Manual Finexpo - Belgium
Manual Finexpo - Belgium
Manual Finexpo - Belgium
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FEDERAL PUBLIC SERVICE OF FOREIGN AFFAIRS<br />
FEDERAL PUBLIC SERVICE OF FINANCE<br />
ONDD, THE BELGIAN EXPORT CREDIT AGENCY<br />
Brussels, January 2012<br />
1
This manual sets out the rules and criteria according to which <strong>Finexpo</strong> functions in its day-today-business.<br />
The objective of this text is to create the transparency necessary to give all<br />
exporters an equal chance in obtaining <strong>Finexpo</strong> support. The <strong>Finexpo</strong> manual is also intended as<br />
a tool for policy makers and for exporters with experience in the field of (un)tied aid and<br />
interest stabilization.<br />
Visit this website for a first acquaintance with <strong>Finexpo</strong>:<br />
http://diplomatie.belgium.be/en/policy/economic_diplomacy/finexpo/more_info<br />
Remarks regarding this manual or questions that remain unanswered can be sent at all times to<br />
finexpo@diplobel.fed.be<br />
The <strong>Finexpo</strong> Secretariat<br />
(Contact information: page 14)<br />
Awex…………………………………..Agence Wallonne { l’Exportation et aux Investissements étrangers<br />
BTC……………………………………………………………………………………………Belgian Technical Cooperation<br />
CIRR……………………………………….…………………………………………Commercial Interest Reference Rate<br />
DAC...……………………………………………………………Development Assistance Committee (at the OECD)<br />
DDR………………………………………………………………………………………………Differentiated Discount Rate<br />
DGD….…………………Directorate General Development Cooperation (a Belgian Federal Institution)<br />
FIT……………………………………………………………………………...……..……..Flanders Investment and Trade<br />
FPS…………………………………………………………………………………………………………Federal Public Service<br />
GDP……………………………………………………………………………………………………..Gross Domestic Product<br />
HIPC………………………………….………………………………………………………Heavily Indebted Poor Country<br />
http://www.imf.org/external/np/exr/facts/hipc.htm<br />
IMF………………………………………………………………………………………………International Monetary Fund<br />
KOF…………………..…………………………………………………….Swiss Institute for Business Cycle Research<br />
LDC……………………………………………………………………………………………………Least Developed Country<br />
http://www.unohrlls.org/en/ldc/related/62/<br />
OECD………………………………….……………Organisation for Economic Cooperation and Development<br />
ONDD……….Office National du Ducroire/Nationale Delcrederedienst (the Belgian Export Agency)<br />
SME…………………...…………………………………………………………………….…Small and Medium Enterprise<br />
SSL………………………………………………………………………………………………………………State to State Loan<br />
UN……………………………………………………………………………………..………………………………United Nations<br />
WTO………………………………………………………………………………………………..World Trade Organization<br />
2
<strong>Finexpo</strong> General Framework<br />
1 <strong>Finexpo</strong> Mission Statement ................................................................................................................. 4<br />
2 General presentation ............................................................................................................................. 4<br />
3 Tied aid program .................................................................................................................................... 5<br />
4 Untied aid program ................................................................................................................................ 5<br />
5 Stakeholders and values ...................................................................................................................... 5<br />
6 Ambitions ................................................................................................................................................... 6<br />
<strong>Finexpo</strong> Concessional Program<br />
1 Tied aid program .................................................................................................................................... 7<br />
2 Untied aid program ............................................................................................................................. 10<br />
<strong>Finexpo</strong> Commercial Program<br />
1 Interest Stabilization .......................................................................................................................... 12<br />
<strong>Finexpo</strong> Procedures: from application to follow-up<br />
1 Composition of <strong>Finexpo</strong> and the role of its members ............................................................ 14<br />
2 Procedural track for tied State to State Loans and Interest Bonifications .................... 15<br />
3 Flow chart of the pre-feasibility study ........................................................................................ 17<br />
4 Monitoring and reporting ................................................................................................................. 18<br />
5 Calculation of the Belgian Interest ................................................................................................ 19<br />
3
<strong>Finexpo</strong> General Framework<br />
1 <strong>Finexpo</strong> Mission Statement<br />
The Missions of <strong>Finexpo</strong> are:<br />
- to contribute to the development of an international regulatory framework for export<br />
