International Trade Centre
U N C TA D / W T O


The mission of the International Trade Centre UNCTAD/WTO is to support developing and transit...
1. One Year Later: The impact of the euro on developing countries’ trade
Stage three of the European Mone...
confidence that the purchasing power of the         total share of the euro legacy currencies prior
invested money will be...
European trade could decrease import flows          trading partners will not be as susceptible to
from third countries.  ...
and Hong Kong); or perhaps even abolition of        therefore essential. In particular, certain sectors
national currencie...
2. Financing Women Entrepreneurs: The conceptual framework for
   countries in transition

The ways in which transition co...
The possession of smaller amounts of              very rooted in their local context, the focus of
personal capital which ...
(1) Macro level: Government and Public             References:
    Institutions serve at the national level and
Unless otherwise specified, all references to dollars ($) are to United States dollars.
The fol...

                                                  ♦ The US Department of ...
CGIC says that the suspension of cover              a company is strong or weak, making
  comes as a result of a shrinking...
♦ Hannover Re set for top year                        money      through     its    international
♦ Russia offers insurance against its own             license to      pursue     credit   insurance
  officials           ...
♦ Kenya: telecoms operator           taps   OND-         In both cases, however, the aim is the same - to
  guaranteed loc...
♦ ECGD backs Mozal smelter expansion                ♦ Gerling NCM         pushes    ahead    with
♦ Proponix: reaching critical mass
                                                      The agreement will assist exporte...
local currency and the local currency senior   ♦ Tunisia: Afreximbank opens a subsidiary
  unsecured debt ratings are now ...
♦ BNP Paribas: Co-operation with                ♦ Turkey receives US Ex-Im fillip
  Dresdner ceases
♦ ING in talks to extend German banking             around US$16-20 billion. Recently, a
  interests                      ...
♦ Libyan bank ABDT opens in Senegal                      slower growth in East Asia, Russia and Brazil
♦ Mexico: the WB approves a US$ 64.6                years, this project is a "great first" in the co-
  million loan to st...
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
Trade Finance Press Abstracts
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Trade Finance Press Abstracts

  1. 1. International Trade Centre U N C TA D / W T O Trade Finance No. 3 & 4/2002 Trade Finance Press Abstracts Contents Feature articles: 1. One year later: The impact of the euro on developing countries’ trade 3 2. Financing women entrepreneurs: The conceptual framework for countries in transition 7 Acronyms and abbreviations 10 Trends and recent developments 11 News from the regions 25 -Middle East and Asia 25 -Eastern and Western Europe 28 -Africa 30 -Central and Latin America 32 OECD Export Credit Rates 34 News on ITC’s Trade Finance Programme 35 Sources for Press Abstracts 36
  2. 2. ITC AND THE PRESS ABSTRACTS The mission of the International Trade Centre UNCTAD/WTO is to support developing and transition economies - and in particular their business sectors - in their efforts to realise their full potential for developing exports and improving import operations, with the ultimate goal of achieving sustainable development. Furthermore, as an executive agency of the United Nations Development Programme (UNDP), ITC directly implements UNDP-financed projects related to trade promotion in developing countries and economies in transition. The ITC trade promotion programmes cover six key areas: Product and Market Development; Development of Trade Support Services; Trade Information; Human Resource Development; International Purchasing and Supply Management; and Needs Assessment and Programme Design for Trade Promotion. The Trade Finance Press Abstracts are compiled quarterly by ITC’s Trade Finance Programme in an effort to provide news and specialised information concerning international trade credit and credit insurance to entrepreneurs, bankers and financial experts in developing countries. Although its content may vary from issue to issue, it is usually structured around a general section, covering trends and new products, and regional sections, made up of news from individual agencies. Events and news from ITC’s Trade Finance team complement the bulletin. ITC’s TRADE FINANCE PROGRAMME What is it? A programme aimed at facilitating access to finance for SMEs in developing and transition countries. How? The programme provides assistance to developing countries and economies in transition via the strengthening of the existing structure of their financial institutions, mechanisms, and schemes - both at public and private sector levels - in order to facilitate the exporting community’s access to finance. It also contributes to building up enterprise capability in the financial field in order to enable these countries and economies to become competitive in international markets whilst reducing their export risks. Who is it for? The Programme is targeted at enterprises and public and private financial institutions in developing and transition countries, with a particular emphasis on LDCs. This issue covers the period from July to December 2002. For further information, please visit ITC’s website at or contact Mr. Carlo F. Cattani Senior Adviser on Trade Finance BAS/DTSS Telephone: (+41) 22 730 0308, Fax: (+41) 22 730 0576 E-mail: International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 2
  3. 3. FEATURE ARTICLES 1. One Year Later: The impact of the euro on developing countries’ trade Stage three of the European Monetary Union expanded greatly. Given that the economies in (EMU) began on 1 January 1999. Three years the euro zone are more and more closely later on, the introduction of euro notes and entangled as time goes by, cross-border coins has successfully taken place. As of 1 financial interconnections have become January 2002, the euro has been part of the increasingly important. This development has daily life of all EU citizens. helped to catalyse greater integration within the euro area. Higher efficiency in financial Since 2001, the global economy has been in a markets due to increased competition will recession and world trade growth has facilitate borrowing and investing for residents stagnated. As the euro area is highly integrated and non-residents of the euro area. The into the global economy and very dependent European bond markets have grown to become on trade, these developments have had a strong the second largest in the world, meaning that negative impact on the EU (European Union) debt securities of unprecedented size can be member countries. The euro area is gradually issued. The consequence of this has been a recovering from this downturn; but inflation in wave of mergers and acquisitions in the retail prices after the euro cash changeover has corporate sector of the euro area, leading to lowered consumer spending interest. This better investment possibilities. development might have some impact on trade between developing countries and the euro A similar development towards further area. integration can be found in the stock market of the euro zone. The new large and open The channels through which the euro affects market place makes a sizeable number of the economy of other given countries are investors available for issuers across the euro different and varied. The weight of influence zone, and so young and innovative firms can of the euro on a single country is still therefore obtain financial aid through their contingent upon the intensity of a country’s listing in the stock market. trade and financial relations with the euro zone, its role in international capital markets, The use of the euro in private portfolio and the exchange rate policy of its state holdings institutions. The size of the euro area, the elimination of The aim of the following article is to provide exchange rate risks, a single monetary policy, an overview of the last developments new cross-border payment systems like concerning trade between the euro zone and TARGET and the harmonisation of procedures developing countries. It will analyse the and market conventions are the driving factors countries of Latin America and the Caribbean, for the establishment of fully integrated, deep, the Middle East, and North and Sub-Saharan broad and liquid markets in euro. Due to Africa. It will also provide a closer look at slow growth and a possible imminent conflict trends in capital markets, private portfolio between the United States and Iraq, the holdings and the international role of the euro. demand for financial assets denominated in euro is rising. International investors are The use of the euro in capital markets attracted by the fact that the policy of the ECB (European Central Bank) is oriented towards Since the start of the EMU was announced, stability. On the other hand, EU domestic issues of international money market investors try to diversify their risk by shifting instruments have taken on increasing some of their assets into other regions. importance as the benefits of issuing corporate Investment from outside the euro area in euro- bonds have increased. In the bond and equity denominated assets is in general dependent on markets, the importance of the euro has International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 3
