Overview Report of the 8 October 2014 High Level Seminar on Long Term Lending to EU Industries Inside and Outside the European Union

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1 Overview Report of the 8 October 2014 High Level Seminar on Long Term Lending to EU Industries Inside and Outside the European Union Introduction In November 2013 CEOs and CFOs of a top group of 30 major European Infrastructure and energy industries (MNEs) strongly sounded an alarm bell: Europe s share in multi billion infrastructure projects globally is rapidly eroding due to an uncompetitive European lending system. Moreover, Europe s Small and Medium sized Enterprises (SMEs) annually lose billions of dollars in subcontracting due to various forms of tied lending by non European lenders (mostly state owned banks) to which Europe s MNEs must turn in absence of an appropriate and competitive EU lending facility. In March 2014 the European Council consequently called for action by the European Investment Bank. Several industries joined a Dialogue Group of major industries and banks which organized a High Level Seminar meeting on 8 October 2014 addressed by European Council President Herman Van Rompuy, Belgian Finance Minister Koen Geens, leading industrialists, economists and top level civil servants. BNP Paribas Fortis Chief Economist Mr Peter De Keyzer pointed at the two growth engines of any economy: demographic growth and growing productivity. Both are slowing in Europe and thus Europe is becoming less attractive for industrial investment, he concluded. This can only be compensated by higher productivity and that can only be achieved by innovation and technological development. A third way out is to assist Europe s larger and smaller industries to win contracts in those economies outside the EU where growth is presently taking shape. It is therefore of great importance that Vice President designate of the European Commission Jyrki Katainen said in his written statement to the European Parliament: We need to help enterprises make the most of cross border opportunities, both within the Single Market and outside the EU, thereby placing them in a better position to create jobs. We need to promote a forward looking trade policy and international convergence of standards and regulations. With an estimated 90% of global growth originating 1

2 overseas by 2015, access to the markets of non EU countries will remain a key factor for Europe s competitiveness. Addressing non tariff barriers to trade is increasingly important to open markets but also to defend EU interests and actively promote a level playing field in other markets. This crucial statement by one of the key players in Europe makes clear that the EU must use any opportunity to help European industries, MNEs and SMEs, to win contracts in the global market. Rightly so, Ms Gunilla Almgren, President of the European SME umbrella organization UEAPME, strongly argued that SMEs must access growth markets outside Europe but can only do so if assisted first of all by MNEs that subcontract SMEs and secondly if the EIB provides competitive Long Term Lending to MNEs including guarantees that draw billions of euros in private funding. Ms Almgren specifically demanded EIB tied lending for out of Europe contracts of MNEs to match trends in Asian lending and to ensure that MNEs are required to subcontract European SMEs. European industrialists such as EIC President Duccio Astaldi, SEOPAN President Julián Núñez, GDF SUEZ Deputy CEO Dirk Beeuwsaert, Ferrovial CFO Ernesto López Mozo, HSBC Managing Director Virginie Grand, and APG Chief Strategist Gert Dijkstra not only all agreed with the statements of Mr De Keyzer and Ms Almgren, but presented convincing data underlining the case made by Ms Almgren. But more came to light: The EIB, UEAPME, major banks and industrial leaders appear to agree that there is enough funding for infrastructure projects inside the EU: there simply are not enough major projects in the pipeline. According to Oxford Professor Dr Dieter Helm this situation may well continue if Europe s economic growth does not pass the 2% mark and if austerity measures continue to set the tone of Europe s policy making. Indeed this may change if the German Government starts responding to Germany s new economic woes which currently bring the German economy to a grinding halt. The Director of European Affairs at the Polish Ministry of Finance, Mr Patryk Łoszewski referred to his Minister s plan to invest 700 billion euro in the European economy: 400 billion more than proposed by incoming European Commission President Jean Claude Juncker to the European Parliament. Given the realities of the European economy Mr Łoszewski explicitly stated that investing through projects inside or outside the EU was mutually complementary. Both he and Prof Helm, as well as Deputy Director General for Finance at DG Markt Mr Olivier Guersent and Director Didier Herbert of DG Enterprise clearly accepted the data in a preparatory PA Document underlining that Europe s SMEs in just three European MNE contracts lost several billions of subcontracting due to tied lending offered by Asian lenders for out of Europe infrastructure contracts. It was noted by all that SMEs out of Europe subcontracts lead to immediate job creation and technology development inside the EU. 2

