1. No category

IMPROVING THE ROLE OF
EXIMBANKS AND ECAs IN THE
OIC MEMBER STATES FOR
INCREASING THEIR EXPORTS
5th Meeting of the COMCEC Trade Working Group
ECAs and Their Role in International Trade
Diana Smallridge, President
26 March 2015
World Exchange Plaza
PO Box 81119
Ottawa, Ontario, Canada
K1P 1B1
tel.: +1.613.742.7829
fax: +1.613.742.7099
www.i-financialconsulting.com
[email protected]
Introduction
1.
2.
3.
4.
5.
6.
2
ECAs in a general context
ECA facilities and features
ECAs in OIC countries
Features of ECAs in OIC countries
Best practices of ECAs
Recommendations and Conclusions
ECAs IN A GENERAL CONTEXT
3
There are different kinds of
institutions that can be called
Export Credit Agencies



4
Export Credit Insurance Agencies (ECIAs) insure
commercial or political risks in countries to where
their companies are exporting.
Export-Import Banks (Eximbanks) provide lending
and other facilities in support of exports, either
directly to exporters or to foreign buyers to
purchase national goods and services.
Export Development Banks are specialized
development banks that are focused on
international trade and investment and are similar
to Eximbanks in terms of facilities offered.
Their mandates are the same
but facilities can be different


The common ECA mandate is to support and
encourage exports and outward investment by
providing financial services in support of
international trade and investment transactions
Types of ECA facilities:




5
Financing directly to exporters and buyers
Financing indirectly through guarantees issued to
commercial banks who lend to exporters
Credit insurance to exporters and banks
Support to importers to facilitate their payment
obligations to exporters
ECAs are established to
serve two main purposes
To diversify a country’s export base and export
markets
1.


To fill market gaps and address market
disruptions
2.

6
By taking risks on new buyers, in new markets for new
exporters
By financing exporters and export transactions
By identifying parts of the market that the private sector
course of finance and insurance are unable to address,
such as SMEs, or foreign buyer risks
OIC ECAs’ contributions to
trade are relatively low
Total Exports
(USD bn)
World
2010
16,092.07 18,032.63
OIC Countries
1,329.35
Total Business
Volumes (USD bn)
2009
Berne Union
7
2009
1,314
1,680.77
2010
1,689
2011
2012
2013
19,147.48
19,726.98
20,357.48
2,122.48
2,261.77
2,215.79
2011
1,686
2012
1,721
2013
1,801
OIC ECAs (Aman
Union)
21.9
OIC ECAs/OIC
exports
<1%
Competition is not between ECAs
per se but between exporters



Competition between exporters must be on
price and quality of exporter product and
service, rather than on the price of their
financing
Subsidized financing packages can create an
unleveled playing field
Two agreements reflect this understanding:


8
The WTO and the OECD Arrangement on Export
Credits
The OECD Arrangement and the “safe haven”
ECAs benefit from bilaterally
and multilateral cooperation


9
Strategic Co-operation
 Berne Union, Prague Club, Aman Union, GNEXID, Asian EXIM Banks Forum, COFACE
Partner Network
Transactional Co-operation
 Debt collection and buyer information
 Reinsurance/coinsurance on multi-sourced
transactions
ECA FACILITIES AND
FEATURES
10
ECA provide facilities along
the Export Chain
11
There are five main types of
facilities offered
1.
Financing facilities

