Exim Banks in Asian Region: Mr. T.C. VENKAT SUBRAMANIAN

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2 Conference on Asian Economic Integration Exim Banks in Asian Region: Cooperation for Enhanced Economic Integration Mr. T.C. VENKAT SUBRAMANIAN Chairman & Managing Director Exim Bank of India New Delhi, November 12,

3 Introduction 2 International trade & investment vital components of economic growth Globalisation opened up new opportunities for economic progress in developing countries through greater integration into global economy. Growing trend towards greater political, economic, and social integration among countries, both inter-regionally and intra-regionally. Regional integration a key factor in the rapid and sustained economic development of the Asian region, linking domestic development and regional economic restructuring. Enhancing economic cooperation among countries facilitates the analysis, identification and formulation of policy options.

4 3 Regional Cooperation enhances & amplifies domestic effort at development Economic integration has increased significantly; some factors: Growing trade interdependence Rapid expansion of investment flows Fundamental shifts toward market-based open policy Economic liberalisation Internationalisation of capital and production networks. Regional cooperation is best manifested in the increasing proliferation of Regional Trading Agreements (RTAs), which is reshaping the architecture of the global trading system. More than one-third of global trade takes place between countries that have some form of reciprocal RTA.

5 4 ASIAN REGION S TRADE significant rise in Trade with Developing Countries Asian Region's Exports (US$ bn) Reorientation of Asian* region s trade 2000 towards Developing countries 1600 to Industrial Countries to Developing Countries While Asia s* exports to Industrial countries have risen five-fold from US$ 259 bn in 1990 to US$ 1.2 trn in 2006, Asia s* exports to Developing countries have risen eight-fold from US$ 188 bn to US$ 1.6 trn Underlying this trend has been the sharp rise in Intra-Asian* exports Source: IMF, Direction of Trade Statistics In 2006, Intra-Asian* exports at US$ 1.26 trn was higher than Asia s* exports to Industrial countries (US$ 1.2 trn) * - East & South Asia excl. Japan Increased Intra-Asian* Exports have boosted regional trade in the Asian* region

6 5 ASIAN REGION S TRADE Developing countries emerging as major import partners Asian Region's Imports (US$ bn) from Industrial Countries from Developing Countries from Asia* (East & South Asia excl. Japan) Source: IMF, Direction of Trade Statistics Since 2000, Asia s* imports from developing countries have surpassed Asia s* imports from Industrial countries, with the trend increasing in subsequent years While Asian s* imports from Industrial countries rose from US$ 554 bn in 2000 to US$ 957 bn in 2006, imports from Developing countries rose much faster from US$ 616 bn to US$ 1.6 trn Sharp rise in intra-asian* imports, from US$ 481 bn in 2000 to US$ 1.18 trn, has boosted Asia s* overall imports from Developing countries * - East & South Asia excl. Japan

7 6 INDIA S EXPORTS - REGIONWISE Enhanced trade with Asian Region India's Exports - Regionwise (US$ bn) Buoyancy in India s foreign trade can be to Industrial Countries to Developing Countries to Asia* * - East & South Asia excl. Japan attributed to the enhanced trade with other developing countries, and with Asian region in particular India s total exports to developing countries (at US$ 67 bn in 2006) are now higher than exports 40 to Industrial countries (US$ 53 bn): Consequently, Developing countries now account for a larger share (56% in 2006) in India s total exports, as compared to that for Industrial countries (44%) 10 Amongst Developing countries, exports to the Asian region (East & South Asia excl. Japan) Source: IMF, Direction of Trade Statistics has been particularly significant, having risen from US$ 2.2 bn in 1990 to US$ 34 bn in 2006

8 7 INDIA S IMPORTS - REGIONWISE Enhanced trade with Developing Countries India's Imports - Regionwise (US$ bn) Recent years have also witnessed the from Industrial Countries from Developing Countries emergence of Developing countries as India s import sources from Asia* * - East & South Asia excl. Japan India s imports from other Developing countries (US$ 74 bn in 2006) are now larger than imports from Industrial 40 countries (US 65 bn) 30 Sustained rise in imports from the 20 Asian region* has underlined this trend 10 In fact, India s imports from the Asian* region rose from US$ 2.7 bn in 1990 to US$ 48 bn in 2006 an 18-fold rise Source: IMF, Direction of Trade Statistics * - East & South Asia excl. Japan

9 8 Role of Exim Banks Exim Banks playing a vital role in promoting international trade Exim Banks support their countries exports through a variety of financing programmes. Help exporters to meet global competition effectively and ensure that they do not lose out due to uncompetitive financing packages. Exporters from AAA rated OECD countries are backed by their Exim Banks with very attractive credit packages while bidding for large global contracts. Exim Banks in the developing world are unable to match such credit packages as their cost of funds are much higher compared to their counterparts in the OECD block.