3 Professor Helm finally formulated the choice for European policy makers as follows: Either the EU decides to engage in the global competitiveness of its industry in order to let them win, or we lose. According to Mr De Keyzer Europeans cannot afford that. I. The Problem I.1. Between 1995 and 2013, the share of new infrastructure projects in Europe of total global new infrastructures has decreased from 33% to 26%. On the contrary, the share of new Asian infrastructure projects has increased from 42% in 1995 to 59% in Moreover, Asia demonstrates astounding figures in the augmentation of total value of infrastructure projects: between 1995 and 2013, the total value of infrastructure projects in Asia has increased with 490.1% to 1,072,773 million USD, as compared to a growth figure of % to 464,793 million USD in Europe. These European figures are lower than the global average of %, which indicates that Europe s global competitiveness has been decreasing over this time period. 3

4 (Source: Power Point Presentation by Julián Núñez, President of SEOPAN, the Spanish Contractors Association, 8 October 2014) II. II.1. II.2. The Market outlook The total EU market for major infrastructure projects in the next ten years is around EUR 4,700 billion (USD 5,890 billion) based on studies by McKinsey and four other sources as quoted in an external working paper of the EIB. Prof. Dr. Dieter Helm suggests being careful with this amount as it is dependent on EU Member States political will and economic growth. If growth is below 2% annually major infrastructure projects may not start as Government s policies may continue to be focused at debt reduction and austerity measures. Anyhow the expected EU volume is dwarfed by the approximately USD 31,110 billion for major projects outside the EU (as projected by the World Economic Forum in April 2014). In response to the present challenges of market erosion as explained by Mr Núñez and the above Market Outlook including sharply reduced global 4

5 competitiveness of European industries, the March 2014 European Council correctly called on the European Investment Bank to further contribute to enhancing European companies' internationalisation and competitiveness. On 8 October 2014 President of the European Council Herman Van Rompuy highlights: In today's international markets, Europe's industrial excellence is no longer a guarantee for success: competitiveness cannot be taken for granted. Efforts are needed to improve our companies' access to markets around the world, in the spirit of free, fair and open trade. II.3. Oxford Economics Professor Dr Dieter Helm agrees. We are not living in an ideal world, he says. If we want to compete for multibillion infrastructure contracts we must do so to win. III. III.1. III.2. Options for Solutions through the real economy : a holistic approach All experts agree: funding for projects inside the European Union is immediately and sufficiently available. But there are not enough major projects in the European pipeline. By % of economic growth and thus projects is expected outside the EU, so that is where we need to go says SME umbrella organization UEAPME President Ms Gunilla Almgren. SMEs cannot do this alone. According to Ms Almgren they require not only Governments but major industries support. These industries require optimal lending conditions to compete globally for major multibillion contracts. Around 40% of such contracts are often subcontracted to SMEs, thus providing immediate income, jobs and technology development inside the EU. To increase the competitiveness of EU companies and to ensure growth in the European Union, all stakeholders must be brought together in order to develop viable solutions. In the words of Prof. Mark Eyskens: All related issues must be seen in a holistically integrated fashion. Let us not seek contradiction where there is none. Let us not struggle among ourselves when the outside world moves rapidly forward. The establishment of Multi stakeholder platforms with MNEs and SMEs in the real economy draws the interest of Deputy Director General for Finance and Services of DG Market, Mr Olivier Guersent. He supports the creation of Public Private Partnerships. Indeed this would follow the example of multi sectorial cluster groups at national level. As so many things national, the good examples require Europeanization, including a European Capital and Human Capital Market, says Mr Guersent. With these elements he seeks an industrial Renaissance to be achieved by further exploiting the synergies between 5

