The EU’s new investment plan for the Eastern partners

What is the EU’s new Economic and Investment Plan? What are the priority areas for investment? What does this actually mean for the partner countries? How will the investment filter through, and will I feel the difference? What are the specific investment plans per country?

What is the EU’s new Economic and Investment Plan?

The Eastern Partnership’s agenda for recovery, resilience and reform is underpinned by an ambitious Economic and Investment Plan. Over the next five years, this plan will mobilise €2.3 billion from the EU budget in grants, blending and guarantees, to stimulate jobs and growth, support connectivity and the green and digital transition.

But this is just a starting point: the EU’s support under the Economic and Investment Plan should facilitate further public and private investments, by joining the forces of the EU, the European Investment Bank, the European Bank for Reconstruction and Development, and other International Financial Institutions, as well as development finance institutions from the EU Member States, partner countries’ national, regional and local governments, municipalities where relevant, and private investors. In this way, the plan is expected to leverage up to €17 billion in public and private investments to support the post-pandemic recovery.

The plan will combine actions to be implemented at local, national and regional level, and will be adapted to the specific needs of each partner country.

The Economic and Investment Plan underpins the Investment pillar of the post-2020 priorities for the Eastern Partnership, which supports post-COVID 19 socio-economic recovery and the aim to build back better through accelerating the green and digital transition.

However, these investments must be combined with clear progress in the fields of judiciary reform, public administration reform and human rights – the Governance pillar, which includes support for democracy, human rights, rule of law reforms, support for the fight against corruption, gender equality, support to civil society and independent media – all key values of the European Union, and the basis of a strong society that provides for its citizens.

What are the priority areas for investment?

Transforming the EaP economies to make them more resilient and integrated has become even more urgent in the context of the post-COVID recovery.

In line with the long-term policy objectives for the EaP beyond 2020, investments will be focused in the following main areas:

• Better transport connections
• Access to finance for SMEs
• Improved competitiveness and integration in EU value chains
• Digital transition
• Sustainable energy
• Environmental and climate resilience
• Health resilience
• Education reform and youth opportunities

However, for such investments to be effective and to foster development that is sustainable, improvements to the policy and regulatory environment are essential. The EU’s support will reflect its conditionality and incentive-based approach, and investments must be combined with clear progress in the fields of judiciary reform, public administration reform and human rights.

What does this actually mean for the partner countries? How will the investment filter through, and will I feel the difference?

You will definitely feel the difference. The Economic and Investment Plan contains a set of five flagship initiatives for each of the partner countries. These are concrete projects that will have a direct impact on people and businesses on the ground.

While the plan is a key part of the European Union’s support for recovery following the COVID-19 pandemic, it aims to do so by advancing each country’s strategic interests, supporting longer-term resilience and competitiveness, and delivering tangible benefits. The flagships have therefore been identified jointly with the partner countries, taking into account their own priorities, needs and ambitions.

What are the specific investment plans per country?

• ARMENIA has identified supporting socio-economic recovery through the ‘build-back-better’ agenda, focusing on support to the green and digital transition and completing the north-south corridor as key priorities, as well as further developing its southern regions.

The five flagship initiatives for Armenia are:

1. Supporting a sustainable,  innovative and competitive economy – Direct support for 30,000 SMEs Priority will be given to finance schemes for the greening of Micro, Small and Medium Enterprises (MSMEs), particularly those in the regions and those led by women. The large Armenian diaspora will be leveraged for impact investment and trade networks. Overall support for SMEs is estimated up to €500 million.
2. Boosting connectivity and socio-economic development – EU investment will focus on remaining segments of the north-south highway, including further supportive infrastructure and logistics. Investments will include planned work on the Sisian/Kajaran road tranche including a tunnel that is expected to cut travel time substantially. This will help increase mobility and opportunities for people in the country. The overall investment is estimated at up to €600 million.
3. Investing in digital transformation, innovation, science and technology – The EU will provide further support for a nationwide roll-out of e-government, the development of digital skills, and tech start-ups, and improve ICT companies’ access to finance. The overall investment is estimated up to €300 million.
4. Building resilience in the southern regions which have been most severely affected by the Nagorno Karabakh crisis – The EU will invest in a holistic approach to strengthen the Syunik region’s resilience and help with sustainable socio-economic recovery. Priority sectors could include housing, infrastructure, tourism, agriculture, education, health, renewable energy and support for local businesses. The overall investment is estimated up to €80 million.
5. Investing in a green Yerevan – Energy efficiency investments will cover lighting and energy infrastructure, heating, cooling and ventilation systems, and use of renewable energy sources in key public buildings. Investment in smart mobility and urban transport, such as the ‘green buses for Yerevan’ initiative, will improve and modernise public transport in the capital, allowing millions of citizens to breathe cleaner air. The overall investment is estimated up to €120 million.