  4. 4. confidence that the purchasing power of the total share of the euro legacy currencies prior invested money will be preserved. to the introduction of the euro. The use of the euro as a vehicle, pricing and The relationship between the euro as an anchor quotation currency currency and as a means of intervention is closely related. Euro-denominated intervention In foreign exchange markets the theory of has taken place in EU accession countries such economies of scale is also applicable. The as Poland, Hungary, Bulgaria, and Estonia. In reduction of transaction costs is one of the spite of this, countries that are not pegging main determinants of the use of a currency as a their currency to the euro may also use it for vehicle currency. intervention purposes, particularly in the context of the G7. In private international transactions, the dollar is the main unit of account. In the case of trade Trading with the euro zone - implications in manufactured goods between industrial and for SMEs in developing countries developing countries, the currency used for invoicing is most usually that of the industrial The introduction of the euro has been followed country or that of a third nation. Trade between by a greater price transparency, which developing countries is often priced in the broadens the opportunities for business trading currency of a third country, and that currency, with the EMU. However, this effect changes used for invoicing, is most likely to be the US risks, as other market players try to benefit Dollar. from the new market opportunities. The role of the euro is comparable with the Latin American and the Caribbean role of the Deutsche Mark prior to EMU, and Countries so the US dollar continues to be the most important vehicle currency. The euro accounts The heterogeneity of the Latin American and for a fifth of the global foreign exchange Caribbean Countries (LAC) is the reason for market turnover. the varied degrees of impact of the introduction of the euro throughout this region. Compared with the US dollar, the role of the Countries with a strong trade relationship with euro as a quotation currency is negligible. the EU (e.g. Mexico and the Central American The situation of the respective currencies for countries) are likely to be more affected than the pricing of commodities is alike, with one others. exception: shares listed on the European stock exchanges, where the euro is dominant. Though the trade openness of the EU is computed on the basis of the average of The euro as an anchor, reserve and merchandise exports and imports as a share of intervention currency GDP, and is quite high, the introduction of the euro is generally not having a strong influence Outside the euro area, 55 countries peg their on trade between the EU and LAC. currency to the euro, include the euro in their currency boards or use it as a legal tender. This The reduction in transaction costs through can be interpreted as a sign of international invoicing in a single currency when trading confidence in the stability of the euro. Since with different EU-countries is moderate. Of close trade and financial linkages are the main greater importance could be the increase in reasons to choose the euro as a reference for efficiency and competition in the EU. As a exchange rate policy, countries using the euro consequence of a rise in import demand in as an anchor can all be found in the so-called the euro area, exports from LAC would also euro-time-zone. increase. On the other hand, the opposite effect is also possible: the elimination of exchange- As a reserve currency, the US dollar is rate risks and the reduction of transaction costs predominant. The euro’s share of total world in the euro zone could lead to a trade diversion foreign reserves is, however, analogous to the effect. This would mean that a rise in intra- International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 4
  5. 5. European trade could decrease import flows trading partners will not be as susceptible to from third countries. fluctuations in the euro. Financial deepening in Europe may lead to an Middle East and North African countries increase in growth in the EU and therefore have a small positive effect on exports from The introduction of the euro is having negative the LAC region. effects on the development of industry in Middle Eastern and North African (MENA) In terms of debt-management policies, the countries. The relatively high degree of sharing share of the international debt that is held in of the manufacturing sector with the euro zone, euros could increase due to a rise in the total and a high share of trade, are the reasons; but foreign trade share with Europe. The euro and the effect depends on the specific country's an enlargement of the European capital market production structure and export orientation. will not significantly change access to capital The MENA region in general will be affected for the LAC region. in two directions by the introduction of the euro. High value-added industries (e.g. Looking at reserve management, the euro has agriculture) will benefit, and low value-added the potential to cause a shift from the Dollar to industries (e.g. basic manufacturing product the euro for reserve holdings, especially in the industry) will suffer. LAC region, where the dominance of the United States is currently strong. Possible disadvantages for non-European companies trading with the EU Sub-Saharan Africa Companies in a close trading relationship with The differences in the openness of trade the euro zone can be hit by several drawbacks. throughout Sub-Saharan Africa are significant. Exports from this region to the EU are almost On the one hand, price fluctuations could exclusively focused on primary occur, caused by exchange rate variability and commodities. losses due to inflation differences between the euro zone and the home country. On the other Growth as a consequence of the introduction of hand, production structures and export the euro could have spillover effects for Sub- performance might be affected through the Saharan Africa; but these effects are only exchange rate volatility of the intra-euro applicable if market integration has taken place zone. It is also possible that euro zone between a Sub-Saharan country and the EU. companies might change the composition of Any increase in exports from Sub-Saharan their supply chain with the objective of Africa will, however, be limited. excluding non-resident partners, in order to avoid currency conversion problems. Finally, The opposite effect is quite unlikely, because goods may be quoted in euros instead of export goods of Sub-Saharan African countries dollars, thus necessitating adjustments in are not in direct competition with goods corporate processes. produced in Europe. Substantial changes can only be expected through a change in the EU Possible adjustments of corporate strategy Common Agricultural Policies. and business processes Another transmission channel through which Preserving competitive advantage should be the euro affects Sub-Saharan countries is the the main aim of a non-European company real exchange rate. The effects of changes in trading with the EU. It is therefore necessary the real exchange rate for one of these that such a company should keep informed countries are determined by the exchange rate about market developments within the EU. In regime in each country, and by geographical addition, exchange rate risk needs to be patterns. Countries pegging their currency to lowered. Possible approaches could include the euro will lose competitiveness in the case floating exchange rates (as in Mexico and of an appreciation of the euro, whilst countries Peru); capital controls (as in China and using a basket of currencies of their main Malaysia); currency boards (as in Argentina International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 5
