Implementation of the European Communities Investment Partners (ECIP) financial instrument for the countries of Latin America, Asia, the Mediterranean region and South Africa, 1996-1999

The Commission first launched the European Communities Investment Partners (ECIP) financial instrument as a pilot scheme in 1988 to facilitate the creation of joint ventures between firms in the European Community and countries of Latin America, Asia and the Mediterranean. The scheme was extended for a further three-year trial period from 1 January 1992 by Council Regulation (EEC) No 319/92 (Official Journal No L 35 of 12.2.1992). The purpose of the present Regulation is to extend the scheme to 1999.

The ECIP financial instrument provides various types of support including the identification of projects and partners, the provision of expert advice on management and training and financial contributions to, and support for, the launch of joint ventures.

Following the conclusions by the Council on 19 April 1994 concerning measures to encourage Community investment in SMEs in South Africa, the new financial instrument is to be extended to South Africa, in addition to the developing countries of Latin America, Asia and the Mediterranean region which were covered by the two pilot phases.
To promote mutually beneficial investment by Community operators, particularly in the form of joint ventures with local operators in the developing countries of Latin America, Asia, the Mediterranean region and South Africa, including tripartite operations with other developing countries to promote regional integration.
No details are available for this section.
The Commission is responsible for the implementation of the ECIP financial instrument. It is to be assisted, depending on the region concerned, by the Committee set up under Regulation No 443/92 (financial and technical assistance to, and economic cooperation with, the developing countries of Asia and Latin America) and Regulation No 1763/92 (financial cooperation with all Mediterranean non-member countries). These committees will deal with matters related to South Africa in the absence of a specific committee for this country.

The ECIP offers four types of financing facility:

- Facility 1:
Grants for the identification of projects and partners, not exceeding 50% of the cost of the operation, subject to a ceiling of ECU 100,000. This facility may be increased to 100% of the cost of the operation, up to a ceiling of ECU 200,000, where this relates to a "build, operate and transfer" or a "build, operate and own" scheme in infrastructure, utilities or environmental services where an eligible country government or public agency is the beneficiary.

- Facility 2:
Interest-free advances for feasibility studies and other actions proposed by operators intending to set-up joint ventures or investment schemes. These advances may not exceed 50% of the cost of the action, up to a ceiling of ECU 250,000, within which pre-feasibility costs of up to ECU 10,000 may be financed by a grant.

- Facility 3:
Capital requirements of a joint venture or a local company with licensing agreements, in order to meet investment risks peculiar to developing countries, through participation in the provision of equity or subordinated loans not exceeding 20% of the joint venture's equity and subordinated loan capital, up to a ceiling of ECU 1 million.

- Facility 4:
Grants for training, technical assistance or management expertise of an existing joint venture, or a joint venture which is about to be established, or a local company with licensing agreements. These grants may not exceed 50% of the costs of the scheme, up to a ceiling of ECU 250,000.

The aggregate amount to be made available under the second, third and fourth facilities may not exceed ECU 1 million per project.

Financial institutions operating within the ECIP instrument are selected by the Commission from among development banks, merchant banks and investment promotion bodies. Contributions awarded under the instrument are, depending on the circumstances and the specific characteristics of each of the four facilities, in the form of either grants or interest-free advances, or participation in the provision of equity or equity loans. Participation in equity or equity loans are, in principle, to be acquired or provided by the financial institutions on their own behalf. However, in exceptional cases, the Commission may authorize a financial institution to hold a direct participation on the Community's behalf. This arises where:

- The financial institution cannot intervene in its own name for regulatory or legal reasons or because of its statutes;
- The Community's direct financial participation is necessary to reinforce, in a decisive manner, the capacity of the promoters to raise other financial resources which could not normally be mobilized due to the particular political situation or to specific legal obstacles in the host country of the joint venture.

Only projects with a particular development or environmental impact, or of significance for technology transfer, are eligible for such direct participation by the Community.

Projects submitted for support under the ECIP initiative are selected by the relevant financial institution (or in the case of Facility 1 by both the Commission and the financial institution), in light of the appropriations adopted by the budget authority and on the basis of the following criteria:

- Anticipated soundness of the investment and the quality and good repute of the promoters;
- The contribution to development, in particular in terms of:
. Impact on the local economy;
. Creation of added value;
. Promotion of local entrepreneurs;
. Transfer of technology and know-how and development of the techniques used;
. Acquisition of training and expertise by managers and local staff;
. Implications for women and improvement of their working conditions;
. Creation of local jobs with conditions of work which do not involve exploiting employees;
. Impact on the balance of trade and the balance of payments;
. Impact on the environment;
. Manufacture and supply to the local market of products hitherto difficult to obtain or of substandard quality;
. Use of local raw materials and resources.

The final financing decision is to be taken by the Commission, which is responsible for verifying compliance with the criteria set out above and compatibility with Community policies, in particular development cooperation policy, and the mutual benefit to the Community and the developing country concerned.

Before 30 April each year, the Commission is required to furnish the European Parliament and the Council with a progress report setting out the projects selected and their economic impact, notably total investment, and the number of joint ventures and jobs created. The report must also include details of the appropriations granted and the repayments to the Community budget and the annual statistics for the previous year. In addition to the annual reports, the Commission must present the results of an independent appraisal of the ECIP instrument to the European Parliament and the Council before the end of 1998.