2.
Guarantee facilities

3.
Support for both wrongful and rightful calls
Advisory and other services

12
Credit insurance and investment insurance
Bonding facilities

5.
Domestic and foreign risks
Insurance facilities

4.
Short-, medium- and long-term domestic and foreign
loans
Overseas market information, country/buyer risk
assessment, general export-readiness guidelines for
SMEs, consultancy services, buyer credit information on
their local companies to other credit insurers
‘
OVERVIEW OF ECAs IN OIC
COUNTRIES
13
23 of 57 OIC Member States
have ECAs, EXIMS or programs
Country
Entity Providing Facilities
Nigeria
Senegal
Algeria
Bahrain
Egypt
Nigerian Export-Import Bank (NEXIM)
Societe Nationale d’Assurance du Credit et du Cautionnement (SONAC)
Compagnie Algérienne Assurance et de Garantie des Exportations (CAGEX)
Export Credit Guarantee Programme under Bahrain Development Bank
Export Development Bank of Egypt (EDBE)
Export Credit Guarantee Company of Egypt (ECGE)
Jordan Loan Guarantee Corporation (JLGC)
The Lebanese Credit Insurer (LCI)
Société Marocaine d'Assurance à l'Exportation
Export Credit Guarantee Agency of Oman (ECGA)
Qatar Export Development Agency (TASDEER/QDB)
Saudi Export Program (SEP) under the Saudi Fund for Development (SFD)
National Agency for Insurance and Finance of Exports (NAIFE)
Compagnie Tunisienne pour l'assurance du commerce extérieur (COTUNACE)
Export Credit Insurance Company of the Emirates (ECIE)
Export Credit Guarantee Fund under Albania Investment Development Agency (AIDA)
Sadharan Bima Corporation's Export Credit Guarantee Department (ECGD)
Asuransi Ekspor Indonesia (ASEI)
Indonesia Eximbank
Export Development Bank of Iran
Export Guarantee Fund of Iran (EGFI)
Export Credit Insurance Corporation (KazExportGarant)
EXIM Bank of Malaysia (MEXIM)
Pakistan Export Finance Guarantee Agency Ltd
Export Credit Bank of Turkey (Turk EXIM bank)
National Export-Import Insurance Company (UZBEKINVEST)
Jordan
Lebanon
Morocco
Oman
Qatar
Saudi Arabia
Sudan
Tunisia
United Arab Emirates
Albania
Bangladesh
Indonesia
Iran
Kazakhstan
Malaysia
Pakistan
Turkey
Uzbekistan
14
More than 50% of OIC Member
Countries do not have ECAs
There may a range of reasons why:
1.
2.
3.
4.
5.
15
There may not be a need for ECA facilities or there
is lack of demand.
The needs of exporters are being met by other
national entities.
There are needs, but there is lack of awareness on
the part of exporters, banks and the government.
There is lack of financial resources from the
government to set up a new institution/facility.
There may have been an ECA facility in place in the
past, but it expired or failed.
FEATURES OF ECAs IN OIC
COUNTRIES
16
There is no single perfect
model for an ECA



ECA objectives vary based on unique country
context
ECA effectiveness cannot be measured only by
its operational and financial success
Rather, what is important is whether the needs
of all stakeholders involved are being met



