Mr. Katainen, on 20 July you will visit Bulgaria where you will be a special guest of the organized by Mrs. Iskra Mihaylova, Chair of the Regional Development Committee of the EP, and the Bulgarian Construction Chamber Conference on flexible EU budget and financial instruments in support to the construction sector. What is the significance of this topic at European level?
Financial instruments can be used as an effective tool to leverage the EU budget, boosting the impact of EU funding and catalysing private investment. This is especially true when we are faced with budget constraints. Their wider employment, working alongside grants, should be considered as a means to achieve the EU’s strategic objectives.
It is important to be clear. The use of financial instruments is not an objective in itself, but a means to achieve our policy objectives in a more efficient way. We have to examine honestly where the use of financial instruments is more effective than the use of grants and vice versa. We will also need to see how financial instruments under different policies can work best together. Financial instruments and grants are not competing with each other, but should complement each other and be used where they are more effective. We need to have a clear strategy and a set of criteria to determine which tools are most appropriate for market needs, beneficiaries and desired objectives.
What are the results of the introduction of financial instruments so far –what is the interest in their use, are there excellent countries and those where they are not popular enough, what is the effect of implementation of these mechanisms on the European budget and on the economy of the Union?
The European Fund for Strategic Investments (EFSI), the heart of the Commission’s Investment Plan for Europe, is an excellent example of an innovative financial instrument, which is helping to boost investment, support jobs and spur growth across Europe. The EFSI acts as guarantee to mobilise private investment and is already expected to trigger more than €200 billion in additional investments, including over €1.1 billion in Bulgaria. In fact, Bulgaria is the third highest beneficiary of EFSI-financing, when measured as a proportion of GDP.
With our proposal to extend and enhance the EFSI, an even greater emphasis is being placed on ensuring that the EFSI reaches where it is needed most. In order to improve the EFSI’s geographical coverage, the proposal puts a strong emphasis on the combination of EFSI support with other EU funds and with financing from National Promotional Banks (NPBs). The proposal also includes enhancements of the scope of the European Investment Advisory Hub (EIAH) to help construct a steady supply of projects and Investment Platforms that can be financed in all Member States.
During the Seventh summit for the regions and cities in 2016 which was held in Bratislava, you said “We need new financial instruments”, what are they?
I referred in particular to the combination of Structural Funds with the European Fund for Strategic Investments to maximise impact. Financing under the European Fund for Strategic Investments can complement Structural Funds. Our proposal to extend the EFSI makes these combinations even simpler.
Administrative burdens are a serious barrier to investment and businesses, especially small and medium-sized. What are the measures that the Commission is taking to simplify procedures and ensure wider access to European funds and to the possibilities that financial mechanisms provide?
The number of EU-level financial instruments and the rules governing their use can be an obstacle to their efficient use. Simplifying their use should contribute to a better, more effective use of EU funding by regional and local authorities, other investors and final beneficiaries in order to make the greatest possible contribution to achieve sustainable growth, job creation and cohesion. Within the context of the Reflection paper on the Future of EU Finances, we are looking at how to maximise the performance of public and private investments around EU priorities. We are exploring various possibilities, including payment for outputs and results, rather than for invoices. We are looking at how to bring more coherence in rules, for example with a single set of rules for cohesion policy funds and clearer demarcation with other EU instruments.
Bulgarian Construction Chamber (BCC) is the most prestigious branch organization, it represents the construction industry in the country; these are over 5,000 companies. BCC is a member of the European Construction Industry Federation; the first Vice-President of the Federation Kjetil Tonning will join the forum in Sofia. What is the importance of the construction sector for the EU economic development?
The construction sector is strategically important to the EU economy – the sector accounts for almost 9% of EU GDP and provides 18 million direct jobs. The financial crisis has had a particularly heavy impact on the construction sector resulting in severe drops in investment. In some EU countries, the industry was hit in particular by the contraction of credit markets, in others it was triggered by the burst of the housing bubble. The pressures on public spending have had and will continue to have a significant impact on investments in infrastructure.
As Vice-President of the EC you are responsible for competitiveness and jobs. Both are among the major challenges faced by the construction industry. There is talk about a very serious problem with the lack of staff. What can be done, how can the EC support the construction sector?
