Last Updated on Thursday, 15 September, 2022 at 2:00 pm by Andre Camilleri
The European Investment Bank Group, which comprises the European Investment Bank (EIB) and the European Investment Fund (EIF), has supported the Maltese economy since 1979 and has since then backed projects in the country for nearly €1bn, the EIB’s vice-president Gelsomina Vigliotti said.
In an interview with The Malta Independent on Sunday, Vigliotti spoke about the assistance the EIB has given Malta, how it has helped Malta in the energy sector and how it is assisting countries facing the current challenges brought about by the situation in Europe.
Vigliotti was in Malta earlier this week to take part in a hybrid conference entitled Financing the transition to a carbon neutral economy held in collaboration with the Central Bank of Malta. She also attended an event in which it was announced that the EIB will be financing a €20m project by Epic to accelerate the company’s network programme.
Could you start by giving a brief overview of what the InvestEU fund is and what it finances?
Sure. Let me start by saying that the EIB is the lending arm of the European Union, the bank of the European Union. We are the biggest multilateral financial institution in the world, the largest provider of finance for climate action, and, among many other things, the leading implementing partner of the InvestEU programme.
The InvestEU Programme, which builds on the successful model of the Investment Plan for Europe, better known as the Juncker Plan, operates through four policy windows that mirror the key policy priorities of the European Union, namely sustainable infrastructure; research, innovation and digitisation; SMEs and last but not least social investment and skills.
On top of the financial products made available under the InvestEU, the EIB, via the Advisory Hub, will provide advisory support in a wide range of sectors to bring more and more projects to the financing stage and to ensure the delivery of InvestEU’s policy objectives.
What are you trying to achieve from your investments within the InvestEU umbrella?
With an EU budget guarantee of €26.2bn, the InvestEU aims to mobilise more than €372bn into the real economy over the period 2022-2026. The programme is an instrument that serves all EU countries, regardless of the size of their economy, to support new green and digital sectors while strengthening EU leadership in RDI and boosting the vibrant start-up ecosystem, both in Malta and Europe.
Another yet crucial element of this programme is that it will focus on operations with a higher risk profile than the average ones financed by the EIB Group, focusing on projects that would be hard to materialise without the InvestEU guarantee.
What have been the most significant Maltese projects that were financed since the start of operations in 1979?
The EIB Group, which comprises the EIB and the EIF, has supported the Maltese economy since 1979, having backed projects in the country for nearly €1bn since then.
If we talk about flagship and visible projects, we are probably most proud of having financed with €40m the construction in Valletta of a new city gate, a new Parliament building and an open-air arena at the site of the former Royal Opera House destroyed during World War II. Improving and upgrading urban infrastructure is a key area for the EIB Group as it contributes to the city’s regeneration and long-term economic growth, especially in a country that relies heavily on tourism. More recently, the EIB has supported with nearly €25m the construction and retrofitting of almost 600 social housing units in Malta.
However, we should not forget to mention the support to small and medium-sized companies, the backbone of the Maltese economy. To give you an idea of impact figures, the EIB Group, mainly via the SMEs Initiative, has backed the business needs of over 2,000 SMEs in the country, supporting more than 13,000 jobs.
Moreover, over the past seven years, we strengthened our commitment to the Maltese Telecom sector by backing three projects with €68m funding from the EIB and mobilising around €165m into the real economy. Fresh from this week is our support to EPIC with a €20m loan, which will help the company to roll out its 5G network to reach nationwide coverage in the country by 2024. Broadband connections are essential to reap the full benefits of digitalising economic sectors such as agriculture, tourism and commerce, thus helping the economy to thrive.
Could you offer a clearer insight into the process a company that is in the recovery stage, must go through in order to apply for funding?
It is very straightforward. Project promoters and financial intermediaries can submit their requests for financing to the EIB Group. They can contact us directly without going via a local authority or government. However, let me stress that projects need to be economically and technically viable and match the eligible policy areas mentioned earlier in order to receive funds via the InvestEU.
Under this programme, we can finance SMEs and RDI projects with an overall total cost of at least €15m, whereas for infrastructure projects we are looking at larger projects in terms of volume.
EIB has had the most activity in the energy sector, why is this the case?
Between 2008 and 2010, we financed two large energy projects in Malta for €250m, representing circa 25% of the overall EIB Group activity in the country. These two operations helped to upgrade and reinforce the Maltese power generating capacity and supply network and implement a cable link interconnecting Malta and Sicily across the Mediterranean Sea. As the EU Climate Bank, we believe that energy investments are vital to ensure Europe’s future as a sustainable yet prosperous economy. We stand ready to support Malta in undertaking the necessary investments and reforms to promote its Green Transition.
As we are speaking about energy investment, I would also like to highlight that the EIB has been the first international financial institution to end financing for fossil fuel projects.
What is the importance of backing SMEs, as opposed to larger corporations?
The EIB is a project-driven bank and finances both large corporates as well as small ones and public sector entities.
In regards to SMEs, these firms are of paramount importance as they are a driving force for global economic development. They create new jobs, products and services, significantly contributing to economic growth. Europe’s 23 million smaller firms represent 99.8% of non-financial businesses and provide around two-thirds of all jobs in this segment.
Furthermore, SMEs are also key drivers of innovation. They are usually more flexible and can embrace change quicker than bigger companies, as experienced during the pandemic. Many small firms offer fresh ideas and compelling new products or services while boasting high growth potential.
However, unlike large corporates, SMEs are often unsuccessful when looking for the funding they need to invest in their future. This is where the EIB Group steps in, addressing this financial gap.
In 2021 alone, the EIB Group, supported over 430,000 SMEs and mid-caps with €45bn invested. Commitment to small and medium enterprises continued to represent the single largest priority of the EIB Group in terms of lending volume.
Given the current crisis in Europe, how important is EIB funding to help member states such as Malta?
Smaller states tend to be more vulnerable to economic shocks and climate change, which is threatening Maltese water supplies and coastlines due to rising sea levels and extreme heat waves. EIB Group financing for smaller states like Malta is key to addressing bottlenecks to lasting and sustainable growth while creating new jobs. We provide favourable financing terms in the form of lower interest rates and/or longer maturities.
Do you see a situation where in the long-term SMEs are going to need more financial support?
Additional resources would be necessary to help SMEs embark on the digital transformation journey to improve competitiveness and performance, spur innovation and enhance productivity. Moreover, under current circumstances, SMEs are facing various challenges including rising inflation as well as fuel and energy price increases. It is therefore crucial to tap into the support of the SMEs to enable them to promote their green transition by investing in energy efficiency, which can address competitiveness challenges and improve energy security by reducing dependence on fossil-fuel imports.