  6. 6. and Hong Kong); or perhaps even abolition of therefore essential. In particular, certain sectors national currencies and adoption of the dollar - the sectors of interest for a developing or euro for domestic transactions. Purchasing country, like agriculture, or certain products arrangements for product sales within the EU such as textiles - should be loosened up. This should be modified by switching to euro zone could foster the exports of developing suppliers. If intra-European demand is countries and, as a result, encourage their substantial, the establishment of subsidiaries in growth. the EU and the possibility of increasing production capacity should be considered. References: Suppliers to EU companies should take into Bekx, Peter (1998). The Implications of the account the fulfilment of payments in euros. Introduction of the Euro for non-EU countries. Furthermore, when initiating trade with the euro zone, the possible necessity of software Cohen, Daniel, Kristensen, Nicolai, Verner & adjustments and changes in processes should Dorte (1999). Will the Euro create a Bonanza be considered. for Africa? ECB (2001) Review of the International Role Conclusion of the Euro. The major findings of this article are that more IMF (2002). IMF Executive Board Discusses competitive financial markets in the EU will the Monetary and Exchange Rate Policies of lead to higher efficiency and therefore the Euro Area and the Trade Policies of the facilitate borrowing and investing for residents European Union, Public Information Notice and non-residents of the euro zone. Another (PIN), No. 02/122. outcome could be a rise in import demand Köhler Horst & Wes Marina, EBRD (1999). from the EU. Furthermore, the conclusion can Implications of the Euro for the integration be drawn that the dollar is still the most process of the transition economies in Central important vehicle currency and the most and Eastern Europe. important reserve currency: only as an anchor currency has the importance of the euro truly Krugman, Paul R. & Obstfeld, Maurice (2000). risen. The impact of the euro on different International Economics. regions differs: it is possible that countries Pollard, Patricia S. (2001). The creation of the with a high share of trade with the EU might Euro and the Role of the Dollar in be the only ones affected. The type and International Markets, Federal Reserve Bank direction of the effect is, however, dependent of St. Louis. on country-specific industries. RiskTrak. Addressing EMU/Euro Transition The international use of the euro will be Risk., dependent on the liquidity, broadness and 10/15/2002. depth of the euro area capital market providing Ruhashyankiko, Jean-Francois (1999). The lower transaction costs. Other important Euro and the Production Structure and Export factors are the stability of the currency itself, Performance of Middle East and North African and the minimising of portfolio risks through Countries. IMF Working Paper. diversification. Solans, Eugenio D. (2002). European financial It is still much too early for any definitive integration and the international role of the assessment of the long-term place of the euro euro. Speech delivered at the Global Economic in the international monetary system. Summit IV. Verner, Dorte (2000). The Impact of the Euro For the purposes of sustainable development, in Latin America. World Bank Latin American developing countries’ access to the European and Caribbean Studies. market needs to be simplified. A reduction of tariffs and a diminishment of quotas are International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 6
  7. 7. 2. Financing Women Entrepreneurs: The conceptual framework for countries in transition The ways in which transition countries are tied more serious constraints than male-owned by trade to the world economy have changed businesses do. This is due to a combination of radically with the move from a centrally- factors rooted in the structure of the enterprise planned economy to a free market. Trade (e.g. size, sector), the entrepreneur’s business liberalisation has resulted in an increase in competencies and the legal and economic international trade, its reorientation towards environment. western countries, and a fast growth in the number and size of women-owned businesses. In addition to this, there is an argument to be Statistics show that women in advanced made that gender characteristics may go some market economies own more than 25% of all way towards explaining the difficulties women businesses. 20-25% of entrepreneurs in face in obtaining finance. Some such transition countries are women. characteristics are listed below. Entrepreneurship is an important entry point Unconventional thinking. Women for women into a modernising economy. entrepreneurs may, when compared to UNECE (2002) classified the development of men, have unconventional ways of entrepreneurship in the countries of transition thinking and doing business. Financial (CITs) into three major groups: intermediaries may not have the skills and experience necessary to evaluate 1. Countries making rapid progress These innovative business ideas for which there countries include the “Visegrád group” – are no benchmark values for credit the Czech Republic, Hungary, Poland and assessment. Slovakia – which, with the exception of Cultural and social values. Because of Slovakia, are now OECD countries. deep-seated social values instilled by Estonia and Slovenia are also making rapid upbringing and education, women may progress. lack confidence when dealing with 2. Countries at an intermediate stage of authorities and financial institutions in transition like Bulgaria, Croatia, Latvia, some countries, and may therefore find it Lithuania, Romania, Kyrgyzstan and difficult convincingly to convey their Uzbekistan. business proposals. For the same reasons, 3. Countries making slow progress with financial intermediaries may also view less commitment from their governments women entrepreneurs as less capable. towards SME sector development. This Family responsibilities. Women typically group includes Albania, The Former combine running a business with running a Yugoslav Republic of Macedonia and the family. This double responsibility may majority of the CIS countries. lead to strong risk aversion, which in turn makes these women more likely to ask for In this context, women business owners are small loans. Family responsibilities and the key agents of change in countries where the implicit issue of multiple priorities may state no longer assumes primary responsibility also disfavour women entrepreneurs in the for direct investment in production, and where eyes of creditors. the role of women entrepreneurs makes a Lack of management skills. In several significant contribution to the economy. The industrialised countries, women problem, however, is that SMEs - and women entrepreneurs often have a higher level of entrepreneurs in particular - operate in an education than their male counterparts, but unfavourable regulatory environment and tend to have little entrepreneurial or regularly face difficulties obtaining finance. management experience. This may place them at a disadvantage in obtaining OECD (2000) revealed a number of possible finance. explanations of the extent to which women- owned businesses perceive these difficulties as International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 7
  8. 8. The possession of smaller amounts of very rooted in their local context, the focus of personal capital which could be used for the framework is to show governance on the start-ups or collateral. Possible explanations regional and local levels. for this phenomenon include lower wage earnings for women, and smaller inheritances A new lending approach to SMEs was for daughters than for sons. presented at the UNCTAD Expert Meeting in 2002. The approach was developed and used Despite these characteristics, which are by SMEloan Hong Kong Limited. SMEloan strongly rooted in traditional gender roles, is a specialised Hong Kong finance company women entrepreneurship should not be treated which operates with the American venture as a ‘special’ case. capital company Whitney & Co. The company leverages the power of the Internet in order Two best practices have been chosen in order to deliver debt and equity financing solutions to propose a conceptual framework for the focused exclusively on SMEs. governments of the transition economies to use when dealing with SMEs. The Italian industrial The main aim of this lending approach is to model presented by UNIDO (1997) has been seek new sources of information beyond chosen in order to create a stable regulatory financial statements, and to focus on cash flow environment in which the competitiveness of projections and business plans. The Internet SMEs is fostered. The model of new lending provides and captures on-going business solutions developed and used by SMEloan information from SME borrowers on a timely Hong Kong limited, introduced in the 2002 basis, and builds a dynamic risk management Expert Meeting of UNCTAD, is also and loan-servicing model for SME lending. incorporated as a component of the conceptual framework. The SME loan lending model focuses on quantitative data in order to achieve credit The Italian industrial model is known world- evaluation by analysing the triangular wide as a successful example of endogenous relationship between cash flows, sales and development based on SME networks and accounts receivable. It manages higher-risk clusters which are strongly rooted in their SME borrowers instead of all borrowers, and communities. The main idea of sustainable, shows which SME borrowers are having long-term development is a bottom-up problems. In this model, the Internet is the growth approach. Bottom-up growth based means by which to obtain information from on small firms is considered a way of SME borrowers and the tool to empower them increasing societal employment - including to borrow more when they want to. SMEloan's self-employment - and a way of incorporating target segment of the market is loans of actors traditionally excluded from economic US$50,000 - US$600,000. development, such as women and young people. The SMEloan model only provides finance for SMEs if their businesses are attempting to The tendency for specialisation by women- grow. SMEloan itself achieved scalability and owned SMEs may be increased by the fact that consistency in the credit evaluation by women entrepreneurs very often concentrate focusing only on those borrowers that are their activities in the women branches of the showing exceptions. They were able to reduce economy. Specialisation becomes a key factor credit losses because the internet-based in creating small-firms networks and clusters - SMEloan system “knows” the business in other words, “SME clusters”. The performance of borrowers on a real-time basis. competitive advantages of SMEs grouped in clusters are based on three key issues: These two models, the Italian model and the specialization, cooperation and flexibility. SMEloan model, appear to have enough positive effects and influence to be used for the Italian SMEs are “governed” by institutions on development of a conceptual framework for the level of the European Union, the Italian countries in transition. government (national), regional government and local institutions. Since SMEs tend to be International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 8