17
Exporters
Government
Private sector providers of lending and
insurance
In#general,#a#healthy#system#is#one#that#effectively#balances#various#stakeholder#needs#and#
interests,#while#accomplishing#the#ultimate#goal#–#providing#exporters#with#the#support#they#
need#to#be#internationally#competitive.###
#
Figure'1:'A'Healthy'Export'Credit'System'
'
There is however ‘a Healthy
Export Credit System’
.
Export Credit System Health Parameters
•Government has sufficient control, relative to its involvement in the export
Government
Control &
Oversight
credit system
•Government sets clear and attainable objectives
•System is regularly reviewed to reflect changes in the private sector
•Fiscal costs are measured and minimized
• Exporters get the coverage they need in the markets they are doing
Mission
Statement
and
Strategic
Objectives
Exporter Focus/
Service
Institutional
Strength
Private Sector
Involvement
business
• The product range meets the needs of exporters and their banks
• Pricing is risk-related and internationally competitive
• ECA is proactive and demonstrates innovation and flexibility
•The institution’s expertise is well-recognized and sought after
•The portfolio is actively managed
•The internal processes are not bureaucratic
•The institution’s human resources are stable and decisions are consistent
• ECA works well with banks
• ECA works well with insurers
• ECA actively encourages participation of private players
• There is no displacing/impeding of the private sector
#
18
#
2.1.1 Government#Control#and#Oversight#
For#Government#Control#and#Oversight,#the#question#that#is#considered#is#the#extent#to#which#
OIC ECAs vary by age
1978
Sadharan Bima Corporation's Export Credit Guarantee Department (ECGD) - Bangladesh
1984
Compagnie Tunisienne pour l'assurance du commerce extérieur (COTUNACE) - Tunisia
1985
Asuransi Ekspor Indonesia (ASEI) - Indonesia
Export Development Bank of Egypt (EDBE)
1987
Export Credit Bank of Turkey (Turk EXIM bank) - Turkey
Export Credit Guarantee Agency of Oman (ECGA) - Oman
Nigerian Export-Import Bank (NEXIM) - Nigeria
Export Development Bank - Iran
Société Marocaine d'Assurance à l'Exportation - Morocco
Export Credit Guarantee Company of Egypt (ECGE) - Egypt
Jordan Loan Guarantee Corporation (JLGC) - Jordan
National Export-Import Insurance Company (UZBEKINVEST) - Uzbekistan
Export Guarantee Fund of Iran (EGFI) - Iran
1991
1992
1994
19
1995
EXIM Bank of Malaysia (MEXIM) - Malaysia
1996
Compagnie Algérienne Assurance et de Garantie des Exportations (CAGEX) - Algeria
1997
National Co. for Credit Insurance and Guarantee (SONAC) - Senegal
1999
Saudi Export Program (SEP) under the Saudi Fund for Development (SFD)
2000
Pakistan Export Finance Guarantee Agency Ltd - Pakistan
2001
The Lebanese Credit Insurer (LCI) - Lebanon
2003
Export Credit Insurance Corporation (KazExportGarant) - Kazakhstan
2005
National Agency for Insurance and Finance of Exports (NAIFE) - Sudan
2007
Credit Guarantee Fund under Albania Investment Development Export Agency (AIDA) - Albania
2008
Export Credit Insurance Company of the Emirates (ECIE) – United Arab Emirates
2009
Indonesia Eximbank
2011
Export Credit Guarantee Programme under Bahrain Development Bank - Bahrain
Qatar Export Development Agency (TASDEER/QDB) - Qatar
OIC ECAs’ mandates vary
based on export development
strategies




20
Diversify into non-oil sectors (Oman, Qatar,
Iran and Saudi Arabia)
Increase national exports and promote new
trade relations (Algeria, Jordan, Lebanon,
Nigeria and Senegal)
Grow exports in specific sectors such coffee,
rubber and manufacturing (Indonesia,
Kazakhstan, Turkey and Malaysia)
Support SMEs as instruments for export
growth (Pakistan and Albania)
OIC ECAs share some
common operating principles
21

Non-competition with private sector
sources of finance and insurance

Maximum response times to clients
OIC ECAs have varying
corporate forms
Bahrain,
Qatar
Saudi Arabia
Albania
Other
`
15%
Lebanon
Privately-owned
4%
Senegal
Algeria
Morocco
Tunisia
Sudan
Pakistan
Mixed state/private
ownership (majority
private sector)
23%
Mixed state/private
ownership (majority
public sector)
12%
Egypt, Jordan
22
State-owned
46%
Nigeria, Oman, UAE,
Bangladesh, Indonesia,
Iran, Kazakhstan,
Malaysia, Turkey and
Uzbekistan
OIC ECAs have 3 levels of
“touchpoints” with Government



23
Financial
Governance
Policy
Government’s financial support
for an ECA can take different
forms




24
One-time or multiple capital injections
Fund, guarantee, reinsure transactions
Facilitate borrowing of an ECA by lending to it
Serve as a backer/guarantor of ECA borrowings
Government participation in
governance is determined by
level of ownership
25

Based on shareholding status, government is
allotted a certain number of representatives on
ECA Boards

Nature of participation includes general
governance and, in some instances,
management of the entity
As an instrument of public
policy, the government’s
influence varies

There is a spectrum of policy influence exercised by
governments over their ECAs
Adoption of
government policy
Strong Relationship

