Verbatim report of proceedings

Wednesday, 6 July 2005 - Strasbourg

32. Impact of lending by the EC in developing countries

  President. The next item is the report by Gabriele Zimmer, on behalf of the Committee on Development, on the impact of the lending activities of the European Community in developing countries [2004/2213(INI)] (A6-0183/2005).

  Gabriele Zimmer (GUE/NGL), rapporteur. – (DE) Mr President, ladies and gentlemen, today’s debate affords me the opportunity to present the report that I have written, on behalf of the Committee on Development, to discuss in particular the effects of the European Union’s lending practices, involving specifically in this instance the European Investment Bank. The primary object of the report that is before you today, and on which you will be asked to vote tomorrow, is to make the European Investment Bank a major, and above all, an effective instrument of development aid.

Today, many of you have shown your support for the ‘Make Poverty History’ campaign, and that is, of course, a laudable thing to do, but, if we – as this House has done symbolically – take part in ‘White Band Global Action Day’, we also have to discuss the extent to which the development aid for which we can claim credit to date actually does what we, again and again – not least to the outside world – claim that it does. Today’s poverty already has a history, and part of that history has to do with the mistakes that have been made in development finance over recent years and have had the consequence that today, still, 2 736 million people – amounting to almost half the world’s population – have less than two dollars a day on which to live.

I would like to return to an element in this morning’s debate that I regard as directly relevant to this report. Movements in Africa have been persistently critical of the way in which the countries of the North exercise control over them; what they want from us above all else is an all-out war on poverty, hunger and disease, and an agreement on our part to the complete and unconditional cancellation of the poorest countries’ debts, so let us give them that. They also call for more, and in particular better, resources to be allocated to development aid than have been to date.

There is no doubt that one of the errors of the past – and one that has to be addressed with reference to the European Investment Bank – was the lack of coordination among the various bodies involved in development finance. Despite the Barcelona agreement, they still, to far too great a degree, operate in parallel – the Commission alongside the Member States, multilateral and national development banks side by side – and ultimately counter-productively. It is for that reason that this report attaches great importance to the need for the EIB, in taking up its new tasks, to give priority to coherence, transparency and, above all coordination, from the very outset.

Among the most fateful errors, though, was the widespread attempt to use what was termed ‘development finance’ as a means of developing our own economic relationships abroad and enabling European businesses to open up markets in the South. If you take a look at the limitations placed upon the European Investment Bank’s mandate, particularly as regards loans in Asia and Latin America, you find that virtually word for word. The European Investment Bank’s shareholders, namely the Member States of the European Union and the Commission, are currently engaged in negotiating a new mandate for the EIB to grant loans outside the EU, but these negotiations are, I believe, actually being conducted to an increasing extent by financial experts, with less and less involvement of experts on development. Nor, so far, have they drawn on Parliament’s expertise. Yet this new mandate must contain a clear commitment to the tasks particularly associated with the achievement of the Millennium Development Goals, and to the combating of poverty in the countries to which money is lent.

In order, though, that this House may be enabled to monitor how this new mandate is worded, it is, I believe, necessary – and something that this report demands – that Members of this House be informed of the progress of negotiations as early as September this year. It is not acceptable that we should be presented with a fait accompli. No longer can the progress of the war on poverty be measured only by reference to figures for economic growth, which often – and particularly in the case of rural areas – conceal increasing poverty, or, indeed, by reference to the level of direct foreign investment, which the bank cites as an indicator of success but is not suitable as such, for it says nothing about the number of jobs created or about the effects the investments have on society or the environment. To take an example: today, in Zambia, the EIB is helping Swiss and Canadian companies to start up large-scale copper mining operations; almost all their profits will go out of the country, while toxins will remain in the rivers to ruin agriculture throughout entire regions. Such things may appear in accounts as foreign investments, but they make no measurable contribution to combating poverty.

The report before you today also contains a range of practical proposals as to how the EIB’s loans can, in future, be put to better use in developing countries. These proposals are made in the context of the Millennium Development Goals and in harmony with the UN’s objectives, and a large number of detailed proposals have been made as to how progress can be achieved in this area.

There is one problem that I particularly want to highlight. I believe that the European Investment Bank still pays far from enough heed to the requirement that it should apply the Millennium Development Goals as indicators, enabling it to assess the effects of its own operations after the event. It relies on general data, which I do not believe to be sufficient, particularly when one draws comparisons with the effectiveness with which the national development banks of certain Member States already operate.

