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Vice-President of the Commission, responsible for transport
Investing in transport infrastructure
European Investment Bank (EIB) Regional Forum
Warsaw, 26 November 2010
Ladies and gentlemen,
The European Investment Bank is an important lender to transport projects across Europe, especially for projects located along the trans-European transport network (TEN-T) and in Member States drawing from the EU cohesion and structural funds. I would like to pay tribute to the crucial role of the EIB and other multilateral financial institutions in renewing the basis for our common prosperity. I would like to pose the question: why are investments in transport infrastructure so important?
The answer is particularly relevant in times of economic struggle, because infrastructure investments boost the construction and electromechanical sectors, which are important contributors to EU employment, and they lay the ground for our future competitiveness. Empirical evidence reveals a positive impact of infrastructure investments on economic growth and job creation: €1 billion generates roughly 30 to 40 thousand jobs per year. Investments in transport infrastructure are essential for providing access to markets and they thereby contribute to the reduction of economic disparities within the EU. In Europe, a very significant imbalance of transport infrastructure still exists between the older and the newer Member States – between East and West. The density of both the road and rail network in Poland, as in most new Member States, is below the EU average. Poland is the only country among the six largest EU Member States, in terms of population, which does not have any high-speed railways. Moreover, there is a significant need for upgrades. Also, the networks of East and West are often very badly connected or not connected at all.
Our objective is to tackle this discrepancy by establishing a true single transport area in the EU. In that context, I support the efforts of the Polish government in continuing with its infrastructure investment plan and the realisation of the priority projects on its territory. Poland is a key transit country between East and West – and the North and South – and this is an important first step in making the single transport area a reality.
The Commission has already launched the review of the TEN-T policy. In May, we asked the Member States, the Parliament, and all the stakeholders if they would support our vision of a dual-layer Trans-European Transport Network, with the creation of a multimodal "core network" of the strategically most important nodes and links within the EU and beyond. This core network will be complemented by a wide and already existing comprehensive network, which will reflect national transport planning. Soon we will prepare a proposal for this core network, which will not only include the main nodes for passengers and freight but will also be an intelligent, future-oriented network. Innovative information and management systems will support logistic functions, intermodal integration, efficient, sustainable operations and traffic management, in order to establish attractive and competitive door-to-door – or at least terminal-to-terminal – transport chains, according to the needs of the users. In spring 2011, we will propose a revised set of TEN-T guidelines, which will give legal form to this vision. These guidelines will look at network planning and implementation tools – including funding – as one package of policy measures.
Let me now talk about money. In transport, considerable amounts of money need to be mobilised because building and maintaining transport infrastructure is extremely costly. I have discussed with three of the biggest private investment banks about how to bring more private capital into European transport projects. They told me the following:
First, there is a lot of money available in the world that is looking for good infrastructure projects. Second, Europe is still a very attractive place for investors, and third, money is available under clear conditions.
Their main recommendations were:
First, cut politics from business. An essential element in this is the existence of strong independent economic operators and regulators. The latter must also execute efficient supervision on undertakings. The best way to ensure the independence of economic operators is to have private enterprises. There are many entities in Europe that can be privatized and their privatization receipts can be then used for those public infrastructure investments which do not generate sufficient revenue streams.
Second: cut bureaucracy. I am talking here about procedures and permits. We have a situation now where almost any interested party can stop investment projects for an unlimited time. The private sector cannot wait forever for such permits.
Third: conditions for infrastructure investments must be stable for long periods, perhaps 30 years. New governments should not reverse decisions made for long term.
And, fourth: projects must have a reasonable size – not too small; not too big.
Also, the best and cheapest involvement of private capital sometimes also requires public guarantees to overcome difficulties in the early years of making a project profitable.
In line with the “Europe 2020” strategy and in consideration of these suggestions, we plan to propose a European funding framework that will help pull together EU, national and private funding. This funding framework will better coordinate the available sources of financing. I have started an in-depth dialogue with my colleague responsible for regional policy, Commissioner Hahn, on how to better coordinate the cohesion and structural funds with the transport policy objectives, aimed at tackling the lack of a truly European single transport network. Equally important is to ensure consistency in funding priorities between the EU and national levels. This framework should therefore provide guidance to national investments on the basis of EU priorities and could comprise other sources of funding, such as revenues from transport activities. This framework requires the development of fair, transparent and efficient criteria to identify the projects to be supported, depending on their EU added value. Therefore, we will pay close attention to proper cost/benefit analysis and assessment on the basis of competitive applications.
The future EU financial perspectives will need to resort more to innovative financial instruments in order to ensure maximum leverage of the EU support. Their leverage effect can be significant, ranging from 10 up to 25 euros per euro of EU contribution. The innovative financing can also increase private sector involvement through resort to public–private partnerships and development of project bonds. We are working closely with the EIB in order to define and develop these new innovative financial instruments. In this process we are also drawing on our experience with three transport sector initiatives, namely the Loan Guarantee Instrument for TEN-T projects, the European PPP Expertise Centre and the Marguerite Fund.
Transport would be the best sector for testing the possible EU role in project bonds, issued by project companies. A certain number of carefully selected TEN-T projects could lend themselves to this mechanism, where both the Commission and the EIB would have to play an important role in providing guarantees as to make such bonds issuance possible. Innovative financing is seen as a challenge by eastern Member States. Some have argued that it is much easier to use grants, especially within the framework of the cohesion and structural funds. However, I am sure that innovative financing can effectively contribute to the realisation of the necessary investments if the Commission and the multilateral development banks commit their resources also towards supporting the Member States in generating an appropriate project pipeline and dealing with complex financial engineering.
Designing the right governance structure and identifying the sources of financing for complex cross-border projects is a problem that applies to all Member States. Therefore, we are thinking about organising the coordination structures for them – the so-called corridors – that can help to resolve the various problems we face, ranging from getting a proper environmental impact assessment done to the appropriate financing arrangement. These ''corridor'' structures can bring together the Commission, Member States, the regions, the local authorities, but also the infrastructure managers, transport operators, and, of course, the financiers. They can facilitate the creation of special purpose vehicles, anchors of any financing arrangement, which could issue project bonds to finance partly or fully the cost of construction. Of course, we are not there yet. Turning this vision into a reality requires a lot of work to be done. However, I am confident that already by the end of 2011 we will manage to put in place a reshuffled and more balanced approach for this complicated puzzle called the trans-European transport network. Our capacity to grow and to create jobs, to make a decisive contribution to territorial cohesion, and, last but not least, to decrease CO2 emissions and pollution depends on our success.
Thank you very much.