What's New December 2020

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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  • UKEF to stop funding overseas fossil fuel projects?
  • EU Commission Approves €625 Million Italian Scheme to Counter COVID-19 Impacts
  • EXIM is helping American workers and keeping China at bay
  • Unions oppose EXIM relaxation of domestic content rules
  • Korea's Eximbank provides $500 mil. for Mozambique gas project
  • Too Many Eggs in the Dragon’s Basket? Part Two: Diversifying Australia’s Export Base
  • UK widens access to export loans as post-Brexit transition ends
  • UKEF concerned over ‘largely unused’ export credit facility
  • Ugandans question ECA supported EACOP pipeline vs energy transition
  • UAE, Israel export credit agencies sign trade cooperation deal
  • Ukrainian-UK Defense Cooperation: Will UKEF Have Kyiv’s Back?
  • Massive SACE loan from Italy to Egypt
  • Shipping lenders face carbon cutting shortfalls despite Poseidon Principles
  • Swedish ECAs propose $2-billion credit for aviation development in Vietnam
  • Norwegian Air secures court protection over €4.1bn debts
  • Hungarian & Russian ECAs sign $1.17 billion Egyptian rail deal
  • Russian Export Forum to focus on COVID-driven incentives for businesses
  • China, Japan, and S. Korea see $205 billion renewable energy market in Southeast Asia
  • Crisis response: a paradigm shift for ECAs

UKEF to stop funding overseas fossil fuel projects?

(Sydney Morning Herald, London, 12 December 2020) British taxpayers will stop subsidising overseas fossil fuel projects under a pledge by Prime Minister Boris Johnson which opens a new front in the push for more urgent international action on climate change. Johnson will announce the "world-leading policy" while opening a virtual climate summit on Sunday morning. The plan is yet to be finalised and a start date has not been settled, but Johnson will tell world leaders he will stop the government's export credit agency from providing finance or other support for the extraction, production, transportation and refining of crude oil, natural gas or thermal coal overseas. Green groups have accused the British government of "rank hypocrisy" for talking tough on climate change while still directing billions of pounds towards polluting projects abroad. In June, it promised nearly £900 million ($1.58 billion) in loans and bank guarantees to help build a huge liquefied natural gas project in Mozambique which will open up the country's vast gas reserves. Environmental campaigners are challenging the deal in court on the basis it is incompatible with the UK's Paris climate accord commitments. A third runway at London's Heathrow Airport was blocked by the courts in February because the mega infrastructure project did not take the UK's climate obligations into account. UN secretary-general António Guterres is pushing for all development finance institutions to halt fossil fuel financing ahead of a crucial international climate summit in Glasgow next November. [Meanwhile, as recently as December 2nd, UKEF revealed in response to a parliamentary question that it had been approached regarding finance for Uganda's EACOP pipeline, but that no decision has yet been made. The French, German and Italian ECAs are also reported to have been approached ($). While a welcome advance, we must remember that these measures have been promised for years with little progress to-date.]


EU Commission Approves €625 Million Italian Scheme to Counter COVID-19 Impacts

(Schengenvisainfonews, Prishtina, 7 December 2020) Operators together and travel agencies in Italy affected by the Coronavirus outbreak will receive financial support to get out of the current economic crisis, as the European Union Commission has approved €625 million Italian scheme, under the State aid Temporary Framework. The European Commission concluded that the scheme notified by Italy completes the conditions set out by the Temporary Framework, significantly that aid will not surpass €800,000 per company; and it will be allocated by June 30, 2021. The Temporary Framework provides several types of aid, which can be granted by the Member States. The framework was amended, on April 3, May 8, June 29 as well as October 13, 2020, and includes, among other financial mechanisms, public short-term export credit insurance for all international countries, without the need for the Member State in question to show that the respective country is “non-marketable”.


EXIM is helping American workers and keeping China at bay

(The Hill, Washington, 17 December 2020) [An example of political influences on EXIM vs the OECD's purely economic free market level playing field.] One year ago, under President Trump’s leadership, Congress came together across party lines to re-authorize EXIM, our nation’s export credit agency. As our great economic resurgence continues and American companies battle the setbacks caused by COVID-19, that decision looks even better. American companies and their workers face an unlevel playing field, where countries like China stack the deck. As just one part of the Chinese Communist Party’s multi-faceted Belt and Road initiative to achieve global dominance, its government offers vast amounts of export finance to incentivize foreign companies to purchase Chinese goods and services. The country’s export financing is estimated to equal 90% of what is provided by all G7 countries combined. While the number of export credit agencies like EXIM has grown to 115 around the world, up from 85 only four years ago, China’s expansive export and trade-related activity far exceeds that of other countries. The reauthorization law charges the agency with a goal of reserving no less than 20% of its total financing authority — $27 billion out of $135 billion — for support of U.S. exports to neutralize export credit or other subsidies provided by China or other covered countries.


