What's New December 2019

"What's New!" is a periodic update to keep you informed of the latest on the ECA Watch website. What's New! features a wide range of materials related to the reform of Export Credit Agencies (ECAs) including NGO publications and releases, news articles, commentaries and announcements about the policies and practices of ECAs and ECA-financed projects world-wide.

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  • Controversy over Chinese subsidies for Huawei
  •  US Ex-Im Bank gets seven-year extension
  •  European Parliament asks Member states to end ECA support for fossil fuel projects
  •  Sweden proposes climate and export strategy which includes ban on ECA support for fossil fuel exploration and extraction
  •  Insurers drop coal in droves to “avoid climate breakdown”
  •  Korean ECA to Extend $375 Mil. to Daewoo E&C’s LNG Plant Project in Nigeria
  •  Gaslog LNG carrier announces $1.05 billion ECA backed debt
  •  Saudi Arabia looks for ECA finance to reduce deficits
  • UAE, Egypt to strengthen trade relations via ECA MoU
  •  Central Bank of Egypt launches ECA
  •  JBIC joins $1.3 billion financing for Bangladesh urea industries
  •  Chubb takes stake in ATI to boost African trade

Controversy over Chinese subsidies for Huawei

(Zdnet, York PA, 26 December 2019) Huawei Technologies has lashed out at a Wall Street Journal report that suggests the tech giant's success is fuelled by billions of dollars in financial support from the Chinese government, arguing that its ties are no different from any other "private company" that operates in China. The WSJ article noted that besides subsidies, Huawei since 1998 has received an estimated $16 billion in loans, export credits, and other forms of financing from Chinese banks for itself or its customers. But the WSJ also notes that Huawei’s largest American competitor, Cisco Systems, received $44.5 billion in state and federal subsidies, loans, guarantees, grants and other U.S. assistance since 2000. Further, it notes that Swedish export authorities provided some $10 billion in credit assistance for Sweden’s tech-and-telecom sector as of 2018 and that Finland authorized $30 billion in annual export credit guarantees economywide from 2017. A 2005 study by the UK Secretary of State for Trade and Industry showed that the "opportunity cost" of UK export credits, i.e. government "subsidies", was around US$271 million per annum. This dispute highlights the well known fact that Chinese and official OECD member export credit agency budgets are subsidies which violate the WTO's Agreement on Subsidies and Countervailing Measures. The OECD ECA Arrangement creates a WTO loop-hole for OECD ECA subsidies if they meet the OECD's poorly monitored and largely secretive OECD ECA self-monitoring. The Arrangement is a self-professed "Gentlemen's Agreement" designed to restrict a race to the bottom in export subsidies, but is flawed by a lack of transparency. So yes, the Chinese subsidize Huawei just as OECD ECAs subsidize their own exporters. The difference is the US claim of internet security concerns wrt Huawei in their efforts to retain economic superiority in global markets. Google and Facebook's violations of internet privacy and security don't seem to rate the same US concerns.


US Ex-Im Bank gets seven-year extension

(Space News, Washington, 21 December 2019) The year-end spending package President Trump signed into law late December 20 includes a 7 year re-authorization for EXIM, a lending agency that has been largely sidelined as a source of cheap financing for U.S. satellite deals since Congress let Ex-Im’s charter lapse in 2015. The $1.37 trillion omnibus bill, which funds the U.S. government through Sept. 30, 2020, provides Ex-Im its longest authorization period ever, though still shorter than what some lawmakers had sought. The enacted legislation also enables the bank to keep lending in the absence of a full board of directors by allowing other government officials to temporarily fill vacancies in order to maintain a quorum. New rules for Ex-Im Bank state that if the bank lacks a quorum for 120 consecutive days during a president’s term, a temporary board will form consisting of the treasury and commerce secretaries, the U.S. trade representative and the bank’s confirmed board members. That temporary board would remain until at least three board members are confirmed or until the U.S. president’s term expires... Proponents of Ex-Im Bank have in recent years sought to use the export-credit agency as a soft power tool to counter Chinese export credit and, by extension, Chinese influence globally. The legislation directs the bank “to focus on the important economic and national security challenges posed by China,” Kimberly Reed, Ex-Im’s president and chairman, said in a statement on Dec. 20. The board of directors of the Export-Import Bank of the United States (EXIM), included Nicaragua in its Country Limitation Schedule (CLS) Program, which, as of December 23, will stop working with Nicaragua. With this decision, Nicaragua joins the “undesirables club of the EXIM,” which also includes Afghanistan, Bolivia, North Korea, Cuba, Eritrea, Haiti, Iran, Libya, Nauru, Central African Republic, Somalia, Sudan, South Sudan, Syria, Tajikistan, Venezuela and Yemen.


