Published 22 December 2015

Export finance

– an international comparative study

Knowledge on how export finance is used to promote exports can contribute to develop­ment of the Swedish Government’s new Export Strategy as well as to coming policy initiatives concerning the supply of capital to firms. This study takes a look at how five other European
countries have organised their export finance system and the types of public export credit guarantees and export credits they offer.

We find that the types of export credit guarantees offered are fairly similar in the countries studied; however, several have launched certain unique products to meet special needs for specific branches or foreign markets. There is less consistency among the countries as regards export credits and export loans. The range of these products is more limited and some countries mainly offer them for business with developing countries.

Trade with new markets requires risk management

Increasing the internationalisation of Swedish companies, in particular small and medium-sized enterprises, is one of the main objectives of Swedish industrial policy. Sweden’s neighbouring countries constitute the predominant export markets for Swedish firms today, whilst the markets with the greatest growth potential are found in the more distant emerging economies. Exporting firms need to establish new contacts in order to grow on the emerging markets. There is generally a greater perceived risk associated with doing business with these markets due to lack of information, generally, as well as cultural and linguistic differences.

This report contains a comparative analysis of the export credit and export credit guarantee systems in Denmark, The Netherlands, Great Britain, Sweden, Germany and Austria. All of these countries have a system in which the state intervenes and covers risks arising in conjunction with export and foreign direct investment. We discuss the products provided by the identified export finance institutions and their portfolio structure. We also examine how products have been adapted to new circumstances such as the development of global value chains and the response to the global financial crisis.

There is little variation in the types of export credit guarantees provided

Export credit guarantees are administered by public sector agencies in Denmark, Great Britain and Sweden, while in The Netherlands, Germany and Austria they are administered by private organisations with an official mandate. The types of guarantees provided are similar in all of the countries studied. This is not surprising, as export credit guarantees are regulated by the EU and multilateral organisations, such as the OECD and the WTO. We found, however, that many of these countries have a few unique products. Some of these are branch-specific, such as guarantees for wind power turbines (Denmark) and aircraft (Germany). In some cases they are specific for certain foreign markets, for instance a product developed in Great Britain specifically for business with Muslim countries.

The internationalisation of small and medium-sized enterprises is a common priority

Enabling more small and medium-sized enterprises to export is a frequent industrial policy goal. Lack of access to capital and difficulties in managing risks associated with inter­national trade are common obstacles to the internationalisation of SMEs. However, adapt­ing export finance to these firms’ needs can be a challenge. Administrative costs per amount guaranteed can be high, not least if individual risk assessments are done for small transactions. The countries studied here have all implemented different types of initiatives to better reach this group. Special export loans for SMEs have been launched in Denmark, Sweden and Austria. The applications process for SMEs has been simplified in The Nether­lands and Great Britain. Information campaigns, regional presence and co-operation with other business promotion and support initiatives are also common ways to reach SMEs and new and prospective exporters.

Adapting export finance to new circumstances

Changing circumstances have led to a need to adapt export finance systems. International trade decreased considerably after the global financial crisis, indicating that access to capital and risk management are important for exporting firms. Denmark, The Netherlands, Great Britain and Sweden implemented a number of measures in order to meet the new challenges. Some examples of these measures include new guarantee products for SMEs, increased refinancing of credits from private financial institutions, and the reintroduction of products for larger firms and for export to wealthier countries. Germany and Austria, on the other hand, did not introduce new products or initiatives. However, the volume of trade guaranteed did increase substantially in all of the countries studied.

The growth of global value chains has led to an increase in the proportion of import (foreign value added) in export goods, as well as an increase in the trade in services. It is necessary to adapt export finance to these new and changing circumstances. The Nether­lands have introduced an import guarantee for Dutch exporting firms. Germany has launched a specific guarantee for the service sector. Several countries have reviewed the ceiling for the proportion of foreign value added content that can be included in export covered by public export credit guarantees. Denmark and Sweden have come the furthest in this regard and currently only require that export benefits the domestic economy in a broader sense, rather than demanding a specific level of domestic value added. All of the countries studied offer guarantees for foreign direct investment and many have introduced flexible guarantees for repeat transactions.

Further studies on export finance systems can contribute to the Government’s export promotion initiatives

Parallel with this study, Growth Analysis is publishing a review of methods used in the scientific literature to assess the impacts of public export finance. We find that the field of research is very limited and over half of the studies are concentrated on just two countries (Germany and Austria). Even though the papers and studies reviewed indicate that export finance has a positive effect on export volumes, we should be careful about making generalisations based on such a limited research material. Growth Analysis proposes two further studies in this area. Firstly, a compilation and analysis of descriptive statistics on Swedish export finance would give a clearer picture of the system and how it is used. Secondly, an evaluation of impacts at the firm level would answer a number of important questions about how products affect different types of firms and trade with different types of foreign markets.


Title
Export finance – an international comparative study

Serial number
PM 2015:24

Reference number
2015/162

Download the report in SwedishPDF