The European Investment Bank - investment in development?

This study addresses three problematic aspects of European Investment Bank (EIB) operations: project assessment, transparency issues and the sector focus of investments. An emphasis is put on how the EIB policy in these areas impacts the environmental sustainability and the level of corruption in the non-European target countries. The aim is to determine the extent to which criticism of the Bank is justified and to outline solutions to the problems when possible.

The most serious and underlying problem is the low compatibility of the Bank’s institutional motivation with the economic development of non-European countries. Risk aversion and profitability concerns lead the Bank to support projects in energy sectors and infrastructure - fields that are highly problematic with regard to the overall development of national economies. Moreover, the Bank uses project evaluation standards in regions outside the European Union that are far less strict than those employed in the EU. This problem is further aggravated by the fact that projects are usually implemented in regions with poorly developed institutions and loosely enforced regulations. Among other things, this means the absence of responsible public institutions to ensure that investments are in line with the economic and social priorities of the given country.

Several solutions can be off ered to improve the situation. Above all, it is necessary to ensure greater internal consistency of Bank activities by employing the same standards both inside and outside the European Union. It is necessary to create and respect clear standards and due diligence for ex-ante evaluations. It is essential in this phase of evaluations to have competent staff specialized not only in the fi nancial aspects of projects, but also in areas such as sociology and the environment. The transparency of project evaluation can be improved by introducing and making public the quantitative value of the evaluation criteria. Accepting inputs from the European and, in particular, the non-European public would also improve the quality of project evaluation and oversight of the Bank’s activities. Finally, it is necessary to eliminate the lingering reluctance to perform ex-post evaluations and to introduce a system of monitoring during the course of actual project implementation with clearly defined sanctions.

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