Pascal Lagarde: ‘Lithuanian National Development Agency will have special importance during the tense economic cycles’
Orientation to a customer, professionalism and cooperation – these are the business and personal values stressed by Pascal Lagarde, an independent member of the Supervisory Council of the National Development Agency ‘Investicijų ir verslo garantijos’ (INVEGA) [en. Guarantees for Investments and Business] and an executive director of the French national development bank ‘Bpifrance’. This finance expert has shared his insights gained at Bpifrance in the interview, and explained what financial strategies give the biggest support for economies and what significant role will non-financial help to enterprises play on the sustainability path.
You joined Bpifrance 10 years ago. What were the main preconditions and conditions for establishment of the French national development bank?
The promise given in 2012 to establish Bpifrance (French national investment bank) was actually a part of the programme of newly elected president François Hollande. The idea was to rearrange public financial institutions operating at that time that were responsible for certain individual areas of economical promotion, for example innovations, loans, guarantees, equity SMEs and large enterprises. The changes were aimed at creating more convenient authority operating according to the single-window principle, where business people could receive all the necessary services. Therefore, I would say that we have had strong support from top political representatives from the very beginning. It was attempted to use these changes to facilitate daily life of business people and to induce national economics.
Now the situation in Lithuania is very similar. The idea to form a synthesis of all the present institutions is strongly supported by politicians. If compared with France, the main differences in the systems are parametric. Bpifrance support covers both financing of innovations and providing non-financial support to enterprises; the Lithuanian national development authority is going to invest into agriculture, real estate and infrastructure as well.
Recently, Bpifrance has been celebrating its anniversary. How would you evaluate the last decade – how was it? What challenges did you encounter and how did you solve them?
We encountered numerous challenges and therefore we greatly appreciate our achievements. In the beginning, it was very important to create and install a common culture among employees of different groups of companies. We were focused on very small parts of the market earlier, such as equity, loans, guarantees or financing of innovations. Only later we realised that if we combined our specialisations, exclusive competences and products, we would be able to give many more benefits to the customers. I would say that the second challenge we had encountered was to create a new trademark, a new identity for the enterprise that would be recognised and appreciated by our customers. The third challenge was to create new financial products and to offer financing models of a new type that we created after having familiarised ourselves with the market. In this way, we were able to offer financing services for the whole range of enterprises.
‘Bpifrance’ is operating according to the decentralised model, while the national development authority in Lithuania will be centralised. What are the best practical solutions of the Bpifrance business model that you would recommend introducing in the Lithuanian national development authority?
The most important aspect is to orient the entire organisation and all the interested parties to the customers. The customer’s path is very important in all organisations: from smaller ones, providing only specific services, up to larger organisations providing universal services. The second one is knowledge of the market and its analysis; we need to understand when and what processes are taking place in the market. This knowledge is necessary to be able to plan in a strategical and qualitative manner, and to adapt the products and their cycles quickly during economic cycles where changes are happening. In my opinion, the third important thing is to maintain a very good human relationship with intermediaries and customers, to have excellent IT systems, and to safeguard good investment portfolios and optimal risk management.
One of the strategic priorities of Bpifrance is decarbonisation and green industrial transformation. Bpifrance has granted EUR 23 billion to induce enterprises to move in the direction of sustainability. In your opinion, what would be the most effective method to induce the Lithuanian enterprises to implement the goals of sustainability and the Green Deal?
This is a very difficult question. I mean that the majority of such enterprises know that they have to implement changes in the fields of environmental protection, social and governance, and to reorient the business to respond to the goals of the Green Deal. The challenge lies in the fact that the enterprises do not know precisely how to achieve this and what funds they should use to finance transformation. These competences are still lacking inside and outside enterprises.
First of all, I would suggest providing non-financial help to enterprises – for example, assessments of the current situation, consultations and opportunities to share good practice and experience. The second step would be to create and provide certain specialised financial services, such as long-term loans or access to capital, so these enterprises are able to finance their journey to more ecological future that may sometimes be expensive and long.
How are business needs changing and what financial instruments do you find effective? How do you safeguard a live dialogue with enterprises and market participants?
At present, the business models in Europe are changing at the speed of light. Climate changes, digital technologies, ESG (environmental, social and governance trends), issues of sovereignty, energy prices, inflation and the war in Ukraine – these are the break points that force a reconsideration of business operations at present. Long-term financing and redistribution are two main elements that are of special importance for financial intermediaries and economic participants, as well as for business people, so that enterprises can become more resistant to economic and geostrategic shocks, and so they can be prepared for challenges of digitisation and climate. The Lithuanian national development agency also finds it important to keep close relations with all market participants – customers, financial intermediaries and interested parties. It is important to understand what is important for everyone and what market needs are present in the different segments.
You have been employed in the Supervisory Council of the Lithuanian National Development Agency for a while. What business or cultural differences have you noticed?
I would like to mention that the welcome by the Supervisory Council was especially warm and pleasant. Nobody regarded me as a foreigner, and only a few minutes later we started serious work. In general, I believe that the Lithuanian business community is very open to external influence and people. Besides, I have noticed great transparency and openness of work in the Lithuanian business and public sectors. When I received an offer to take part in the selection, I thought that the process would be collaborative, but everything was much more serious. I was interviewed more than once and was screened by the commission, and I am not used to such a selection process. One more thing that surprised me is that everyone is very straightforward and express their opinions openly. This differs greatly from the French mentality – we do not always say what we think, and try to avoid conflicts. In Lithuania, you say what you think, then discuss, a decision is made and everyone is happy with it, even if it is different from the one you believed to be right in the beginning. It was quite a big difference for me.
In your opinion, how should we assess and measure the future success of the national development agency?
I believe that this agency will play a crucial role in promotion of the Lithuanian economy and industrial transformation. It will be among the most important financial institutions in the country. Its success may be assessed according to three criteria: first, satisfaction of customers, financial intermediaries and other interested parties in the agency’s work; second, scientific and objective assessment of financial programmes; and third, a sustainable and profitable organisation that operates with determination regardless of any economic cycles. Of course, I would like to be part of the creation process of this institution.