6 services and goods in a truly integrated internal market, which would ensure European competitiveness and thus economic recovery in Europe. Furthermore, through the integration of capital markets in the EU particularly long term funding can and must be achieved; the hesitance in Europe to invest must be overcome; the role of the major European industries is indispensable to help achieve this. III.3. III.4. Belgian Minister of Finance Mr Koen Geens agrees: The attractiveness of the contracting of European multinationals and the subcontracting of European SMEs on the basis of superior technologies and competitive prices, including competitive lending, is the only answer. Multi stakeholder working groups including the support of both European and national Authorities may well be the best answer to this challenge. Minister Geens welcomes the fact that the European Commission is seriously considering adapting the EIB s mandate to re create the competitiveness of EU companies with fast, effective and irreversible solutions. Indeed, Mr Katainen told MEPs in his 7 October hearing that he intends to work closely with the EIB to identify possible ways for improving its role in stimulating investment. Furthermore he stated that at EU level, we need to make sure that the available funds are used more effectively in supporting investment this can include the use of innovative financial instruments. UEAPME President Ms Almgren refers to barriers which SMEs must overcome when expanding their businesses outside the EU. There is a language problem, a manpower problem and we truly need the support of MNEs to open doors and be taken seriously. According to her this implies that the interests of SMEs and MNEs are not contradictory but complementary. She also calls on the EIB to assist the MNEs to win major non EU infrastructure projects by providing competitive Long Term Lending conditions through forms of tied lending favouring the subcontracting of Europe s SMEs. IV. IV.1. Reform of EIB: expanded mandate and provision of guarantees During the whole of the seminar Mr Alessandro Carano, Head of Unit and Managerial Adviser, Institutional Strategy department of the European Investment Bank, emphasized that it was up to the European policy makers plus Member States to ensure the connection between political leverage and financial leverage. They have to consider how the present constraints of the EIB, particularly concerning tied lending and the provision of guarantees, could be overcome. He made clear that this could well be part of the ongoing two 6

7 track mandate review process launched on the one hand by the European Council in March 2014 and on the other hand by Vice President designate Katainen as announced in the European Parliament in the framework of the 300 billion Euro investment package. I think that given the growth prospects are what we know inside Europe and outside Europe, it is almost natural that these two streams will be at some point connected, said Mr Carano emphasizing this was his personal opinion and not necessarily that of the EIB. IV.2. IV.3. IV.4. In this context, EU Council President Herman Van Rompuy and Belgian Finance Minister Geens statements appear fully aligned with the key statement of Oxford University Economics Professor Dr. Dieter Helm. If European Industries want to compete globally they must play to win. The EU must start operating in the world as it is and not as it ideally should or could be. For the EIB this implies an appropriate expansion of its mandate and the provision of guarantees both to compete with other lenders and to ensure that Europe s SMEs get their fair share of major outside European contracts through tied lending respecting international standards as set by the WTO. Finance Minister Geens: Banks and pension funds clearly request European guarantees to free their huge potential to provide long term lending. An expansion of the mandate of the European Investment Bank is now considered and is expected to include a substantial expansion of the EIB s funding as well. The equipping of the EIB to allow it to play a much more aggressive and decisive role in the growth of the European economy must be agreed. In his hearing by the European Parliament Mr Jyrki Katainen made quite clear that increasing the lending capacity of the EIB and improving its role in stimulating investment were two objectives which are part and parcel of the ambitious Jobs, Growth and Investment Package of 300 billion Euros announced by the new Commission President Jean Claude Juncker. Regarding the better use of available public resources, he said, at EU and national level, I intend to promote a better use of the EU budget funds, improve and maximize the role of the EIB and National Public Investment Banks and ensure that the composition of fiscal consolidation supports investment. The Director for European Affairs of the Polish Ministry of Finance Mr Patryk Łoszewski referred to the plan of Minister Szczurek, on behalf of whom he spoke, to substantially enlarge the public funding for investment in the EU. However he stated that there are no contradictions between lending to European companies for projects inside and outside the EU. The options to boosting investments outside Europe and inside Europe are not mutually contradictory and on the contrary, they are complementary and constitute two 7