It was the tsunami that showed the urgent need for change if the EIB is to be able, in emergencies, to make proper loans independently of external economic criteria and provide really effective help. For this, it needs a clearer mandate from its shareholders, the Member States, so I ask you, tomorrow, to vote to adopt this report, for by so doing you will maintain the productive and cooperative relationship between this House and the European Investment Bank, and we will be enabled to make progress in the field of development aid.

  Louis Michel, Commission. (FR) Mr President, Mrs Zimmer, ladies and gentlemen, I would like to start by congratulating Mrs Zimmer on her report on the impact of the European Investment Bank’s activities in developing countries. We think that this report raises many very important issues, and I will not pretend that I do not largely agree with their analysis.

Before commenting in more detail on the report itself, let me first give my impressions of the situation regarding the implementation of the investment facility. Some of you will know that I wrote to Mr Maystadt in February this year, expressing concerns about the Cotonou Investment Facility. I am happy to say that the situation has improved significantly since then. One of the improvements that I have noticed is a greater willingness to take the risks inherent in investment in developing countries; another is the systematic application of a new framework seeking to measure the impact of operations on development. We are talking to the EIB about simplifying the decision-making structure for the facility’s projects. In short, we think that the investment facility is on the right track in the ACP region.

I would now like to make five comments on the report, starting with services of general interest. We entirely agree that it is necessary to improve the provision of services of general interest in developing countries, for example in the water and transport sectors. As many of these projects are not viable in commercial terms, they obviously require an element of subsidy. Consequently, we have proposed to the Member States that, for the next budgetary period, we should double the interest subsidy package that accompanies the investment facility in the ACP countries, and increase it to EUR 400 million.

With regard to cooperation between the EIB and the Commission, we recognise that even more needs to be done to improve the infrastructure in developing countries. The Commission is preparing a communication on Africa, as you know. This communication will propose a considerable increase in the availability of regional and transcontinental infrastructure. This objective will require substantial efforts to be made to improve coordination between the EIB and the Commission, as well as with other financial bodies and institutions. In this context, a group of officials from the EIB and the Commission is currently analysing how our two institutions could improve cooperation in the future. Clearly, it will also be important to cooperate with other lenders, as I have just said.

With regard to micro-lending, we fully support the reference to micro-lending in the report. As the United Nations has declared 2005 to be the International Year of Microcredit, this subject is a political priority. In this regard, the Commission recently decided to make Commission aid for micro-lending considerably more professional. An important pillar of this new approach is to step up cooperation with those banks that specialise in development, particularly the EIB, with regard to the provision of microcredit. Consequently, the Commission strongly supports the European Parliament’s call to increase the EIB’s microcredit aid.

Turning to the development indicators, here too we recognise that the EIB needs to adopt the Commission’s key indicators to assess the results of its operations and to set up an independent evaluation unit.

Finally, with regard to the review of the external lending mandates, we recently proposed, at a meeting between the Commissioner for External Relations and President Maystadt, to increase the development aspect of the EIB’s external activities, outside the ACP region. The review of the external lending mandates, which the EIB and the Commission are now beginning, provides the opportunity to do so.

I should not like to finish without paying tribute to President Maystadt and his team, who, certainly during all our meetings and whenever we have been in contact, have shown themselves to be very open-minded. Within the EIB Presidency, at any rate, there is clearly a considerable openness to development and if President Maystadt cannot go any further in terms of effectiveness, it is partly because, unfortunately, there are rules and his goodwill has its limits. That said, he is someone who is very open to reform. He is even studying the options for reforming the EIB, to make it more sensitive to development issues and to ensure that, within the decision-making bodies, the development aspect is taken more broadly into account, which is clearly difficult as things currently stand and given the composition of the decision-making bodies.

  Nirj Deva, on behalf of the PPE-DE Group. – Mr President, I would like to begin by congratulating Mrs Zimmer on her excellent report and congratulating the Commissioner for his proactive initiatives. I know he has been going up and down to Luxembourg to see Mr Maystadt and I think something very good is going to come out of all this.

The EU is the largest aid donor in the world. The EIB’s lending facility is four times the size of the World Bank. But you, Mr President, know everything about the World Bank. Who knows anything about the EIB? Unless we do something about it, we could even change the EIB’s name to the European Invisible Bank. The EIB should be Europe’s premier financial institution for lending and development. It should lend to infrastructure and to SMEs. It should lend microcredits. It should lend beyond the EDF. It should be able to lend to all the developing countries that the European institutions help.

