(The Times, London, 20 September 2021) The UK’s UKEF has been accused of exaggerating how many businesses it has supported, of undermining the national drive towards net-zero carbon emissions and of doing too little to help smaller exporters. MPs on the Commons’ international trade committee said that UK Export Finance had directly helped far fewer companies than its “headline figure of 549 businesses supported” in the 2020-21 financial year, with only 167 directly applying for finance and insurance. Global Trade Review also notes that the government inquiry into the work of UKEF has raised concerns over the agency’s concentration of support in certain sectors, ambiguous figures in its annual accounts, and potential exposure to environmental and human rights issues.
Newsletter
U.S., Europe at OECD Seek to End Export Financing for Coal
(Wall Street Journal, Paris, 14 September 2021) The U.S., the European Union, South Korea and other wealthy nations are moving to forbid their export-financing agencies from supporting coal-fired power projects overseas, in an effort to end government support for a fuel that is one of the world’s biggest sources of greenhouse gases. The proposed ban, which will be made this week at the Organization for Economic Cooperation and Development, is part of the West’s campaign to push China, India and other big developing countries to take a tough position against coal ahead of the November climate summit in Glasgow, Scotland. China and India have resisted entreaties by the U.S. and Europe to commit to end subsidies for coal-fired electricity, raising fears that deadlock over the issue could result in the collapse of climate negotiations in Glasgow. The OECD, a Paris-based organization of 38 developing and developed economies, oversees an agreement governing export-credit agencies, which provide financing for overseas customers of the countries’ domestic companies. The U.S., the 27 nations of the EU, the U.K., Norway, Switzerland, Japan, Australia, South Korea, New Zealand and Turkey are signatories of the deal. In other news the US Treasury has instructed representatives at multilateral development banks to support clean energy projects over fossil fuels, putting the fate of several gas projects in the balance. Interestingly no news could be found on the OECD website today on the results of the OECD coal negotiations on September 15-16. The OECD web site divulges no results at all for searches re export credit and their ECA work page is burried very deep in their site map and shows no postings since September 8th. Indications are that there were differences over the definition of “unabated coal fired plants” to be banned, whether to include gas and mining or transport of coal. Further meetings are planned for October 12th and 20th. As world leaders met for a high level dialogue on energy at the UN in New York, 200 green groups urged them to embrace renewables and stop financing all fossil fuels.
UKEF to forge closer trade ties with Central America
(Export Institute, Peterborough, 12 August 2021) UK Export Finance has signed a partnership with CABEI, Central America’s leading development bank, to encourage joint financing of major clean energy, infrastructure and construction projects. Trade between the UK and Central America was worth over £1.7 billion in 2020. At least £2.5bn is now available for new business in each of Guatemala, Honduras and Panama and £1.5bn for Costa Rica, El Salvador and Nicaragua. Countries that can benefit from the joint financing agreement include the Dominican Republic, Panama, Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica. The UK signed a continuity trade deal with Mexico in December and started talks on a £5bn trade deal in March that promised an ‘Aztec-Brexit bounce’. However, as reported in IOE&IT Daily Update, the deal was rendered obsolete after the EU signed a more generous and comprehensive deal between its 27 members states and Mexico. According to a report from the House of Lords’ International Agreements Committee, the UK could now have to wait another three years to catch-up with the EU in trade with Mexico.
Chinese banks and ECAs stay silent on human rights allegations
(Global Trade Review, London, 11 August 2021) Chinese banks have a “dismal” rate of engagement with concerns about the human rights impacts of their overseas investments, a new report says. The London-based Business and Human Rights Resource Centre (BHRRC) says China’s banks, including private, state-owned and development banks, have responded to only one of 20 requests to answer to human rights concerns raised by civil society organisations. BHRRC said that overall, it has recorded 670 allegations of human rights abuses “linked to Chinese business conduct abroad”. Countries where most complaints are recorded are Myanmar, Peru, Ecuador, Laos, Cambodia and Indonesia. China’s banks’ 5% rate of response to BHRRC requests compares to the Asian and global financial sector’s response rate of 63%.
Can China green the Belt and Road?
(China Daily, Beijing, 9 August 2021) The Chinese government issued a policy on July 16 encouraging Chinese businesses to integrate green development through overseas investment and cooperation. The document, titled “Green Development Guidelines for Overseas Investment and Cooperation”, was jointly issued by the Ministry of Commerce and the Ministry of Ecology and Environment. The guidelines recommend that Chinese businesses support investments in clean energy and also cover trade, by requiring companies to speed up integration with the global green supply chain, carry out green procurement and purchase environmentally friendly products and services. The guidelines are specifically addressed to some of the most important financial institutions: the China Development Bank, China Import-Export Bank and Sinosure, China’s export credit agency. In June this year, the Belt and Road Initiative International Green Development Coalition, ClientEarth and the Beijing Institute of Finance and Sustainability conducted a two-day workshop on environmental and climate risk mitigation with the largest financial institutions in the Belt and Road Initiative. Although the process is not without difficulties, these institutions are developing key policies, such as categorization of projects based on environmental risks, requirements for environmental standards, impact assessments, third-party evaluations, information disclosure and public participation, grievance mechanisms, and even potential fossil fuel exclusion policies.
