The European Fund for Sustainable Development plus (EFSD+) has endorsed a further package of 24 guarantee programs to support investments in the EU’s neighborhood and enlargement countries.
The new guarantees, worth €2.4 billion, are expected to generate investments in the order of €17 billion in priority sectors, including renewable energy, digital connectivity and private sector competitiveness, under the EU’s Economic and Investment Plans (EIPs) for the Western Balkans and South and Eastern Neighborhood.
The European Fund for Sustainable Development Plus (EFSD+) is part of the EU’s investment framework for external action and ensures worldwide coverage for blending, guarantees and other financial operations.
With the signing of guarantee agreements between the EU and 11 European and international financial institutions, such as the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and national development banks, these institutions will have three years to obtain investments in relevant areas, such as the Black Sea connectivity in the Eastern Neighborhood. The EU guarantee is also expected to increase banks’ finance for small and medium enterprises, as well as to increase the issuance of green bonds in the EU partner countries.
What is the EU’s new Economic and Investment Plan?
The Eastern Partnership’s agenda for recovery, resilience and reform is underpinned by an ambitious Economic and Investment Plan. Over the next five years, this plan will mobilize €2.3 billion from the EU budget in grants, blending and guarantees, to stimulate jobs and growth, support connectivity and the green and digital transition.
But this is just the starting point: The EU’s support under the Economic and Investment Plan should facilitate further public and private investments, by joining the forces of the EU, the European Investment Bank, the European Bank for Reconstruction and Development, and other International Financial Institutions, as well as development finance institutions from the EU Member States, partner countries’ national, regional and local governments, municipalities where relevant, and private investors. In this way, the plan is expected to leverage up to €17 billion in public and private investments to support the post-pandemic recovery.
The plan will combine actions to be implemented at the local, national and regional levels, and will be adapted to the specific needs of each partner country.
The Economic and Investment Plan underpins the Investment pillar of the post-2020 priorities for the Eastern Partnership, which supports post-COVID 19 socio-economic recovery and the aim to build back better through accelerating the green and digital transition.
However, these investments must be combined with clear progress in the fields of judiciary reform, public administration reform and human rights, the Governance pillar, which includes support for democracy, human rights, rule of law reforms, support for the fight against corruption, gender equality, support to civil society and independent media, all key values of the European Union, and the basis of a strong society that provides for its citizens.
What are the priority areas for investment?
Transforming the EaP economies to make them more resilient and integrated has become even more urgent in the context of the post-COVID recovery.
In line with the long-term policy objectives for the EaP beyond 2020, investments will be focused in the following main areas:
• Better transport connections
• Access to finance for SMEs
• Improved competitiveness and integration in EU value chains
• Digital transition
• Sustainable energy
• Environmental and climate resilience
• Health resilience
• Education reform and youth opportunities
However, for such investments to be effective and to foster development that is sustainable, improvements to the policy and regulatory environment are essential. The EU’s support will reflect its conditionality and incentive-based approach, and investments must be combined with clear progress in the fields of judiciary reform, public administration reform and human rights.
What does this actually mean for the partner countries? How will the investment filter through, and will we feel the difference?
The Economic and Investment Plan contains a set of five flagship initiatives for each of the partner countries. These are concrete projects that will have a direct impact on people and businesses on the ground.
While the plan is a key part of the European Union’s support for recovery following the COVID-19 pandemic, it aims to do so by advancing each country’s strategic interests, supporting longer-term resilience and competitiveness, and delivering tangible benefits. The flagships have therefore been identified jointly with the partner countries, taking into account their own priorities, needs and ambitions.
What are the specific investment plans for Georgia?
Georgia has identified transport and digital connectivity (in particular through the Black Sea) and digital development as key priorities. Support for SMEs, access to finance and boosting export potential also feature high on Georgia’s agenda.
The five flagship initiatives for Georgia are:
1. Black Sea connectivity — improving data and energy connections with the EU – This initiative will further integrate the Georgian market with the EU market through the deployment of a submarine fiber optic cable. Citizens will benefit from a faster and more stable direct internet connection between Georgia and the EU. Further interconnectivity on energy between Georgia and the EU will also be promoted with a technical and economic feasibility study for deploying a submarine electricity cable between Georgia and the EU. The overall cost of the investment is estimated to amount to up to €25 million.
2. Transport connections across the Black Sea — improving physical connections with the EU – Among other things, this flagship will involve developing new ferry services and refurbishing ports, which will promote trade in goods and facilitate the movement of people by creating a direct link with the EU Member States. Improved connections will boost trade and economic cooperation, and strengthen Georgia’s role as a bridge between Europe and Asia. The overall cost of the investment is estimated up to €100 million.
3. Sustainable economic recovery — helping 80,000 SMEs to reap the full benefits of the DCFTA – Support will include equity investments to accelerate the integration of Georgian SMEs into wider EU value chains, contributing to the diversification of trade between the EU and Georgia. A significant part of the EU’s support will go to SMEs in the agri-food sector. The overall support reaching SMEs is estimated to amount to €600 million.
4. Digital connectivity for citizens — high-speed broadband infrastructure for 1,000 rural settlements – This flagship will reduce digital inequalities by developing high-speed broadband infrastructure for around 1,000 rural settlements and strengthening ‘last-mile’ connectivity. This will contribute to economic development and recovery, while promoting digital inclusion in line with the national broadband strategy. The overall investment is estimated to amount to up to €350 million.
5. Improved air quality — cleaner air for over 1 million people in Tbilisi – In the coming years, the EU will work on improving air quality monitoring in Georgia by installing air monitoring equipment and building capacity. Besides work to identify pollution sources, concrete investments will be made to improve the situation. The initiative will also contribute to investment in green and sustainable urban transport in Tbilisi by building two urban cable-car lines. The overall investment is estimated to €100 million.