10 9 The Asian Exim Banks Forum Creating an Institutional Mechanism for Regional Cooperation Global trade and investment flows in recent years have witnessed the increasing manifestation of emerging countries from Asia as important drivers of growth. The challenge How to capitalise on globalisation by designing an institutional mechanism, which ensures that a country can seize new opportunities created by globalisation. The Asian Exim Banks Forum was initiated by Export-Import Bank of India (Exim India) in 1996 for enhancing regional cooperation & forging a stronger link among member institutions. First meeting of Asian Exim Banks was held in India, which led to the formation of the Asian Exim Banks Forum.

11 10 The Asian Exim Banks Forum Marking a Decade of Enduring Cooperation Cooperation among Exim Banks is vital for successful completion of an international project. While Exim Banks are considered as competitors, considering that they support their respective national exports, the objective of this Forum is to collaborate while competing through enhanced economic cooperation among member institutions. Every year, the Exim Banks meet at the CEO level in a different member country by rotation. Members of the Forum include Exim Banks from Australia, China, Japan, Korea, Malaysia, Thailand (all founding members), Indonesia and Philippines (who joined subsequently), in addition to Exim India. Asian Development Bank is a permanent invitee since There are other invitees from similar institutions who attend as observers.

12 11 The Asian Exim Banks Forum Endeavor is to Promote Intra-regional Trade & Investment The Annual Meetings serve as a forum for discussing a wide range of issues focused on fostering common understanding as well as exchanging and sharing information. First two meetings took place in Bangalore and Mumbai, India, both in 1996, hosted by Exim India. The discussions focused on formalising an annual meeting and developing a common agenda. Specific topics covered at each meeting were decided in advance and reviewed during the time leading up to the meeting. Substantial progress made with the support and active participation of the member Exim Banks. Provides an opportunity for cooperation in areas that transcend trade and investment, such as social sectors capacity building and governance.

13 12 The Asian Exim Banks Forum from sharing experiences and knowledge building At the meeting in Bangkok (2000), member institutions signed a Memorandum of Understanding (MOU). The main pillars of the MOU the establishment of bilateral L/C confirmation. The meeting in Kuala Lumpur (2002) witnessed signing of a Multilateral L/C Confirmation Facility Agreement by participating Institutions (on voluntary basis). The meeting also marked the evolution of a concept for establishment of a regional trade refinance/reinsurance mechanism by Exim India, in view of inadequate availability of export finance.

14 13 The Asian Exim Banks Forum to actually implementing mechanisms for facilitating trade & investment The meeting in Manila (2003) marked the initiation of the Bilateral L/C Confirmation Facility Arrangement with the signing of the facility agreements by Exim India and Exim Malaysia Exim India and Exim Thailand Exim Malaysia and Exim Korea At the meeting in Beijing (2004), establishment of a regional export credit agency for Asia to facilitate credit enhancement and increased liquidity to weaker economies in the region was discussed.

15 14 The Asian Exim Banks Forum.. Promoting Regional Cooperation through Trade Financing 11 th Annual Meeting in Goa, India, in 2005 focused on Promoting Regional Cooperation Through Trade Financing The Forum deliberated on issues including: Role of Asian Exim Banks in financing and developing SMEs; Role that Exim Banks can play in facilitating two way FDI flows The Meeting witnessed the technical launch of the Asian Exim Banks portal developed by Exim India 12 th Annual Meeting in Tokyo, Japan, in 2006 focused on Partnership in an Era of Globalisation and Regional Integration Proposal for the creation of a Pan-Asian EXIM Bond that would utilise the regional capital markets to raise capital by bundling Asian bonds (discussions underway) Exim India and JBIC signed an untied Loan Agreement for JPY Equivalent US$ 100 mn; long tenure, competitive pricing

16 15 IN SUM Important Milestones Important outcomes of past endeavours of the Asian Exim Banks Forum include the following : - Signing of the Memorandum of Understanding Multilateral Letter of Credit Confirmation Facility Agreement Bilateral Letter of Credit Confirmation Facility Agreements Feasibility of a framework for establishment of a Regional Export Credit Agency for Asia for trade refinance/reinsurance facilities Web Portal of Asian Exim Banks Forum Creation of a Pan-Asian EXIM Bond that would utilise the regional capital markets to raise capital by bundling Asian bonds (under discussion) Training Committee

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