8 pillars of the same process. European industries will benefit from increased investment outlays in both of these cases. IV.5. Mr Łoszewski referred to the informal ECOFIN Council meeting on 13 September in Milan, "where finance ministers discussed numerous measures to overcome the investment crisis in the European Union and agreed on setting up a Project Identification Task Force co chaired by the Commission and the EIB. Its task will be to jointly identify viable investments in Europe and of European significance that are currently not being realised due to economic, regulatory or other reasons and draw up a road map until December to boost investment in Europe." Furthermore, Mr Łoszewski explained that the "ECOFIN Council underlined that both public and private investment should be at the centre of the EU level response to promote growth potential and stressed that investment policies are a focal point for different policy tools, including structural, fiscal, monetary policies and financial regulation... ECOFIN asked the Commission to consider options to direct more resources of the EU budget in the medium term towards productive and growth oriented investments and consider streamlining governance arrangements under joint initiatives with the EIB." IV.6. IV.7. Furthermore, Mr Łoszewski presented the initiative of the Polish Minister of Finance to create a European Fund for Investment with the aim of mobilising additional financial resources in the range of 5.5% of EU GDP, to enhance not only European investments, but also increase long term productivity growth rates in Europe, further stimulate private capital expenditure and help achieving the vision of Europe He explained that "in order to avoid crowding out the private investment, the programme should focus on such areas where private sector does not and will not deliver, at least on its own". In this respect, Mr Łoszewski stated that "the risks of doing 'too little' outweigh significantly risks of doing 'too much'." He emphasised that "the capital of the Fund would be leveraged by borrow in the financial market and directly invested in the selected infrastructure projects" and that "these additional resources should supplement not replace European Investment Bank financing and genuine functions of the EU budget. The President of the European umbrella organization for contractors, EIC, Mr Duccio Astaldi referred to the so called Camdessus Report that pleaded for an expansion of the EIB mandate already in In line with this Report Mr Astaldi recommended establishing a streamlined EIB mandate with high level EU objectives for all regions for the purpose of enhancing the coherence of the EIB external activities. The EIB should focus on financing sustainable public and 8

9 private investments in support of EU policies in all eligible countries outside the EU, with specific emphasis on, among others, economic infrastructure. IV.8. The President of the Spanish Association of Infrastructure and Services Contractors and Concessionaires (SEOPAN), Mr Julián Núñez, detailed the enormous potential for investment outside the EU. The trend of global infrastructure investment demonstrates how emerging countries will be the key markets for growth. (Source: PowerPoint presentation by Mr Julián Núñez, President of SEOPAN, 8 October 2014) IV.9. EIC President Mr Astaldi, however, described the substantial challenges facing European industries in Africa. While BNP Paribas Fortis Chief Economist Mr Peter De Keyzer referred to the African continent as an enormous opportunity with a population growing from 1 billion today to 3.3 billion in this century, Mr Astaldi demonstrated how Europe lost terrain on exactly this continent. 9

10 (Source: PowerPoint presentation by Mr Duccio Astaldi, President of EIC, 8 October 2014) IV.10. Mr Gert Dijkstra, Chief Strategist of APG, managing the world s second largest pension fund ABP, thus stressed that the required improved competitiveness in lending conditions for EU industries bidding for extra EU major (infrastructure) projects can include Pension Fund investing, particularly if political and inflation risk is managed through EU guarantees. EIB guarantees provide stability and comfort for long term investments. He added that EIB and regional development banks can play a role as platforms for structuring, risk management, co finance, local knowledge and information sharing. IV.11. Chief Economist Mr De Keyzer gave a very recent example of the impact of guarantees: Even a simple guarantee can help growth go along. Mr Draghi didn't have to spend a single Euro and yet growth recovered since his guarantee of the European Monetary System. V. Tied lending: yes or no V.1. EIC President Mr Astaldi highlighted the current worldwide situation with regards to forms of tied financing. This slide illustrates the differences between Europe and the rest of the world as seen by IMF and the US Ex Im Bank. The 10

