Filed on March 22, 2021 | Last updated on March 22, 2021 at 10.59 am
Strategic to protect businesses' cash-flows, and accelerate the economic recovery during/post pandemic providing access with confidence to new markets, the UAE Federal export credit company Etihad Credit Insurance (ECI) contributed to stabilise the UAE non-oil economy, as well as create new opportunities for investments and project financing. Massimo Falcioni, CEO at ECI, makes a statement in an exclusive interview with Business and Technology Review.
As private sector banks responded to the crisis by reducing their exposure to risk - hurting exporters while doing so - ECI moved in quickly to provide alternatives and act as a market stabiliser.
How do you think was the non-oil export performance of the UAE in the past year amid the impact of the Covid-19 pandemic?
While the crisis had brought unprecedented challenges in the past year, it was also during this ordeal that the country has shown utmost resilience, stepping up ahead of the world through its actions that helped alleviate the economic pressure posed by the pandemic on businesses and exporters in the country. It has given a strategic approach in terms of trade, as well as rolled out stimulus packages that cushioned the financial blow of the crisis. Coupled with its stern safety measures against the disease, sectors went from fear to action - all because of the exemplary leadership shown by the UAE government.
Most of the non-oil exporters, which activated one of the trade credit solutions provided by the Federal export credit company Etihad Credit Insurance, increased their exports from two up to three times. In fact, we have given the chance to UAE exporters to off-set the reduction of the global trade demand, which was estimated by the World Trade Organization for 2020 at 18.5 per cent versus the previous year, opening new international markets or new buyers.
According to the Federal Competitiveness and Statistics Centre, in the first nine months of 2020, the non-oil trade of the country has reached Dh1 trillion, with the value of imports reaching Dh572.88 billion, exports reaching Dh192.32 billion, and re-exports at Dh269.104 billion.
China was the UAE's leading trading partner with a total trade of Dh124.45 billion, followed by Saudi Arabia at Dh90.8 billion, India at AED70 billion, US at Dh60 billion, and Switzerland at Dh41 billion.
In addition, for four consecutive years, it has ranked first in the MENA Region and ninth in the world amongst the most competitive countries in the world, according to the Institute for Management Development (IMD) World Competitiveness Yearbook 2020 - issued by World Competitiveness Centre of the World IMD in Switzerland.
The country also took the third spot globally, and first in the Arab region in terms of re-exports, placed amongst top 20 import and export countries worldwide in 2019, during which, the non-oil trade (including direct trade and free zones and warehousing arrangements) grew by five per cent.
What is your outlook about the UAE non-oil economy this year?
The UAE has made great efforts in propelling the national economy and hastening the recovery phase of several sectors from the effects of the Covid-19 pandemic. The leaders' initiatives have contributed to business continuity, reopening of commercial activities, as well as fortified their competitive advantage globally.
Because of such feats, new analysis from the UAE Central Bank estimates that the country's real GDP growth in 2021 will increase by 2.5 per cent, and the non-oil real GDP by 3.6 per cent, after an estimated contraction of 6.0 per cent in 2020.
The Expo 2020 Dubai, starting in October, will also contribute to accelerate the country's economic recovery, with an estimated positive impact on the non-oil GDP of 0.5 / 0.8 basis points.
What was the role of the Federal export credit company Etihad Credit Insurance (ECI) to UAE's economy in 2020?
Export credit agencies (ECAs) are strategic to insure business volumes, creating/safeguarding jobs and easing SMEs access to bank funding, empowered by governments to stabilise and possibly accelerate the economic recovery during/post pandemic.
Despite being recently established (just in February 2018), the UAE Federal export credit company ECI has not only been crucial to contribute in stabilising the economy, but has also become a much-needed and oft-consulted fount of information on new markets, new opportunities, and the dynamics of the 'new normal'.
ECI has stepped in to provide businesses hit by the economic downturn the facilities they need to weather the storm. As private sector banks responded to the crisis by reducing their exposure to risk - hurting exporters while doing so - ECI moved in quickly to provide alternatives and act as a market stabiliser. We were able to leverage our international AA- credit rating, and the fact that ECI is a fully government company (sovereign risk), to have both local and international banks honour the guarantees we provided.
In addition, UAE-based exporters experienced few difficulties in finding commercial banks willing to discount their ECI insured receivables. However, we went further and helped exporters tap into new markets and find new opportunities. We have been very keen to weave a regional and global network of partners. While this is a very competitive region by nature, ECI is not in the business to compete with others, but to collaborate and offer support. Our network now serves us well and allows ECI to establish new trade routes and help companies replace any business they may have lost due to the pandemic.
What were some of the initiatives undertaken by ECI in order to support the UAE economy moving forward?
We have been very active in terms of fulfilling our mandate of accelerating and sustaining the UAE's non-oil economy, in line with the vision of the country's leaders.
Among the strategies we have launched in order to propel the UAE economy towards greater heights, include the introduction of ECI Islamic, our Shariah-compliant export credit solutions set to boost the country's halal export industry and to cement its strong position as a global leader in the fast-growing Islamic economy.