  9. 9. (1) Macro level: Government and Public References: Institutions serve at the national level and create policy and strategy, which influence P. Bianchi, Lee M. Miller & S. Bertini trade performance at other levels of the (UNIDO) (1997). The Italian SME Experience system. And Possible Lessons For Emerging Countries. (2) Meso level: Support Agencies refer to industrial bodies, which provide incentives SMEloan: and facilities for potential and present traders. (3) Micro level: The Firm and Management UNCTAD (2002). Improving the represent the last level or component of the Competitiveness Of SMEs Through Enhancing system and include all the so-called SMEs. Productive Capacity: Financing Technology. Common to the three components in the Expert Meeting. 28-30 October 2002, Geneva. system is that, in unison, they can help to create a stable regulatory environment and boost the competitiveness of SMEs by improving policy and SME access to development practitioners. Through these activities the ultimate aim of promoting trade strategy is achieved. Trade promotion strategy should be based on key strategies, pursued by SMEs on their own: The innovation strategy, which is based on the generation of new ideas, such as a new product or service creation The cluster strategy, which focuses on networks of firms which are linked to each other in order to access new ideas and knowledge The foreign direct investment strategy, which bestows upon the firm such advantages as know-how and know-why. The framework above shows synchronicity and interconnectedness within the system, and is designed to improve policy and SME access to finance. The model proposed by SMEloan Hong Kong Limited is a potential solution for the creation of this kind of institution in the transition economies. This should help eliminate the most specific barrier faced by women entrepreneurs: finance. International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 9
  10. 10. ACRONYMS AND ABBREVIATIONS Unless otherwise specified, all references to dollars ($) are to United States dollars. The following acronyms and abbreviations are used: CIRR Commercial Interest Reference Rate COFACE Compagnie Française d’Assurance pour le Commerce Extérieur ECA(s) Export Credit Agency (Agencies) ECGC Export Credit Guarantee Corporation, India ECGD Export Credit Guarantee Department, United Kingdom FDI Foreign Direct Investment GTF Global Trade Finance HIPC(s) Heavily Indebted Poor Country (Countries) L/C Letter of Credit LDC(s) Least Developed Country (Countries) MIGA Multilateral Investment Guarantee Agency NCM Nederlandsche Credietverzekering Maatschappij, Netherlands S&P Standard & Poor’s (ComStock Inc., USA) IT Information Technology TF Trade Facilitation In this Issue: AFESD Arab Fund for Economic and Social Development ART Alternative Risk Transfer ATI African Trade Insurance Agency BOOT Buy Own Operate Transfer CCB Czechoslovak Commercial Bank EEHC Egyptian Electricity Holding Company EFIC Export Finance Insurance Corporation ECG Export Credit Group, OECD FSA Financial Services Agency IDA International Development Agency IDB Islamic Development Bank IMF International Monetary Fund KNCU Kilimanjaro Native Corporation Scheme, Tanzania SACE Sezione Speciale per l’Assicurazione del Credito all’Esportazione, Italy SURF Settlement Utility for Risk and Finance VEB Vneshconom Bank, Russia VTB Vneshtotg Bank of Russia International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 10
  11. 11. TRENDS AND RECENT DEVELOPMENTS CREDIT INSURANCE ♦ The US Department of Agriculture’s ♦ Japanese insurers hit by downgrades Commodity Credit Corporation allocates US$ 120 million of export credit Eight Japanese non-life insurers have been guarantees downgraded by Moody’s Investors Service, the credit rating agency, which cited as its Total credit guarantees for the export of US reasons slowing industry growth and poor agricultural commodities to Turkey investment returns due to continued available under GSM-102, the weakness in the broader economy. Department’s export credit guarantee The agency downgraded the insurance programme, now amount to US$ 465 financial strength ratings of seven insurers million. ♦ by one notch. Tokio Marine fell to Aa2; (International Trade Finance, July 2002) Nichido Fire to Aa3; Sompo Japan to Aa3; Mitsui Sumitomo Insurance to A2; Toa Reinsurance to A2; and Nissay Dowa to ♦ OECD consensus: medium- and long- A3. Aioi Insurance suffered a two-notch term premium categories are raised for downgrade to A3 due to damaged consumer several countries confidence and declining capital following losses through reinsurance contracts with Belize moves to category six for political risks, from category five (on a one to seven Fortress Re, the US reinsurance company.♦ scale, where one is equal to lowest risk). (Financial Times, July 2002) Colombia also moves to six (previously five). Kenya is now seven (six), St. Kitts ♦ Munich Re faces ratings cut after bailout and Nevis five (four), St. Vincent and the of US arm Grenadines five (four), Uruguay five (three) and Venezuela five (four). ♦ Standard & Poor’s warned that it might cut (International Trade Finance, July 2002) Munich Re’s triple-A credit ratings. This comes after the world’s largest reinsurer said it would inject a further $2 billion (€2 ♦ Turkey: Export Risk Guarantee Agency billion) into American Re, its troubled US removes Pamukbank from its list subsidiary, and raised its estimate of losses from the September 11 attacks by a further The removal from the list of banks for $500 million. which cover of commercial risk is available is due to deterioration of the bank’s rating. S&P said its decision reflected heightened ERG is able to provide cover for ten local concerns about American Re’s earnings and Turkish commercial banks, including capital adequacy and their impact on the Akbank; Finansbank; Kocbank; Turkiye group as a whole. Munich Re executives Garanti Bankasi; and Yapi ve Kredi insisted it was the final injection of funds Bankasi. ♦ into the ailing US unit, which required a $1 billion bailout last year after heavy third- (International Trade Finance, July 2002) quarter losses. But analysts said the size of the cash injection pointed to continuing ♦ Venezuela: South African credit insurer problems at the US company, acquired five Credit Guarantee Insurance Corporation years ago for about $2.5 billion.♦ of Africa is no longer able to insure Venezuela (Financial Times, July 2002) International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 11
  12. 12. CGIC says that the suspension of cover a company is strong or weak, making comes as a result of a shrinking economy, clients able to fine-tune predictions by civil unrest and a banking sector that has all adding their own data. Elsewhere, credit but broken down. Unrestricted cover has information providers such as Dun and been unavailable for some time, but the Bradstreet are providing management and latest downgrade means that even letters of analysis products, through which credit credit from local banks are regarded as insurers can track, in real time, each unacceptable security. ♦ adjustment to an individual receivables file or any tuning of debt failure probability. (International Trade Finance, July 2002) The speed at which such models spawn new reinsurance products remains to be seen. ♦ ♦Yugoslavia: ERG reclassifies Raiffeisebank Jugoslavia (International Trade Finance, July 2002) The Swiss ECA now accepts the bank’s ♦ Argentina crisis: a test of the relevance of cover for short-term commercial risk and its many of the new private market political status as guarantor for credit guarantee risk players transactions.