An export credit agency (ECA) can become a key element of the export promotion system, provided it won’t simultaneously become a source of additional risks: fiscal, financial, corruption, and so on.
The law, adopted in late 2016, raises a lot of questions, which have already been raised in an issue of Reform Index. The key issues are (1) taking the newly established state institution to support exports out of the reach of the laws governing all other financial and insurance institutions in the Ukrainian market, (2) a rather peculiar structure of the institution’s governing bodies, and (3) selective support, which is provided only to a few sectors of economy. Another question is the compliance of the law with Ukraine’s international obligations.
In its current form, the law creates additional budget obligations and, therefore, risks, which the IMF can’t ignore while working with the country.
Interestingly, a manipulative infographic is used to support the new law on creation of an export-credit agency. In particular, the data on the Canadian ESA, Export Development Canada, features such numbers: +570 thousand jobs in 2013, which apparently must indicate the growing number of jobs in Canada to more than 0.5 million thanks to ESA. Even though Canada’s population is about 32 million, and such a jobs growth is quite strange. In fact, the report of the agency tells about the help to sustain such number of jobs rather than create them. Another interesting figure is +17% of exports per year. It seems that Canadian exports increase at such pace thanks to ECA. In fact, according to the agency’s data, Canadian exports grew by 3.2% in 2013 (the year the infographic refers to).
Using performance indicators by Euler Hermes as an argument in favour of creation of a state institution to support exports is also surprising, because Euler Hermes is a private company that has been providing credit insurance services worldwide for over a century. In the middle of the last century, the company, together with the well-known accounting firm PWC, was chosen by the German Government as the service provider of export credit guarantees on behalf of the German Government. But this is only one aspect of activities of the company, which makes comparison of the business models of Euler Hermes and the newly created ECA in Ukraine wrong.
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