The EIB’s statute needs to be strengthened by Parliament: to create a legal base, to have a grant funding element so that its lending and its interest charges can be much more competitive and be given with some security. For example, if the EIB were to lend at 1% a EUR 1 billion loan, it is only going to cost EUR 10 million. If it were to charge 2%, it is only EUR 20 million. What is EUR 20 million in our development budget? Very little, but it would enable the EIB to give billions to create infrastructure, create small businesses, create microcredits, and it would cost our Community aid budget EUR 20 million. That is all we are talking about. I think it is high time we did this.

  Alexandra Dobolyi, on behalf of the PSE Group. – (HU) First and foremost, I would like to thank Mrs Zimmer for her excellent report and all her hard work, and to thank the European Investment Bank for its cooperation. I am convinced that we all have a responsibility to explore and to deal with the problems of the developing world. I welcome the policy set out by the European Parliament, the Commission and the British Presidency regarding this issue. Developing world countries should not have to subsist merely on aid; possibilities must be opened up for bringing their economies to life. Instead of economic paralysis, a way out must be created for them. I would like to draw your attention to the following points that are being realised via the European Investment Bank’s lending activities.

The European Investment Bank supports the objectives set out by the European Union in the Cotonou Agreement and in the eight Millennium Development Goals. The fact that the bank takes into account the views of non-governmental organisations and public opinion, even at the project monitoring stage, is important. Environmental impact assessment and an environmental impact statement have now been integrated into the project cycle, while attention will continue to be focused on the social and employment policy consequences of the investments. A comprehensive anti-corruption policy and an open, transparent process of negotiation and concluding contracts will create a sound basis for this – the parties must namely put in place appropriate internal inspection mechanisms to expose corruption.

Lastly, I would like to highlight an issue that I consider to be a priority: in developing its lending to the private sector, it will now be possible to monitor respect for human rights and compliance with ILO labour standards and OECD guidelines. I believe that the only instruments worth applying are those that bring effective development and not merely transitional solutions to the problems of the developing world.

  Frithjof Schmidt, on behalf of the Verts/ALE Group. – (DE) Mr President, Commissioner Michel, ladies and gentlemen, I too would like to thank Mrs Zimmer for this fine report. The importance of the European Investment Bank is underlined by two facts; one is that the EUR 40 billion it lends make it the world’s biggest public source of credit, while the other is that its active presence in over 100 countries makes it, as a development bank, second only to the World Bank in terms of size. The problem, though, is that its statutes stipulate that the European Investment Bank is not actually meant to function as a development bank; they in fact impose upon it the obligation of adjusting its interest rates in line with what the market demands, that is to say of not offering particularly low rates of interest in order to promote objectives in such fields as development policy.

It has, however, been required to apply its lending policy towards achieving the Millennium Development Goals, and this, although something that is very much to be welcomed, is a contradiction, and one that ought to be resolved by the bank undergoing a fundamental reform. I believe that some fundamental thinking needs to be done about whether it might not be rational and proper for the Bank’s funding of development to be separated, institutionally speaking, from its European activities. It is because I believe that a political solution needs to be found to this ongoing contradiction that I regard this as the principal subject for attention in any discussion about the Bank’s policies.

Until such time, though, as such a fundamental reform is got underway, there is a need for other practical steps to be taken towards improving its policies and in order to enable it to help achieve the Millennium Development Goals. One thing that I believe has to be done is for the granting of loans to be guided by the need to address poverty and meet social, environmental and human rights criteria, which must take precedence over financial and technical considerations, and which the Bank’s management must ensure is put into practice.

Secondly, I think it very important that the Bank should make more use of the instruments for interest rate subsidy provided for in the Cotonou and MEDA agreements, in order to become able to finance the development of small and medium-sized enterprises by means of loans at lower rates of interest. The difference between these and the high rates that the Bank’s statutes oblige it to charge can then be made up by means of subsidies.

The third thing that has to be done is to assess and take into account the social and environmental effects of large-scale infrastructure projects, and to do so to a much greater extent than before. It is particularly important that no support be given to projects that do not meet the criteria of the World Commission on Dams, that is to say major dam-building projects. These three things I do believe we can put into practice right now, and then, in the long term, there will be a need for a fundamental debate on reform.