♦ Export and trade finance teams at major (International Trade Finance, July 2002) European Banks are warning that the readiness of new private market political ♦ Stormy business climate could ferment risk underwriters to pay out on Argentinian new reinsurance products claims will be seen as a key test of the insurers’ relevance to banking needs. This As the reinsurance industry comes fully to is because of the changed nature of terms with a disastrous 2001, some emerging country crises: now economic observers are predicting that the market’s activity is much more market-based, and navel-gazing will eventually help to spawn governments are much less often the a new set of products for clients. Some financiers or guarantors of purchases and optimistic brokers forecast that the projects. reinsurance market will continue to support the existing needs of the primary credit and Argentina has exhibited a series of political risk market, and will also develop piecemeal failures rather than any state- to support the changing needs of primary imposed national moratorium on all players. This will lead to more efficient use payments. Bankers at the IBC conference of capital by the primary players and more warned openly that underwriters who seek efficiency in the market, which will reduce to exploit this fact to draw a particular pressure on pricing. According to this point narrow definition of political risk and avoid of view, the key to revamping reinsurance paying claims are likely to see their new models is technology that enables primary business dry up.♦ players better to understand individual and (International Trade Finance, July 2002) overall portfolio risks. This is being developed in-house in many cases, although ♦ Hermes: New license in Japan it is sometimes outsourced from information providers in which credit Hermes - the subsidiary of German credit insurers have often taken stakes. insurer group Euler & Hermes (Allianz) – Among the latter category is Company has obtained a license to distribute its forces Watch, in which Gerling NCM has credit assurance to Japan. It will work on increased an original 10% investment to domestic credit assurance; credit assurance 23%. Presently able to provide evaluations export activities will remain in the hands of of the financial health of every company in the governmental agency Nipponese Export the UK, it plans to provide a service to and Investment Insurance (NEXI).♦ clients for all the world’s quoted companies (Le Moci, May 2002) by the end of 2002. This service uses more than 20 analytical models to explain where International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 12
  13. 13. ♦ Hannover Re set for top year money through its international connections, or indemnify them if the Hannover Re, the world’s fifth-largest customer does eventually default. ♦ reinsurer, said it was on course for one of its best years after it reported a 32 per cent (Credit Notes, June 2002) increase in first-half earnings. Strong premium income in its property and ♦ French insurers move to reassure casualty reinsurance division lifted investors Hannover’s earnings before interest and tax Axa and AGF, the French insurers, have to €284.3 million ($287.1 million). Net moved to reassure nervous investors about income for the first half rose 23 per cent to their solvency ratios – which measure their €146.3 million.♦ abilities to meet obligations – following (Financial Times, August 2002) damaging stock market falls in recent months. Reporting first-half results, both ♦ Swiss Re rating under review companies produced figures showing that they have room for manoeuvre on solvency Standard & Poor’s placed the triple–A thresholds. They also said that declining credit rating of Swiss Re under review with income from capital gains has been offset negative implication. The rating agency by improved operating profits as a result of said it was concerned Swiss Re’s capital charging customers higher premiums. adequacy declined this year to a level inconsistent with its current top rating. This Axa, the largest French insurer, said it had reduction was driven mainly by unrealised set aside an extra €89 million ($89.4 investment losses of SFr 2.4 billion and a million) to provide for costs arising from lower net income than in 2001. ♦ the World Trade Centre terrorist attack; this is in addition to the €561 million put aside (Financial Times, August 2002) last year. Axa also set aside a further €225 million to cover falls in equity prices, ♦ Credit Guarantee (South Africa): taking its total charge to €1 billion. AGF, a winning new customers in unfamiliar subsidiary of Germany’s Allianz, set aside markets €212 million in the first half of this year to cover capital losses on equity holdings The number of business failures after 11 attributable to shareholders. September has had a distinct impact on the claims ratios of credit insurers, making for Because at present each insurance group much more difficult underwriting applies different rules, the French insurance conditions. Mike Truter, Credit Guarantee’s regulator has begun negotiations to new managing director, is not unduly introduce a common standard on provisions pessimistic about the future. What Credit for equity depreciation.♦ Guarantee has to do, he said, is continue (Financial Times, September 2002) providing good services to clients and pay claims quickly when they arise. South ♦ Marsh/Benfield talks break down African businesses, he added, should be capitalising on the opportunities that are The plans for a takeover of the UK-based now presenting themselves, even though to Benfield Group by Marsh, the world’s giant some exporters this may entail venturing in insurance brokerage, have been shelved; into unfamiliar markets and dealing with but talks point out Marsh’s continued strange customers. Credit Guarantee can eagerness to enlarge the company’s play a valuable role in vetting these risks, portfolio in the direction of insurance helping exporters to identify good quality broking business, especially with regard to clients and to concentrate all their energies an increase in insurance and reinsurance on developing the market with these. If premiums.♦ something goes wrong for some reason, he (Financial Times, August 2002) finally argued, Credit Guarantee will step in and assist the exporter in collecting their International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 13
  14. 14. ♦ Russia offers insurance against its own license to pursue credit insurance officials business.♦ (Le Moci, September 2002) The Russian government and the World Bank have initialised a program in the ♦ Gipac launches coverage of political risk Russian Federal Centre for Project Finance that provides investors with a “non- Gipac (une assurance crédit des entreprises commercial risk” insurance against agroalimentaires) has chosen Sial (Salon “government performance and force international de l’agroalimentaire) as the majeure”. The aim of this initiative is to stage on which to launch its first credit enhance foreign direct investment and to insurance for political risk. This is a totally put an end to disagreements between new product, but indispensable for politicians and officials. Projects in the coal preserving the big accounts. Gipac is and timber industries will be the first to be guaranteeing more than €15 billion of backed up with such insurance; and large- transactions; of that, 40 per cent is for scale guarantees in the oil, gas and diamond sectors may follow. The annual premium exports.♦ charged for this insurance is around 1.5 per (Le Moci, October 2002) cent of the total loan value.♦ (Financial Times, September 2002) ♦ Credit assurance in times of credit crunch ♦ MIGA: so far an almost unknown Confronted with a strong increase in instrument of guarantee damage credit since the second semester of 2001, insurance companies have reviewed The Multilateral Investment Guarantee the tariffs of their policies. Furthermore, the Agency (MIGA) is a subsidiary of the agreement on guarantees and the procedure Worldbank that was created in 1988. It for credit allocations has become more offers long term guarantees (15 to 20 years) selective and restrictive. Less lucrative covering four non-commercial risks contracts have even been terminated, or not associated with foreign direct investment (FDI): the lack of foreign exchange and renewed, due to difficult conditions.♦ transfer restrictions; breaches of contracts; (Le Moci, October 2002) expropriation; and armed conflicts and civil disorders, including terrorism. Moreover, ♦ Ukraine: Swedish ECA EKN resumes MIGA offers technical assistance to the cover for medium-term business recipient country and, co-operating with other private and public insurance An EKN statement has confirmed that “we companies, issues guarantees under its are open, with a very restricted policy, for name in 155 countries. Since its creation, medium term guarantees (risk period not MIGA has signed around 70 guarantees for exceeding five years)”. EKN is only dealing projects in Africa, facilitating FDI in the with private buyers financed with an range of $4 billion. Africa accounts for 13.5 international financial institution such as per cent of MIGA’s portfolio.♦ the European Bank for Reconstruction & (Marchés Tropicaux, July 2002) Development. EKN’s policy for short-term guarantees is unchanged at premium class ♦ Euler & Hermes enter China four plus 100 per cent.♦ (International Trade Finance, September The French-German Euler & Hermes group 2002) is the first foreign credit insurance company to obtain a license to open a representation office in China. In two years’ time, the company may be allowed to ask for a International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 14
