Government export credit agencies have been mulling multilateral collaboration in order to support the US$1-trillion Belt & Road Initiative and other projects that require significant funding investments.
This was highlighted in the recent Annual Investment Meeting (AIM) webinar in Dubai, sponsored by Etihad Credit Insurance, and participated by ECAs from the UAE, UK, Italy, France and China.
Spanning across 70 countries with US$1 trillion investment requirement over the 10-year period from 2017, BRI has been hailed as the most ambitious infrastructure initiative aimed at improving physical, trade, economic and digital connectivity across various sectors.
To help meet the investment needs of this massive project, the role of export credit agencies in
closing the large infrastructure gap constraining trade, openness and future prosperity is crucial.
Massimo Falcioni, CEO of Etihad Credit Insurance, the UAE’s federal export credit company, underscored that cooperation of governments through their respective ECAs can expedite the realisation and success of the BRI, also called the New Silk Road initiative.
According to Falcioni, such teamwork can lead to knowledge sharing between the ECAs, especially since they know the solvency of each of the company under their wing better than anyone else.
He also noted that cooperation between ECAs is essential in successfully funding big projects, such as those involved in the BRI, due to the fact that they can work together in terms of co-insuring and re-insuring large-scale initiatives. “We represent governments and through us – export credit agencies – we can help put in place solutions through co-insuring, reinsuring and knowledge sharing,” Falcioni said.
In addition, he said ECA collaboration can open up additional business opportunities, especially in terms of organising B2B meetings with pre-qualified clients and forging strategic alliances.
“This is true for the BRI and many other projects. Global cooperation amongst ECAs today is beyond crucial to help the world surmount a successful upturn from the crisis,” Falcioni said, noting that all the ECAs present in the AIM digital forum are strategic partners of ECI.
COLLABORATION: NEED OF THE HOUR
Collaboration is the need of the hour as the requirements for trade credit have also increased dramatically due to the market disruption brought about by the COVID-19 pandemic.
An article by Global Trade Review in May, citing International Chamber of Commerce (ICC) data, showed that as much as US$5 trillion of trade credit market capacity will be needed to return trade volumes back to 2019 levels in the wake of the COVID-19 crisis.
“With the World Trade Organisation (WTO) estimating a potential decline in global merchandise trade in the order of 13-32% in 2020, we hypothesise that something in the order of US$1.9-5tn capacity in the trade credit market will be required to enable a rapid V-shaped recovery as demand returns to the global economy,” the ICC report says.
Experts who participated in the digital forum, “Government Export Credit Agency’s Leadership in Belt & Road Initiative International Cooperation”, tackled the importance of a robust multilateral cooperation in shoring up support to the trade credit market, starting with BRI.
The New Silk Road initiative comprises a wide array of development and investment programmes that would stretch from Asia and Africa all the way to Europe—including development of ports, roads, railways, airports, power plants, and telecommunications networks.
Once completed, major investments in infrastructure of the New Silk Road are expected to impact 65 per cent of the world’s population and about a third of the global GDP, according to the data released by international financial institution European Bank for Reconstruction and Development.
While there are a lot of opportunities, the key to winning in this market is through offering competitive terms, said Italian Export Credit Agency (SACE)–Head of Dubai office for Middle East & North Africa Maurizio d’Andria. He said each ECA has to compete against their foreign counterparts with more competitive offerings.
He noted that while “the way to go and achieve consistent success is to give very competitive terms,” there is still a room for competitors to collaborate, such as in their shared goal of benefitting from BRI.
Describing the current market as a “blue ocean,” Runmo Zou, the Business Development Director for Dubai Team of China Export and Credit Insurance Corporation (SINOSURE), said that more than 97 per cent of their revenues are from short-term facilities, hence there are more room for ECAs to grow.
Another area of growth and collaboration are initiatives that promote sustainability. Catherine Dorgnac, Area Manager for the Middle East, Turkey, and Central Asia for Bpifrance noted the importance of incorporating sustainable initiatives in order to create a world well prepared to battle potential crises.
She said that COVID-19 has visibly reset trade and industries, a reason why ECAs, governments, and businesses must unite to address socio-environmental challenges. “We want to be supportive of all projects related to creating smart and sustainable cities. We want those committed to sustainable solutions,” Dorgnac said.
UK Export Finance (UKEF) has already echoed the benefits that nations can garner from global cooperation. UKEF, the oldest ECA in the world, has been aiming to work alongside China and other ECAs to ensure the large-scale success of the programme, according to Senior Counsellor for Middle East, Afghanistan and Pakistan David Moleshead.
Falcioni said: “Combining the resources of the governments through ECAs can make a difference, especially in the success of BRI. Working together, we can help put every government access the infrastructure development funding. Cooperation is vital because there is this knowledge transfer, mutual understanding and learning, which can help put in place co-insuring and reinsuring solutions.”
“We know that only by working together, we can create a market where everyone can win. We are much stronger if we work together. Together, we win,” he added.