26
Influenced by
government policy
Independent of
government policy
Weak Relationship
ECA’s direct adoption of government policy as an
institutional mandate signals a strong relationship
between the two.
OIC ECAs have adopted
various business models•
The model based on the unique
national needs and circumstances
Insurance
Only ECA
•
•
•
•
•
Turkey
Indonesia (Exim),
Saudi Arabia,
Sudan,
Nigeria
Full-service
ECA
•
•
•
•
•
•
•
•
•
•
Oman
Senegal
Morocco
Tunisia
Algeria
Jordan
Kazakhstan
UAE
Qatar
Bangladesh
Indonesia (ASEI)
Lending
only ECA
• Egypt
• Iran
27
OIC ECAs offer 6 types of
facilities and products






28
Financing facilities
Guarantee facilities
Insurance facilities
Bonding facilities
Islamic finance and insurance instruments
Advisory or other services
Facilities cater to exporters’
needs across the Export Chain
29
OIC ECAs offering various
kinds of Financing products
30
Financing Facilities
ECA in OIC Member Country
Foreign input facility and local current facility
Nigeria, Turkey, Indonesia (Exim)
Financing for purchase of raw materials and inputs
Nigeria, Indonesia (Exim) Sudan
Special facilities financing for SME exporters
Turkey
Classic trade finance products
Nigeria, Indonesia (Exim), Iran
(EBDI), Turkey
Receivable finance from existing export sales
Nigeria
Factoring or receivables discounting
Egypt (ECGE), Lebanon
Upstream financing for future exports/exporters
NIgeria
Classic buyer’s credit facilities to overseas buyers of their
country’s exports
Saudi Arabia, Malaysia, Turkey,
Indonesia (Exim), Iran (EBDI)
Project finance facilities
Turkey, Malaysia
OIC ECAs offer two main kinds
of Guarantee facilities to banks
Domestic credit
guarantees
•
•
•
•
•
•
•
•
•
•
31
NEXIM
JLGC
SEP
NAIFE
ECGF
Indonesia EXIM
EDBI
MEXIM
PEFG
Turk EXIM
International guarantees to
foreign/local banks
•
•
•
•
•
MEXIM
Turk EXIM
SEP
Indonesia EXIM
EDBI
Almost all OIC ECAs offer
Insurance facilities

All but Uzbekinvest, EDBE, Albania and EDBI
offer export credit insurance
 Whole turnover basis



32
• Insurance on domestic sales (Senegal, Egypt
(ECGE), Jordan, LCI, Oman)
Special transaction basis
Credit insurance to cover documentary credits
for banks (Saudi Arabia, Kazakhstan, Malaysia)
A few offer foreign investment insurance
(Indonesia, Kazakhstan, Malaysia)
OIC ECAs offer two types of
bonding facilities
These facilities are offered by ECAs Senegal, Algeria, Bahrain,
Iran, Malaysia, Turkey and Uzbekistan
Insurance against
unfair or wrongful
calling of bonds
(covers political risks)
Guarantees against
any calling of the
bond, wrongful or
rightful
Bonding
Facilities
33
A small number of OIC ECAs offer
Islamic finance and insurance
instruments
Shariahcompliant general
insurance
• Indonesia
Islamic versions
of conventional
financing
• Indonesia (Exim)
• Malaysia
34
Shariahcompliant credit
insurance
Islamic
Finance and
Insurance
Facilities
• Qatar
• Malaysia
Data on Business Volumes
supported by OIC ECAs has
limitations



35
Data is available for only 18 institutions
About a third of these institutions do not have
updated data
Inconsistencies in the type of data reported
(some entities in the Aman Union report
lending numbers while others include domestic
credit insurance in their data)
Business Volume of OIC
ECAs varies significantly
Distribution of OIC ECAs by Business Volume (USD Millions)
8
7
6
5
4
3
2
1
0
< $100m
36
$100 $500m
$500 $1,000m
$1,000 $2,000m
$2,000 $3,000m
> $3,000
m
ECA’s BV/Exports indicates its
importance to the national
economy

