The EU’s Financial Architecture for External Investment: Progress, Challenges, and Options

Mikaela Gavas and Hannah Timmis
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Mikaela Gavas: Center for Global Development
Hannah Timmis: Center for Global Development

No 136, Policy Papers from Center for Global Development

Abstract: In 2017, the EU launched an ambitious programme of investment mobilisation in Africa and the Neighbourhood: the External Investment Plan (EIP). The EIP aims to increase the scale, impact, and coherence of EU-supported external investment by introducing various innovations to the European financial architecture, including a new guarantee mechanism and a unique “three-pillar” approach to investment support. The European Commission is proposing a significant expansion of the EIP under the EU’s new long-term budget, the Multiannual Financial Framework 2021–27, replacing the current plethora of investment tools and modalities with a single framework. This paper provides a comprehensive overview of the evolution of the EU’s complex external investment architecture. Based on interviews with stakeholders, it documents lessons learned during the EIP’s first year of implementation and proposes a series of options for the design and operationalisation of the new investment framework. To increase the additionality, development effectiveness, and efficiency of EU-supported external investment, it recommends that the European Commission improve the current architecture by providing greater policy steer to investors; increasing competition among institutions for investment support; clarifying linkages between the three pillars; setting clear guidance, fee structures, and standardised contractual terms; and strengthening management of investment tools.

Keywords: European Union; the External Investment Plan; the European financial architecture; blended finance; guarantees; Multiannual Financial Framework; development finance institutions (search for similar items in EconPapers)
Pages: 18 pages
Date: 2019-01-11
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