EIB’s focus in India is on financing climate action: Andrew McDowell
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New Delhi: The European Investment Bank (EIB) is owned by the 28 economies of the European Union (EU) and is touted as the largest development bank. A day before finance minister Arun Jaitley inaugurates EIB’s first branch in India, its vice-president Andrew McDowell talks about the bank’s priority areas and plans for India. Edited excerpts:
About 90% of your investments are in Europe. What makes you focus on India?
European Investment Bank is funded by the member states of the European Union. It is the largest multilateral lending bank in the world. Last year, as a group we invested about €83 billion in total, with a balance sheet of €570 billion. To put that in context, that is about twice the annual lending of the World Bank. The goal is to support economic development of our member countries within the European Union as well as our partners around the world. Asia is the fastest growing region in the world and is creating huge opportunities as well as huge challenges in terms of global sustainability of economic growth. That’s why we want to build a stronger partnership with Asia and India in particular. Our focus in India is on financing climate action and investments that help to decarbonize.
What is the need for opening a branch in India? What activities will it undertake?
Our total historic investment in India is around €1.7 billion. It goes up and down depending on the number of projects we get each year. We certainly find having a presence on the ground is going to be increasingly important in terms of developing relationships with our local partners. That’s why we are basing our regional office in New Delhi. We are going to meet Prime Minister Narendra Modi to discuss how the EU bank can help strengthen the bilateral relationship between Europe and India. We will be announcing €450 million new investments for India on Friday in the presence of finance minister Arun Jaitley in climate action and urban transportation projects.
What are the challenges you face in India while implementing projects?
We find India a very good place to do business. We are in fact very impressed by the rate at which loans that we sign have been disbursed. Obviously, as we continue to invest more in the renewable sector and in climate action in general, we will be looking at the regulatory environment and how it can continue to support bringing more investment into the sector.
What is your view on the current state of the economy in India and the Narendra Modi government?
We see here a government carrying out ambitious reforms to change and to take India to the next level of development. It is our job as an EU institution to support that.
Are you looking towards issuing any rupee-linked bond in offshore markets to boost local financing?
What we will be doing is working with some local partners, including some of the financial intermediaries with whom we have strong partnerships, to help them develop rupee bonds, including tapping into the green bond market. We are the pioneer in the development of green bonds, funding certified projects in renewable energy primarily and more broadly on sustainable development goals. This year, we have been the largest issuer of green bonds. What we are going to do is to work with local partners around the world including in India, pass on that expertise on how to develop and tap that market themselves because we see a growing pool of global liquidity that wants to invest in that market in clean energy and renewables. But it is quite a complex process. Working how to get projects certified, how to develop relationship with the institutional investors, those are things that we can help in our local Indian partners.
Will these be issued in India or overseas?
There are no fixed plans yet but they can be local rupee bonds.
Are you keen on investing in the private sector in India as well?
Traditionally in India, we have financed projects that have been guaranteed by the sovereign. But of course, we are now listening to our counterparts that the preference now is to borrow without sovereign guarantee given the overall fiscal and debt situation in India and that is something that we are actively exploring.
The Bilateral Investment Treaty (BIT) with most of the European countries and India is expiring soon because India insists on signing on a new draft treaty it has prepared. How do you see it impacting investments from Europe?
It is a matter for member states and European Commission how they want to replace the BITs and how they want to approach the Indian government to start the process to do that. It will be now for EU as a whole to agree to a new framework (as opposed to individual member countries when the treaties were signed originally). As I understand, potential investors from Europe are already raising this issue with their governments and with the European Commission about its implications on investment protection. Quite clearly, it is becoming a factor in the minds of potential investors.
How do you see the increasing number of development banks, especially NDB (New Development Bank) and China-led AIIB (Asian Infrastructure Investment Bank)?
It’s good. The challenge for us all is to try and adopt common standards, common definitions. The second challenge is to ensure that what we are doing is not replacing private investment but mobilizing the private sector so that we have a multiplier effect, because if we were crowding out the private sector as multilaterals, we will not be helping anybody. That requires experience, cooperation and good design in terms of the interventions we make. That’s why EIB is here to attend the annual meeting of the New Development Bank this weekend.
So, is the European economy stabilizing or there is more volatility expected in coming days?
European economies are obviously going through several years of difficulties: the financial crisis in 2008-09 and then, the sovereign debt crisis in the euro zone in 2012-13. But what we are seeing is that for the first time in 2016, every single European economy has started growing again. What we are seeing is not only growth in Germany but economic recovery and growth in France, Spain, the UK and in the peripheries of the euro zone as well. This is very good news and what it shows is that some very resolute action taken two to three years ago to reform the euro zone as well as aggressive monetary policy easing has worked. And also some of the actions taken by EIB under the investment plan for Europe to dramatically increase the scale of lending. They have begun to pay off and they have started to have an impact.