37
This share of exports indicates the level of ECA
involvement in supporting exports
OIC ECAs’ average BV/Exports
appears consistent with OECD
ECAs but is actually much lower
• Average business volumes to exports for OIC ECAs is 5.48%
• Note: OIC Average falls to 1.84% when excluding Turk Exim and LCI
Distribution of OIC ECAs by “Business Volume as % of Exports” (%)
8
7
6
5
4
3
2
1
0
< 1%
38
1 - 5%
5 - 10%
> 10%
OIC ECAs partner with various
private and public sector entities
Internat’l
Banks
Private
Insurers
Domestic
banks
National
ECA
National
dev’t
banks
Gov’t
agencies
39
Other
ECAs
Assoc’ns
BEST PRACTICES OF ECAS
40
Eight case studies of OIC and
Non-OIC ECAs are showcased

OIC
Nigeria
2. Malaysia
3. Turkey
4. Indonesia
5. Lebanon
Non-OIC
1. New Zealand
2. Finland
3. Canada
1.

41
Nigeria: Sharp focus on
specific SME export market


42
NEXIM focuses on non-oil exports and virgin
segments of the market which commercial
banks are not structured to service
Lessons learned:
 Identify comparative advantage and build
knowledge
 Establish a clear vision and mission to define a
market space in which to focus
 Ensure good, up-to-date and reliable product
information is available
Malaysia: Linking local businesses
to global markets with a full product
offering


43
MEXIM supports export oriented businesses,
especially those in non-traditional sector, in
their expansion to new regional and global
markets
Lessons learned:
 Have a defined mandate, design niche
products and invest in staff
 Establish a Client Charter
 Form smart partnerships
Turkey: ECA with government
back-stop


44
Loss incurred under TurkExim’s programs due
to political risks are covered by the Turkish
Treasury and compensated appropriately
Lessons learned:
 Nature of government support
 Partnerships to benefit clients
 By participating in international groups,
monitor and follow other ECAs to diversify its
products and to develop new ones with an
innovative approach
Indonesia: A flexible business
model for today’s markets


45
Indonesia’s twin ECAs both offer Shariahcompliant products
Lessons learned:
 Give the ECA a clear mandate
 Flexible business model and innovative new
products for new/existing clientele
 Strong government backing
 Sound underwriting processes
Lebanon: Export credit services
delivered exclusively by the private
sector


46
Lebanon’s LCI is the only entity addressing the
export market and supports SMEs in engaging
in domestic and cross-border trade
Lessons learned:
 Private sector has significant capacity to
insure exports but cannot meet all the needs
 Holistic support to clients
New Zealand: The pragmatic
go-slow approach


47
New Zealand’s NZECO adopted a slow and
careful approach in identifying and addressing
the needs of exporters and relied on
outsourcing its technical management
Lessons learned:
 Start slow
 Listen to the exporters
 Outsource to the experts
 Create synergies with other parts of
government
Finland: A key player when
the market is disrupted


48
During the global financial crisis, Finland’s
Finnvera was able to offer exporters they cover
they needed to continue exporting to markets
that had been prohibited but that are major
export markets for Finnish exporters
Lessons learned:
 Understand not only the nature of the market
gap but why it is there
 Price to risk, but consider exporter
competitiveness
Canada: An ECA that makes
exports happen


49
Canada’s EDC offers the range of export credit
and financing products including equity in order
to support “integrative trade”
Lessons learned:
 Benefits of a commercially oriented ECA
 Competition with the private sector is not
necessarily a bad thing
 The role of government should be carefully
circumscribed and defined
 Innovations in product offering and approach
come from thinking about global supply chains
and how national companies fit
Best practices models should
not be “cut and pasted” but
lessons can be adapted

50
Case study examples indicate what makes an
ECA effective:
•
Minimize risk position of the government
through sound governance
•
Optimize the involvement of commercial
banks and private financiers
•
Meet the needs of exporting companies by
first understanding these needs and
subsequently providing business solutions
Lessons can also be drawn
from unsuccessful ECAs