NEXIM: Promoting Social Inclusion With WAYEF
(This Day Alive, Lagos, 8 August 2021) The Nigerian Export Import Bank (NEXIM) has introduced a specific policy intervention that is promoting economic and social inclusion of key segments of the population, in particular women and youth. UN population projections for Nigeria in 2020 indicated that about 62% of Nigerians were below 25 years old; while over 50% are women. The Women and Youth Export Facility (WAYEF) is a deliberate and targeted funding scheme to address the needs of these vulnerable groups notes NEXIM Managing Director Mr. Abba Bello. Over the years, the bank has provided enormous support for many export-oriented industries that are high employers of women and youths such as cashew, shea, hibiscus, ginger among others, where a lot of women are involved in cleaning and packaging of products for export.
World Economic Forum warns global trade finance gap could reach $2.5 trillion by 2025
(Euro Money, London, 6 August 2021) The World Economic Forum has warned that the global trade finance gap could reach $2.5 trillion by 2025 as large numbers of funding applications continue to be rejected due to lack of collateral or information from the requesting entities. More than half (60%) of the banks that responded to a survey conducted by the Asian Development Bank just prior to the outbreak of the coronavirus pandemic expected an increase in the volume of trade finance requested by importers and exporters but subsequently rejected. Governments around the world have taken a variety of steps to support trade finance since the start of the pandemic, including increasing the capacity of export credit agencies, expanding working capital programmes and introducing new facilities to support exporters and importers – particularly SMEs.
UKEF finances 6 hospitals in Ivory Coast
(Global Construction Review, London, 6 August 2021) UK Export Finance has lent €241m toward a €326m project to build six hospitals in the Ivory Coast, with UK-headquartered NMS Infrastructure Ltd. contracted to do the work. The hospitals will serve a catchment area of more than a million people, and will be built in Bouaké, Boundiali, Katiola, Kouto, Minignan and Ouangolodougou. The financing, a mix of buyer credit and direct lending to Ivory Coast’s Ministry of Health and Public Hygiene, will fund design and construction, equipment, post-completion training and technical support.
How ECAs can catch up on climate action
(Global Trade Review, London, 4 August 2021) Export credit agencies (ECAs) are lagging private financial institutions in setting targets for reaching net zero greenhouse gas emissions and are missing opportunities as the energy transition gets underway. That’s the argument of a University of Oxford paper published last week by a group of five researchers, including experts in trade, law and economics. Former Bank of England governor Mark Carney says in the paper’s foreword that ECAs “are increasingly conspicuous by their absence” in efforts by financial institutions to back a transition away from fossil fuels.
Lexology report: Export Credit Agencies and Insurers
(Lexology, London, 24 August 2021) ASHURST LLP has produced a 12 page overview of official export credit agencies in the EU, OECD, UK and globally, which broadly reviews ECA history, policies, competition, budgets, sector agreements, etc. It notes that as recently as the turn of the century, the OECD Arrangement was understood to cover the vast majority of export credits globally, whereas US EXIM now estimates that in 2019 total activity provided under the rules of the OECD arrangement amounted to only 34% of total export and trade-related finance – approximately US$76 billion. The OECD arrangement is described as a ‘gentlemen’s agreement’ among its participants, seeking to ensure there is not a race to the bottom or a crowding out of private financing options that could lead to public resources subsidising exporters. The participants to the Arrangement claim that, despite its voluntary nature, the international cooperation that regulates ECA operations has been a mainstay of the market for decades, looking to ensure that competition remains on the quality and pricing of goods and services rather than the financing terms, i.e. subsidies. However they admit that the core purpose of ECAs is to promote exports to provide jobs domestically and increase the wealth of the country they originate from. Meanwhile, ECA Watch maintains that monitoring of the implementation of the OECD Arrangement, its sectoral agreements as well as the Common Approaches on social and environmental due diligence for officially supported export credits, remains seriously inadequate. The lack of transparency in the application of due diligence procedures results in official ECA support for multiple projects to contravene international environmental, human rights and other treaties and agreements to which these ECAs’ own governments are parties. While a somewhat useful overview of complex ECA agreements and practices, the report neglects the significant contraventions of international rights and the resultant trauma caused by so many official ECA supported projects on people and their families across the globe.
