Big spender in town
The Forum is entitled "Investment in the new member states," and will include President Kwaniewski and PM Marek Belka as keynote speakers. It represents the first EIB forum ever to be held in a new member state. The EIB is the EU's long-term financing institution, and is bigger in volume than the World Bank. The WBJ had a chance to speak with the president of the EIB, Philippe Maystadt:
How has the role of the EIB changed or how will it change as a result of accession?
Probably we will increase the volume of our operations. You know that the total of lending in the new member states represents some 18 billion. But the biggest part, of course, is in Poland, and we expect to continue. Just to give you an idea, this year-2004, our lending in Poland represents 7.5 billion [from 1990 to present]. And it will probably reach a total amount of 9 billion at the end of this year.
How far is Poland, in terms of development, from the Old EU countries, and how long will it take to catch up?
Well, you know that there are still some differences. The most visible is the gap in per capita income. The income gap in Poland is still, as you know, lower than the EU average. But I think that the new member states will catch up with the Old EU and if there is what we expect-top growth in the new member states-this would help to close this. Of course it could take some years.
Which sectors of the Polish economy need to be developed the most and which ones as soon as possible?
I would welcome developments in several sectors, both in industry and services. As far as Europe is concerned, we will finance infrastructure for sure-because there are still important needs. But at the same time we need also to finance more and more investments in private companies.
How about telecommunications?
As you know, Poland is the largest market in telecommunications in Central Europe, with a larger scope for further expansion. When we look at the figures, the number of fixed-line versus the number of mobile customers, we expect an increasing substitution of fixed-line traffic by mobile.
How about promoting competition in telecommunications?
I think this will come precisely with the new Telecommunications Act, with a special emphasis on competition. We can expect a rising competition following this sector liberalization.
Even though right now it is basically a monopoly, and the prices...
The prices are high, but I'm pretty sure that they will decline. I'm sure we will see a declining trend in the tariffs for voice calls exactly following liberalization and increased competition. This has been so in all the EU countries. So after the arrival of new competitors we have seen a decline in the tariffs. We've seen that in several Old EU member states and I'm pretty sure that we will see the same trend in Poland.
If I'm a Polish entrepreneur, what difference does it make that the EIB is in Poland?
There are several advantages. First of all, the terms of the loans, because as you know EIB is a major international borrower, in fact the biggest non-sovereign issuer on the financial markets, and we enjoy the AAA rating. So we can borrow ourselves large volumes of funds on very advantageous terms.
A second advantage would be in terms of maturity. In Poland this is the main advantage of EIB loans-is the fact that we can lend for longer term than usually commercial banks can do. We lend for 20 years, sometimes more-even sometimes 30 years, which is longer than a commercial bank. Another advantage of the EIB loan of course is that they can be extended in the złoty so the loan would avoid exchange rate risk.
I would also mention as an additional advantage of EIB lending the fact that we have a specialized team of 80 economists and engineers for the technical appraisal of projects. This is another reason why commercial banks like very much to work with us, [as it] gives comfort to all the banks participating in all the financial arrangements.
Have you heard that Polish entrepreneurs feel that they are discriminated against by the commercial banks?
I didn't know that, but maybe EIB could help in this respect.
What advice would you give to Polish entrepreneurs?
Well, it depends on the size of the project, of course, because for small projects we have to go through intermediaries-it's what we call 'global loans,' but for bigger projects the company can go directly to EIB and we can see whether we can cofinance a project. Usually EIB finance is up to 60 percent of the total cost of the project.
EIB would bring to the intermediary-usually the commercial bank-cheaper funding, on the condition that the intermediary might use this funding to on-lend to SMEs on better terms. Better terms but also-maybe mostly-in terms of maturity. When we give a global loan to a bank, the bank will on-lend for a longer term, and for smaller enterprises that is quite important.
What are your plans for Poland this year, next year, and the years to come?
This year we expect to lend some E9 billion, and we expect to continue our level of investment over the next years, with, I would say, another moderate increase of the total volume of our operations in Poland. I say moderate because you know that at the same time Poland will benefit from the structural funds. So we have to find the right combination between financing by the total funds, and EIB loans, but we can expect a moderate increase of our lending in Poland in the next years, toward infrastructure-I mean transport and telecom, probably also from environment, where you can expect more from EIB loans in the coming years. We can expect that we will increase our lending in new fields like education, health, research-these areas which are in the context of the so-called Lisbon strategy. I expect that we will increase our lending in these fields in Poland as well as in other member states.