Unions oppose EXIM relaxation of domestic content rules

(Market Screener, Annecy, 8 December 2020) EXIM, the U.S. export credit agency that is supposed to support U.S. jobs by financing exports of U.S.-made goods, is instead considering extreme proposals to destroy requirements that tie financing to domestic content rules. Under the guise of competition from China, the Bank posted a public notice just before Thanksgiving soliciting comments on weakening its current domestic content requirements. Proposals to weaken the current content rules would allow U.S. exporters to offshore more American jobs to other countries and receive Ex-Im financing to do so.


Korea's Eximbank provides $500 mil. for Mozambique gas project

(Korea Times, Seoul, 14 December 2020) The Export-Import Bank of Korea (Eximbank) said Monday it will provide $500 million (545 billion won) in financial support for a major integrated liquefied natural gas (LNG) project in Mozambique. The project financing by the state-run lender is aimed at helping Korean companies successfully complete the construction of two LNG plants. The total value of the project is about $23.5 billion. When the project is finished, about 12.9 million tons of LNG will be produced from the plants annually. This amounts to 23 percent of Korea's annual LNG imports. "We expect the project to create 1,300 new jobs annually and promote foreign exchange earnings," an official from the lender said. The Korean construction and equipment manufacturers taking part in the project plan to invest $550 million in the five-year project. Eximbank also said it expects two Korean shipbuilders ― Hyundai Heavy Industries and Samsung Heavy Industries ― to win orders for 17 LNG ships, though contract negotiations are still underway. This is not the first Korean Exim's project in Mozambique. A group of eight export credit agencies have joined the project across the globe. They include Eximbank, the Export-Import Bank of the United States, the Japan Bank for International Cooperation and SACE from Italy. The project has exposed workers to Covid-19 and created a natural resource curse in Mozambique where export credit agencies have supported hugh MNC oil and gas developments.


Too Many Eggs in the Dragon’s Basket? Part Two: Diversifying Australia’s Export Base

(Future Directions, Nedlands, 15 December 2020) Since the publication of Part One of this paper, further deterioration in the Australia-China political and trading relationships has occurred, with the media offering useful commentary and analysis of the escalation, including as it relates to exports of wine, barley and coal. Despite serious current issues, Australia’s export reliance on China as a key destination for commodity exports will continue, but concurrent initiatives to broaden and grow the export base have to be pursued. Productivity benefits accrue from exporting, but the primary explanation is economically simplistic, in that countries promote their exports to cover the payments made for imports. Australia needs to continuously import an array of products and services that are not produced domestically but which are vital to sustaining the economy and preserving a high standard of living.


UK widens access to export loans as post-Brexit transition ends

(Reuters, London, 7 December 2020) Britain’s government said on Monday it would offer a wider range of loan guarantees to promote exports as part of a drive to boost overseas sales following the country’s departure from the European Union, its biggest foreign market. Lenders will receive a state guarantee for 80% of the money they lend to companies to support exports, up to 25 million pounds per business. The guarantees will be available to support working capital and other general costs, and will not be tied to specific export contracts, which was usually the case under previous schemes underwritten by export credit body UK Export Finance.


UKEF concerned over ‘largely unused’ export credit facility

(The NEWS, Islamabad, 11 December 2020) The UK on Thursday asked Pakistan to expedite utilisation of 1.5 billion pounds of annual UKEF credit line by facilitating UK businesses investing in and exporting to the South Asian economy. British High Commissioner to Pakistan Christian Turner said £1.5 billion of credit line for export credit facility remains largely unused. “British companies are keen to invest in [sic - invest in, not "sell to"] the energy sector of Pakistan especially in off-grid solutions and distribution, generation system,” Turner said. The UK credit financing for Pakistan has tripled in the last two years. In September, UK Export Finance, a state-owned credit financing agency, increased its annual funding limit to £1.5 billion from £1 billion earlier for British businesses to promote trade with and investment in Pakistan.