  15. 15. ♦ Kenya: telecoms operator taps OND- In both cases, however, the aim is the same - to guaranteed local debt target potential foreign buyers and borrowers in the markets concerned, and to strengthen In a notable use of Kenya’s capital markets, contacts with national exporters with an on- mobile telephone company Safaricom has the-ground presence.♦ raised a five-year Ksh205bn ($33m) loan from six local banks to support the expansion of its (International Trade Finance, October 2002) network. The loan was syndicated to six banks in Kenya, which also arranged a Ksh4bn ♦ Credit Guarantee: underwriting profit floating rate bond facility and a €25m loan, despite “brutal” insurance climate raised by Safaricom in 2001 for the project’s Against the backdrop of what CEO Mike first phase. The market is now awaiting one of Truter calls a “brutal underwriting climate” for the largest-ever sectoral deals in Africa, a credit insurers around the world, Credit $455m-equivalent project financing being Guarantee has produced surprisingly good jointly arranged by Citibank and Standard results for the past financial year. The Bank London for Nigerian mobile operator company achieved an underwriting result of MTN Nigeria. Bank meetings in this area are some R7.1 million on a total insured turnover scheduled for late September and early of R75.8 billion for the year ending June 2002. October.♦ This was despite having paid claims of more (International Trade Finance, September than R400 million and incurring underwriting 2002) losses of more than R40 million from reinsurance-inwards on credit risks elsewhere ♦ IFC boosts Brazilian trade finance sector in the world.♦ with $600m package (Credit Notes, October 2002) The International Finance Corporation has decided to provide new liquidity for Brazil's ♦ Trade Finance takes political risk in its tight markets by extending trade credit lines stride worth $600m to two of Brazil’s largest private While financial markets in the developed sector banks, Banko Itau and Unibanco, for on- world have been gripped this past year by the lending to Brazilian exporters. IFC executives newly-realised phenomenon of accountancy believe the new package will encourage risk, emerging markets specialists have been international lenders to keep credit lines open struggling with a more familiar, if more to Brazilian financial institutions.♦ intractable, problem – that of political risk. (International Trade Finance, October 2002) James Cunningham, associate director at Marsh Credit & Political Risks Europe, had ♦ EDC creates Warsaw office for growing this to say: “ the events of September 11 did eastern European markets not have a direct impact on the political and Export Development Canada (EDC), Canada’s credit insurance markets in the Middle East”. official export credit agency, has established a Trade finance has always been regarded as the permanent representative in Warsaw to market most resilient of financial products, able to its services to potential clients in eastern continue when all other capital markets are European markets. Poland is the fourth country effectively closed. The performance of the where EDC has established foreign trade and export finance markets in the Middle representatives - the other three being China, East over the year since September 11 has Brazil and Mexico. EDC's approach contrasts proved this point again.♦ with the business development policy at, for (Global Trade Review, September/October example, UK’s Export Credits Guarantee 2002) Department (ECGD). The ECGD has undertaken so-called “destination marketing”, whereby, rather than establishing representative offices, ECGD sends underwriters and senior officials on visits to a range of emerging market countries. International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 15
  16. 16. ♦ ECGD backs Mozal smelter expansion ♦ Gerling NCM pushes ahead with integration The UK’s Export Credits Guarantee Department (ECGD) is the latest export Final rebranding and integration of NCM credit agency to support Mozambique’s and Gerling Credit products and services in expanding Mozal aluminium smelter – the the UK goes ahead from this month, as country’s biggest target of foreign management presses on with the detailed investment in 27 years of independence. implementation of the merger approved by The country remains one of the world’s the European Union competition regulators poorest, but it has a strong track record of at the end of last year. Among the services economic and political reform and efforts to offered, Serv@Net, the rebranded NCM combat poverty. Mozal helps to diversify Orbis, allows clients and brokers to have a the export base away from a reliance on direct online link through which to report farm products, such as cashew nuts, and debts and payment delays, trigger collection electricity sales to South Africa from the services and make loss claims where Cahora Bassa dam. Institutions supporting necessary. Mozal include COFACE and other major export credit agencies, the Development The merger has also cut the German Bank of Southern Africa, the International exposure that now accounts for less than 20 Finance Corporation and CDC Capital per cent of group premium income and Partners (the former Commonwealth exposure; but Gerling NCM continues to Development Corporation).♦ expand in emerging markets. A joint venture has been set up in Tunisia, and a (International Trade Finance, February co-operation agreement signed for Latvia. 2002) In addition, a new office in Curacao will service trade through the Netherlands BANKING SECTOR Antilles, an important centre for oil trade, business services and offshore finance. ♦ SocGen moves away from francophone- (International Trade Finance, July 2002) oriented past ♦ Mistrust in the banking system Like other large Paris banks, Societe Generale has broadened the geographical The proportion of respondents to a survey spread of its client base amongst capital launched to find out who had recently asked goods and project companies. Now they are its bank for trade finance advice was just active in 17 programmes in exporting 30.5 per cent, a fall from 34 per cent in countries. 2001. Some nine per cent claim never to consult their banks. More than half of all Amongst non-OECD countries, great exporters are dissatisfied with credit and confidence is placed in Turkey and Iran. country risk cover provided by their banks. This confidence reflects real factors. In fact, All these findings tend to suggest that many Iran’s efforts to honour the settlements of small companies remain amateurish in their trade payment obligations rescheduled at a export dealings, rarely seeking expert moment of crisis in the 1990s have paid advice and shielding themselves from the dividends. With the Islamic Republic now impact of exchange rate movements or in a much stronger financial position, insuring their receivables. ♦ European Banks have hurried to get massive export credit lines in place. Turkey (International Trade Finance, July 2002) has also been careful to ensure it meets its debt payment obligations. This means that SocGen is still maintaining country risk capacity for new Turkish deals.♦ (International Trade Finance, July 2002) International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 16
  17. 17. ♦ Proponix: reaching critical mass The agreement will assist exporters from Proponix, the web-based trade services both countries involved in joint projects in provider formed in 2000 by its three client third countries. HBOR and the ECGD have banks - Bank of Montreal, Barclays and also entered into an agreement for the ANZ - and the American Management exchange of know-how. ♦ system, is looking to pull in new banking (International Trade Finance, September clients to attain the critical mass seen as the 2002) key to building a 21st century trade finance- related system. After the US, Canadian and ♦ EX-IM India/Africa: The Export-Import Australian markets, Proponix has carved a Bank of India signs a five-year, $10 niche in the Asian market, opening a Hong million line of credit with the Eastern Kong service centre. The centre offers L/C and Southern African Trade and reinsurance services, as well as the facilities Development Bank (PTA Bank) for bank clients to bring in exporting documents - again, such as L/Cs - to be Under the credit line, importers based in catalogued, scanned, imaged and moved PTA Bank’s 16 members countries will onto the Proponix online platform. This is make advance payments of 10 per cent of supported by the web-enabled Object contract value, with Ex-Im Bank providing TradeLine (OTL) back office engine. the remaining 90 per cent of contract value Documents are then processed to PTA Bank. Ex-Im Bank will reimburse electronically at the processing centres in Melbourne or Toronto. Indian exporters on shipment of goods. ♦ (International Trade Finance, September The second phase of the expansion plans is 2002) the targeting of the OTL platform at the European market.