support;<br />
- to support the exports of Belgian capital goods and related services to developing<br />
countries, taking into account these countries’ development needs and the need for<br />
economic, environmental and social sustainability, within the international regulatory<br />
framework.<br />
2 General presentation<br />
<strong>Finexpo</strong> is an inter-ministerial advisory committee managed by the Directorate financial support<br />
to exports (B2) within the Federal Public Service Foreign Affairs, Foreign Trade and<br />
Development Cooperation and by the Administration for International and European Financial<br />
Affairs of the Federal Public Service for Finance. Its name combines two key words: financing<br />
and export. The objective of <strong>Finexpo</strong> is to support the export of Belgian capital goods and related<br />
services.<br />
As the Belgian economy is a very open economy, it is number one in the KOF Economic Institute<br />
Ranking of Most Globalized Countries. Belgian exports amount for 80 percent of the GDP and<br />
create half of the country’s economic growth 1 . This economic openness made <strong>Belgium</strong> a strong<br />
proponent of free trade and of the creation of a level playing field for exporters. The WTO, World<br />
Bank and the OECD all contribute to these policy objectives and authorize export support only<br />
under the form of tied or untied aid to developing countries. <strong>Finexpo</strong> operates under this<br />
restricted framework set up by the aforementioned international organizations. Consequently,<br />
<strong>Finexpo</strong>’s scope of action is rather limited. In terms of share in total Belgian exports, eligible<br />
African countries amount for 2.1%, Latin-America for 0.3% and Asia for 5.6%. 2 Combined with<br />
the fact that only 8% of Belgian exports are capital goods and the Belgian economy is essentially<br />
structured around SMEs and subcontractors, it is crucial that <strong>Finexpo</strong> fully takes advantage of<br />
the limited opportunities offered.<br />
Export is essential for the Belgian economy, especially the industrial sector, which is under<br />
pressure due to increasing competition in international markets. It is <strong>Finexpo</strong>’s responsibility to<br />
offer Belgian exporters the proper financial instruments. Exporters can apply for State to State<br />
Loans, Upfront Grants, Interest Bonifications and Interest Stabilizations.<br />
In addition to this, <strong>Finexpo</strong> supports Least Developed Countries (LDCs) and Heavily Indebted<br />
Poor Countries (HIPCs) by providing State to State loans in the field of untied aid.<br />
Regardless of the fact that the project falls under the tied or untied aid program, <strong>Finexpo</strong><br />
support is conditional upon the needs and interests of the host country. The project should fulfill<br />
rational economic, social and environmental needs of the host country and should significantly<br />
contribute to its economic and social development. The financial terms and conditions of the<br />
1<br />
The World Bank (http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS)<br />
2<br />
Statistics from the National Bank of <strong>Belgium</strong>, 2010, communautarian method.Contrary to the Belgian intra-EU trade balance which<br />
has a 20 billion EUR surplus, our extra-EU trade balance shows a 10 billion EUR deficit Belgian exports to non-EU countries amount<br />
to merely 26.8% of total Belgian exports of which 15% to non-OECD countries [Source: External and intra-EU trade - statistical<br />
yearbook, 2010]<br />
4
<strong>Finexpo</strong> instruments are such that the support contains a concessional element of 35 or 50<br />
percent of the whole contract value. Complementary to this type of export support are the<br />
export policies of the regional export agencies, which focus mainly on the support of smaller,<br />
preparatory actions preceding the actual project. At the same time, the regional export agencies<br />
are members of the <strong>Finexpo</strong> committee, which ensures close cooperation and sharing of<br />
expertise and experiences. ONDD, which is also a member of the <strong>Finexpo</strong> committee, is the<br />
Belgian export credit agency that acts as public insurer for the commercial aspects of the<br />
<strong>Finexpo</strong> financing packages.<br />
3 Tied aid program<br />
Tied aid is the main field in which <strong>Finexpo</strong> is active. Eligible projects need to (1) be of high<br />
quality,(2) have a considerable Belgian economic interest and (3) show a clear socio-economic<br />
and development relevance for the host country.<br />
<strong>Finexpo</strong>’s tied aid program does not pursue a sectoral policy. However, for development reasons<br />
<strong>Finexpo</strong> only supports projects that are not commercially viable 3 and concern capital goods and<br />
related services. Furthermore, <strong>Finexpo</strong> is fully compliant with the OECD Arrangement on<br />
Officially Supported Export Credits and respects the minimum concessionality levels and list of<br />
eligible host countries which are listed in it. Also, the OECD Recommendations on the<br />
