Hi-tech pioneers to get funding to compete with US

Date: 27/05/1999

By Renée Cordes

EU LEADERS are set to approve a h1-billion programme for channelling Union funds into 'innovative' high-technology projects at the instigation of French Finance Minister Dominique Strauss-Kahn.

The plan is intended to help the Union compete with the Americans at the cutting edge of new technologies by imitating the 'picking winners' approach to funding cross-border transport schemes.

At next week's Cologne summit, EU leaders will call for the creation of a priority list of hi-tech projects which could benefit from Union funds, along the lines adopted for the showcase Trans-European Networks (TENs). A committee of industrialists and scientists have been tasked with drawing up a list of areas which the European Investment Bank (EIB) could support.

" This should help not just the hi-tech fast-growing companies but others as well that might have great techniques or technologies they want to exploit," said Gary Parker, spokesman for the small and medium-sized businesses lobby group UEAPME.

Three years ago, an alliance of the German, British, Dutch, French, Finnish and Swedish governments rejected a proposal by Acting European Commission President Jacques Santer to increase TENs and research spending by €1 billion.

The EIB has already invested €600 million indirectly in hi-tech companies as part of the mandate it received at the June 1997 summit in Amsterdam, allocating the money to venture capital firms which take a chance on start-up companies.

Under the new plan, it will be able to draw up to h1 billion from its reserves to allocate to venture capital firms and offset risks of investing in start-ups. "It makes the EIB one of the largest sources of risk capital in Europe," said EIB spokesman Adam McDonough, who added that any recommendations from the Cologne summit would be voted on by the bank's board of governors at its meeting in June.

The approach is a gamble for the EIB, which normally provides loans with government guarantees. However, officials said they were confident the institution would get a return on its investment, even if only in the long term.

Venture capital funds tend to be very specialised in particular sectors or regions, investing in a number of companies so as to diversify their investment and minimise risk if one or two should fail. In addition to providing funding, the fund manager contributes advice and expertise in an effort to contribute to the success of the enterprises.