♦ ♦ Russia: Norilsk Nickel secures a $75 (International Trade Finance, July 2002) million structured copper pre-export finance facility arranged by Deutsche Bank and SG ♦ Tunisia: Amen Bank obtains a credit limit from ADB The facility is built around a medium-term export contract between Norimet, a Norilsk Amen Bank, second private bank of subsidiary, and the Hamburg-based Tunisia, has obtained a credit limit of 26 Norddeutsche Affinerie. Deutsche Bank’s million dinars (€20 million) from the Amsterdam branch acted as the sole African Development Bank (ADB). This is mandated arranger and offshore agent, with the first time that ABD has granted a credit SG’s Paris operation as senior arranger, limit to a private bank without the guarantee whilst Deutsche Bank Ltd, Moscow, acted of the bank’s host country. as onshore agent and passport bank. A limited syndication of the facility on a club This credit limit will allow Amen Bank to grant 10 year loans to its customers for the basis is planned. ♦ financing of projects in the sectors of (International Trade Finance, September manufacturing industries, transport, tourism 2002) or the services.♦ (Marchés Tropicaux, June 2002) ♦ Malaysia: Standard & Poors (S&P) raises the country’s sovereign rates one notch ♦ Croatia: The Croatian Bank for Reconstruction and Development S&P accepted as positive a succession plan (HBOR) signs a one-stop shop co- for the transfer of the country’s operation agreement with the UK’s premiership, which has reduced the near- ECGD for export guarantees and term uncertainty in the policy environment. insurance The outlook remains stable. The long-term International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 17
  18. 18. local currency and the local currency senior ♦ Tunisia: Afreximbank opens a subsidiary unsecured debt ratings are now A+, while in Tunis the long-term foreign currency and foreign currency senior unsecured debt ratings are Following decisions by the African BBB+. The short-term foreign currency Development Bank, the African Export- sovereign rating is A2. ♦ Import Bank (Afreximbank) has opened a (International Trade Finance, September subsidiary office in Tunis. The office 2002) provides a full range of financial activities and an agency to ensure follow-up of the ♦ South Africa: The Export-Import Bank projects that it co-finances in the countries India and the Industrial Development where the bank is active.♦ Corporation of South Africa sign a (Marchés Tropicaux, August 2002) memorandum ♦ Algeria: Creation of two new private The aim of the memorandum is to promote banks two-way investment and trade relations between South Africa and India, and to The monetary and credit council of Banque develop business opportunities. ♦ d’Algérie has authorised the creation of two (International Trade Finance, September new private banks, the Algerian Gulf Bank 2002) and the Arcobank. In addition, the council is willing to bring three further bank ♦ IMF’s plan for bankruptcy gaining institutions into the market.♦ favour (Marchés Tropicaux, September 2002) The International Monetary Fund (IMF) ♦ EDI and the security of international international bankruptcy procedure for payments sovereign governments is supported by the Group of Seven shareholder countries. The The International Chamber of Commerce IMF’s new course of action in the case of has started to draw up a supplement to the sovereign bankruptcy is to persuade the Uniform Customs and Practice for governments of emerging markets to add Documentary Credits (UCP 500), called e- special clauses to government bonds in UCP. This new publication concerns order to aid restructuring.♦ bilateral relations between clients and banks (Financial Times, September 2002) and the file presentation and digital data that they exchange via EDI (Electronic Data ♦ Tunisian-Kuwaiti Development Bank Interchange).♦ invests in leasing (Le Moci, September 2002) The Tunisian-Kuwaiti Development Bank (BKTD) has decided to reinforce ♦ Algeria: Saudi credit of $10 million for investment in leasing. As a result, the two banks Tunisian-Emirates Investment Bank has completed the purchase of 25,000 shares The Saudi fund for development has agreed from the International Arab Leasing to a credit of $10 million for two Algerian Society. The BKTD is one of the rare banks. The purpose of this credit is to development banks specialising in new finance 100 per cent of the import into project financing techniques.♦ Algeria of goods and non-petroleum products of Saudi origin.♦ (Marchés Tropicaux, July 2002) (Marchés Tropicaux, September 2002) International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 18
  19. 19. ♦ BNP Paribas: Co-operation with ♦ Turkey receives US Ex-Im fillip Dresdner ceases The US Ex-Im Bank is providing a loan The agreement between BNP Paribas and guarantee supporting US$4.1m worth of Dresdner has been closed due to changes in exports for a new thermal spring tourist resort market conditions and development being built in Turkey. The exporters are World strategies.♦ Brands Inc, Caterpillar Inc, and numerous US suppliers of furniture and a diesel power (Le Moci, October 2002) generator. ♦ Syria: Toward the first private bank Turkey is one of US Ex-Im Bank’s largest markets; the Bank’s Turkey portfolio exceeds The Syrian banking sector is totally US$115m in financing to support US exports nationalised. Nevertheless, the authorities of equipment and services to Turkey for a have announced the possible authorisation broad range of sectors including power, of private banks in the forthcoming year.♦ transportation, textiles, housing and tourism.♦ (Le Moci, October 2002) (Global Trade Review, September/October 2002) ♦ ECGD mulls over risk transfer to private sector, and carries out less business ♦ Nigeria: The African Development Bank The ECGD, the UK’s export credit agency, approves a $50m loan to finance a credit will be considering offers from reinsurers line to Citibank Nigeria and investment banks over the next few This credit line will be used for on-lending weeks for the transfer of its existing risk medium-term funds to corporate clients. The portfolio into the private sector. By majority of funds will be directed towards transferring some of its portfolio into the companies with export-oriented operations in private sector, ECGD can free up capacity, the power, telecommunications, textiles within its risk limits, for new export manufacturing, petroleum service, tourism, and business. ECGD is willing to take Turkish marine transportation sectors. The companies and Brazilian risk, within limits, and also are expected to use the funds to facilitate did a rare sub-Saharan deal in backing a rehabilitation, modernisation and expansion of slice of the Mozal project in production facilities.♦ Mozambique.♦ (International Trade Finance, September (International Trade Finance, September 2002) 2002) ♦ Japanese: deal for TradeCard ♦ Russia: The EBRD agrees a $10m loan and equity option with Russia Standard TradeCard Inc, the financial supply chain Bank in the multilateral’s first Russian company that enables buyers and sellers to consumer finance deal initiate, conduct and settle their trade transactions securely over the Internet, has This 3.5-year loan will help develop announced an agreement with Mizuho consumer finance and encourage a broader Corporate Bank to start a joint initiative range of products in the Russian banking introducing the TradeCard Platform to sector. Russia Standard Bank has pioneered Japanese corporate customers. Mizuho will the availability of consumer credit in introduce the TradeCard Platform to its Russia, which will aid the development of customers in Japan and will assist in the the economy and help develop retail development of various aspects of the chains.♦ platform's functionality. The goal is the ability (International Trade Finance, October 2002) to carry out export finance, import finance and settlement on TradeCard.♦ (Global Trade Review, September/October 2002) International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 19