11 latter draws the conclusion that similar policies must be adopted to avoid further erosion of the US market share. (Source: Power Point Presentation by Duccio Astaldi, 8 October 2014) V.2. Referring to Mr Núñez analysis, UEAPME President Ms Almgren pleaded for the introduction of tied lending through an EU content requirement for access to EIB loans: 11

12 (Source: Ms Gunilla Almgren, President UEAPME, Powerpoint Presentation 8 October 2014.) V.3. V.4. V.5. With respect to competitiveness in infrastructure projects, Mr Carano argued that the procurement rules of the EIB would have to be changed, and as I said this is not just a procedural change, it is a fundamental change of the way the EU approaches its partnerships with third countries and it involves also a political discussion in my view because it is not simply introducing a conditionality or a tied aid that will have no consequence on the relationship with the direct host of the project and maybe other partners. I think it has to be done in a way that protects, let s say, the interest [of the EIB] at 360 degrees. Mr Núñez (SEOPAN) emphasised that currently it is mainly Europe s competitors who are benefiting from tied financing conditions in large scale infrastructure projects: The EIB must ensure that Europe competes at the same level as the competitors. Professor Helm appeared to agree: So the question is: can we tie these bids to contracts with European companies only? Again, in a perfectly competitive textbook model you just contract with anyone, you choose to contract and European SMEs would have to fight for market share alongside everyone else. But we are not in that world. This isn t a first best world but a second best one in which others play by different rules. So if we want to play to win and we want 12

13 to get the benefits for European SMEs and indeed other companies, larger ones across Europe, we need to put some contingency into this framework and indeed we can link the financial guarantees directly to the subcontracting issues". VI. VI.1. VI.2. Global capacities and conditions for economic growth: expanding EIB mandate is a conditio sine qua non Expanding the EIB mandate with the inclusion of tied lending is not exactly a luxury that may or may not be considered. In line with Vice President Katainen and UEAPME President Almgren s statement that 90% of global economic growth takes place outside the EU, Chief Economist Mr De Keyzer expresses concerns on Europe s future growth capacity. Europe will not be able to tolerate a future of lack of growth, characterised by stagnation, deflation and low interest rate, during the upcoming years. Comparing the Japanese and German models he explains the two building blocks of economic growth: productivity growth and demographic growth. Both of these growth engines are declining inside Europe. Demographic growth is negative. Therefore Europe needs more productivity growth, which comes through innovation, more research and development, focusing more on technology spill overs from big corporates to SMEs. The Commission forecasts that EU GDP per capita will drop by 0.9 % per annum during the upcoming 10 years. Mr De Keyzer notes that investment decisions will be made by corporates on the basis of per capita growth, which makes Europe an unattractive investment destination as compared to other regions. By consequence economic growth in Europe is far too low. Mr De Keyzer: Almost every part of the world, almost every country that Europe trades with, is growing faster than Europe does. This means that trade, investment projects in any other part of the world, outside Europe, could help Europe s economy grow. If we just look at the demographic projections for a continent like Africa which this century alone will grow from a population of 1 billion to 3.3 billion, given the technological catch up that is still taking place there right now, the infrastructure needs in this context, could yield fantastic growth opportunities for Europe in the near future. But as Mr Astaldi convincingly demonstrated: the EU rapidly loses the competition with Asian investors. According to Mr De Keyzer, Europe needs to do far more in order to avoid a Japanese future. Inflation is far too low; interest rates are already at zero. In 13