Environment, Sustainable Lending and Bribery and Corruption are strictly applied.<br />
4 Untied aid program<br />
<strong>Finexpo</strong> also has an untied aid program for projects with an international tender. Potentially,<br />
projects in poor developing countries worldwide qualify for this <strong>Finexpo</strong>-program. In order to<br />
build in a focus and thus reduce potential applicants to a manageable number, a sectoral<br />
approach was adopted. Projects in one of the following sectors qualify for this program: rural<br />
electrification, public transport, water, health, education & government and research &<br />
development. Eligible host countries are LDCs (UN) or HIPCs (IMF/Worldbank) for which the<br />
Belgian federal government has the experience and capacity to guarantee the follow-up and<br />
control.<br />
5 Stakeholders and values<br />
Three groups of stakeholders can be identified.<br />
The first group of stakeholders are exporters of capital goods and related services that are<br />
located in <strong>Belgium</strong> (tied aid program) and abroad (untied aid program) along with their<br />
respective banks. <strong>Finexpo</strong> expects high standards regarding the quality of their projects, and<br />
demands yearly monitoring reports during the implementation of the project and reporting<br />
afterwards (cf. page 18). In return <strong>Finexpo</strong> commits itself to advise and assist the applicants<br />
during the application procedure and to complete the procedural track within the indicative<br />
time limits set out on page 15 and 16 of this manual.<br />
The developing countries that host the projects are a second group of stakeholders. It is<br />
<strong>Finexpo</strong>’s responsibility to watch over the development relevance of the project, and to make a<br />
correct a priori assessment of the project’s contribution to the economic and social development<br />
of the host country.<br />
3<br />
According to the ex-ante guidance<br />
(http://www.oecd.org/officialdocuments/displaydocumentpdf?cote=td/pg(2005)20&doclanguage=en<br />
5
A third group of stakeholders are the regional export agencies and the industry federations for<br />
which <strong>Finexpo</strong> functions as a pivot that delivers information from the international policy and<br />
business level. Several <strong>Finexpo</strong> members participate in different OECD meetings and negotiate<br />
policy guidelines regarding export issues and topics related to development cooperation.<br />
Through the OECD notification and reporting system, <strong>Finexpo</strong> has access to information on the<br />
individual export transactions of other member states. This information can be useful for the<br />
regions, the industry federations and the exporters. <strong>Finexpo</strong> also informs them on new<br />
guidelines or agreements that the OECD has adopted. <strong>Finexpo</strong> is fully compliant with the policies<br />
of the OECD and WTO, and also aligns itself with the sustainable lending practices of the IMF and<br />
the World Bank.<br />
6 Ambitions<br />
<strong>Finexpo</strong> wants to open international markets for Belgian producers, especially SMEs, and give<br />
them the opportunity to build international references and continue from there on their own<br />
power. This multiplier effect is often very difficult to measure exactly and success is never<br />
guaranteed, but it remains <strong>Finexpo</strong>’s pre-eminent ambition, since it conciliates <strong>Belgium</strong>’s<br />
fondness of free trade with the necessity of keeping its exporters competitive.<br />
While doing so, <strong>Finexpo</strong> wants to contribute and promote the Belgian industrial image and<br />
reputation abroad, as well as to contribute to the economic and social development of the<br />
recipient country.<br />
6
<strong>Finexpo</strong> Concessional Program<br />
1 Tied aid program<br />
Description<br />
The tied aid program of <strong>Finexpo</strong> means that <strong>Finexpo</strong> issues or supports export credits with ‘soft<br />
conditions’ on the conditions that Belgian exporters are involved. Tied aid can be given through<br />
three instruments:<br />
1) Upfront Grant<br />
2) Interest Bonifications (if desired with additional upfront grant)<br />
3) State to State Loans (SSL)<br />
The first instrument is largely self-explanatory and is an upfront grant of 35% of the credit<br />
amount. The last two instruments are so called ‘soft loans’ that result in a concessionality level of<br />
35% (or 50% for the LDCs).<br />
The concessionality level means that public buyers in developing countries do not have to repay<br />
the full loan amount at market conditions, but that <strong>Finexpo</strong> provides the buyer with longer<br />
repayment terms, reduced interest rates and/or an upfront grant. These soft conditions change<br />
every year since <strong>Finexpo</strong> has to calculate the concessionality level of its loans according to a<br />
reference rate determined by the OECD, the so-called Differentiated Discount Rate (DDR).<br />
Upfront grant is a grant of 35% of the credit amount given directly to the exporter at the<br />
starting point of credit. It results directly in a concessionality level of 35% and is only used for<br />
