Bulc: Make a Difference for the Future, Think Long-Term, Think EU

At the 23-24 March conference on Transport Investment in Sofia, Bulgaria, the Commissioner for Transport, Violeta Bulc, spoke extensively on the challenges faced by the European Union (EU) and how it is working to increase awareness of the numerous investment possibilities available to project makers, especially those from cohesion countries and the Eastern Partnership.

She began by speaking about the challenging conditions under which the EU Commission has had to operate in the last two years: the social post-effects of the economic crisis (which, she claims, is now over- “official indicators show that member states recognise that only EU investments and innovation can secure the prosperity of each member state”); the refugee crisis which, “though not an issue completely solved, one we are confident we now know how to address;” terrorist attacks, which triggered fear and doubt over the concept of the EU and its ability to protect; Brexit (Great Britain’s announcement of its intent to leave the EU) the negotiation for which, Bulc says, the Commission for Transport will be fully engaged in, “in order to ensure transparency, non-discrimination, reciprocity, and continuity for all transport stakeholders;” and climate change, which is a “global challenge, crossing borders, the main focus of which is decarbonisation.”

“The EU is dedicated to being a force and player to ensure that we minimize the effects- that our transport is no longer [seen as] a dark force that pollutes the planet but is one which drives innovation, improves the world for future generations, and creates jobs, sustainable solutions and healthy conditions for people to develop in the long-term,” Bulc said.

She went on to explain how the Commission encourages new models and new investments to make transport an enabler of development and not an obstacle. “The trend of investment is positive,” she said. “1% spending on conventional investments- transport, energy, digitalization- can lead to 1.5% GDP increase over four years. If you do it well, and efficiently, that can go up to 2.4%. Such measurable, tangible stimulation has a positive effect on people’s lives”.

The new investment plan for Europe, announced in February, is clearly much needed, aimed at reigniting enthusiasm to work together, create fresh sources of money that can be engaged, and to push the EU back onto the path of sustainability. “At the first stage, we are mobilizing EUR 350 billion of fresh investment. So far, the improved EIB operations are expected to trigger EUR 177 billion additional investment in just two years. That will represent, in the future, a vital, dynamic force with which to achieve even more ambitious goals,” Bulc said.

The Commission’s proposal is to extend the European Financial Strategic Investment (EFSI) program to engage EUR 500 billion of fresh investment in the European market by 2020.

“Transport is one of the drivers of the civil market, with connectivity and trade between countries raising standards and increasing the competitiveness of the economy both locally and globally,” Bulc pointed out.

Core ambitions the EU Commission has in its aim to boost investment and development:

Digitalization- 80% of the EU population lives in cities. Today, civilization is driven by technology and this needs to be capitalized on- smart mobility and urban solutions, connecting rural areas with cities, and making better use of resources, hand-in-hand with de-carbonization.

Safety- The biggest silent killer in Europe is road accidents. 70 people die a day on European roads. By working with the UN, with concrete initiatives from the EC, and with the Declaration on Road Safety EU ministers will be signing this week in Malta, the expectation is that the statistics will be radically improved within the next two years. “Road fatalities and serious injuries, including the rehabilitation cycle, are costing the EU EUR 100 billion annually,” Bulc said. “That’s four times more than the transport grant budget for six years. Imagine putting this money into education, investments in social welfare… we have to focus on people, on things that are changing, improving conditions, positioning ourselves in an important global role. The EU is the largest economy in the world. Period. Sometimes I feel we behave like one of the poorest. Other regions look to us- what we are doing, how we deal with diversity, how we implement changes, and how we deal with the challenges of restructuring sustainable concepts”.

There are a lot of good projects out there (though many need to make use of the European Investment Advisory Hub to get them finalized for application) but there is not enough money to implement them all. In comes EFSI to bridge the transport infrastructure financial gap. The 2014-2020 budget to mobilise financing for transport is as follows: Connecting Europe Facility (CEF) - EUR 24.05 billion from the EU budget, EIB - around EUR 14 billion/year, EFSI - EUR 70 billion from the EU budget, and Horizon 2020 - EUR 6.3 billion from the EU budget. The above, once blended with financing from National Promotional Banks or private sector investors, is expected to go a long way to solving the current oversubscription of projects unable to be funded but still considered of essence to EU development.

The European plan for strategic investment functions in cooperation with the European Investment Bank (EIB) to mobilize finance for investment and raise awareness of the diversified set of financial tools available to project promoters- such as development loans from commercial banks for projects with clear business outcomes and a low level of risk. But to get things done and moving forwards, the Commission knows that it cannot only invest in low-risk projects. So part of EFSI is there to provide guarantees which lower the risk factor of projects which it considers of strategic importance, “though sometimes even that is not enough, especially in cohesion countries, so we came up with new ideas to bring them on-board, by encouraging private institutional investors to invest in infrastructure projects,” Bulc elaborated. Blending, as this system is called, is a way for Member States to make use of EFSI and CEF grants alongside Public-Private Partnership (PPP).

There seems to be a lack of competence in Member States to create quality investable projects and the Commission is working to improve capacity and competences to better use innovative financial mechanisms.

“The clean transport facility, launched in December 2016, targets the better organization of transport, especially in urban areas,” Bulc told the conference audience. “Spain, France, and Latvia already picked it up. We need [you] to shift priorities in transport.”

Also launched at the end of 2016 was the Green shipping guarantee, now in its pilot phrase in France, The Netherlands and Scandinavia, with roll-out phases available in all interested countries under EFSI financing. Drones and drone related technologies are also of interest to the Commission, and a legal framework is being established in this regard.

Commisioner of Transport Violeta Bulc, who is looking forward to visiting Georgia in October this year to talk about the One Road, One Belt- Silk Road project, closed the Investment in Transport conference with appeals to each group present:

“To project promoters- I have no doubt there is a high number of good transport projects which might be good candidates for EU investment. They need sound realistic technical and financial engineering, proper preparation before entering implementation and financing phase. Please work on these capacities. You are experts at using European grants. Become now experts at using innovative financial mechanisms. Make use of the Blending initiative which offers both economic and social benefits, and be educated on what is available through INEA, DG Move and the European Investment Advisory Hub.

“To governments and public institutions- I strongly encourage you to proactively support and promote projects, to establish a robust pipeline of projects. Foster the conditions in the country for the projects to be invested in. Technical and financial engineering knowledge needs to be raised within the ministries for capacity building.

“To ministers and administrations- We must continuously shape our regulatory framework; we need to continuously bring onboard the changes necessary for transparency and simplification to speed up the processes in order to ensure efficiency and time-effectiveness. What we’ve done so far to stimulate PPP is:

1) Capital charges have been lowered for insurer investment in infrastructure projects;

2) Proposed to reduce charges for investment in infrastructure companies;

3) Proposed to reduce charges four times for banks for certain infrastructure assets in order to improve commercial bank engagement;

4) Introduced guidance for public procurement.

Help us to recognise what else we need to do to continue walking this path of higher investments in European organizations, European transport and infrastructure, and improving the conditions for European businesses to flourish and be globally competitive.

“And last, to investors- Continue following our progress. Keep pushing us to do the right things. Be our partners, be present in the developmental environments. Show interest and patience in the process of developing projects, and give us public support for further liberalization and the establishment of a single European transport area”.

Katie Ruth Davies