• AZERBAIJAN has economic diversification at the heart of its policy agenda. Flagship support for SMEs, rural development, connectivity through the greening of the port of Baku and support for a digital transport corridor alongside the further development of the concept of smart and green cities all clearly contribute to this overriding objective.

The five flagship initiatives for Azerbaijan are: 

1. Green connectivity – supporting the green port of Baku – Support will be provided to the Port Baku Authority for further investment in the greening of the port to make it a sustainable hub for the smooth and accelerated movement of goods and services for trans-Caspian and other regional economic integration. The overall investment is estimated up to €10 million.
2. Digital connectivity – supporting the digital transport corridor – The EU will support the digitalisation of transport corridors in Azerbaijan, including the use of satellite navigation services, thus improving efficiency and reducing costs in the handling of freight across the digital transport corridors. The overall investment is estimated to amount to up to €10 million.
3. Supporting a sustainable, innovative, green and competitive economy — direct support for 25,000 SMEs – By promoting and diversifying SMEs’ access to finance, but also by facilitating the development of entrepreneurship and the provision of targeted capacity building support, this flagship will directly support the country’s economic diversification and greening of the economy, while supporting the competitiveness of start-ups and SMEs. The overall support to SMEs is estimated up to €50 million. 
4. Innovative rural development – The aim will be to facilitate access to credit for small and medium-sized farms and food business operators with a focus on food safety standards, sustainable irrigation practices, sustainable tourism in rural areas, the social economy and other green growth investments. The overall investment is estimated up to €50 million.
5. Smarter and greener cities – The green city concept is most advanced in Ganja (the second largest city and a recent signatory of the Covenant of Mayors), where a pilot smart and green city investment will focus on municipal solid waste, street lighting, and sustainable urban public transport infrastructure (electric trams). Building on this pilot, the objective is to support up to five additional smart, green city initiatives in the future, possibly starting with Mingachevir (another major urban centre in Azerbaijan). The overall investment is estimated up to €20 million.

• BELARUS has seen an unprecedented mobilisation of grassroots movements following the falsified elections in August 2020. The EU supports the people’s fight for democratic rights and, in the event of a democratic transition, stands ready to support Belarus with a comprehensive €3 billion economic plan, which includes support for SMEs, connectivity and trade links, twin digital and green transition and the foundations of a sustainable free and democratic Belarus.

The proposed support is dependent on a democratic transition. In the event that this takes place, the EU would support Belarus through the following five flagship initiatives:

1. Supporting an innovative and competitive economy — direct support for 20,000 SMEs – The EU would step up support for sustainable private sector development across the country with a view to unleashing business initiatives, facilitating SMEs development, and reducing the overreliance on the public sector targeting at least 20,000 SMEs. The overall support to SMEs is estimated up to €350 million.
2. Improving transport connections and facilitating EU-Belarus trade – Priority projects would facilitate trade and reduce bottlenecks. These include construction of the Minsk – Oshmany road, modernisation of the railway between Zhdanovichi and Molodechno, and the upgrade of the Lithuania-Belarus border road crossing point. The overall investment is estimated up to €200 million.
3. Boosting innovation and the digital transformation – To showcase Belarus’ edge in this field and boost digital skills across the EaP, the EU would establish an EaP IT-school in Minsk targeting young people in all the partner countries. This would be complemented by further investments to unleash Belarus’ innovation capacity through the development and implementation of the ‘entrepreneurial university’ concept bringing together academia and the private sector. Finally, the EU would invest in e-governance to modernise and facilitate transparent public service delivery to private individuals and businesses. The overall investment is estimated up to €20 million.
4. Supporting a green Belarus — energy efficiency, waste management and infrastructure – In the event of a democratic transition, the EU would redouble investments in this area and substantially boost its support for the country’s green transition through a combination of technical assistance and investments in waste management, energy and water utilities, and municipal/urban development. The overall investment is estimated to up to €200 million.
5. Investing in a democratic, transparent and accountable Belarus – The EU would deliver a substantial assistance package to support civil society and independent media, complemented with a comprehensive rule of law and judiciary reform, including legal framework review, capacity building and training of justice professionals. The overall investment is estimated up to €100 million. 

