Große-Puppendahl, S., Karaki, K., Bilal, S. 2016. Investment promotion for sustainable development: The roles of DFIs and export credit agencies. (Discussion Paper 208). Maastricht: ECDPM.
In recent years and in the aftermath of the world financial crisis, economic slowdown in Europe has encouraged European governments and the European Union (EU) to set up support programmes and instruments that can stimulate national economies and help create the jobs needed to tackle both (youth) unemployment and crumbling growth rates. By providing access to (trade) finance and mitigating risk, the ambition is to help enterprises to expand and grow internationally, as “foreign exposure by these companies can increase enterprise competitiveness, provide access to foreign markets and resources, create new opportunities for exports, and generate profits” (UNCTAD, 2015).
Promoting trade and investment along sustainable principles is one of the means to achieve the goals of the 2030 Agenda for Sustainable Development. To this end, what are the potential synergies between development finance institutions (DFIs) and export promotion agencies (ECAs) in promoting sustainable and responsible investments?
DFIs and ECAs follow different institutional mandates and objectives to promote investments and exports. But they tend to engage with similar clients and in similar markets. Besides, the sustainability principles required by DFIs and those of ECAs do tend to converge. Potential for synergy and cooperation thus seems obvious.
Yet, DFI-ECA collaboration until now has been rather limited, due to various challenges that need to be overcome, relating to issues such as differing policies, approaches, operating procedures, credit and pricing parameters, tenor and currency preferences, and transaction eligibility criteria. There is a need for a better understanding of the
respective business practices and priorities of DFIs and ECAs.
More systematic efforts are therefore needed to enhance the cooperation and synergy between DFIs and ECAs. This must also be steered by policymakers, so as to foster a more conducive institutional and policy environment and provide the right incentives for each institution to cooperate, building on their respective comparative advantages, towards enhanced sustainability.
Photo: A bakery funded by the microcredit project of ADB. Credits: Asian Development Bank, via Flickr.