51
Some features that make an ECA ineffective
include:
•
Governance structure and business model
that allows political interference leads to
unsound decisions
•
Absence of detailed market knowledge and
customer feedback leads to unsustainable
products offerings
•
Inability or reluctance of shareholders to
provide necessary financial backing
All ECAs encounter some
common obstacles





52
balance operating within the “market gap” while
promoting the involvement of the private sector
maintain a flexible organizational structure to step into
or out of a particular market segment while keeping
current with modern banking and insurance practices
be financially self-sustaining while only serving areas of
the market that the private providers deem too risky or
where costs cannot be fully recovered from the client
have staff who have the requisite expertise while
following civil service hiring requirements restrictions
operate independently from the government while still
being subject to various forms of guidance
Common success factors ensure
an ECA is on the right path



53
Sensitivity to the capacity and evolving needs of
exporters and market players (banks, insurers, etc.)
combined with awareness of government priorities
Effective management of internal operations relies on
sound systems, trained management and staff and the
ability of an ECA to exercise autonomy
Relations with the government. When an ECA is unduly
influenced in the area of policy-making, the institution
is unable to serve its clients
Common success factors
ensure an ECA is on the right
path (Cont’d)


54
The financial instrument used by ECAs, namely the
explicit or implicit guarantees of the national
government, is reliant upon the acceptance of the
ECA’s credit rating in the market.
The raison d’être of ECAs is to identify and address
market gaps and needs. Thus, a disconnect with
market conditions which is manifested in the
nature of an ECA’s approach and product offerings
compromise the institution’s ability to exercise its
mandate and achieve its objectives.
RECOMMENDATIONS &
CONCLUSIONS
55
Recommendations for the
government
1.
2.
3.
4.
5.
56
Give the ECA a clear mandate, statutory
functions and a sound governance structure
Define the nature and extent of government
financial support, and properly plan for this in
the national budgeting process
Constantly monitor and review the ECA’s
activities and portfolio
Circumscribe the role of the government in the
ECA’s activities
Undertake regular, external independent
evaluations
Recommendations for improving
existing ECAs
1.
2.
3.
4.
57
Establish a clear vision and mission to define a
market space in which to focus
Understand not only the nature of the market
gaps but why they exist
Understand the export market and exporters’
contribution to global supply chains
Conduct extensive research to ensure up-to-date
knowledge about the needs of national
industries and evolving trade flows, in order to
design the products and facilities that best suit
the export landscape
Recommendations for improving
existing ECAs (cont’d)
5.
6.
7.
8.
9.
58
Consult with the private sector sources of
finance and insurance with a view to maximizing
their contribution
Create links to international partners and
players
Seek client input and feedback
Continuously review and improve internal
technical and management systems
As a financial institution, ensure financial
sustainability through robust planning and risk
management
Recommendations for new
ECAs, prior to establishment
1.
2.
3.
4.
5.
6.
7.
59
Conduct research and undertake consultations
Define and analyze the market gap
Validate analysis and identify policy options
Consider a variety of business models and the
fiscal and financial implications
Consider options for the preferred corporate
form and related governance arrangements
Develop a business plan
Establish a detailed implementation plan
Conclusions

ECAs are important public policy tools that will
enable OIC countries to:



Current state of OIC ECAs


60
Achieve the organization’s shared goal of
expanding intra-OIC trade
Increase OIC export growth, ultimately
increasing OIC’s share of global trade
Contribution to national exports is below
international standards
There is also a wide range of disparity in
capacity, experience and practices
Conclusions (Cont’d)

61
Possible ways forward:
 Engage in capacity building and institutional
strengthening both for those OIC countries
with and without ECAs
 Establish tailored technical cooperation
partnerships between new ECAs and more
advanced ones
 Promote existing initiatives such as Aman
Union’s training and information exchange for
OIC insurers
Thank You
World Exchange Plaza
P.O. Box 81119
Ottawa, Ontario K1P 1B1, Canada
Tel.: +1-613-742-7829 ext. 20
Fax: +1-613-742-7099
General Email: [email protected]
Direct Email: [email protected]