small projects. If an upfront grant is combined with an Interest Bonification (cf. infra) the grant<br />
is lower than 35% of the credit amount. Nevertheless, the overall concessionality (i.e. the<br />
combined concessionality of the upfront grant and interest bonification) has to add up to 35%.<br />
Interest Bonifications are loans issued by a private bank for which the FPS Foreign Affairs:<br />
- reduces the interest rate up to 0%: depending on the level of the DDR and the funding<br />
costs of the private bank involved;<br />
- extends the repayment term to 10 to 15 years, also depending on the level of the DDR and<br />
the funding costs of the banks;<br />
- adds an additional upfront grant (cf. supra) in order to modulate the repayment term and<br />
make it less long if that would be desirable.<br />
State to State Loans (SSL) are loans provided by the Belgian FPS Finance to the Ministry of<br />
Finance in the host country and have:<br />
- a 0% or 2% interest rate: depending on the World Bank status of the host country and the<br />
level of the DDR;<br />
- repayment terms of 20 years preceded by a 10 year grace period during which the buyer<br />
does not have to make any repayments.<br />
The SSL is combined with a commercial credit issued by a private bank. The ratio between the<br />
SSL and commercial credit depends on the level of the DDR so that the concessionality level<br />
becomes 35% (or 50% for LDCs).<br />
Preconditions<br />
The tied aid program of <strong>Finexpo</strong> functions within a strict national and international legal<br />
framework:<br />
- the annual budgetary limits as laid down in the royal decree of 30 May 1997;<br />
- the OECD Arrangement on Officially Supported Export Credits;<br />
- the Agreement on Subsidies and Countervailing Measures by the WTO.<br />
7
In order to guarantee a multiplying effect of <strong>Finexpo</strong> support and in order to give a sufficient<br />
number of companies the opportunity to apply, contract amounts cannot exceed 20 million EUR<br />
for State-to-State loans or 15 million EUR for Interest Bonifications. These maximum amounts<br />
are necessary because the budgets for SSL and Bonifications:<br />
- have to respect strictly the annuity principle of the federal budget, i.e. the budgetary<br />
impact of a project has to be attributed to one fiscal year only and cannot be spread over<br />
2 or more fiscal years. Also, other budget rules on financial engagements and executions,<br />
approval by the council of ministers etc. have to be followed strictly (cf. also chapter VIII<br />
flow chart);<br />
- are limited to respectively 60 million EUR and 37 million EUR (commitment appropriations of<br />
2011).<br />
Combinations of SSL and Bonifications or exceptions on the maximum contract amount can be<br />
made for projects with an exceptional Belgian (strategic) interest or when state of the art<br />
Belgian research and development is involved in the project. This flexibility is necessary in order<br />
for <strong>Finexpo</strong> to optimally and fully exploit its limited budget that is already subject to numerous<br />
national and international constraints.<br />
Assessment criteria of the applications for the ti ed aid program<br />
Exporters can apply for SSL, Bonifications and upfront grants by filling out the <strong>Finexpo</strong>-ONDD<br />
questionnaire (on both organization’s websites). The applications will be assessed according to<br />
the criteria set out below.<br />
Criterion Sub-Criteria Responsible party<br />
Quality of the<br />
Project<br />
The necessary information has to be filled out in<br />
the <strong>Finexpo</strong>-ONDD questionnaire. [minimum<br />
prerequisite]<br />
Pre-feasibility study (cf. page 17 of this manual: i.a.<br />
World Bank and embassy advice);<br />
Environmental study in accordance with the OECD<br />
Recommendation on the OECD Recommendation<br />
on Common Approaches on Environment and<br />
Officially Supported Export Credits.<br />
Applicants (exporter<br />
and bank)<br />
Verification by the<br />
<strong>Finexpo</strong> secretariat<br />
Shared responsibility<br />
of the Exporter and<br />
the <strong>Finexpo</strong><br />
Secretariat<br />
Exporter<br />
Commercial<br />
non-viability<br />
Belgian interest<br />
Verification if the applicant’s project comes under<br />
one or more accepted sectors by the OECD (rural<br />
electrification, water sanitation projects, public<br />
transport, education, public administration and<br />
core tasks of central or local governments)<br />
If the applicant’s project cannot by categorized in<br />
one of the sectors accepted by the OECD, and<br />
consequently the commercial non-viability is not<br />
unequivocal, a cash flow study has to be carried<br />
out, compliant with OECD ex-ante guidance on tied<br />
aid. (i.a. a negative cash flow during the first 10<br />
years during which the project is in operation is<br />
required.)<br />
Calculation of the total Belgian content of the<br />
project with a minimum threshold of 50%.<br />
8<br />
<strong>Finexpo</strong> Secretariat<br />
Exporter<br />
Exporter
However, also other elements can play a role in the<br />
assessment of the Belgian content: cf. page 19 for<br />
