(Thomson Reuters Foundation, London, 1 March 2019) A torrent of banks and other financiers are shifting their money out of coal as investment risks in it grow. We have only 12 years left to save the planet from devastating climate change, the Intergovernmental Panel on Climate Change warned last October. With important governments missing in action, financial institutions have now emerged as unlikely allies of climate activists. In recent months banks and other financiers have pulled out of the coal and other fossil fuel sectors. The World Bank was the first major financial institution to end lending for most coal projects in 2013. Six year later the trickle is turning into a torrent. According to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA), more than 100 banks, pension funds, insurance companies, asset managers, development banks and export credit agencies with assets of at least $10 billion each have by now adopted some kind of coal restrictions.
Index for March 2019
Volume 18, Issue 3
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(OECD, Paris, 27 March 2019) With the adoption of the revised Recommendation of the Council on Bribery and Officially Supported Export Credits (OECD/LEGAL/0447) in 2019, ECG Members and other non-Members that have adhered to the Recommendation (hereafter, the “Adherents”) are demonstrating their continued commitment to take appropriate measures to deter bribery in the export transactions that they support. Implementation of the revised Recommendation will be monitored via surveys of the measures that Export Credit Agencies have put in place to combat bribery and will be supported by regular workshops to consider best practices, relevant international developments and evolving business practices. [The OECD Recommendations are not legally binding and rely only on moral force. OECD reporting on surveys and internal "monitoring" have fallen short of expectiations by international NGO corruption monitors.]
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(National Association of Manufacturers, Washington, 8 March 2019) Securing a level playing field internationally [i.e. matching corporate subsidies] is vital to manufacturers in the United States, which already export about half their production, supporting millions of workers across the country. While there’s been a lot of focus on foreign barriers that impede U.S. exports, one of the most concerning problems is of our own making: the Senate’s failure to confirm nominees to the Board of Directors of the U.S. Export-Import Bank. Without these nominees, the Ex-Im Bank cannot even consider major deals over $10 million or even act on the reforms that Congress set out it when it last reauthorized the bank in 2015. With the Ex-Im Bank severely weakened, manufacturers in the United States are losing sales to foreign competitors who are backed up by nearly 100 other export credit agencies around the world. For example, China’s two Export Credit Agencies routinely help their companies out-muscle their U.S. rivals. Last year, China provided $45 billion in medium- and long-term investment support for projects around the world, more than the rest of the world combined. According to the National Association of Manufacturer’s estimates, manufacturers lost at least $119 billion in manufacturing output, translating into 80,000 fewer manufacturing jobs in 2016 and 2017 as a result of an inactive Bank.
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(Global Trade Review, London, 13 March 2019) Excluded from many projects in countries under IMF bailout programmes, UK exporters are calling for a trade and aid link in African infrastructure and a rewrite of OECD guidelines that bind export credit agencies. The support is good but UK exporters want more. Some of the most lucrative public sector projects in Africa are out of their reach because of IMF rules on borrowing for Africa’s 30 heavily indebted, poor countries. If a country has reached its borrowing limit, it can’t borrow anymore unless 35% of that debt is concessional or has a grant element. Infrastructure groups say they could win much more business if the UK’s department for international development (DfID) was prepared to link some of its annual £13bn foreign aid budget with export credit. For UK exporters it is never enough. UKEF financing, albeit with long tenors and flexible terms, isn’t concessional. It’s never been part of the ECA’s remit to provide concessional export credit finance and the grant element of a loan can only come from the UK’s development agency. Unlike other OECD countries such as Japan, South Korea, Italy and France where their ECAs combine loans with a grant or aid element, DfID doesn’t want its budget or support linked to UK companies bidding for infrastructure projects.
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Reuters, Geneva/Paris, 28 March 2019) The World Trade Organization said on Thursday the United States had ignored its request to halt a subsidized tax break for Boeing Co in its main plane-making state of Washington as a 15-year-old transatlantic trade row edges towards tit-for-tat sanctions. The European Union said the WTO appeal ruling had vindicated its claims that Boeing continued to receive illegal subsidies, but the United States said only one measure, a Washington state tax break worth around $100 million annually, had been found still to violate the rules. A 2018 ruling by the WTO already found that the EU was also failing to stop its own illegal subsidies for Europe's Airbus. Washington has since claimed an unspecified amount in damages and a WTO mediator is still examining this claim. The "Bank of Boeing" is what critics sneeringly call the Export-Import Bank of the United States, a federal agency that provides low-cost loan guarantees that help companies, including Boeing, expand and compete internationally.