• GEORGIA has identified transport and digital connectivity (in particular through the Black Sea) and digital development as key priorities. Support for SMEs, access to finance and boosting export potential also feature high on Georgia’s agenda. 

The five flagship initiatives for Georgia are: 

1. Black Sea connectivity — improving data and energy connections with the EU – This initiative will further integrate the Georgian market with the EU market through the deployment of a submarine fibre optic cable. Citizens will benefit from a faster and more stable direct internet connection between Georgia and the EU. Further interconnectivity on energy between Georgia and the EU will also be promoted with a technical and economic feasibility study for deploying a submarine electricity cable between Georgia and the EU. The overall cost of the investment is estimated to amount to up to €25 million.
2. Transport connections across the Black Sea — improving physical connections with the EU – Among other things, this flagship will involve developing new ferry services and refurbishing ports, which will promote trade in goods and facilitate the movement of people by creating a direct link with the EU Member States. Improved connections will boost trade and economic cooperation, and strengthen Georgia’s role as a bridge between Europe and Asia. The overall cost of the investment is estimated up to €100 million.  
3. Sustainable economic recovery — helping 80,000 SMEs to reap the full benefits of the DCFTA – Support will include equity investments to accelerate the integration of Georgian SMEs into wider EU value chains, contributing to the diversification of trade between the EU and Georgia. A significant part of the EU’s support will go to SMEs in the agri-food sector. The overall support reaching SMEs is estimated to amount to €600 million.
4. Digital connectivity for citizens — high-speed broadband infrastructure for 1,000 rural settlements – This flagship will reduce digital inequalities by developing high-speed broadband infrastructure for around 1,000 rural settlements and strengthening ‘last-mile’ connectivity. This will contribute to economic development and recovery, while promoting digital inclusion in line with the national broadband strategy. The overall investment is estimated to amount to up to €350 million.
5. Improved air quality — cleaner air for over 1 million people in Tbilisi – In the coming years, the EU will work on improving air quality monitoring in Georgia by installing air monitoring equipment and building capacity. Besides work to identify pollution sources, concrete investments will be made to improve the situation. The initiative will also contribute to investment in green and sustainable urban transport in Tbilisi by building two urban cable-car lines. The overall investment is estimated to €100 million.

• The REPUBLIC OF MOLDOVA has identified supporting the economy and connectivity, fostering the green and digital transition, and education as key priorities, in line with efforts to stimulate long-term socio-economic recovery and unleash the country’s untapped economic potential. Pilot initiatives, such as the inland freight terminal, are also aimed at exploiting the full potential of the DCFTA with the European Union.

The five flagship initiatives for the Republic of Moldova are: 

