Role of export credit agencies in PFI/PPP projects

Abstract

The paper presents the results of an investigation into the role of export credit agencies (ECAs) in international private-finance initiative/public–private partnership (PFI/PPP) projects. The research was based on an assessment of published literature and a study of relevant official reports. The use of PFI/PPP procurement to deliver essential infrastructure continues to grow worldwide. In developing countries, funding raised locally through taxation, the money markets and official development assistance is inadequate to meet the required needs. PFI/PPP projects with foreign private participation provide a vital contribution to the acceleration of economic growth and provision of essential services and infrastructure. It is demonstrated in this paper that ECAs play a number of key multiple roles in international PFI/PPP projects. First, the role of ECAs can be as lenders. ECA loans can be offered to exporters, investors or directly to the special-purpose vehicle. ECAs also play the role of insurers/guarantors. ECAs are diversified in country risks and therefore best placed to cover political and non-commercial risks. They can provide cover for non-commercial risks which include: currency inconvertibility and transfer restrictions, expropriation, war and civil disturbance or breach of contract, etc. The professional advisory role includes arranging project finance and a disputes resolution service. ECAs play key multiple roles in the realisation of international PFI/PPP projects. They are clearly central to efficient risk management in such projects and for attracting foreign direct investment into infrastructure in developing countries.