14 fact, we in Europe need every source of economic growth we can get our hands on. Thus, we need to look for growth abroad, as the growth opportunities will be outside Europe. Indeed: unless Europe s bureaucracies communicate with industrial leaders and expert economists consistently, expanding the EIB mandate through tied lending for out of Europe major infrastructure projects may not be understood as a conditio sine qua non for European economic growth in the next decades. NB: See the newly published book by Mr Peter De Keyzer on Growth makes you happy, Lannoo, 2014 VII. Financing EU industries infrastructure projects inside and outside the EU VII.1. While all speakers and experts agree that there is enough funding available for inside EU investment, but a lack of viable projects qualifying for long term investment, the picture outside the EU is fundamentally different. According to HSBC Managing Director Ms Virginie Grand a vast number of large sale projects financed outside the EU require support from public agencies to be bankable. In this respect, Asian public agencies are particularly active and efficient hence the need of Public Sector support to make the bids of EU firms on a level playing field with their competitors. Virginie Grand: Inside Europe I don t believe liquidity is a problem, there is ample liquidity on both the equity side and the debt side. The problem is a lack of a pipeline of projects. Ms Grand describes difficulties of national governments to identify, select, develop and bring projects to the market. But the money is there. Among the reasons cited for the lack of funding for extra EU Projects the following are mentioned by both Ms Grand and APG Chief Strategist Mr Dijkstra: The risks associated to extra EU infrastructure projects and the way they are perceived which prevent institutional investors (pension funds and insurers) from providing financing (under new rules imposed by EU, i.e. Solvency II and Basel) Infrastructure is an underdeveloped asset class, due to its specific characteristics such as the long term nature of the investment and political risks such as expropriation, changes in regulatory and political system and valuta changes (including the time inconsistency problem). Gert Dijkstra, APG Asset Management: What we need is a stable, reliable regulatory and project framework that makes long term investments attractive. 14

15 (Source: Power Point Presentation by Gert Dijkstra, 8 October 2014) VII.2. Deputy Director General Mr Guersent and other speakers agree that the European Investment Bank is indispensable to provide funding in order to overcome market failures. But Ms Grand highlights that the EIB s external lending mandate is currently set at 10% of its operations and does not match the Public Sector support granted by its Asian competitors. In addition, the current EIB mandate constrains ex EU operations. By consequence she believes an expansion of the EIB s external mandate is required. Moreover she indicates that the EIB inside the EU is crowding out lending at the expense of commercial banks or institutional investors: Projects that the EIB lends to in Europe no longer suffer from market failures. Most of these projects would find funding without the EIB albeit at less aggressive financial conditions. That was not the case at the height of the crisis when EIB's involvement was a prerequisite to the financing of any large project in Europe. As commercial bankers and advisors to granting authorities or bidding consortia, we observe that EIB loans in effect may prevent new investors (such as Allianz) from getting into these infrastructure projects which they would be keen to do, as they have expertise and legitimacy. Rules are what they are in terms of extension outside of EU but hopefully they can change as there is money which could be usefully channelled outside Europe in support of the bids of European companies. We know well and we trust the technical skills and innovation capabilities of the EIB we 15

16 have for example experimented with their Bond Credit Enhancement mechanism if they can act under an extended and updated mandate. VIII. Financing of infrastructure projects outside EU by non EU lenders VIII.1. The call for more internationalisation and competitiveness by the European Council of March 2014 requires a harder look at what constitutes a losing European role. DG Enterprises Director Didier Herbert has assisted SMEs inside and outside the EU but refers to the documents of PA Europe to describe the current imbalance. Asian competitors are simply better backed up by their state owned commercial and development banks which offer optimal Long Term Lending Conditions against forms of tied lending. In one of its preparatory papers PA Europe focused at just three multibillion outside Europe infrastructure projects won by European industries with Asian lending. In each of these cases around 40% of the contract sum was subcontracted to non European SMEs. This appears to be an increasingly consistent pattern robbing the EU of billions of direct income, jobs and technology developments through its SMEs. Director Herbert: In March 2014 the European Council was alerted by this development. Today you have made your case and now we have to implement solutions. VIII.2. One speaker after the other confirms that competitive financing from JBIC, KExIm and Chinese banks undercuts EU industries borrowing costs with EU financial institutions. According to Dirk Beeuwsaert, Deputy CEO of GDF SUEZ: Over the years many European investors teamed up with Asian players in order to have access to these competitive sources of funding. This however unavoidably leads to a substantial loss of know how and contracts for the European industry. The PA Preparatory paper on MNE/SME Relations clearly shows the devastating effect on the whole European industry and economy. VIII.3. Mr Alessandro Carano of the EIB said he believed there is an opportunity to try to bring more coherence in the European external action in linking more with the EEAS which should be reconciling all these policies when we have a dialogue with countries outside Europe. We need to leverage all the palette of diplomacy and instruments we have at our disposal. Mr Carano furthermore hinted that more coherence between Europe s development and investment policies is called for. Actually, we believe the issues are quite important. Given prospects for growth in Europe and the prospects for growth in emerging countries, I think the case is quite clear. 16