Ugandans question ECA supported EACOP pipeline vs energy transition

(Daily Monitor, Kampala, 30 November 2020) In the wake of Covid-19, there is need for governments to ensure a just recovery and transition to low-carbon energy systems for economic and social recovery. Clearly, the government continues to fail Ugandans in-terms of current fossil fuels development plans. Government is still making progress towards development of its 6.5 billion barrels of oil, with plans to build a $3.5b East African Crude Oil Pipeline (EACOP). However, as government seeks to turn oil reserves into tomorrow’s fuels, oil development will certainly further lock us onto the path to irreversible climate change and failure to meet Paris Climate Agreement, goals. Moreover, many oil projects continue to rob locals of their land and livelihoods in violation of their land and other property rights. These are degrading the environment and climate in equal measure,  hence fuelling a triple crisis. Mr. Cyrus Kabaale, Uganda


UAE, Israel export credit agencies sign trade cooperation deal

(Gulf News, Dubai, 13 December 2020) Etihad Credit Insurance (ECI), the UAE Federal export credit company, and The Israel Foreign Trade Risks Insurance Corporation (ASHR’A) have agreed to jointly create a strategic cooperation in supporting exports, trade and investment; explore new business opportunities; and forge collaborations in technical assistance, training, and capacity building in both countries. The annual exchange of trade between the UAE and Israel in a wide spectrum of industries is expected to reach $4 billion (Dh14.68 billion) a year. Under the US promoted UAE-Israel Abraham Accords, the first normalization of relations between an Arab country and Israel since that of Egypt in 1979 and Jordan in 1994, the UAE has abolished Federal Law No. 15 of 1972 regarding the Arab League Boycott of Israel and the penalties thereof. As there are no Emirati embassies in Israel document authentication for company and bank account setup will also be a challenge.


Ukrainian-UK Defense Cooperation: Will UKEF Have Kyiv’s Back?

(Eurasia Daily Monitor, Washington, 15 December 2020) In October 2020 a funding pledge was made by the UK’s export credit agency in the amount of 1.25 billion pounds ($1.68 billion) for the construction of missile boats and new naval infrastructure in Ukraine. Missile boats and naval bases are critically important to Ukraine’s capacity to deter an enemy as well as respond in a crisis in the Black Sea and the Sea of Azov. These capabilities are crucial to Ukraine in this closed maritime theater considering Russia’s overwhelming superiority when it comes to anti-ship missiles. Moreover, London promised to send Royal Navy ships to the region in order to boost Ukraine’s ability to combat threats in the Black Sea.


Massive SACE loan from Italy to Egypt

(Middle East Eye, London, 11 December 2020) Government sources in Egypt familiar with economic and military cooperation with Italy have revealed that an agreement is imminent between the Egyptian government and the Italian Export Credit Agency (Sace), reported Al Araby Al Jadeed. The agreement would clear the way for Egypt to obtain a loan of more than 5bn euros ($6 bn), which would be financed by a number of Italian and European banks, the news website said. The loan would be disbursed in phases during the current and following fiscal years and used to finance half of the amount required in the Italian-Egyptian arms deal, worth about 11bn euros ($13.3 bn), according to the sources. The sources said that Egypt had previously purchased two Italian multipurpose frigates (FREMM) as part of the deal worth 1.2bn euros ($1.45bn), of which 500m  euros ($605m) were a loan from Italy to the Egyptian Ministry of Defence. The new loan would increase the interest rate by about five percent over the previous one. However, the sources refused to disclose the interest rate that had been agreed upon. Any new deal would impose significant economic burdens on Egypt for about seven years, with the Ministry of Defence paying the largest instalment of the value of these loans, according to the sources.


Shipping lenders face carbon cutting shortfalls despite Poseidon Principles

(Reuters, London, 16 December 2020) Many of the world’s biggest lenders to shipping companies fell short of carbon-cutting targets last year in the first analysis of CO2 goals for the sector. Global shipping accounts for nearly 3% of the world’s CO2 emissions and the industry is under pressure to reduce those emissions and other pollution. About 90% of world trade is transported by sea. Last year, a group of leading banks signed up to environmental commitments known as the Poseidon Principles, whereby financiers take account of efforts to cut CO2 emissions when providing loans to shipping companies. In the first climate assessment report issued by the signatories, which includes emissions data collected from borrowers, just 3 of 15 financiers – Bpifrance Assurance Export, Export Credit Norway and ING – were aligned with IMO decarbonisation targets in 2019. Twenty banks jointly representing approximately USD 150 billion in shipping finance, have come together to commit to the Poseidon Principles, some of them ECAs.