the complete methodology.<br />
Development<br />
relevance<br />
Eligible<br />
countries<br />
Verification of the calculation of the Belgian<br />
content and verification that the applying company<br />
or the entity through which it applies, is located in<br />
<strong>Belgium</strong>.<br />
World Bank and or Regional Development Bank’s<br />
advice<br />
Pre-feasibility study<br />
Advice embassy and/or local representative of the<br />
Directorate General Development Cooperation<br />
(DGD).<br />
Verification of the compliance with the countries<br />
eligible for tied aid as determined by the OECD<br />
Secretariat on the Arrangement on Officially<br />
supported Export Credits.<br />
http://www.oecd.org/dataoecd/2/57/40817749.pdf<br />
FPS Economy<br />
<strong>Finexpo</strong> Secretariat<br />
Shared responsibility<br />
of the Exporter and<br />
the <strong>Finexpo</strong><br />
Secretariat<br />
<strong>Finexpo</strong> Secretariat<br />
<strong>Finexpo</strong> Secretariat<br />
9
2 Untied aid program<br />
Description<br />
Contrary to the tied aid program, the untied aid program of <strong>Finexpo</strong> does not require Belgian<br />
exporters to be involved. Untied aid is given through State to State Loans (SSL), which are<br />
loans from the Belgian FPS Finance to the Ministry of Finance in the buyer country and have:<br />
- a 0% or 2% interest rate;<br />
- repayment terms of 30 years, of which 10 years grace period during which the buyer does<br />
not have to make any repayments.<br />
Preconditions<br />
The untied aid program of <strong>Finexpo</strong> functions within a strict national and international legal<br />
framework:<br />
- the annual budgetary limits as laid down in the royal decree of 30 May 1997;<br />
- the Guidelines of the Development Assistance Committee (DAC), the OECD Arrangement<br />
and the Helsinki Principles on Aid.<br />
Given the fact that the approval of untied aid is not linked to a predetermined exporter, this<br />
support is given under the form of SSL. In order to give a sufficient number of developing<br />
countries the opportunity to apply, contract amounts cannot exceed 10 million EUR. Contrary to<br />
the tied SSL, untied SSL are often not mixed with a commercial credit and therefore have a more<br />
significant impact on the SSL budget. Therefore the maximum contract amount is proportionally<br />
reduced to 10 million EUR or 1/6 th of the yearly budget for SSL.<br />
Assessment criteria of the untied aid program<br />
Government administrations and agencies of developing countries can apply for untied SSL by<br />
filling out the untied aid questionnaire on <strong>Finexpo</strong>’s website. The applications will be assessed<br />
according to the criteria set out below.<br />
Criterion Sub-Criteria Responsible party<br />
Quality of the<br />
Project<br />
The necessary information has to be filled out in<br />
the <strong>Finexpo</strong> questionnaire for untied aid.<br />
[minimum prerequisite]<br />
Recipient Country<br />
Development<br />
relevance<br />
Sector<br />
Pre-feasibility study (cf. page 17 of this manual: i.a.<br />
World Bank and embassy advice);<br />
Environmental study in accordance with the OECD<br />
Recommendation on the OECD Recommendation<br />
on Common Approaches on Environment and<br />
Officially Supported Export Credits.<br />
Should be undisputable<br />
World Bank and or Regional Development Banks’s<br />
advice<br />
Advice embassy and/or local representative of the<br />
Directorate General Development Cooperation<br />
(DGD).<br />
Pre-feasibility study checked by BTC or another<br />
consultant with appropriate expertise<br />
Rural electrification, public transport, water,<br />
health, education & government and research and<br />
10<br />
Shared responsibility<br />
of the recipient<br />
country and the<br />
<strong>Finexpo</strong> Secretariat<br />
Recipient country<br />
<strong>Finexpo</strong> Secretariat<br />
<strong>Finexpo</strong> Secretariat<br />
<strong>Finexpo</strong> Secretariat<br />
<strong>Finexpo</strong> Secretariat<br />
<strong>Finexpo</strong> Secretariat
Eligible host<br />
countries<br />
development<br />
Least Developed Countries (UN) or Highly<br />
Indebted Poor Countries (IMF/World Bank) for<br />
which <strong>Belgium</strong> has the experience and capacity to<br />
guarantee the follow-up and control.<br />
<strong>Finexpo</strong> Secretariat<br />
Implementation and follow-up<br />
Once the untied SSL is granted to the recipient country, the organization of a public tender is<br />
mandatory. This tender will be prepared by the recipient country in close collaboration with the<br />
<strong>Finexpo</strong> Secretariat.<br />
On behalf of the <strong>Finexpo</strong> Secretariat, the BTC or another consultant with appropriate expertise,<br />
observes and monitors the tender procedure and verifies the conformity of the proceedings with<br />
the tender rules in force:<br />
- the analyses of the specification book<br />
- guidance during the opening of the procedure<br />
- analysis of the incoming offers<br />
- awarding the contract<br />
BTC or the other consultant with appropriate expertise is not actively involved in the decision<br />
