On the 3rd of February in the first reading Verkhovna Rada of Ukraine passed the bill №3793 “On making amends to the Law of Ukraine “On ensuring large-scale expansion of export of Ukrainian goods, works and services by insuring, guaranteeing and cheapening of export crediting”. As introducers of amends explain, the implementation of the bill will allow to reactivate the Export Credit Agency and make it function efficiently in concordance with the modern international framework. UA-Times Agency presents the experts’ views on this legislative initiative.
According to the message on governmental portal, amending to the correspondent Law gives an opportunity to broaden the power/enhance the capacity of the Export Credit Agency (ECA), conduct insurance and reinsurance of export factoring; assign the right of initiative for the ECA’s management to transfer separate transactional functions to other institutions with an indispensable approval of the supervisory board; increase the opening statutory capital of ECA to 2 billion hryvnias ($71 million); enables ECA’s insurance of investments only from non-profit risks on the basis of the global practice; expand the scope of support of Ukrainian export with added value; implement a new form of government assistance by means of the state guarantees for the ensuring of ECA’s debt obligation performance; controls the ECA funds application, which were provided by state and private investors, as well as by international organizations as donor assistance through the establishing a separate record of correspondent target contributions and donor assistance.
“The main idea of this Law is establishing the Export Credit Agency. The main function of ECA is the insurance of credits and guarantees of export contracts and importing partners’ credit deals on Ukrainian goods procurement. The agency was established in 2018, however, during 2020 organization structures were still being formed, and regulatory documents were still being developed. The Agency’s activity was hardly noticeable last year, and did not result in export performance increase.
Surely, not all exporters are interested in risk insurance of their importers. In fact, state-run company is to take the risks of private sector. Besides, its activity favours the money being taken out of Ukraine though investing. Enterprise’s statutory fund, as well as compensation of credits interests and insurance payments are formed on the taxpayers’ money”, – informs independent expert and Ph.D. in Economics Oleksandr Khmelevskiy.
The expert emphasizes that at the coat of Ukrainian taxpayers ECA finances not only domestic, but also foreign companies. ECA is above the law on insurance and financial services, and executive branch authorities do not have directly influence it. “In July 2020 the amends to the Law were introduced to Verkhovna Rada. They had been under consideration for a long time, and have recently been adopted as the basis. The amends imply the increase of the ECA’s statuary capital a factor of 10 to 2 billion hryvnias, the restriction of government assistance to the Agency with the help of state guarantees for ensuring ECA’s debt obligation performance and cancellation of such implement as securitization guarantee. In other words, the government has restricted the project support and its positive impact on the Agency’s activity is highly unlikely. That is why there is no point in waiting for any substantial support of exporters and export increase”, – comments Khmelevskii.
The head of a non-governmental organization “Yedyna Nadiia (The only hope)”, a barrister Oleksandr Zakrynychnyi believes that the key benefits for business from ECA’s activity is simplified financing access, expansion into new markets and export augmentation, floating capital optimization on condition of using factoring instruments etc. Zakrynuchnyi comments upon the advantages of the bill:
“According to the bill, government assistance of the export is lent within the established by Law on the state budget for a correspondent year extent, in particular, it is suggested to enhance the ECA’s statutory capital dimensions to no less than 2 billion hryvnias.
It is worth mentioning that the bill also implies: the expanding of ECA’s power to carry out the insurance and reinsurance of export factoring; enabling the insurance of ECA’s investments only from non-profit risks on the basis of global practice; ensuring the control over ECA’s funds exploitation, provided by the state and private investors, as well as international organizations by means of donor assistance through introducing the separate record of the correspondent target contributions and donor assistance. In addition, the bill gives an opportunity to establish a new form of government assistance – state guarantees as a means of ensuring the performance of ECA’s debt obligations”.