ANNOUNCEMENT 09 Aug 2010In August 2010, the government of Japan announced a change in its trade finance instruments.
NUMBER OF INTERVENTIONS
The Japan Bank for International Cooperation press release: Buyer's Credit for ERC Refinery Project in Egypt of 10 August 2010: http://www.jbic.go.jp/en/information/press/press-2010/0810-7262
JBIC information on export loans: http://www.jbic.go.jp/en/finance/export
On 9 August, the Japan Bank for International Cooperation (JBIC) signed a USD 900 million buyer's credit loan agreement with the Egyptian Refining Company (TAKRIR) S.A.E. (ERC) in project financing. A number of commercial banks additionally co-financed the loan with Japanese governmental agency Nippon Export and Investment Insurance (NEXI) providing insurance for the co-financed portion.
The loan will finance the Egyptian company's project to construct and operate processing units for refining atmospheric residue. The construction of the new processing units will be undertaken by a joint venture consisting of among others Japanese Mitsui & Co., Ltd. The Japanese company will here supply plant facilities and machinery for the project.
In this context the JBIC stated: 'To create export opportunities for Japanese industries, JBIC will continue its support for Japanese overseas business activities by drawing on its expertise, risk-assuming function and wide range of financial instruments.'
Buyer's credit agreements
JBIC provides direct loans named buyer's credit to overseas importers. Loans are obtained if it finances the purchase of Japanese machinery, equipment or technology in specific eligible sectors. The Bank hereto stated that these loans are intended to 'positively contribute to Japanese companies'. Further information can be found on the Bank's website under export loans.
Project financing loans include preferential terms such as repayments being solely made from the project's cash flow generation and secured on the basis of the project's assets alone. As such the loan agreement is tied to the project's finances and not the company in question.
The GTA includes state guarantees and other financial incentives that are likely to affect the restructuring and performance of firms facing international competition, whether from imports, in export markets, and from foreign subsidiaries.
According to UN Comtrade, no trading partner exceeded the GTA threshold of USD 1 million on the affected tariff line 8419 in the year prior to the intervention. Thus, no affected trading partners have been identified.