making process of the tender and continuously reports its findings back to the FPS Finance.<br />
11
Commercial Program<br />
1 Interest Stabilization<br />
Description<br />
The Stabilization program of <strong>Finexpo</strong> fixes the interest rate (CIRR) of export credits that Belgian<br />
exporters offer to their clients.<br />
<strong>Finexpo</strong> compensates the exporter’s bank if CIRR < euribor + fixed margin.<br />
The exporter’s bank has to compensate <strong>Finexpo</strong> if CIRR > euribor + fixed margin<br />
Every year, the fixed margin is reviewed by the <strong>Finexpo</strong> secretariat and is based on an analysis<br />
of the real funding costs incurred by the private banks.<br />
Preconditions<br />
All <strong>Finexpo</strong> decisions are made while honoring the OECD Arrangement on Officially Supported<br />
Export Credits.<br />
Assessment criteria of the interest stabilization program<br />
Exporters can apply for interest stabilization by filling out the application form on <strong>Finexpo</strong>’s or<br />
ONDD’s website. The applications will be assessed according to the criteria set out below.<br />
All of the following criteria are to be met:<br />
1) Clear Belgian content or interest:<br />
- Calculation made and presented by the Ministry of Economy: a minimum of 30% Belgian<br />
content is required. However, also other elements can play a part in the assessment of the<br />
Belgian content: cf. page 19 for the complete methodology.<br />
- The applying company or the entity via which it applies, is preferably located in <strong>Belgium</strong>,<br />
but contrary to the tied aid program of <strong>Finexpo</strong>, this is not a necessary condition for the<br />
interest stabilization.<br />
2) Currencies: priority on the Euro. Also possible: USD, Yen, Swiss Franc and stable OECDcurrencies<br />
for which a CIRR is available.<br />
3) Eligible countries: all.<br />
4) Determination of the CIRR:<br />
A CIRR can be determined in one of the two following ways:<br />
- First method: can be used at any time. The CIRR is fixed on the moment of the signing of the<br />
commercial contract, unless the credit convention is signed more than 6 months after the<br />
commercial contract is signed. In this latter case, the CIRR at the moment of the signing of<br />
the credit convention is used. The date on which the exporter submits his case to <strong>Finexpo</strong> or<br />
on which <strong>Finexpo</strong> delivers a positive advice is not relevant for the determination of the CIRR.<br />
Timeline<br />
Signing of the commercial<br />
contract<br />
==> CIRR<br />
Maximum 6 months delay<br />
12<br />
Signing of the<br />
credit convention<br />
==> CIRR
- Second method: can be used by the exporter in case he wants to preserve or hold a CIRR<br />
before the signing of the commercial contract and the credit convention. In this case the<br />
exporter can ask to hold the CIRR at the moment of his application, raised by 20 base<br />
points. This holding period is valid for 4 months during which the commercial contract<br />
has to be signed. If this is not the case, the exporter can submit a new reservation request<br />
to stabilize at the new CIRR + 20 base points.<br />
Once the commercial contract is signed no later than 4 months after a reservation, the<br />
credit convention has to be signed no later than 6 months after the signing of the<br />
commercial contract. If there are more than 6 months between the signing of the<br />
commercial contract and the credit convention, the CIRR (without 20 extra bp.) at the<br />
moment of the signing of the credit convention shall be used (analogous to method 1).<br />
Contrary to method 1, the date of submission of a reservation request has an impact on<br />
the level of the CIRR that will be used. It is entirely the responsibility of the exporter to<br />
manage this timeframe properly.<br />
Timeline<br />
request for<br />
reservation<br />
==> CIRR +<br />
20 bp.<br />
max. 4 max. 6<br />
months Signing of months<br />
delay the<br />
delay<br />
commercial<br />
contract<br />
Signing of<br />
the credit<br />
convention<br />
==> CIRR<br />
13
<strong>Finexpo</strong> Procedures: from application to follow-up<br />
1 Composition of <strong>Finexpo</strong> and the role of its members<br />
The <strong>Finexpo</strong> Secretariat<br />
The <strong>Finexpo</strong> Secretariat is made up of Representatives of FPS Finance and FPS Foreign Affairs,<br />
and coordinates <strong>Finexpo</strong>’s daily business. The Secretariat handles the applications for the<br />
Interest Bonifications and Upfront Grants (FPS Foreign Affairs) and the SSL (FPS Finance).<br />
Moreover, it functions as the point of contact for the exporters.<br />
SPF Foreign Affairs Representatives<br />
(Interest Bonifications, Upfront Grants and<br />
Stabilizations)<br />
Danielle Fronville<br />
Advisor General<br />
Danielle.fronville@diplobel.be<br />
+ 32 2 501 83 65<br />
SPF Finance Representatives<br />
(State to State Loans)<br />
Hilda Ackermans<br />
Vice-President<br />
Hilda.ackermans@minfin.fed.be<br />
+ 32 2 574 71 46<br />
Hendrik Jansen<br />
Advisor and Secretary of the Committee<br />
Hendrik.Jansen@diplobel.fed.be<br />
+ 32 2 501 82 53<br />
