5 Dec 2014

Estonia, Latvia and Lithuania 10-year owners at NIB

After close cooperation between NIB and Estonia, Latvia and Lithuania since the early 1990s, the three Baltic countries became full-fledged owners of the Bank in 2005. Since then, NIB’s lending exposure has more than doubled in the Baltics, contributing to NIB’s vision of a prosperous and sustainable Nordic-Baltic region.

At a meeting of Nordic prime ministers at Harpsund in Sweden in June 2003, the five heads of government agreed in principle to invite Estonia, Latvia and Lithuania to become members of NIB. The initiative expanded the Nordic policy to include the development of the Baltic Sea region, a matter of great interest to all Nordic and Baltic countries. Following national ratification processes, the three Baltic countries became full-fledged owners of NIB on 1 January 2005.

Ten years of NIB membership has been like a flash from a lighthouse in the Baltic Sea. For NIB, having three new member countries has meant increased scope for lending. More importantly, the enlargement meant that the Bank’s mission covered a larger geographical area than before and with countries in the midst of capital-intensive transformation.

In February 2004, former president of Finland Martti Ahtisaari gave a speech at a business forum in Vilnius where he stated that the Baltic Sea region has a range of challenges that are best solved by working together.

“The Nordic Investment Bank has an important role to play in investing in cross-border projects and financing infrastructure. There is great potential for growth in the whole Baltic Sea region. The membership of Lithuania, Latvia and Estonia in the Nordic Investment Bank is one way of supporting this growth, which benefits the Nordic and the Baltic countries alike,” Ahtisaari said then.

Ten years after, Pentti Pikkarainen, Director and Chairman of the Board at NIB, says that inviting the Baltic countries as co-owners of NIB was “definitely a right decision.”

“It has strengthened economic and political cooperation in our region. There is a lot of sympathy among the owners of NIB to support prosperity in the Baltic countries,” says Pikkarainen who is also Director General of Financial Markets at the Finnish Ministry of Finance.

“The Nordic-Baltic countries belong also to the same constituency in the IMF and the World Bank and we have excellent cooperation also in those institutions.”

Baltic investment programme

NIB has had long and fruitfull cooperation with Estonia, Latvia and Lithuania since long before 2005. The Baltics have been important lending receivers since they regained their independence in 1991.

Back then, there was a great need to develop financial mechanisms and to provide technical assistance with the purpose of initiating investments in small and medium-sized enterprises.

The Bank established a special Baltic Investment Programme that ran until 1999, and provided technical assistance to the management of banks, resident advisors in the credit departments and hands-on training of staff.

NIB’s lending exposure to the Baltic countries has more than doubled since they became members in 2005. At the end of August 2014, NIB’s total loan exposure in the Baltic countries amounted to EUR 1,110 million equal to 6.9% of NIB’s total exposure.

Significant loan projects

In the past decade, NIB has financed the acquisition of new service vessels and expansion of cargo handling capacity at the sea ports of Klaipeda, Riga and Tallinn.

The Bank has also contributed to the technical modernisation of railway operators in all three Baltic countries. In 2013, NIB and the Lithuanian railway company AB Lietuvos gelezinkeliai signed a 19-year-maturity EUR 114 million loan agreement for the construction of a European-gauge track as part of the future Rail Baltica route.

Rail Baltica can be easily labelled the project of the century for Estonia, Latvia and Lithuania. An investment in infrastructure of a magnitude historically unprecedented for the Baltic trio, its significance in the second decade of the 21st century compares to the opening of national borders after the fall of the Iron Curtain in the early 1990s.

Several loans to the countries’ national power utilities have financed the refurbishment of power plants and upgraded transmission lines. In 2005, NIB signed a loan agreement of EUR 53 million with Nordic Energy Link, a joint venture of five companies from the Baltic countries and Finland, to finance Estlink 1. This was the first ever power connection between the Baltic region and the rest of the EU.

In 2014, the Bank signed a 10-year-maturity, EUR 50 million loan agreement with AB Litgrid for the construction of an electricity transmission line between Lithuania and Poland. The LitPol Link will be the first interconnection between the Lithuanian power system and the electricity infrastructure of Western Europe.

The Bank has also participated in the modernisation of the health care sectors and acquisition of equipment for a number of hospitals in Latvia and Estonia.

These are but a few of NIB’s loan projects in Estonia, Latvia and Lithuania. All in all, the Bank had 98 outstanding loans in the Baltics at the end of August 2014.

Read more:

Baltic economy expert: Past ten years a rollercoaster ride. Column by Morten Hansen, Head of the Economics Department at Stockholm School of Economics in Riga