What is it? The EIP in a nutshell
The External Investment Plan (EIP) aims to encourage private sector investment in Africa and the EU Neighbourhood, in countries and contexts which are otherwise unattractive or risky.
According to the European Commission, the EIP provides a coherent overall framework to improve investment in Africa and the Neighbourhood, in order to promote sustainable development and tackle some of the root causes of migration, by leveraging funds from the EU, its Member States, other donors, financial institutions and the private sector.
Investments will mainly be targeted to improve social and economic infrastructure, for example municipal infrastructure and proximity services, and on providing support to SMEs, microfinance and job creation projects.
It is based on 3 pillars (see below diagram):
- A new investment fund, the European Fund for Sustainable Development (EFSD)
- The EFSD will provide for a new guarantee, which will be passed on to intermediary financing institutions and directly to private institutions, which in turn will lend support, via loans, guarantees, equity or similar products, to final beneficiaries. The objective is to leverage additional financing, in particular from the private sector, as the EFSD guarantee will reduce the risk for private investment and absorb potential losses incurred by eligible counterparts, for example public financing institutions and private sector investors.
- Technical assistance for broader policy environment to help local authorities and companies develop a higher number of sustainable projects and attract investors, in order to further engage the private sector.
- A range of dedicated thematic, national and regional EU development cooperation programmes, combined with structured political dialogue targeted at improving the investment climate and the overall policy environment in the countries concerned.
Why are we concerned about the EIP?
Plan International EU Office, as part of a coalition of CSOs, have a number of concerns with the EIP as currently proposed.
Overall, we are concerned by the underlying objectives and rational of the EIP. Instead of putting sustainable development and poverty reduction at the core of the EIP’s missions and operations, it seems to be linked to the EU’s migration control policy on the one hand, and the promotion of European private investments abroad on the other hand.
More fundamentally, the proposals seem to make some challenging and perhaps unsubstantiated claims assuming a necessary link between investment, job creation, growth and development.
In particular, we are concerned by:
- The proposal focuses on job creation as its main expected result. This is based on the increasingly disputed assumption that growth per se generates jobs. The proposal does not specify what types of jobs, who will get the jobs (i.e. the most left behind or not), or what type of projects to ensure sustainable green jobs.
- The framing for the EIP seems to be tied to a particularly negative formulation of and understanding of migration - the EC states that the EIP will help tackle the “root causes” of migration, and implies that migration is a “problem” to be “solved”. By making this negative link, the EIP risks being seen as an instrument of EU foreign policy rather than a development instrument.
- By pooling public resources and using ODA to subsidise private companies most often owned and domiciled in OECD countries, the EIP diverts aid from public investments.
- No sufficient social, environmental, labour or human rights safeguards are yet in place to ensure that private finance in development reaches its stated goals.
- It is not certain that the EIP will generate decent jobs with local micro, small and medium sized enterprises – it may in fact be a disguised promoter of tied aid and crowd out local SMEs in favour of large international companies.
- The suggestion for a minimum 20% threshold for funds to be climate relevant is too low and unambitious.
What are our recommendations to improve the EIP?
Our recommendations to improve the EIP include:
- De-link the EIP, EFSD in particular, from European migration control policies and short-term foreign policy objectives;
- Adopt a multi-dimensional approach to growth which goes beyond GDP and fully integrates the social, environmental and governance dimensions;
- Ensure that a majority of aid is still directed to support the public sector, which in turn is crucial to private sector investment;
- Incorporate stronger language within the regulation to ensure full visibility, transparency and accountability of the EIP;
- Ensure sufficient social, labour, environmental and human rights safeguards and legal framework are in place prior to the implementation of the initiative;
- Scale up evaluations and monitoring to ensure the ‘do no harm’ principle is respected and that this instrument can ‘maximise positive benefits’;
- The EIP should be used exclusively to support local companies in developing countries, with a focus on micro, small and medium size companies;
- Ensure that employment opportunities generated by the EIP are decent and sustainable;
- All projects financed under the EIP should be climate proof in line with the objectives of the Paris Agreement;
- Put in place robust policies addressing gender discrimination in labour markets to accompany any efforts to diversify economies.