INSME's Interviews

"Innovation 2010 Initiative: 50 billion euro to win the European challenge for innovation"

INSME: What kind of activities can be financed under the European Investment Bank's Innovation 2010 Initiative?

Mr. Munini: All kind of investment projects in research, development and innovation can be financed, without being limited solely to infrastructures but including pure research activities (such as for instance the cost of researchers), obviously after verifying the project’s technical and economic feasibility. This is the most important novelty resulting from the Lisbon Agenda, which modifies the traditional focus of the European Investment Bank (EIB) on infrastructure projects.

INSME: And who are the beneficiaries of this financing?

Mr. Munini: We want to target on the one hand enterprises (either financing their projects directly or through banks and financial institutions in each country); on the other hand, those actors offering services related to innovation and technology transfer to enterprises (for instance incubators) and this can be done by collaborating with public bodies. These targets, with regards to an area which I know very well – that is Italy - have been identified as priorities by the agreement signed by EIB and the Italian Ministry for Research in February 2004.
So, the European Investment Bank directly funds projects whose cost exceeds 25 million euro. Generally speaking these are projects presented by large-medium enterprises. For instance, referring to Italy, we financed Pirelli and some other medium enterprises.
Support to small and medium-sized enterprises (SMEs) is important as well and this is done through the bank system as follows: the EIB opens a credit line with a bank and the bank allocates EIB funds to SMEs. For instance, in Italy we have recently signed a lending agreement with Sanpaolo IMI for a dedicated amount of 100 million euro to be allocated among enterprises that will invest in research and development.
As far as the public sector is concerned, in Italy we are working at sub-national level with the Lombardy Region and some other regions to identify projects to be funded. Ideally we would like to gather 4 or 5 regions in a credit line to cover the whole country. We will develop this project in 2005.
This is the way in which the EIB could act in each country. That is by putting into action different operating tools and aiming at following each phase of the innovation process (from education to base research to applied research).

INSME: And what about the financial amount you allocate to enterprises?

Mr. Munini: Considering the operating lines I mentioned before (that is direct funding and intermediated funding), the EIB directly supports projects whose cost exceeds 25 million euro and the amount that can be financed is a maximum of 50%. Projects whose cost is below 25 million euro are funded through EIB’s domestic partner banks. The EIB has a network of financial intermediaries and these manage some credit lines on behalf of the EIB, directly evaluating the projects presented by enterprises. In this case, even projects whose cost is extremely low can be financed (it can also be 80,000 - 100,000 euro) and the amount that can be financed is once again a 50% maximum. Beneficiaries of these funds intermediated by banks are SMEs.

INSME: Talking about intermediated funds, do you think that banks in each country do enough to promote this tool? And to what extent are they able to evaluate innovation projects?

Mr. Munini: Actually this EIB tool has been known for 30 years. So banks are used to interacting with the EIB. What is new is the fact that this financial instrument is applied to research, development and innovation. As a matter of fact, implemented projects are just a few. However, those that have been implemented act as multipliers. In 2004 in Italy we have approved projects related to research, development and innovation for an amount exceeding 1 billion euro and will allocate about 700 - 800 million euro. In 2003 these numbers were respectively 400 and 200 million euro; in 2005 we should further increase these amount. All the efforts for innovation however cannot come from SMEs. So achieving these results is ambitious.

INSME: So what is your assessment of this financing initiative for SMEs?

Mr. Munini: It is undoubtedly one of the strongholds of EIB’s activities (more than one third of EIB’s activities falls into the category of intermediated credit projects for SMEs). More specifically, as far as R&D is concerned, we cannot fully assess results because R&D is a sector that has never been financed either by the EIB or the bank system at these levels before. From this point of view, the EIB plays an important role as an innovator of financial products. We had to adapt our procedures, our themes and definition of contents in order to attain these levels. And together with financial intermediaries, such as Sanpaolo IMI in Italy for instance, we also had to find new instruments that are starting to work only now. Operating procedures however have been identified and the role of the EIB is clear and well defined.

INSME: Can you suggest a best in class as far as financing of projects for SMEs is concerned? Can you name a European country in which the experience in these credit lines is better?

Mr. Munini: Actually these credit lines are still very limited in number (just a few units). I can quote an example that seems interesting to me as to how the EIB, banks and public sectors have acted to finance SMEs. This example is related to ICO, Instituto de Crédito Oficial, the Spanish governmental institute that funds some facilitation laws. In short, ICO co-funds projects benefiting from public facilitation laws, and in doing so contributes to complete the financial plan on best conditions. In this way projects are partly funded by EIB and partly funded by public bodies. This could be similar to what we could do in Italy when funds allocated by the Minister for Research will be available: EIB funds could be put alongside those made available by the Ministry [INSME: in February 2004, the Italian Ministry for Education, University and Research (MIUR) and the European Investment Bank signed an agreement due to support research projects].