European Parliament asks Member states to end ECA support for fossil fuel projects

(European Parliament, Brussels, 28 November 2019) The European Parliament resolution of 28 November 2019 on the 2019 UN Climate Change Conference in Madrid stresses that the EU’s budget should be consistent with its international commitments on sustainable development and its mid- and long-term climate and energy targets. Article 54 welcomes the decision taken by the EIB to end financing for most fossil fuel energy projects from the end of 2021 and specifically asks "the Member States to apply the same principle when it comes to export credit guarantees."


Sweden proposes climate and export strategy which includes ban on ECA support for fossil fuel exploration and extraction

(ECA Watch, Ottawa, 30 December 2019) The Swedish government has presented a climate policy action plan with 132 measures to the Riksdag "taking a holistic approach to how emissions will be reduced throughout Swedish society." We have been unable to find an outline of these measures but have been informed that the also recently updated trade and investment strategy includes a ban on export credits for fossil fuel exploration and extraction by 2022 (at latest) including for example, mining and construction machinery, trucks, dump trucks and wheel loaders, drilling equipment, excavators, where the purpose is to use these for the extraction of coal and oil or gas. It also includes fire protection equipment for oil drilling platforms. We hope to be able to provide further information in our next issue.


Insurers drop coal in droves to “avoid climate breakdown”

(Unfriend Coal, London, 2 December 2019) The number of insurers withdrawing cover for coal has more than doubled in 2019 as the industry’s retreat from the sector accelerates and spreads beyond Europe, the Unfriend Coal campaign reveals today in its third annual scorecard on insurance, coal and climate change. Coal exit policies have been announced by 17 of the world’s biggest insurers controlling 46% of the reinsurance market and 9.5% of the primary insurance market. Most refuse to insure new mines and power plants, while industry leaders have ended cover for existing coal projects and the companies that operate them, and adopted similar policies for tar sands. Action has escalated since international NGOs launched the Unfriend Coal campaign in 2017. Insurers have also divested coal from roughly $8.9 trillion of investments – over one-third (37%) of the industry’s global assets. Insuring Coal No More: The 2019 Scorecard on Insurance, Coal and Climate Change is published by 13 civil society organisations from 10 countries. It was launched to an industry audience at the Insurance and Climate Risk conference in London, as the UN Climate Summit commences in Madrid. As of November 2019, at least 111 globally significant financial institutions – including commercial banks, development financiers, insurers, export credit agencies and central banks – had divested from coal or reduced their exposure to the sector in other ways. Yet in July 2019, 2,459 coal plants with a combined capacity of 2,027 gigawatts were in operation, and another 980 with a combined capacity of 925 gigawatts were planned or under construction.


Korean ECA to Extend $375 Mil. to Daewoo E&C’s LNG Plant Project in Nigeria

(Business Korea, Seoul, 23 December 2019) The Korea Export-Import Bank announced on Dec. 22 that it will provide US$375 million in loans to Daewoo Engineering & Construction’s LNG plant project in Nigeria. For the first time as a Korean company, Daewoo E&C won the LNG plant as a prime contractor in September. It will carry out the project on an engineering, procurement and construction (EPC) basis. The LNG plant market had been dominated by five or six builders from developed countries including the United States, Japan, and Italy. The project involves building an LNG plant with an annual production capacity of 7.6 million tons and additional facilities for the plant on Bonny Island of southern Nigeria. When the plant is completed, the nation’s LNG production will soar from 22 million tons to 30 million tons annually. Apart from the Korea Export-Import Bank, the Korea Trade Insurance Corp. is considering extending a loan of a similar size. Korean export credit agencies (ECAs) are expected to provide around US$750 million to the project. This project is also the first to be supported through a special account set up by the Korean government to help Korean companies land more overseas orders.


