EFIC enhances support for export trade through agreement with Asian Exim Banks

Export Finance and Insurance Corporation (EFIC), the Australian government’s export credit agency, recently endorsed a framework financing agreement with members of the Asian Exim Banks Forum.

The endorsement was signed at the 16th Annual Meeting of the Forum in Busan, Korea, by EFIC and the Exim Banks of China, India, Indonesia, Japan, Korea, Malaysia, the Philippines and Thailand.

The agreement forms the basis for Exim Banks to jointly finance large projects which are beyond the capacity of commercial lenders or a single Exim Bank. With international projects and contracts increasingly involving multi-sourcing (using suppliers from several countries), the agreement will help these agencies to work together to support exporters from member countries.

‘Risk-sharing arrangements can benefit exporters, overseas buyers, project sponsors and the Exim Banks’, said EFIC’s Head of Product Management & Risk Transfer, Chang Foo.

‘For an Australian company, it creates a one-stop shop for financing when they’re sub-contracting to an Asian firm or using Asian suppliers: only one set of documents needs to be negotiated with the agency providing the loan, which then enters separate risk-sharing arrangements with other members. Starting from a framework agreement also means negotiations between member agencies will be quicker and easier. And risk-sharing can free up an agency’s capacity to support more exports’.

Mr Foo also sees risk-sharing as a way to support export-focussed projects located in Australia. ‘EFIC is increasingly called upon by Australian corporate clients to finance large domestic projects which have an export focus – for example, oil or gas extraction projects where the resource will be exported, or the construction of infrastructure like rail or port facilities to enhance Australia’s export capacity. The debt finance needed for these projects can be beyond what commercial markets can currently provide, so the owners turn to these Exim Banks and EFIC as an alternative source of stable, long-term finance’ he said.

‘Risk-sharing agreements mean that we can pool resources to meet these financing needs. As most exports from these projects are destined for Exim Bank member countries, especially China, Japan, Korea and India, agencies from these countries have a vested interest in working with EFIC to get the projects up and running,’ said Mr Foo.