Ahmet KILICOGLU

1
NEW CHALLENGES FOR ECAs OPERATING IN EMERGING /
FAST GROWING MARKETS

• Ahmet KILICOGLU
• September 13, 2007
• (Prague, Czech Republic)

2
CHANGING ENVIRONMENT FOR ECAS - 1

• ECAs confront substantial changes in business
  environment
• ? Tough competition (private insurers in ST)
• ? More experience and technology brought in by
  the private sector
• ? Shift from standardized products basic
  business model
• ? Requirement for more sophisticated/tailor-made
  solutions
• ? Customer satisfaction concern
• ? Sharper questioning from own governments about
  proper role of public sector especially after EU
  Directives
• ? Increasing pressure from NGOs on ECAs

Prague 2007
3
CHANGING ENVIRONMENT FOR ECAS - 2

• ? European ECAs set up subsidiary organizations
  to separate their government account business
  from export credit business.
• ? Government-backed export business shrinks in
  the total export volume in major exporting
  countries.
• ? WTO requirements for ECAs to break-even.
• ? Changing nature of borrowers in export
  credit business from project and commercial
  borrowers rather than governments.
• ? Mandate of guardian authorities to support
  SMEs.

Prague 2007
4
CHANGING ROLE OF ECAs

• ? Official ECAs are mostly left with
• ? longer maturities
• ? riskier countries/risks
• ? ECAs will remain critical financial
  partners/financiers in taking M/L-T risks in
  developing countries.

Prague 2007
5
DISTINCTION BETWEEN DEVELOPED DEVELOPING
COUNTRIES ECAs

• ? Missions are same
• ? Developed country ECAs more flexible more
  financial resources, technology
• ? Developing country ECAs continue traditional
  role - fill in the gap of their banking sector
  cover ST have to pursue the export-led growth
  strategies of own gvts.

Prague 2007
6
CHALLENGES FACING THE DEVELOPING COUNTRIES ECAs

• ? Risk diversification
• ? Left with high risk long maturity
• ? Rules to be followed
• (WTO, OECD, EU Directives, Paris Club)
• ? Break-even mission by own gvts
• ? High pressure from own gvts for efficient
  utilization of limited public resources
• ? Less flexible to adopt to changes (products,
  technology, experience)
• ? Direct lending, insurance guarantee
  functions together

Prague 2007
7
TURKISH CASE - TURK EXIMBANK

• ?Export-led growth strategy of all gvts
  establishment of Turk Eximbank in March 1987.
• ?Immature financial market indispensable in
  times of crisis - Direct lending, insurance and
  guarantee functions, ST being highest portion
• ?Turkey WTO Member, OECD Member, EU Candidate
• ?Customs Union with EU as of Jan. 1996 issuance
  of Communiqué (Export 96/12) for Officially
  Supported Export Credits parallel to major
  disciplines of the OECD Arrangement.

June 2006
8
GENERAL FINANCIAL OUTLOOK

• For 2006
• Total Assets 2.9 billion
• Total Loans / Total Assets 82
• Capital Base 1.63 billion
• 3.5 billion in loans and 4.3 billion
  insurance cover
• Total 7.8 billion support (9 of the
  Turkish exports)
• Rating Same as the Turkish Treasury
• Standard Poors BB-, Stable Outlook
• Moodys Ba3, Stable Outlook

Prague 2007
9
THE TURKISH EXPORT CREDIT INSURANCE MARKET
? Turk Eximbank- sole official export credit
agency market leader with the
lion-share ? 3 big players operating since
recovery from crisis provide combined cover
(export domestic credit) Result less appetite
from the market for export credit insurance
cover ? Obligation of Turk Eximbank due from EU
Directives in search of removing distortions of
competition due to state-aid ? seperate entity to
be established

Prague 2007
10
CHALLENGES FACING TURK EXIMBANK
? Plan to set up a subsidiary entity for export
credit business along with supplementary
products ? Transposition of the EU Directives
into national Law (amendment of Banks Law ) 2
Directives under External Relations Chapter ?
Rules to be followed (WTO, OECD, EU, Paris Club,
Basel II) ? Core business is mainly ST
reluctance of other financial institutions ?
Gvts export policies very high risk
countries

Prague 2007
11
CONCLUSION

• ? ECAs will always be critical financial
  partners / financiers for high-risk countries/
  business.
• ? ECAs of developing countries are indispensable
  actors for their economies.

Prague 2007
12

• THANK YOU !

June 2006