Gaslog LNG carrier announces $1.05 billion ECA backed debt

(Hellenic Shipping News, Cyprus, 17 December 2019) LNG carrier GasLog Ltd. announced that it has signed an Export Credit Agency-backed debt financing of $1.05 billion with twelve international banks for its current newbuilding programme (the “Newbuild Facility”). The Newbuild Facility covers the balance due to the shipyard on delivery and consequently the final instalments of the seven newbuildings are fully funded. Five of these seven newbuildings are scheduled to deliver from the yards into firm multi-year charters in 2020 and the remaining two into firm multi-year charters in 2021. GasLog’s owned fleet consists of 32 vessels, with 25 liquefied natural gas carriers on the water and seven LNG carriers on order. This includes 13 LNG carriers in operation that are owned by its New York-listed unit GasLog Partners.The deal is backed by the Export Import Bank of Korea (“KEXIM”) and the Korea Trade Insurance Corporation (“K-Sure”), who are either directly lending or providing cover for over 60% of the facility. Gaslog's latest tanker acquisition was recently launched at the South Korean Samsung Heavy Industries shipyard.


Saudi Arabia looks for ECA finance to reduce deficits

(Bloomberg, Riyadh, 11 December 2019) Saudi Arabia may tap international debt markets as early as next month as it seeks funding to help bridge its widening budget deficit. In addition to selling bonds the debt office is also looking at alternative options including export credit agency financing. Fahad Al-Saif, head of the Finance Ministry’s debt management office, said “We are now engaged in ECA financing that actually makes sense to be plugged into the portfolio. Also infrastructure finance, project finance -- it depends. There are certain governmental projects that we could finance away from the debt capital markets.”


UAE, Egypt to strengthen trade relations via ECA MoU

(Gulf Today, Dubai, 16 December 2019) UAE and Egypt have agreed to strengthen trade relations and boost bilateral exports between the two countries through a Memorandum of Understanding (MoU) signed between Etihad Credit Insurance (ECI), the UAE Federal Export Credit company and the Export Credit Guarantee Company of Egypt (ECGE). UAE-Egypt non-oil trade in 2018 amounted to Dhs20.1 billion (US$5.44 B), a 14.6 per cent growth compared to Dhs17.6 billion (US$4.8 B) in 2017 indicating a strong overall strategic partnership between the two countries, according to data released by the UAE Ministry of Economy. Furthermore, the UAE ranks first globally in terms of investments in Egypt with total FDI amounting to Dhs24.3 billion (US$6.6 B) reflecting the activity of 990 Emirati companies that invested in Egypt at the end of 2018. Egypt, on the other hand, ranks 28th globally in terms of investing in the UAE with total FDI valued at Dhs3.3 billion (US$899 M) during the same period.


Central Bank of Egypt launches ECA

(Global Trade Review, London, 11 December 2019) The Central Bank of Egypt (CBE) has signed off on a new US$600mn export credit risk company in a bid to bolster Egypt’s intra-Africa trade links. The new company, which will be based out of Cairo, will seek to help Egyptian companies win contracts for major projects with African governments, which the African Export-Import Bank (Afreximbank) claims are [could be?] worth US$60bn annually. Trade between Egypt and other African countries is only around 2% of total Egyptian exports.


JBIC joins $1.3 billion financing for Bangladesh urea industries

(The Daily Star, Dhaka, 2 December 2019) The Hongkong and Shanghai Banking Corporation (HSBC) has arranged USD1.3 billion financing for Bangladesh Chemical Industries Corporation (BCIC) to set up its Ghorasal Potash Urea Fertilizer Project (GPUFP). This is the largest financing backed by an Export Credit Agency ever completed in Bangladesh. BCIC has signed loan agreement for $1.3 billion with Japan Bank for International Cooperation (JBIC), Bank of Tokyo-Mitsubishi UFJ Ltd (MUFG) and HSBC. Of the total credit HSBC will provide $300 million and rest $1 billion will be arranged by JBIC and MUFG.


Chubb takes stake in ATI to boost African trade

(Global Trade Review, London, 11 December 2019) Global insurer Chubb has made a US$10mn equity investment in the African Trade Insurance Agency (ATI), becoming the first global property and casualty insurer to invest in the multilateral political risk and credit insurance agency. ATI supports trade and investment in African member state nations by offering complete risk solutions, including credit insurance and political risk products. It currently has 16 African nations and 10 institutional members as shareholders, and claims to support trade and investment in the countries it represents equivalent to between 1 and 2% of their GDP.