Monday

24th Jul 2017

Opinion

Look through an investor's lens, Europe!

  • European Structural and Investment Funds go to paying for roads like these. (Photo: Mikolaj Welon)

On February 14 the Polish government bet on investments, launching the Responsible Development Plan, an ambitious new strategy

It aims to raise the investment rate to 20-25 percent of GDP by 2020 and keep it at 25 percent by 2030. We aim to achieve this external and internal sources of funding.

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The European Structural and Investment Funds (ESIF) and particularly the cohesion policy funds will play an important role in the implementation of our aims.

According to our estimates, they contribute to increasing investments by 2 percentage points. This gives us grounds to believe that the cohesion policy will have a further substantial influence on investors’ activity in Poland.

Moreover, one of the most important strategic projects is the best possible coordination of work of different ministries and governmental agencies when it comes to obtaining funds from the Investment Plan for Europe - the Juncker Plan or EFSI.

This is already taking shape – more than 30 projects, worth over €17 billion will be funded by the Juncker Plan.

There are different sources of funding at the EU member states’ disposal. The challenge now is to use them in a way that ensures more quality investments in Europe.

The solution seems obvious: combine them together, although with a certain degree of flexibility. But it is not an easy task.

Make the most of EFSI and ESIF

The Juncker fund was created two years after legislative instruments for cohesion policy, therefore the ground rules for those two tools are different.

Currently, a potential investor in need of EU support has to talk to at least two officials in two separate entities. The lack of a common, coherent offer is acting as a deterrent.

At the same time, investors are faced with difficulties and hurdles, instead of making the most of what EFSI and ESIF have to offer.

This is the lens through which we should look at this problem.

The investor is the one taking the risk and making the whole effort.

An opportunity to change the current state could occur along with the review of the Multiannual Financial Framework. We would like to use it to introduce regulations foreseeing broad possibilities of combining two sources of funding as possible.

This applies both to financial instruments used to distribute funds for specific projects and to single investments. Let us look at it in more detail.

In the first case – financial instruments – greater flexibility would mean, for instance, combining either complementary guarantees and loans, or loans and grants from Juncker Plan and cohesion funds.

We see it as a chance to create instruments suitable for investors’ needs in the whole EU.

Europe must do more for investors

The other issue is the two sources of funding in one investment project, where entrepreneurs face an array of practical problems.

Imagine an investor willing to finance a project worth €1 million, who received 30 percent of the needed money from an EU grant. It's no problem so long as the rest of the investment is funded by own resources or bank loans.

However, if funds from Juncker plan come into play, the grant has to be decreased, as a loan from this source lowers the eligible costs – the basis for the grant. It does not help in creating a favourable and accessible investment environment.

There are two legislative proposals on the financial instruments on the table right now, yet they still raise many questions.

Moreover, they only concern instruments providing financing for projects but do not touch the issue of individual investments.

This is why we have prepared our own proposal, which will help remove the obstacles in individual projects. We are convinced that, together with other stakeholders, we can come up with satisfactory solutions.

It is worth underlining that despite the barriers mentioned above, we are now implementing a project funded by combined sources. A modern route, which will drive part of the car traffic out of the city centre, will be built in Krakow.

The road is being built with help from the Juncker fund, whereas the tram tracks are catered for by an EU grant.

This is an example of a successful combination of the funds. But we can certainly make the whole process less complicated and more investor-friendly.

The investors’ perspective lies in the interest of the whole EU.

Jerzy Kwiecinski is Polish secretary of state in the ministry of economic development. Witold Slowik is Polish undersecretary of state in the ministry of economic development.

Analysis

Doubts hang over EU investment plan's future

Questions of value for money and a lack of transparency complicate adding almost €200 billion more and extending the Juncker investment plan to 2020.

Stronger EU-Egypt ties must not disregard human rights

The EU’s apparent willingness to water down its stance on human rights in Egypt could seriously compromise its credibility and have far-reaching consequences for its relations with other countries in the region.

Winter is here for Spitzenkandidat, but he'll survive

Candidates from all political families should be presenting their vision on where the Union should be headed. European socialists want to keep the Spitzenkandidat procedure for future elections.

Greece needs a new plan

Two years into its third bailout, Greece needs to combine the necessary fiscal targets with a new vision. This can be done in the context of the ongoing industrial revolution.

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