The feasibility of the proposed establishment of a Trade Credit and Investment Guarantee Agency is being worked out to support exports, imports and investments in Asia.
Head of ADB’s permanent representation in Azerbaijan Nariman Mannapbekov told Report that ADB first presented the draft concept on expediency for Trade Credit and Investment Guarantee Agency (TCIGA) at one of the meetings convened under the Central Asia Regional Economic Cooperation (CAREC) Program, in 2017. Subsequently, ADB decided to expand the scope of a feasibility study by including 18 ADB developing member countries (DMCs) of the Central and West Asia, East Asia and South Asia subregions. In 2018, followed by consultations these DMCs committed to participate in creating the TCIGA subject to a positive outcome of ongoing feasibility study.
The main purpose of the Agency is to help promote foreign direct investment and economic growth through intra and interregional trade. If established, it will not only deliver trade-related financial instruments in the region, but also will encourage and support regional small and medium enterprises and other non-traditional exporters to trade competitively in domestic, regional and global markets. Improving countries’ competitiveness to trade within and outside their local markets is expected to promote economic diversification and pave the way for a sustainable long-term economic growth through increased value-added production and employment in the region.
Credit insurance can be used, among other risk mitigation instruments, to form a sustainable production base between adjacent enterprises that are separated by geographical borders. “For example, a country’s manufacturer of food products requires raw materials that are produced in a neighboring country. Entrepreneurs can cooperate with each other by having the food manufacturer purchase the missing materials from his foreign partner(s) against deferred payment terms insured by the Agency.”, said the head of the ADB Baku office.
The feasibility study is expected to be completed by April 2020 and will be shared with relevant public and private sector stakeholders in interested DMCs, including Azerbaijan. ADB will consider providing sovereign financing support to DMCs that may decide to participate in the proposed Agency.