
sustainable and inclusive growth. A central pillar of ADB’s re-engagement with Myanmar is 
improving connections to narrow the income gap between the urban and rural areas within the 
country and close the development gap with its neighbours. To boost growth throughout the 
country,  ADB  will  work  with  the  government  to  identify  key  infrastructure  investments, 
particularly  in  transport  and  energy.  ADB  will  also  work  with  communities  on  rural 
infrastructure  projects  and  develop  other  projects  to  improve  the  livelihoods  in  rural  areas 
where the majority of people live, including in ethnic minority areas. 

ADB  will  formulate  an  investment  program  and  funding  targets  for  the  country  once  the 
government  has  settled  its  outstanding  arrears  with  ADB.  ADB  is  working  closely  with  the 
government and other creditors regarding the arrears. After arrears clearance, ADB will roll 
out a series of grants aimed at helping government ministries, including in the critical area of 
education,  to  better  plan  and  implement  development  programs  and  projects,  manage  the 
reform process, and improve data gathering. A first loan from ADB in almost 30 years ($512 
mn) was signed in January 2013. The loan will also be used to finalize arrears clearance and 
sustain  government  efforts  to  revamp  the  national  budget  process  and  modernize  tax 
administration. It will also support trade policy reforms  and capacity development,  improve 
the investment climate and small and medium-sized enterprise development. 

85 

 
 
13. 

 ANNEX 6 – GUARANTEED PORTFOLIO BY COUNTRY 

EUR million

Albania
Algeria 
Argentina 
Armenia
Azerbaijan
Bangladesh
Bosnia Herzegovina
Brazil
Chile
China 
Colombia 
Costa Rica 
Croatia
Ecuador 
Egypt 
El Salvador 
FYROM
Georgia
Guatemala
Honduras
India 
Indonesia 
Israel 
Jordan 
Kazakhstan
Kosovo
Kyrgizstan
Laos
Lebanon 
Maldives 
Mexico 
Montenegro
Morocco 
Nicaragua 
Pakistan 
Panama 
Paraguay 
Peru 
Philippines 
Republic of Moldova
Regional - Pacte Andin
Russia
Serbia
Singapore 
South Africa 
Sri Lanka
Syria 
Tajikistan
Thailand 
Tunisia
Turkey
Turkmenistan
Uzbekistan
Ukraine 
Uruguay 
Venezuela 
Vietnam 
WB&Gaza 
TOTAL activities amount

of which investment grade
%

Outstanding 
Disbursed Amount 
across mandates

 Signed Amount 
under the current 
mandate 

257,24
0,00
269,56
3,04
-
12,96
628,01
909,77
-
96,54
178,88
7,89
481,89
33,05
2.037,23
35,71
219,94
57,58
-
-
198,99
82,63
259,89
419,71
-
-
-
77,83
567,50
40,71
111,85
189,26
2.483,49
4,76
50,52
172,53
73,61
98,11
104,32
39,79
2,96
204,71
1.542,15

-

1.304,09
121,13
727,99
-
18,22
2.355,41
8.330,67

-
-
202,24
23,88
-
248,36
18,66
25.305,24
2.905,05
11,5%

83,00
-
246,00
20,00
-
-
625,00
970,00
-
59,00
100,00
-
-
-

1.456,00

-
225,00
190,00
-
-
250,00
-
407,00
334,00
-
-
-
-
447,00
-
123,00
221,00
1.760,00
69,00
100,00
424,00
69,00
-
-
225,00
-
383,00
1.889,00
-
648,00
-
695,00
7,00
-

1.746,00
4.772,00

-
-
891,00
28,00
-
370,00
-

19.832,00
2.590,00

13,1%  

86