1. Supporting a sustainable, innovative, green and competitive economy — direct support for 50,000 SMEs – From 2021, the EU will roll out programmes to foster the overall competitiveness of the Moldovan economy, with a focus on the green and digital transitions. The aim is to directly support 50,000 Moldovan SMEs and self-employed people. The Moldovan Organisation for SMEs Development (ODIMM) will play a key role in this respect. The overall support for Moldovan SMEs is estimated at up to €500 million of access to finance.
2. Boosting EU-Moldova trade — construction of an inland freight terminal in Chisinau – In order to facilitate trade and reduce bottlenecks, an inland freight terminal, building will be constructed in Chisinau (where 80% of all import/export operations take place), allowing for customs clearance and the provision of other essential freight services closer to the consumption and production centres. The overall cost of the project is estimated at around €30 million.
3. Increasing energy efficiency — expanding the refurbishment of district heating systems in residential buildings in Chisinau and Balti – The heating grid will gradually be replaced to allow residents to regulate the heating in their own apartments. In addition, thermal insulation will be provided to further improve energy performance. This will boost energy efficiency and reduce CO2 emissions, create jobs, improve people’s quality of life and reduce their electricity bills. The overall cost of the investment is estimated at up to €300 million.
4. Improving connectivity — anchoring Moldova in the TEN-T – The road programme will cover Moldova’s main road infrastructure, facilitating trade with the EU and strengthening the government’s capacity to maintain roads and protect physical assets through efficient axle load controls. The overall cost of the investment is estimated up to €780 million.
5. Investing in human capital and preventing ‘brain drain’ — modernisation of school infrastructure and implementation of the national education strategy – The EU will provide concrete assistance to Moldova’s national education strategy, especially modernising the education system, improving school infrastructure, matching skills development to labour market demand – with a focus on green and digital jobs – and ensuring the attractiveness of the teaching profession. Additional measures to improve access to childcare and other basic social services will also be mobilised to boost women’s employment. The overall cost of the programme is estimated to amount up to €25 million.

• For UKRAINE, robust and sustainable economic recovery from the pandemic is of paramount importance, and SME’s access to finance is crucial in this respect. Successful land reform is a top priority and, in providing new opportunities, key for the transformation of the economy. This also applies to further improvements of transport infrastructure, which will improve connections with the EU and within the region. The government also has high ambitions as regards digital transformation and e-governance and is keen to align with the European Green Deal in order to enable green transition.

The five flagship initiatives for Ukraine are: 

1. Supporting a sustainable, innovative, green and competitive economy — direct support for 100,000 SMEs – The EU will support programmes focusing on business incubators and will facilitate SMEs’ access to finance, expanding their export capacities and giving an overall boost to the economy. The overall support for SMEs is estimated at up to €1.5 billion. 
2. Economic transition for rural areas — assistance to over 10,000 small farms – The EU will support Ukraine’s land reform by contributing to the Partial Credit Guarantee Fund, which will support more than 10,000 small farms to secure quicker access to affordable loans and purchase the farmland they are cultivating, with an aim to develop more sustainable agricultural production and adapt to the consequences of climate change. The overall investment is estimated at up to €100 million 
3. Improving connectivity by upgrading border crossing points – Further exploitation of Ukraine’s tourism potential will soon require it to handle a four- or five-fold increase in border crossings. There will be a particular focus on border crossing points with EU Member States. Investments will focus on physical infrastructure, intelligent queuing and processing systems (especially for lorries) and IT systems that will streamline currently inefficient business processes. This will be complemented by further improvements in transport infrastructure, including rail and road links between major Ukrainian cities and border crossing points with EU Member States. The overall investment to upgrade border-crossing points is estimated at up to €30 million.
4. Boosting the digital transition — modernising public IT infrastructure – The success of the e-government eco-system depends on the administration’s IT infrastructure, which needs modernisation. This is also important for cybersecurity reasons, as Ukraine continues to be at the frontline of Russian hybrid attacks. The next few years should see the launch of a public sector digital transformation programme to support the modernisation of the administration’s digital transformation infrastructure and is based on a joint needs assessment by Ukraine and the EU. The overall investment is estimated at up to €200 million. 
5. Increasing energy efficiency support for renewable hydrogen – The Energy Efficiency Fund (EEF) set up in 2018/2019 and financially supported by the Ukrainian Government, the EU and Germany is funding projects to improve energy efficiency in apartment buildings to strengthen Ukraine’s energy independence, reduce household energy bills and cut excessive energy waste. The number of applications to the fund is so high that further EU funding and Ukrainian co-financing will be needed in the coming years. The overall number of households benefiting from support from the fund could reach 150,000. The EU also intends to support the development of clean and renewable energy in Ukraine, and renewable hydrogen is an important priority area for EU cooperation. The overall new investment in the EEF is estimated at up to €100 million.