17 VIII.4. So is it forbidden to act as the non European lenders and Governments do? In 2013 only one third of the worldwide stream of export finance was governed by OECD rules (see following slide). Yet, some Member States with stronger economic growth and funding capacities, coupled with experienced risk assessment facilities such as, for example, the KfW state bank of Germany (often called on by the EIB that lacks such a facility) invoke these rules against the EU following the Asian example. But Oxford Prof. Dr Dieter Helm does not agree: If we want to compete for major contracts outside the EU we must do so to win or accept loss. If we do this, if we provide the finance, if we tie in the SMEs and other European contractors then we have a chance of winning a substantially better share of this world contracting market.eic President Astaldi underlines that there are no repercussions at either WTO or OECD level against Japanese or Korean tied financing practices. China is outside OECD rules on government procurement: (Source: Power Point Presentation by Duccio Astaldi, 8 October 2014) VIII.5. Ernesto Lopez Mozo, CFO of one of the most successful Spanish multinational enterprises Ferrovial underlines the statements of Prof Helm and Mr Astaldi: As Europeans we have very good skills, we can compete anywhere in the world but we have to share our know how. We are ever less competitive as time goes by. Companies will follow growth wherever it goes. But as a consequence EU industries are forced to subcontract part of the project to Asian subcontractors who after having become acquainted with one or more 17

18 projects in terms of working methods, training, technological development and IPR, sharpen their competitive edge over their European peers. We must encourage expansion of the EIB mandate to be as competitive as the rest of the world. Teaming up with Asian companies should not happen just because they facilitate more competitive tied and/or public financing SMEs know that if they provide the right solutions from a technical point of view, if they can provide something innovative, they can win projects through subcontracting. When we go to develop infrastructure in a foreign country we use subcontractors even if we have a company there. We can bring European subcontractors so they can provide competition. But this can be hampered by tied financing from other regions. VIII.6. Minister Geens agrees. No European Union effort will succeed unless there is a market driven alignment between Europe s multinational enterprises working outside the EU and Europe s SMEs that require subcontracting through these MNEs. That seems to be the work carved out for the European Commission and the European Parliament in addressing EIB mandate expansion and creating competitive Long Term and tied lending facilities in line with WTO policies. VIII.7. Ms Almgren of UEAPME indicates one of the ways to do this: through Public Private Partnerships. (Source: Power Point Presentation by Gunilla Almgren, 8 October 2014) 18

19 IX. Key conclusions The following key conclusions can be drawn from the inspiring High Level Seminar: 1. All stakeholders participating in the growth through investment strategy agreed that in view of the fact that by 2015 an estimated 90% of global growth will originate overseas, it is crucial that in the present review of the EIB s mandate and its lending capacity and tools, the question of how to tap into this enormous investment and growth opportunities has to be a top priority. 2. A broad consensus also exists on the need to increase transparency, coherence and consistency in the EU s capabilities to support, on a competitive basis, long term financing of major infrastructure projects outside the EU. 3. Agreement exists that this implies a thorough upgrading of existing guarantee systems at national and European levels, as well as the introduction of more tied lending. 4. Finally, stakeholders agree that through the enormous leverage of subcontracting provided by European multinationals to European SMEs when winning infrastructure projects in third countries, the technological, innovation and, last but not least, employment benefits for the EU economies should be given thorough weight in the reform of the EIB. 13/10/