+ 32 2 501 88 27 (Fax)<br />
Sylvie Graffe<br />
Advisor<br />
Sylvie.Graffe@diplobel.fed.be<br />
+ 32 2 501 83 98<br />
+ 32 2 501 88 27 (Fax)<br />
Eddie Boelens<br />
First Attaché and Secretary of the Committee<br />
Eddie.Boelens@minfin.fed.be<br />
+32 2 574 74 24<br />
Johan Dubois<br />
Attaché<br />
Johan.Dubois@minfin.fed.be<br />
+ 32 2 574 75 14<br />
+ 32 2 579 58 37<br />
The <strong>Finexpo</strong> Committee<br />
The <strong>Finexpo</strong> Committee delivers its advice to the minister of Foreign Affairs or to the Council of<br />
Ministers (in case of SSL) on the projects for which a valid application has been filed. The<br />
committee is chaired by the Director-General of Bilateral Affairs (FPS Foreign Affairs) Geert<br />
Muylle. The Committee consists of representatives from federal administrations and regional<br />
agencies. All <strong>Finexpo</strong> members are expected to participate in the assessment of the submitted<br />
projects. The Committee only delivers a positive advice if a majority of the members can support<br />
it. Below each party’s specific responsibilities are listed.<br />
- FPS Finance:<br />
o Contact point for the State-to-State Loans (SSL);<br />
o Main analysis of the projects via SSL (Quality of the project);<br />
o In contact with the World Bank and IMF (Advice regarding the feasibility and<br />
relevance of the project);<br />
o Examination of the financial liability of the countries concerned.<br />
- FPS Foreign Affairs:<br />
o Contact point for the Bonifications, Upfront Grants and Stabilizations;<br />
o Main analysis of the projects Bonifications, Upfront Grants and Stabilizations<br />
(Quality of the project);<br />
o In contact with the Belgian Embassies worldwide (advice regarding the<br />
feasibility and relevance of the project);<br />
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o<br />
Examination of the political situation of the countries concerned.<br />
- FPS Economy<br />
o Examines the Belgian interest of the projects (cf. page 19 for the methodology);<br />
- FPS Budget<br />
o Examines and watches over the budgetary impact of the advices.<br />
- Directorate General of Development Cooperation<br />
o Examination of the Development relevance of the projects.<br />
- The federal Export Credit Agency ONDD<br />
o Advice concerning the commercial, economic and political risk of the host<br />
country involved;<br />
o Business plan, strong and weak points of the project in view of potential cover;<br />
o Environmental study.<br />
- Regional Export Agencies (Awex, FIT, Brussels Export):<br />
o Analysis if the projects and instruments of <strong>Finexpo</strong> are complementary with the<br />
regional export instruments;<br />
o Interaction between the regional and federal support to projects (exchange of<br />
information and expertise, etc.).<br />
2 Procedural track for tied State to State Loans and Interest Bonifications<br />
Introductory meeting between <strong>Finexpo</strong> Secretariat and the exporter in (i.a. to<br />
check if the project is eligible)<br />
[Week 1]<br />
Exporters fills out the application form (to be found online). The <strong>Finexpo</strong><br />
Secretariat or the exporter’s bank are there to assist the exporter in correctly<br />
filling out the form. <strong>Finexpo</strong> sends a written confirmation when the completed<br />
form is received.<br />
[Timing: depends upon the swiftness with which the exporter provides <strong>Finexpo</strong><br />
with the relevant information]<br />
The <strong>Finexpo</strong> Secretariat makes a first analysis of the dossier:<br />
(i.a. seeks advices from the WB, Embassy, Belgian interest etc.)<br />
[Timing: 2 - 4 weeks]<br />
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Presentation of the project before the <strong>Finexpo</strong> committee. Basically the <strong>Finexpo</strong><br />
Committee can:<br />
- advice positively (either unconditionally or conditionally upon minor<br />
changes in the project or limited extra information )<br />
- advice negatively<br />
- delay a project if e.g. the committee thinks the project might be<br />
qualified but that too much elements are still unclear.<br />
The applicant will be informed of <strong>Finexpo</strong>’s decision.<br />
[Timing: one meeting per month]<br />
If <strong>Finexpo</strong> issues a positive advice the administrative completion can be set in,<br />
according to following steps:<br />
1. Notification at OECD by ONDD (*)<br />
2. The exporter has to obtain a priority letter from the PM or Minister of<br />
Finance from the recipient country (**)<br />
3. FPS Finance prepares a note for the Council of Ministers and submits the<br />
project also to the Inspection of Finance. The inspection can demand<br />
additional studies at all times (e.g. a price study, an analysis of the<br />
development relevance of the project,…) This will be taken care of by and<br />
organized by the SPF Finance. (*) (**)<br />
4. Once the Council of Ministers (**) or the Minister of Foreign Affairs (for all<br />
other programs) has taken a decision, the exporter and the Belgian<br />
Embassy are officially informed of this decision.<br />
5. - Signing of the commercial contract between the contracting parties.<br />