  20. 20. ♦ ING in talks to extend German banking around US$16-20 billion. Recently, a interests showdown between the Banking Supervision and Regulation Agency ING, the Dutch banking and insurance (BSRA) and a powerful, politically group, is close to acquiring Banca protected corporation resulted in Capitalia’s German direct banking business Pamukbank, a small bank run by the in a deal that could intensify competition in corporation, being taken under the SDIF. the country’s overcrowded banking market. The chairman of the corporation was The two groups are in “exclusive talks”, subsequently banned from the banking bankers said, with observers valuing the industry. business at around €500m. The two parties Such events as these are good indicators of are expected to conclude a deal “within the the distances travelled in the next few weeks”, although differences over depoliticisation of the Turkish banking price could hold up an agreement.♦ industry and the boosting of the power of (Financial Times, January 2003) autonomous regulatory bodies.♦ (Global Trade Review, September/October ♦IFC helps out Tanzania Ex-Im 2002) The International Finance Corporation ♦ Citibank wins go-ahead for China deal (IFC) is investing up to US$3.5m in the Export-Import Bank of Tanzania. The Citibank, the US financial giant, has won financing package includes a senior loan of Chinese government approval to buy its up to US$1m. “Besides providing clients first minority stake in a Chinese mainland with long-term financing, Tanzania Ex-Im bank, providing a platform for the US bank Bank will gain from the IFC's global to sell more products to China's growing expertise in training employees with the middle class. Under the planned deal, latest technology in international banking”, Citibank is set to buy 8.26 per cent of the says SMJ Mwambenja, managing director Shangai Pudong Development Bank for of Tanzania Ex-Im. Tanzania Ex-Im is a $112m, cementing a strategic partnership mid-sized Tanzanian bank specialising in that may allow Citibank to use Pudong’s pre-export crop financing as well as trade network of 272 branches in 30 Chinese and financial services to SMEs.♦ cities. Citibank will use the network to (Global Trade Review, September/October promote credit cards and other products, 2002) Chinese sources said yesterday.♦ (Financial Times, December 2002) ♦ Turkey: the final pangs of modernisation. ♦ Morocco: BMCE Bank registers good As Soli Ozel, professor of international results in the first semester relations and political sciences at Istanbul The Moroccan BMCE Bank has seen Bilgi University, points out, “the most increases in its most important index of critical aspect of any reformist policy in activity. Its only first-quarter loss was in the Turkey, the restructuring of the banking net result (191.2m Dirham against the 202.7 sector, was not tackled early enough”. million of the first semester of 2002). Its net Ultimately, the Turkish banking sector has product had climbed 4% at the end of June been restructured at massive cost to the 2002 to 1.06 billion Dirhams (€101.4m). industry and to taxpayers. BMCE Bank has pursued the development Under the restructuring, Turkish public of banking and credit insurance products sector banks gained their autonomy and and services as well as those linked to some 22 private banks were taken under the foreign trade.♦ Savings Deposit Insurance Fund (SDIF), at a cost of US$12 billion. The losses of the (Marchés Tropicaux, November 2002) public sector banks were estimated to total International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 20
  21. 21. ♦ Libyan bank ABDT opens in Senegal slower growth in East Asia, Russia and Brazil has reduced investment demand,” the Bank A new bank with Libyan capital, the African noted.♦ Bank for Development and Trade (ABDT), has (International Trade Finance, December 2002) opened in Senegal. The bank, created following a decision by the Community of ♦ BBVA sells Brazilian assets to Bradesco Sahel Saharian States, started its activities at the beginning of 2003. ABDT’s ambition is to BBVA, the Spanish financial group, yesterday open agencies in every member state of the sold all its assets in Brazil to Bradesco, the Community of Sahel Saharian States, an country's number one private bank, in a deal organisation of economic and political co- worth R$2.63bn (US$797m). operation. The Bank will focus its activities on medium-term credit for the private sector. The BBVA will receive R$2bn in cash and a 4.5 Bank is a non-profit organisation and will per cent stake in Bradesco in exchange for therefore offer rates of credit lower than those BBV Banco, its local unit. It will also gain one of its competitors.♦ of eight seats on Bradesco’s board. (Marchés Tropicaux, November 2002) The deal is the latest in a series of buy-outs of ♦ South Africa: Stanbic changes name foreign banks by Brazilian groups and shows the difficulty many such banks have faced in The shareholders of South’s Africa Standard expanding in Brazil’s competitive banking Bank (Stanbic) approved the bank’s name sector.♦ change. As of June 3rd 2002, the bank's name (Financial Times, December 2002) has been changed to Standard Bank Group Limited. The older name, now defunct, was Standard Investment Corporation Ltd.♦ SMEs (Marchés Tropicaux, November 2002) ♦ Croatia: HBOR signs a five-year syndicated loan ♦ Zambia: privatisation of 51% of Zanaco’s capital The Croatian Bank for Reconstruction & Development announced that the € 82.5 The government of Zambia will give away million loan would be used mainly to 51% of the capital of Zambia’s National finance local firms’ exports and investment Commercial Bank, Zanaco, to the private projects. ♦ sector. The financial condition of Zanaco, the country's most important retail bank with (International Trade Finance, July 2002) almost 43 agencies and 1440 employees, is no longer favourable. The bank has a large ♦ Kyrgyz Republic: EBRD launches a US$ deficit.♦ 15.3 million facility to support SMEs (Marchés Tropicaux, November 2002) This facility, co-financed by the Swiss government, the US government and the ♦ World Bank: urgent need for global trade IFC, will provide credit lines of US$ 50 to reform US$ 50,000 for on-lending to local entrepreneurs. The credit lines are twinned The World Bank has renewed its call for fresh with technical assistance funds provided by efforts to liberalise trade and open up new the EU and USAID to help partner banks to opportunities for exporters from the develop efficient lending programmes. ♦ developing world. Private foreign investment in infrastructure is down by a quarter on 1997 (International Trade Finance, July 2002) levels. “Investors are becoming averse to long- term projects; accounting scandals in industrial countries have driven from the market major players such as Enron and Worldcom; and International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 21
  22. 22. ♦ Mexico: the WB approves a US$ 64.6 years, this project is a "great first" in the co- million loan to strengthen the country’s operation between Algeria and France, non-bank financial intermediaries, and to according to Colin de Verdiere, French expand financial services to the poor ambassador in Algiers. The project priorities relate to the reform of the legal Technical assistance provided by the World framework of quality and standards, the Bank will include the institutional creation of an accreditation centre in strengthening of saving and credit conformity with international standards, institutions (SCIs), the modernisation of assistance with ISO 9000 certification and their information systems, and training for the appointment of fifty persons in charge their management and staff in the areas of of quality.♦ finance, accounting, risk management, (Marchés Tropicaux, June 2002) credit analysis and governance. At the community level, the poorer segment of the ♦ Cambodia: The ADB announces plans to population will be trained in the basic extend $286 million in loans as part of an principles of household finance and updated country strategy and financial transactions. ♦ programme update for the three-year (International Trade Finance, July 2002) (2003-2005) rolling plan ♦ French co-operation: Launching an The programme will focus on development official program of “ industrial coaching” of the rural economy, human resources, and in Africa and the Mediterranean the private sector.♦ (International Trade Finance, September The Entreprises et Dévelopement Network 2002) (French Ministry of Foreign Affairs, UNIDO and the Centre for Industrial ♦ MIF: The Inter-American Development Development in Brussels) has launched a 3- Bank-administered Multilateral year programme of “industrial coaching” in Investment Fund approves grants Africa and the Mediterranean. The totalling $6.2 million for regulation of programme is financed by the Priority SMEs and the banking sector Solidarity Programme of the French Government to the amount of € 680,000. A US $914,000 grant to Bolivia will help The Enterprises et Dévelopement Network Fundacion para el Desarrollo Empresarial to seeks to create pools of SMEs in the same facilitate the transition of SMEs and micro- sector, and provides them with common enterprises from the informal economy to services. The new programme seeks to use the formal economy. these pools to identify partners in both developing and industrialised countries, A $1.24 million grant to Nicaragua will create a “binome” (a partnership between help central bank Superintendencia de two SMEs, one from either type of Bancos y Otras Instituciones Financieras to country), and helps the industrialised SME strengthen its organisational structure and to support and coach a similar partner in enhance its capacity to supervise financial Africa or the Mediterranean.♦ institutions.♦ (Le Moci, July 2002) (International Trade Finance, September 2002) ♦ Algeria: French support of SMEs ♦ Vietnam: The ADB announces plans to Algeria and France signed a financing extend $280 million in loans as part of an convention regarding priority mutual aid updated country strategy and funds (a financial instrument of French co- programme update for the three-year operation). This will launch a project to aid (2003-2005) rolling plan the development of private Algerian SMEs. With up to 3 million euro distributed over 3 International Trade Centre UNCTAD/WTO Trade Finance Programme Press Abstracts n° 3 & 4 /2002 Page 22