Improving the Role of Eximbanks/ECAs in the OIC Member States
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6.2. Applying Key Lessons For The Government
A government that sets up an ECA - and then ignores it – is as unhelpful as a government that
sets one up and intervenes in its operations. The government must understand the role of an
ECA as a critical public policy tool to promote and enhance exports. But, it must also know that
the ECA is a financial institution that takes risks and must be professionally run.
o Give the ECA a clear mandate, statutory functions and sound governance structure:
It is essential that the ECA is given a very clear mandate which covers not only the
objective to support and promote exports, but should also outline whether or not the
institution works with private sector sources of financing and insurance active in the
market. In the case of Indonesia, this dual mandate is well defined. In other countries,
such as Nigeria and Canada, promoting the involvement of commercial banks or private
insurers is a secondary consideration. Either way, the ECA should know whether its role
is to play strictly within the market gap, or whether actively competing with the private
sector is acceptable.
o Define the nature and extent of government financial support and properly plan
for this in the national budgeting process: There are many ways the government can
provide financial backing for its ECA. In the first instance, share capital is the most basic
support, wherein the government either wholly owns or partially owns the institution.
Secondly, there are countries (such as Turkey) in which the government provides
guarantees for certain risks/compensation for losses relating to specific transactions.
Thirdly, ECAs can borrow on the domestic and international capital markets with full
faith and credit of the government, such as Canada, with some strict borrowing limits.
Finally, the government can act as a provider of direct loans to the ECA, such as in the
case of Indonesia EXIM where the government is the lender of last resort. Defining the
extent of government backing is necessary for the ECA itself, as well as for its creditors,
clients and international partners.
o Constantly monitor and review the ECA’s activities and portfolio: Depending on the
nature of government backing, it is advisable for the government to keep a close watch
on the potential financial implications of the ECA’s activities on the national accounts to
avoid any surprises. Annual corporate plans should be submitted which outline the
ECA’s maximum contingent liabilities and financial position.
o Circumscribe the role of the government in the ECA’s activities: Apart from the
financial backing, the government can have additional avenues of involvement with an
ECA’s activities and it is important that these are well defined. If it is normal practice
within statutory corporations or state-owned enterprises for a government Ministry to
be represented on the Board of Directors, then the government representatives need to
consider carefully whether they are representing the government as “owners” (such as
might be the case for officials from Ministries of Finance) or as an official from the line
ministry, i.e. Ministry of Trade, who might be representing the trade interests of the
country. In this latter case, the Ministry of Trade needs to be careful not to blur lines
between its role on the Board and its role as the Ministry responsible for the national