The UAE leaders' initiatives have contributed to business continuity, reopening of commercial activities, as well as fortified their competitive advantage globally.
ECI has secured AED5 billion worth of non-oil trade in the past year, a 300 per cent increase from 2019, thereby providing further a solid contribution to the country's economy and employment.
We have also fortified our support for SMEs, issuing Dh420 million worth of trade credit support to small and medium enterprises (SMEs) from January to November 2020, which translates to Dh1 billion non-oil trade insured turnover. Our tailor-made solution, SME Protect, also allowed them to stay competitive and enter high-growth markets despite the global challenges of 2020.
In line with the UAE Leadership commitment towards the 17 Sustainable Development Goals (SDGs) for a country which looks beyond just GDP as a measure of its worth, we have also signed an agreement with Masdar, Abu Dhabi Future Energy Company-wherein we will explore establishing political and commercial risk insurance solutions to improve bankability and attract cheaper capital to Masdar's renewables projects in the UAE and globall
I would also like to note our participation in the World Logistics Passport (WLP), wherein we will extend financing support to participating countries in a bid to further position the country as a paradigm of economic sustainability. This undertaking will help remove trade barriers following the supply chain disruptions caused by the recent global crisis, as well as fulfil ECI's mandate to accelerate the national diversification of the UAE.
We have also eased export trade and project financing for Dh200 million, having issued policies for AED19 million fees for its services and paid Dh1.7 million claims (60 per cent ceded to reinsurers). We have also recovered Dh11 million out of Dh25.5 million (43 per cent) non-payments notified.
We are continuously forging strategic partnerships with leading export credit agencies (ECAs), banks and financial institutions in order to ensure we provide utmost support to UAE businesses when it comes to insurance coverage and bank loans, which boosts their confidence and guarantees their business continuity.
It is also worth noting that ECI plays an important role in the quality of life of UAE residents through strengthening employment opportunities. Our keen efforts on providing bespoke risk mitigation tools and financial solutions have helped businesses in the UAE maintain their operations and even gain a competitive advantage in the international markets. Their growth has led to securing and maintaining of, as well as opening more jobs for residents in the country-thereby helping everyone strengthen their quality of life.
What is the worth of trade credit support ECI provided to UAE businesses in general so far? What is the expected worth of support in 2021?
ECI has secured AED5 billion worth of non-oil trade in the past year, a 300 per cent increase from 2019 (which reported Dh1.3 billion worth of support), thereby providing further a solid contribution to the country's economy and employment.
In the past year, the revolving credit guarantees issued by ECI to UAE exporters and re-exporters grew 11 times to reach 2,013 from 179 in 2019, providing a total guaranteed exposure of AED 1.5 billion, a 300 per cent increase from the Dh376 million registered in the previous year.
ECI's guarantees protected and facilitated Dh5 billion worth of non-oil exports to more than 75 countries, which is five times what it had secured the year before. These countries and territories include Italy, Brazil, Morocco, Bahrain, France, Hong Kong, UK, South Africa, Jordan, Kuwait, Egypt, India, Oman, Iraq, Saudi Arabia, and the UAE.
In 2019, ECI has secured AED1 billion worth of non-oil exports to 35 countries.
The top sectors that were served by this state-backed support are cable (26 per cent), steel (14 per cent), petrochemicals (14 per cent), and building materials (11 per cent).
These sectors represent three-quarters of ECI's insured sectors. Meanwhile, the packaging (nine per cent), automotive (eight per cent), power and energy (seven per cent), healthcare (six per cent), food (two per cent), waste management (less than one per cent), fertiliser (less than one per cent), logistics (less than one per cent), textiles (less than one per cent), and electronics (less than one per cent) sectors rounded out the beneficiaries.
In terms of the expected worth of support, ECI seeks to double the amount of trade credit support provided to UAE businesses in 2020.
What is ECI's strategy for 2021? How is your new logo and website in line with the UAE's journey towards the next 50 years?
Our constant strategy for 2021 is continuous improvement and innovation. It is important to emphasise that ECI was established in line with the UAE's 2021 Vision, which aims to implement economic diversification policies, and reduce the dependence on oil resources as a source of income, in preparation for the inevitable post-oil era. ECI's primary purpose is to guarantee commercial and non-commercial risks associated with the export and re-export of goods and services. ECI has always been staunch in its mandate to enhance trade opportunities for the country's export sector-striving hard to establish introduce initiatives in order to strengthen UAE businesses in line with the vision of the UAE's leaders.
Launching a modern-looking logo and enhancing our customer experience through our new website signify our innovative approach to reflect the UAE Federal export credit company's mandate of providing state-of-the-art fintech and digital solutions for trade and export credit, as well as introducing new initiatives that will further propel UAE businesses and exporters towards greater heights.
Our new logo bears the symbol of our leaders' vision and strategic goals to bolster the country's economy. Through this new milestone, we aim to further echo our efforts to help the UAE in its economic diversification goals, especially as it begins its journey towards the next 50 years.