Page 54 - bne_Magazine_March_2018

54 Opinion bne March 2018
In spite of repeated warnings about the Pljevla coal plant, the Czech Export Bank initially decided to support the project.
COMMENT: Export credit agencies lurk in the
shadows of responsible financing
Dan Heuer of Bankwatch
Export credit agencies (ECAs) are financial tools used by countries to help realise exports for their own enter- prises abroad. Typically an ECA finances projects that are too risky for commercial banks, in an effort to shelter companies from the political and economic uncertainties of operating in places with weak institutional capacities and legal frameworks. In the event that a project goes bust, the ECA steps in and assumes the loss, with the expenses of the original financing and possible repayment sourced from national budgets.
Export credits are big business. Members of the industry’s Berne Union insured nearly $1 trillion dollars between 2012 and 2016. That amount far exceeds the total investments of multilateral lenders such as the World Bank and the regional development banks, and accounts for 11% of world trade.
Yet in spite of the fact that ECAs are publicly-backed financial institutions that enjoy a significant place in the global economy, very little information about their operations is known to the public. A new study by Bankwatch and Finance & Trade Watch sheds light on the operations of seven ECAs in the countries of Central and Eastern Europe.
www.bne.eu
Surveying the institutional set-up and operations of agencies in Austria, Poland, Czech Republic, Croatia, Hungary, Slovakia and Romania, the report finds that this lack of transparency has led to their involvement in a number of economically and politically-compromising projects.
One such example is the ongoing spat between the Vítkovice Machinery Group and Adularya's Yunus Emre power plant in Turkey,which could result in a bill of hundred of millions of euros for the Czech state. The Czech exporter jumped into the coal power plant without first setting clear conditions for its construction, and the Czech Export Bank and the Export Guar- antee and Insurance Corporation quickly followed suit and backed this deal. It later transpired that the boilers delivered by a Czech company for the plant were unable to burn the low- quality coal destined for Yunus Emre. Both sides claim that the other is responsible for the failure. Nevertheless it is clear that such a project should have never been supported by ECAs. It
is unclear whether the power plant will ever operate, but the Czech state is likely to have to pay up anyway.
In fact, Czech ECAs have a rich history of financing risky proj- ects. In the case of a cement factory in Vietnam, a police inves-