INSME: Incubators and in general what we call “intermediaries” (that is, research centres, science and technology parks, development agencies, etc.) are among the main protagonists of the INSME Network. Can you tell us something more about the financing initiatives dedicated to these bodies? You said before these bodies are a privileged target for the EIB too...

Mr. Munini: The EIB initiatives target all those players that support "intermediaries", that is public bodies at national or sub-national level. These initiatives have been particularly successful in the Scandinavian countries, where EIB has now an institutional role of co-financer. Co-operation with these organisations can be viewed as an example of public-private partnership, which represents one of the main priorities of the Innovation 2010 Initiative.

INSME: INSME firmly believes in public-private partnership too, as we are afraid that the public sector launches initiatives that are not considered as priorities by the private sector and so resources are wasted. In your opinion, how can this collaboration be carried out?

Mr. Munini: My opinion is that public-private partnership can be carried out by targeting incubators and science and technology parks. Talking about these players, there is an initiative worth mentioning and this is Sincrotrone Trieste, that we fund. The EIB is interested in technology clusters and excellence clusters because these are initiatives supported by the public sector and requiring dissemination in the private sector.

INSME: Within the Innovation 2010 Initiative, are there any other instruments available to fund innovation, in addition to the one described so far?

Mr. Munini: There is the European Investment Fund (EIF), a fund of funds investing in venture capital funds that are different in goals, geographical distribution, quantity and quality of innovation they look for and sectors in which they invest. The EIF’s portfolio consists of about a hundred funds. Each of them invest in a number of initiatives. If we cross these dimensions, we can say that there are several hundreds of enterprises benefiting from EIF support. The EIF is a consolidated reality, that has been operating for 7 to 8 years.

INSME: How can you assess EIF’s activities during these years? Has it achieved positive results?

Mr. Munini: The EIF has complied with its terms of reference. In other words, over this period it has invested diversifying its assets, it is present on different markets, it is a recognised player, it has helped to determine certain quality standards. If we consider the financial returns, we must say that this is not the best business cycle. Notwithstanding this, banks too maintain a role within the EIF and the Fund’s activity is evolving in interesting sectors. For instance the Fund is acting as a consulting body for the European Commission in the field of regional development, assessing the feasibility of regional investment funds. Another example is Germany: the government has appointed the EIF to assess the feasibility to set up investment funds worth of 250 million euro.

INSME: We can gather from what you say that EIB and EIF are becoming more and more inter-dependent and that their role is changing. Is it true?

Mr. Munini: Yes, it is. EIF and EIB are interdependent and integrated. For instance, the European Commission is identifying the way the VII Framework Programme can be used. EIB and EIF have been involved in this process, because in addition to classical instruments, it is envisaging to adopt innovative instruments.

INSME: Does EIB also carry out initiatives outside the European Union?

Mr. Munini: EIB is present in the ACP countries [Africa Caribbean Pacific]. It also has a financing department in Latin America and Asia. However, financial resources allocated to these areas are quite small (300 - 400 million euro that are renewed every 3 - 4 years). In Latin America, we usually fund infrastructures or initiatives originating from European enterprises that want to diversify in these markets. The same can be said for Asia.

INSME: And what about financing for innovation in these areas?

Mr. Munini: Of course, we can directly finance those enterprises that submit innovative projects to us. As far as financing for SMEs through intermediated capital is concerned, this instrument cannot be used because of the Bank’s dimension compared to the dimension of the market. If we consider Latin America for instance, we support a small number of  projects per year, usually co-funded with the Inter-American Development Bank. As for the Mediterranean basin countries, we have an intense investment activity. FEMIP [Facility for Euro-Mediterranean Investment and Partnership] is a remarkable example.

INSME: Going back to Europe, what is the total amount of financial resources made available by EIB?

Mr. Munini: Generally speaking, the Growth Initiative has given us a mandate to spend 50 billion euro in the decade 2000 – 2010 for projects focussed on research, development and innovation. We have prepared ourselves to achieve these levels of investment, which are remarkable compared to our previous activities and also to the sector’s dimension.

INSME: Do you think you will succeed in investing this amount of money without intensifying communication and promotion activities? Our impression is that instruments and resources made available by EIB are not very well known. Are you sure these opportunities will be seized?

Mr. Munini: The mandate received by EIB is certainly remarkable in amount: spending 50 billion euro for research, development and innovation in a decade is extremely challenging. But given the wide range of areas which we can support and thanks to the collaboration carried out with the major private and public players in the sector, we are confident that this effort will be successful, as initial results already demonstrate.

November, 2004 Copyright © INSME 2004

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