The European Investment Bank is providing a USD 80 million loan (some EUR 93 million) (1) to Philips Semiconductors Philippines Inc. (PSPI), owned by Koninklijke Philips Electronics N.V., the parent company of the Philips Group, for the construction of the second integrated circuits assembly and test facility in Calamba, Philippines. The project concerns the extension of the existing production plant to more than double its capacity. The new building will be completed by the end of 2001; machinery will be gradually installed until mid-2004.

The operation provides significant benefits. Globally-operating Philips will optimise its production cycle for semiconductors and therefore improve its international competitiveness. Philips is one of the most important foreign direct investors in the Philippines. The project will create jobs with world class working conditions. It will favour increased skill levels in the supply industries, which gives scope for attracting further foreign direct investment.

The commercial risk of this 8-year loan (3-year grace period) will be guaranteed by Koninklijke Philips Electronics N.V. Risks of currency non-transfer, expropriation, war and civil disturbance are covered by the European Union (EU) budget guarantee. Accordingly the loan does not increase Philips' country risk exposure in the Philippines.

The loan is provided in the context of the EU co-operation policy with third countries. In Asia and Latin America (ALA), the EIB may lend up to EUR 2.48 billion during 2000-2006 to support capital investment projects implemented by subsidiaries of EU companies or joint-ventures between EU and ALA firms, or investment that results in environmental improvements or fosters regional integration. The EIB was set up in 1958 to finance investment furthering EU integration. It lends for regional development, infrastructure, energy, industry and environment. Outside the EU, the Bank contributes to the European development co-operation policy in some 130 countries in Central and Eastern Europe, the Mediterranean region, Africa, the Caribbean and the Pacific, Asia and Latin America.

In 2000, the EIB provided loans totalling some EUR 36 billion. The Bank borrows on the capital markets the funds for its lending. Its bonds have regularly been rated "AAA" by the leading rating agencies. The EIB works on a non-profit basis and can pass on to project promoters the excellent conditions it obtains on the markets. The EIB may finance up to 50 percent of project cost. On average it provides one third of the funding and co-finances investments with other institutions.

(1) 1 EUR = 0.8453 USD, 0.6026 GBP