EU funds have introduced in Bulgaria a higher level of competition in public contracts related to major road and energy infrastructure projects. This is a positive effect, since the increased competition contributes to higher quality and more adequate prices once it comes to spending EU taxpayers’ money. The increased competition is also profitable for the Bulgarian economy, since it gives an opportunity to reduce total infrastructure development costs. I am also aware of the situation regarding the lack of high-skilled professionals and qualified trainers in Bulgaria. EU funds have helped the Bulgarian Construction Chamber to implement a number of EU-sponsored programmes such as ‘Train-to-Near Zero Energy Buildings: the building knowledge hubs’ and ‘BUILD UP Skills EnerPro’, both aimed at increasing the skill level related to energy efficiency in buildings. Moreover, the programme ‘High heels; building opportunities for women in construction’ focuses on soft skills training of women.
The first objective of the 2020 strategy for construction – stimulating favourable investment conditions – is particularly important. The focus is on building renovation and on Trans-European Networks projects, which are aimed at boosting the growth of the construction sector while feeding into the objectives of European Energy, Transport and Cohesion policies.
I also want to highlight the innovative financing instruments implemented on the EU level to boost lending to SMEs and other companies. EFSI has interesting opportunities for projects promoting energy efficiency and sustainability. It is financing projects like near-zero energy building construction or urban renewal of housing. The SME window of EFSI is already expected to benefit approximately 427,000 small and medium-sized enterprises and mid-caps in Europe. In the proposal to extend EFSI (EFSI 2.0.), the Commission proposed that at least 40% of EFSI projects under the infrastructure and innovation window should contribute to climate action in line with the COP21 goals. Projects improving the energy efficiency of buildings are included in this, involving both the construction of new energy efficient buildings as well as renovating existing buildings for them to be energy efficient.
Public private partnerships (PPP) is little applied in our country. What is your opinion about the possibilities it provides?
Public Private Partnerships can, when properly used, be an effective and cost-efficient means of combining the expertise and capacity of the public and private sector and levering scarce public resources.
However, well prepared Public Private Partnerships require a high level of expertise from the relevant Member States authorities and from private promoters. It is necessary for the proper selection, evaluation, design, preparation and implementation of such projects, as well for establishing the most appropriate funding arrangements. In this context, the Commission and Member States look into further cooperation, additional technical assistance, and improved exchange of information. This would help national or regional long-term public and private investors and project promoters to benefit more from past experience, as well from good practices in the case of completed projects. The European Public Private Partnership Expertise Centre, already operating within the EIB, is a good example of such a network, and could be further developed in the future.
You come from Finland where before becoming Prime Minister you were Minister of Finance, you were named best finance minister in EU in 2008 by Financial Times. Your country is seen as a model for successful development, financial stability, and you are usually the leader of the lowest level of corruption. I had the pleasure to visit it under anticorruption training at HAUS institute and I am impressed. How is all this achieved?! Give the recipe.
The Finnish administrative culture is the result of decades of consistent development. One of the most important factors contributing to the low level of administrative corruption is the transparency of the regulatory system. I see that the active involvement of civil society is and has been an invaluable part of building a culture of transparency. It is said that Finland is „a land of thousands of associations“ and there is an element of truth in this. The involvement of civil society organisations in public decision-making has certainly helped to build trust in public institutions.
Stroitel Newspaper is an edition of the Bulgarian Construction Chamber, we are the official media partner of the conference and your interview will be published in the issue to be spread at the event. What is the most important message that you will address to the forum participants – high-ranking representatives of Bulgarian institutions and the construction business as well as to our numerous readers?
I would like to emphasize the importance of a long-term vision on the competitiveness of the sector. We need an upgrade of skills and qualifications, innovation and move towards sustainable, ‘green’ economy, as well as circular business models. I would encourage you to tap the potential of this shift and to make use of the instruments that the EU has to offer to help in this. In addition to EFSI that I mentioned before, “InnovFin – EU Finance for Innovators”, the joint initiative of the EIB and the Commission implemented through the European Investment Fund (EIF), is interesting in this respect. „InnovFin“ involves a number of complementary financing tools as well as advisory services to foster investments by both innovative small and large companies. In addition to „InnovFin“, the EIF has a number of other initiatives to supply equity, debt and microfinance instruments to micro-businesses and