How much investment will the new €5.1 billion EU External Investment Plan generate?

How much investment will the new €5.1 billion EU External Investment Plan generate?
03 February 2021

The EU expects to attract a considerable amount of investment in neighbouring and African countries with the European External Investment Plan. It supports projects that not only bring benefits for individuals, communities, and businesses, but also have a financial return for investors, which gives the latter an extra incentive to participate. The EU achieves that through the European Fund for Sustainable Development (EFSD), worth €5.1 billion.

The EFSD involves two main parts:

  • The Guarantee Fund

There are always risks when investing in developing countries, as local currencies can lose value, laws can change suddenly, and the political situation may become unstable. The Plan ensures that these potential risks are shared with investors and private lenders in the EU’s partner countries. This means that, in case a loss occurs for one of the abovementioned reasons, investors can get part of their money back.

€1.55 billion have been allocated through the Plan for financial guarantees. This is expected to bring in 17.5 billion in total investment. Up until now, the EU has concluded 18 agreements with partner organisations to put the guarantees into practice.

  • Blending Projects

A blending project incorporates mainly grants from the EU with equity from public financiers, such as governments or development banks, as well as private investors, such as commercial banks or pension funds. The EU supports blending projects in various sectors such as transport, sustainable energy, private sector development, and sustainable agriculture, and also develops access to finance for local micro, small and medium enterprises.

So far, the grants and blending projects have been allocated €3.5 billion, exhausting all the money available. The funds ensured the implementation of 181 projects in all. It should translate into approximately €32.6 billion in overall investment.

Moreover, there is also the possibility for EU Member States, third countries and even private philanthropic actors to contribute to the EIP. For instance, the EU received a sizeable contribution from the Bill & Melinda Gates Foundation of around €53 million.

Based on previous experience and knowledge, the EFSD is expected to get an average economic support of around x10 its initial value. In the end, this will translate into over €50 billion public and private investments, which will support the extremely valuable investment in sustainable development, inclusive growth, and job creation in developing countries, which will simultaneously intercept some of the principal causes of irregular migration.

Image © European Commission, 2014


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