Australian companies stand to benefit from EFIC agreement

13 Feb 12

Australian companies stand to benefit from a Reciprocal Risk Participation Agreement signed last week between the Export Finance and Insurance Corporation (EFIC) and the Export-Import Bank of China (EXIM China).

The agreement is a framework for financing goods and services exported from Australia or China and overseas investment from the two countries. It follows a multi-lateral framework agreement endorsed by the Asian EXIM Banks Forum at its 16th Annual Meeting on October 2010 in Busan, South Korea.

Under the Agreement, eligible Australian exporters can benefit from financing jointly provided by EFIC and EXIM China particularly when Australian and Chinese companies are working together in a third country. “With this agreement we will broaden the ways our organisations work together to help exports and investments to continue to grow between our two countries, to the benefit of Australian and Chinese companies" said Angus Armour, CEO and Managing Director of EFIC.

The agreement also could be used to facilitate the financing of resource projects in Australia where the resources are to be exported to China.

“Risk-sharing agreements allow us to pool resources to meet the financing needs for projects which we wish to support. Recent projects in the resources sector in Australia, where EXIM banks and ECAs play a crucial role in the financing, are examples of situations where both Australia and China can mutually benefit,” Mr Armour said. “With EFIC's support Australian companies can win sub-contracting work to these projects either as "tier-one" suppliers, supplying directly to the project, or as "tier-two" sub-contractors to these suppliers.”

When a company is financing a transaction under this framework agreement only one set of documents needs to be negotiated with the party providing the loan, which then enters a separate risk-sharing agreement with the other EXIM Bank or ECA. This can free up an EXIM Bank or ECA's capacity to support more exports, and will allow one party to provide a financing facility on the condition that other party guarantees a portion of such facility.

The agreement can be used to leverage capacity through co-financing to offer meaningful financial support, especially for larger projects located in China or Australia, that are beyond the capacity of the commercial market or a single EXIM Bank or ECA. This is especially relevant in today's volatile financial markets. By leveraging capacity, it can help project sponsors overcome credit head¬winds, where credit is in short supply.

About Asian EXIM Banks Forum Established in 1995, the Asian EXIM Banks Forum is a group of export credit agencies representing ten countries in the Asian Region. The purpose of the Forum is to enhance co-operation and forge strong relationships among members in order to promote global trade and investment.

The Forum members are EFIC, Export-Import Bank of China, Export-Import Bank of India, Indonesia EXIM Bank, Japan Bank of International Cooperation, The Export-Import Bank of Korea, Export-Import Bank of Malaysia, Philippine Export-Import Credit Agency, Export-Import Bank of Thailand and the newest member, Vietnam Development Bank. The Asian Development Bank is a permanent observer of the Forum.

About The Export-Import Bank of China Established in 1994, the Export-Import Bank of China is a state bank solely owned by the Chinese government. Its aim is to promote Sino-foreign relationship and international economic and trade cooperation.

It has a charter to implement the state policies in industry, foreign trade and economy and finance to facilitate the export and import of Chinese products and services as well as to support Chinese companies' outbound investment by way of its loan and guarantee programs. It also has an active program in raising funds in the domestic and international capital markets.

About Export Finance and Insurance Corporation as the Australian Government's export credit agency, EFIC provides finance and insurance solutions to help Australian exporters overcome the financial barriers they face when growing their business overseas.

EFIC works directly with exporters or with their banks to provide loans, guarantees, bonds and insurance products which can be tailored to meet the needs of both large and small exporters.

EFIC is uniquely placed to do this: using its over 50 years of export finance and industry expertise, contacts at financial institutions around the globe, the strength of its AAA credit rating and an entrepreneurial business approach to make export deals happen.

For further information please contact:

Sarah Beyrath
Senior Manager, PR and Communications
Export Finance and Insurance Corporation
Phone: +61 2 8273 5276
Email: sbeyrath@efic.gov.au

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