How has the role of the EIB changed or how will it change as a result of accession?
Probably we will increase the volume of our operations. You know that the total of lending in the new member states represents some 18 billion. But the biggest part, of course, is in Poland, and we expect to continue. Just to give you an idea, this year-2004, our lending in Poland represents 7.5 billion [from 1990 to present]. And it will probably reach a total amount of 9 billion at the end of this year.
How far is Poland, in terms of development, from the Old EU countries, and how long will it take to catch up?
Well, you know that there are still some differences. The most visible is the gap in per capita income. The income gap in Poland is still, as you know, lower than the EU average. But I think that the new member states will catch up with the Old EU and if there is what we expect-top growth in the new member states-this would help to close this. Of course it could take some years.
Which sectors of the Polish economy need to be developed the most and which ones as soon as possible?
I would welcome developments in several sectors, both in industry and services. As far as Europe is concerned, we will finance infrastructure for sure-because there are still important needs. But at the same time we need also to finance more and more investments in private companies.
How about telecommunications?
As you know, Poland is the largest market in telecommunications in Central Europe, with a larger scope for further expansion. When we look at the figures, the number of fixed-line versus the number of mobile customers, we expect an increasing substitution of fixed-line traffic by mobile.
How about promoting competition in telecommunications?
I think this will come precisely with the new Telecommunications Act, with a special emphasis on competition. We can expect a rising competition following this sector liberalization.
Even though right now it is basically a monopoly, and the prices...
The prices are high, but I'm pretty sure that they will decline. I'm sure we will see a declining trend in the tariffs for voice calls exactly following liberalization and increased competition. This has been so in all the EU countries. So after the arrival of new competitors we have seen a decline in the tariffs. We've seen that in several Old EU member states and I'm pretty sure that we will see the same trend in Poland.
If I'm a Polish entrepreneur, what difference does it make that the EIB is in Poland?
There are several advantages. First of all, the terms of the loans, because as you know EIB is a major international borrower, in fact the biggest non-sovereign issuer on the financial markets, and we enjoy the AAA rating. So we can borrow ourselves large volumes of funds on very advantageous terms.
A second advantage would be in terms of maturity. In Poland this is the main advantage of EIB loans-is the fact that we can lend for longer term than usually commercial banks can do. We lend for 20 years, sometimes more-even sometimes 30 years, which is longer than a commercial bank. Another advantage of the EIB loan of course is that they can be extended in the złoty so the loan would avoid exchange rate risk.
I would also mention as an additional advantage of EIB lending the fact that we have a specialized team of 80 economists and engineers for the technical appraisal of projects. This is another reason why commercial banks like very much to work with us, [as it] gives comfort to all the banks participating in all the financial arrangements.
Have you heard that Polish entrepreneurs feel that they are discriminated against by the commercial banks?
I didn't know that, but maybe EIB could help in this respect.
What advice would you give to Polish entrepreneurs?
Well, it depends on the size of the project, of course, because for small projects we have to go through intermediaries-it's what we call 'global loans,' but for bigger projects the company can go directly to EIB and we can see whether we can cofinance a project. Usually EIB finance is up to 60 percent of the total cost of the project.
EIB would bring to the intermediary-usually the commercial bank-cheaper funding, on the condition that the intermediary might use this funding to on-lend to SMEs on better terms. Better terms but also-maybe mostly-in terms of maturity. When we give a global loan to a bank, the bank will on-lend for a longer term, and for smaller enterprises that is quite important.
What are your plans for Poland this year, next year, and the years to come?
This year we expect to lend some E9 billion, and we expect to continue our level of investment over the next years, with, I would say, another moderate increase of the total volume of our operations in Poland. I say moderate because you know that at the same time Poland will benefit from the structural funds. So we have to find the right combination between financing by the total funds, and EIB loans, but we can expect a moderate increase of our lending in Poland in the next years, toward infrastructure-I mean transport and telecom, probably also from environment, where you can expect more from EIB loans in the coming years. We can expect that we will increase our lending in new fields like education, health, research-these areas which are in the context of the so-called Lisbon strategy. I expect that we will increase our lending in these fields in Poland as well as in other member states.
