Export Credit Guarantee Agency needed to support Mongolian export growth
EconomyUlaanbaatar /MONTSAME/ EuroChamber has successfully concluded a four-month study on Export Financing for Mongolian companies and SMEs, handing it over to Deputy Prime Minister Mr. Ya. Sodbaatar on Tuesday, August.25 during a public-private-dialogue event at the Mongolian National Chamber of Commerce and Industry (MNCCI).
And Press conference, presentation of detailed results & recommendations and stake-holder discussion was held on Friday, August. 28.
According
to the Export Finance Study conducted by EuroChamber Mongolia in cooperation
with MNCCI and funded by the European Union via the TRAM Project, Mongolian
non-mining exports can be increased by 50-80%, if suitable export financing
solutions would become available. Export Credit Guarantee scheme, as a
cornerstone of Government’s export promotion scheme is a necessary
prerequisite for this.
• Export financing accounts today for less than 0.5% of the total
corporate&SME loan portfolio of Mongolian commercial banks.
• The creation of an institutional and legal framework for export promotion is
urgently needed (i.e. establishment of an ECA). Pre-export financing guarantee
scheme is critically important, in addition to post-shipment export financing,
both for non-mining as well as mining products.
• The European Union will continue supporting Mongolia's economic
diversification and equitable growth.
• EuroChamber Working group to be established to improve the legal framework
for international trade finance instruments, esp. factoring and forfeiting.
In a press conference, followed by a presentation and roundtable discussion,
all stakeholders discussed the results of "Export Financing for Mongolian
SMEs" study, the key recommendation of which is to improve export-oriented
legal framework and establish an Export Credit Guarantee Agency.
Opening
the discussion, Mr. Marco Ferri, First Deputy Ambassador of the EU Delegation
to Mongolia, said: “The European Union will support Mongolia's economic
diversification and equitable growth. We will attempt to share know-how from
relevant experience of the European Union.”
The
discussion was attended by more than 25 representatives of exporting companies,
from the Ministry of Finance, the Ministry of Foreign Affairs, domestic
commercial banks, international financial institutions, the EU Delegation to
Mongolia, the MNCCI and the TRAM project team.
The main finding of the study was that export financing in Mongolia accounted for
less than 0.5% of the total corporate and SME loan portfolio of commercial
banks. Study also shows that new banking products, esp. pre-export financing,
lower interest rates and less demanding collateral requirements are desired by
exporting companies.
"The
availability of a government-backed export credit insurance will enable
Mongolian commercial banks to provide better, cheaper and more accessible
financing to exporters." - Tomas Bravenec, Executive Director of
EuroChamber Mongolia.
The
main recommendation of the research team is to establish a “Berne Union” type
Export Credit (Guarantee) Agency. This way, Mongolia has the potential to
increase export of value-added products, increase the access to export
financing by SME and large exporters, reduce the cost of financing, as well as
impact of Covid-19 on the economy, and stimulate economic growth.
“Mongolia has a lot of untapped potential, and the involvement and support from
the private sector is very important in establishing the Export Credit Agency
(ECA). The alternative to this, which is loan interest rate subsidies, is
non-scalable, a “one-off” approach. Whereas using the same amount of funds for
establishing an ECA would reap much more, an longer term benefits" - Carl
Krug, Senior Private Sector Development Specialist, Mongolian Trade Promotion
Project (TRAM).
EuroChamber
Mongolia is envisaging working closely with public as well as private sector
stakeholders to make the establishment of an ECA a strategic priority of the
Government, as well as to work towards improvement of bankability of companies
through capacity building.
“We are looking forward to continue our cooperation with EuroChamber on this strategically important topic. Export promotion, Government support and increased competitiveness of our exporters is at the heart of our work at MNCCI.” –
T. Duuren, CEO of MNCCI
Based on proposal of the participants, EuroChamber Mongolia will establish a
working group to create legal environment for enabling international trade
financing instruments such as forfeiting and factoring to be used widely by
commercial banks in Mongolia.
EuroChamber Mongolia