  Alessandro Battilocchio (NI). – (IT) Mr President, ladies and gentlemen, I am speaking on behalf of the socialists of the new Italian Socialist Party. First of all I would like to congratulate the rapporteur on the excellent job she has done.

The principal operational recommendation of the UN’s Millennium Project stipulates that all developing countries, still in conditions of extreme poverty, should adopt bold national strategies so as to be able to achieve over the course of a decade the objectives agreed on.

The countries in question should draw up precise financial plans, set out the extent of internal resources that can be invested in the plan and how much will have to be obtained from donors. It is clear, in fact, that the fight against poverty is primarily the responsibility of the developing countries themselves, even though it is equally obvious that the achieving of the Millennium Development Goals nonetheless requires a substantial increase in public aid, to eliminate the poverty trap.

In this context, EU action, even though it has got off to a good beginning, must be rapidly improved and the mechanisms relating to action must be made more flexible and dynamic. On the basis of concrete and operational experience, the appropriate and necessary improvements should be made. There should, of course, be greater consistency and synergy between the various European aid programmes, bringing together European development policies, such as the Millennium Objectives laid down in 2000 and the Cotonou Agreement, and the EIB’s policies.

2005 is the year of micro-credit. It is particularly important to adopt further instruments to stimulate the investments of small and medium-sized businesses and to encourage entrepreneurship, especially among women and young people.

I would also like to emphasise one final point. In two weeks’ time a delegation from this Parliament, of which I will have the honour of being a member, will visit the areas in Indonesia struck by the terrible tragedy of the tsunami. An entire region of our planet now sees its future compromised. With regard to this situation it is our responsibility to give the EIB a new, specific emergency mandate, with a view to allowing these people to make a start on their future in a less troubled manner. Lending a hand by giving practical support to people who are on their knees, trying to get up, is a duty of solidarity that Europe cannot and must not shirk.

  Louis Michel, Commission. (FR) Allow me to make a few final remarks on the importance of the EIB’s external activities in the developing countries. As I said at the beginning of the debate, the EIB is a very important partner for the Commission when it comes to implementing new political initiatives, particularly the provision of infrastructure in Africa. We appreciate the progress that the EIB has made. Several recommendations from Parliament are encouraging it to continue down that path. We will continue to assist the bank in its efforts and we will endeavour to increase the possible synergies between our two organisations with the aim of improving aid to developing countries.

Many of the answers to the questions and remarks that have been put forward, and rightly so, clearly require, or in any event entail or would entail, an updating or amendment of the statutes. It is clear that with the current statutes it would not be possible to meet the wishes that have been expressed. We could consider various changes, but I am not going to discuss that subject today. Suffice it to say that we are considering it, even if, politically, I have the feeling that it will be difficult to achieve.

For the time being, we can already work towards renewing the mandates, and we can also consider altering the make-up of the Board of Governors, for example by introducing parity between the representatives of the Finance Ministers and the ministers responsible for development. Indeed, at the moment, the statutes and the composition of the Board of Governors pose a major problem. You did, I think, say as much in your speech, and others have also mentioned it. If I might make a personal observation, for this to be possible, the Finance Ministers will have to come to believe that the Development Ministers have a contribution to make to the Board of Governors, so that we can move away from a purely financial way of thinking, which I fear is not the right approach.

On the other hand, President Maystadt is currently exploring an option that would involve creating a subsidiary of the EIB, dedicated to development, with a Board of Governors made up solely of development representatives. That subsidiary could then have the interest-rate subsidy at its disposal and would therefore have much more flexibility to integrate the considerations and requests that have been raised regarding, for example, the social aspect. You are right: certain goods and services cannot be commoditised or, in any event, cannot be commoditised under the same conditions as others. The environmental aspect, and all issues of this kind, are components that are strictly development matters and that require different financial treatment, which would tend to involve subsidies.

I broadly agree with everything that has been said, but we must make do with what we have for the time being. We must make the EIB work better, contribute to improvements and, at the same time, reflect on its future. However, I must point out - and this is extremely important - that all of the teams with which I have worked so far, in both the presidency and management of the EIB - we have already had several meetings - have struck me as showing a modern and open attitude to these possibilities. I must say that usually we are faced with much greater conservatism when we want to carry out reforms of this kind. It is therefore interesting that within the EIB we can count on this open-mindedness, this flexibility and this mentality. I sincerely believe that they largely share the concerns that have been expressed here.

  President. The debate is closed.

The vote will take place on Thursday at 12 noon.