Swedish ECAs propose $2-billion credit for aviation development in Vietnam

(VnExpress International, Hanoi, 6 December 2020) Swedish financial institutions have proposed a commercial loan to develop aviation projects in Vietnam, including the Long Thanh International Airport. The Swedish Export Credit Agency and the state-owned Export Credit Corporation in Sweden have now proposed increasing the credit limit to $2 billion to cover upgrade projects and air traffic management expansion. To be eligible for the credit line, Vietnam will have to use 30% of the loan to purchase Swedish technologies and equipment. In addition to the Long Thanh and Tan Son Nhat airports, Vietnam plans to upgrade other airports. The country currently has 22 civilian airports. They served near 116 million passengers last year, up 12 percent from 2018.


Norwegian Air secures court protection over €4.1bn debts

(Irish Times, Dublin, 7 December 2020) Norwegian Air Shuttle secured a crucial lifeline on Monday when the High Court granted the embattled carrier and five Irish subsidiaries protection from creditors. Norwegian owes creditors, mainly aircraft lessors and banks, more than $5 billion (€4.1 billion) in total, while it faces running out of cash early next year. Its 140 aircraft are held by companies based in Ireland. US aircraft lessor Aviation Capital Group recently got a judgement in the English High Court for $6.3 million for rent due on Boeing 737s.  The Export Import Bank of the United States, which has given export credit guarantees to Boeing, is owed $46 million, while the carrier’s potential liability could run into the hundreds of millions, tied to ten 737s and three 787s.


Hungarian & Russian ECAs sign $1.17 billion Egyptian rail deal

(TXF News, New York, 9 December 2020) Egyptian National Railways (ENR) raised the benchmark for big-ticket export finance collaboration at the end of 2019, after the state-owned company signed a €1 billion ($1.17 billion) dual ECA-backed buyer’s credit facility to back the procurement of 1,300 Transmashholding passenger coaches from the Russian supplier. The more than 15-year financing, which involved three countries and marked the largest project in ENR’s history to date, will be provided between Hungary's HEXIM, the Hungarian Export-Import Bank and the Hungarian Export Credit Insurance that are operating in an integrated manner as the ECA of Hungary, and Russia’s Roseximbank, and the Russian Agency for Export Credit and Investment Insurance (EXIAR).


Russian Export Forum to focus on COVID-driven incentives for businesses

(RT News, Moscow, 7 December 2020) On December 9, the 'Made in Russia’ International Export Forum will hold a roundtable on “Fine-tuning the export support framework: countering the downturn in global trade.” Russian and foreign experts are expected to focus on the current state of global trade, support measures as well as prospects for 2021. It will bring together experts from development institutions and export credit agencies, as well as specialized international organizations to discuss current trends in global trade and key support measures during the ongoing pandemic. The participants will also share their forecasts for the next year.


China, Japan, and S. Korea see $205 billion renewable energy market in Southeast Asia

(Webwire, Tokyo, 15 December 2020) A report from Greenpeace Japan identifies a US$205 billion opportunity for [ECA] renewable energy finance in Southeast Asia in the next ten years – 2.6 times bigger than the coal market of the past decade. From 2009 to 2019, major public banks in China, Japan, and South Korea invested only USD $9.1 billion in solar and wind, but USD $78.9 billion in coal and gas, making them top public financiers of fossil fuels globally. But this started to shift in 2020, as did national climate commitments from these G3 countries. From 2021 to 2030, Southeast Asian demand for electricity will need invested capital worth USD $125.1 billion for solar energy, USD $48.1 billion for wind energy, and USD $32.6 billion for other renewable energy sources, the report found. Additionally, Southeast Asia’s emerging green bonds market is making an international shift away from fossil fuel finance (both public and private). The report provides a rare cross-region snapshot of public and private finance. Despite being an OECD member, China blends official aid and export credit numbers in public financial disclosures in violation of OECD-DAC criteria. This makes public money harder to track. Furthermore, private finance is not widely transparent among the three countries, and analysts rely on third-party data, which is by nature incomplete.


Crisis response: a paradigm shift for ECAs

(Global Trade Review, London, 10 December 2020) When Covid-19 brought global trade to a near standstill, export credit agencies (ECA) stepped up by introducing or expanding cover for working capital programmes, rather than traditional project-led financing. But with the pandemic still raging and concerns over insolvency growing, do companies need to see a paradigm shift in export credit?