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(Globe & Mail, Toronto, 26 March 2019) Senior federal officials sought to warn Canada’s export agency that it had suffered “significant” risk to its reputation because of its US$41-million loan to the controversial Gupta brothers who were at the heart of a South African corruption scandal, internal documents show. The documents, obtained by The Globe and Mail under federal access laws, show that Global Affairs Canada wanted an explanation of the risky loan from the federal agency, Export Development Canada, during a planned meeting in March, 2018, where the Gupta deal was scheduled to be a top agenda item. Canada's export agency was aware of allegations against South Africa's controversial Gupta family for the past five years, yet it went ahead with a US$41-million loan to the Guptas anyway, a lawyer for the family says. After a year of legal battles, Canada’s export agency has won the right to sell a notorious Canadian-funded airplane that played a highly visible role in the corruption scandal that toppled South Africa’s former president, Jacob Zuma.
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(Standard Media, Nairobi, 7 March 2019) The Government of Kenya paid Sh10 billion to insure the loans taken for construction of the controversial Arror and Kimwarer dams, but industry experts argue the cost should not have exceeded Sh1 billion. Italian insurer SACE was paid Sh11.1 billion [94.2 million Euros] as premium for the loan, but a reputable firm that offers products on sovereign loans argues the much it would have charged was Sh750 million. In essence, going by arguments by local industry experts, Kenya paid 15 times over the fair rate to the Italian government-owned credit insurer for insuring the loans procured from a consortium of banks led by Intesa San Paolo. It would be a subject of interest for investigators to determine why SACE charged 17.5 per cent of the loan amount as premium, against industry rates averaging 1.5 per cent.
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(Sydney Morning Herald, Sydney, 5 March 2019) A major oil and gas company wants Australian taxpayer money spent on overseas energy projects, stoking fears that a Morrison government plan to boost development in the Pacific is a smokescreen for fossil fuel investment. A government amendment to the operation of its export credit agency, the Export Finance and Insurance Corporation, quietly passed Parliament's lower house with support from Labor last month. It is now being considered by a Senate committee. A submission to the Senate inquiry by Papua New Guinean oil and gas company Oil Search suggests fossil fuel projects may be lining up for funding under the proposed laws. The government bill would add $1 billion to the finance corporation's existing $200 million calling capital and broaden the national interest test for investment decisions. The Coalition and Labor combined to defeat an amendment to the bill proposed by Greens MP Adam Bandt that would have barred the corporation from facilitating thermal coal exports. Mr Bandt, the party’s climate change and energy spokesman, said the bill would “expand Australia’s fossil fuel exports at taxpayer expense”.
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(Global Trade Review, London, 13 March 2019) Europe to exempt export credits from banks’ leverage ratios have been received positively, but is this good news for all export finance banks? Last month, EU ambassadors endorsed the capital requirements regulation adjustment package, including an exemption for export credits from the leverage ratio. On the face of it, this should resolve a long-standing headache for export finance banks, who would suffer under Basel III due to a lack of an exemption from the leverage ratio calculation from the export credit agency (ECA)-backed portion of any transaction, despite the near-zero credit risk of an ECA. After years of advocacy by the European Banking Federation (EBF) export credit working group, the ICC global export finance committee and the ICC regulatory advocacy committee, along with support from the Berne Union, various European ECAs and national banking associations, the export finance community can now claim a victory. In practice, this will mean the traditionally low-risk business of export finance should become more attractive for banks, bringing much-needed liquidity to the market. Former EBF export credit working group chair, Henri d’Ambrières, tells GTR that a reluctance on the part of EU regulators to go further with this regulation could mean some exporters may be put at a disadvantage. This could lead to Spanish exporters losing competitiveness against their German counterparts in markets such as Latin America. The two countries jointly account for 40% of all EU exports to the region, and compete in areas such as capital goods for Latin America’s booming renewable power sector – usually purchased in dollars.
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(The East African, Nairobi, 6 March 2019) China will host its second Belt and Road Initiative (BRI) forum later this year, in its push to link the country by sea and land through an infrastructure network with Asia, the Middle East, Africa and Europe. The initiative launched by President Xi in 2013 seeks to strengthen Chinese global dominance through more than $1 trillion investment in infrastructure. In Africa, China invests majorly on transport and energy with Nigeria, Angola, Ethiopia, Kenya and Zambia among the largest partners in the BRI. In 2018, President Xi, during the Beijing Summit of the Forum on China Africa Cooperation (FOCAC), pledged $60 billion in financial support to Africa as part of the country's engagement with the continent in the next three years.
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Business Wire, Washington, 28 March 2019) Leaders of government, business, and academia will address the 2019 Annual Conference of the Export-Import Bank of the United States (EXIM) that held on Thursday and Friday, March 28-29, 2019, at the Omni Shoreham Hotel in Washington, D.C. The conference agenda as of March 27th is outlined here.