Trade and Industry Press Notice PN 36



Telephone: 020 7219 5777/5779


Publication of Report

Inquiry into The Work of the Export Credits Guarantee Department

Commons Committee calls for clarity on ECGD funding

Government Ministers should end the current uncertainty over the future of the Export Credits Guarantee Department and publish their plans for funding of the Department as quickly as possible, according to a report published today by the Trade and Industry Select Committee (The Sixth Report of the Trade and Industry Committee in Session 2003-04, The Work of the Export Credits Guarantee Department, HC 506-I).

The ECGD's Mission and Status Review 1999-2000, published in July 2000, had committed the Department to improving its service to exporters while ensuring that its operations were consistent with the Government's objectives of promoting sustainable development, human rights, good governance and trade. It further recommended that ECGD move towards a capitalised funding system in the form of a government Trading Fund.

The Committee found that the implementation of the Review's key recommendations, in particular work towards Trading Fund status, had been slower than originally expected. The delay had generated uncertainty over ECGD's future role and the perception among exporters and their customers of a lack of commitment on the part of the Government. The Committee concluded that, while the delay in the establishment of the Trading Fund is to be regretted, it was vital that a project of this type and value is founded on the correct basis.

It is now essential, however, that Treasury and DTI Ministers complete their deliberations and publish their future plans for ECGD as quickly as possible. Any new funding arrangements would need to have an in-built mechanism to review the capitalisation of the Fund and, if necessary, to increase it. Such a process should be subject to Parliamentary scrutiny.

The Committee also concluded that the ECGD performs a valuable role to assist UK exporters through the provision of medium- and long-term financial guarantees, insurance and reinsurance. It had not been convinced by suggestions that all of the functions of the ECGD could be performed by the private sector, but called for a systematic examination of the costs and benefits derived by the UK economy from companies which are assisted in maintaining a manufacturing base in this country as a result of the Government's support for exports.

Some UK exporters felt that the performance of ECGD compared unfavourably with Export Credit Agencies in other countries. The Committee called on exporters to recognise that whilst ECGD remains underwritten by the Government there will inevitably be a need for a cautious approach to ensure that the taxpayer is not exposed to unnecessary risk.

The Committee suggested that a clearer statement of ECGD's policy in support of sustainable development would draw further attention to the Department's willingness to support projects which contributed to the Government's objectives, and not those which did not, while at the same time offering clarity to companies which were concerned about the Department's continued commitment to export facilitation.

The Committee acknowledged the progress which ECGD has made on the development of its procedures for assessing the environmental and other impacts of projects for which its support is requested and welcomed the Department's improved procedures for combating bribery and corruption. As with the Department's standards for the protection of environmental standards and human rights, the effectiveness of these measures will depend on the rigour with which they are to be implemented.

During the course of its inquiry the Committee received several representations critical of the Department's involvement in the Baku-Tbilisi-Ceyhan (BTC) pipeline project. Such representations merited further investigation and will be the subject of separate consideration.

For further information please contact the Committee Office on 020 7219 5777/ 5779.

15 June 2004