‘Our Approach Is Win-Win’
By Simon Lewis 23 May 2014
The Export-Import Bank of the United States (Ex-Im Bank), a government-owned bank that provides loans to aid American exporters, announced in February that it would return to Myanmar after 27 years away, reflecting improving ties between the government and the United States.
Initially, in terms that are subject to regular review, Ex-Im Bank can only give out short- and medium-term loans and only for so-called sovereign projects that have the backing of the Myanmar government. The move is a clear signal, however, that the United States is keen not to be left behind as Myanmar’s market opens up to more foreign goods, and as infrastructure is developed.
In March, Patricia Loui, a member of Ex-Im Bank’s board of directors, visited Myanmar, meeting with government officials and US businesses working in the country. She also sat down with a group of reporters, including The Irrawaddy’s Simon Lewis, at the US embassy in Yangon, discussing the bank’s re-entry into the country, and the impact it will have.
Question: Why is Ex-Im Bank returning to Myanmar?
Answer: We have long roots here. In 1934, we financed the Burma Road, specifically [Ex-Im Bank] financed a loan of about US$25 million and it was for the acquisition of US trucks from General Motors and Ford that were used in the construction process.
Our last transaction here was in 1987, so it’s been almost 30 years and we’re very pleased with the progress that this country has made in terms of opening the economy and the move toward a more open government and democratization. The macroeconomic environment is such that we were able to open on Feb. 6.
[When entering a country,] we do a country risk assessment. That country risk assessment takes into consideration both the ability to repay as well as the willingness to repay. Our economist was here last fall, analyzing the macroeconomic conditions, as well as conducting assessments of the infrastructure, the transparency, the rule of law, and the conditions that really business looks for in making investments in a country, and that combination of factors, as well as the political opening of the county, has made us forward leaning.
Q: What services are you offering in Myanmar?
A: We are open for sovereign lending for both the short and medium term, so up to five years amortization, in bank guarantees, insurance, credit insurance as well as direct loans.
We’ve been working both with the US Chamber of Commerce, as well as with the US-Asean Business Council, and their memberships, in assessing potential opportunities that US exporters see in [Myanmar], and some of the areas that are high on the list are: opportunities in the energy sector, both oil and gas as well as in renewable energy; also in the health facilities and health equipment sectors—General Electric has already had a couple of transactions in this area—and there’s also a strong interest by US exporters, and we believe a market demand, for telecommunications infrastructure. These are just some of the top sectors, but we are certainly open to working with the government of this country in terms of bringing American technology and American quality and American innovation to help the broader economic development.
Q: Is there a limit to how much you can loan out for companies wanting to export to Myanmar?
A: Ex-Im does not have country limits in terms of its authorizations or its exposures and we also do not have sector limits. So really we go and we meet demands for export financing from the US where there are gaps between what the exporter is seeking and what the commercial markets are willing to offer.
We go where there is this gap. And we did find there that there was very strong interest. Ex-Im’s mission is to provide financing support for US exporters. So, as the forward-leaning US exporters began entering this market, there was more and more interest in our ability to help them finance the exports, whether it’s through guarantees or direct loans, or through credit insurance. So we cannot just enter the market because this market was closed for so long. But given the interest of US exporters, we did reassess, and obviously all of this was triggered by the suspension of sanctions initially on the part of President Obama.
Q: What benefits will Ex-Im Bank’s presence bring to Myanmar?
A: Ex-Im, as with the US government as a whole, is really here to encourage responsible investment into the country, and I think that our American brand really is quite well known for the high standards that we’ve set for corporate social responsibility, and giving back to communities, as well as our very high standards in the environmental sector, and just trying to find an approach that is of mutual benefit.
I like to say that Ex-Im’s approach really is win-win. And the reason I say that is that besides the financing that we can provide for US exporters, we can also finance 30 percent of local costs. So for example if a power plant or a solar field is being developed here, there would need to be the construction costs, there would need to be the installation, there would need to be the staff training, so that would fall under local costs. So that 30 percent of the contract value is really a direct infusion into the local economy, and in fact the World Bank studies have shown that when foreign investment like [from] the United States is infused into an Asean member nation, the rate of GDP growth increases by about 3 percentage points per year. So that’s really win-win. We’re interested, yes, in supporting US exporters, but it does result in infusion into the local economy that benefits the broader economic development of the country.
Q: How do the currently suspended US sanctions against Myanmar impact your work here?
A: We’ve been focused [on the question]: “Given the environment, which included the suspension of sanctions, how can we maneuver? How can we do what we need to do to assess the environment and to open [Ex-Im Bank in Myanmar]?” This is the first step. Obviously, we’re now open in the sovereign sector. We hope that as conditions improve—as there is more rule of law, as there is more transparency, as there is more financial infrastructure; again, the conditions that can assure the businesses and US exporters that we will be able to be repaid—that we can expand our relationship. But right now we’re quite happy to be where we’re at, frankly.
This interview first appeared in the May 2014 print issue of The Irrawaddy magazine.