- Signing of the financial convention between the contracting parties for<br />
the interest Bonifications.<br />
- Signing of a loan agreement between the Belgian State and the relevant<br />
counterparty in the recipient country for SSL.<br />
(*) = can be organized at an earlier point in time if the exporter and/or the<br />
<strong>Finexpo</strong> Secretariat consider it desirable.<br />
(**) Only necessary for SSL, not for interest bonifications<br />
[Timing for SSL: 3 to 4 months]<br />
[Timing for all other applications: 4 to 6 weeks]<br />
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3 Flow chart of the pre-feasibility study<br />
In the above-mentioned procedures for tied and untied aid, a pre-feasibility study is a<br />
prerequisite. However, a pre-feasibility study is not always sufficient to judge a submitted<br />
project properly. Therefore, the <strong>Finexpo</strong> Secretariat can always decide to take additional steps in<br />
cooperation with the BTC or another consultant with appropriate expertise before the project is<br />
presented to the <strong>Finexpo</strong> Committee. The flow chart below is a cascade of steps that can be<br />
undertaken to study a project more in depth. Every step in the flow chart is evaluated by the<br />
<strong>Finexpo</strong> secretariat, which manages the contacts with the consultant and which decides if<br />
additional study work is needed.<br />
The <strong>Finexpo</strong> committee can thus issue a well-informed advice, based on the presentation of the<br />
project, including the results of the pre-feasibility study, if necessary extended with a desk<br />
research or a feasibility study.<br />
Pre-feasibility study contains at<br />
least:<br />
- a detailed description of the<br />
project (to be provided by<br />
the exporter.)<br />
- an advice of the World Bank<br />
and embassy, including full<br />
answers to the questions<br />
asked herein. (Taken care<br />
of by the <strong>Finexpo</strong><br />
Secretariat.)<br />
IF<br />
SUFFICIENT<br />
ANSWER<br />
End of the procedure<br />
IF NOT<br />
SUFFICIENT<br />
Desk research on the<br />
project by BTC or<br />
another consultant<br />
with appropriate<br />
expertise. This desk<br />
research may, or may<br />
not include a price<br />
study, depending on<br />
the uncertainties and<br />
loop holes in the<br />
project's description.<br />
IF SUFFICIENT<br />
IF NOT<br />
SUFFICIENT<br />
end of the<br />
procedure<br />
Feasibility<br />
study on the<br />
spot by BTC or<br />
another<br />
consultant with<br />
appropriate<br />
expertise<br />
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4 Monitoring and reporting<br />
Copy of the contract<br />
The exporter has to provide the <strong>Finexpo</strong> Secretariat with a copy of the commercial contract<br />
immediately after it is signed by the parties. The exporter has the obligation to inform the<br />
Secretariat immediately if the works as described in the commercial contract differ substantially<br />
from the information provided in the <strong>Finexpo</strong> application form. The exporter also has to explain<br />
the reasons behind the changes made.<br />
Review reports<br />
During the entire implementation or construction period of the project, the exporter has to<br />
provide the <strong>Finexpo</strong> Secretariat with a yearly report on the progress of the works. This yearly<br />
reporting can be brief, but has to contain at least:<br />
- A clear description of the works achieved: the different activities and sub-activities<br />
undertaken and the risks faced and difficulties encountered;<br />
- A clear timing for the different activities and sub-activities that have to be done yet.<br />
The last reporting should also contain lessons learned and recommendations for the future.<br />
<strong>Finexpo</strong> will place a template for this reporting on its website.<br />
Quality check and follow-up reports<br />
The <strong>Finexpo</strong> Secretariat can ask at any point in time to BTC or another consultant and/or the<br />
embassy a quality and reality check of the reports delivered. This will be done for at least 2<br />
projects per year.<br />
The <strong>Finexpo</strong> Secretariat will organize a follow-up report 3 to 5 years after the completion of the<br />
project: executed by the BTC or another consultant with appropriate expertise. This will be done<br />
for at least 2 projects per year.<br />
The <strong>Finexpo</strong> Secretariat shall select the projects that are up for quality checks or follow-up<br />
reports on the basis of:<br />
- The information disclosed by the yearly reports provided by the exporter during the<br />
construction period. E.g. if certain information remains unclear or if after oral<br />
consultation with the exporter questions remain unresolved, this could lead to quality<br />
and reality checks and/or follow-up reports.<br />
- Concentrations on exporters and recipient countries, where high concentrations lead to<br />
increased likelihood for quality and reality checks and/or follow-up reports.<br />
The quality checks and the follow-up reports shall be shared with the <strong>Finexpo</strong> Committee and its<br />
results shall be communicated to the public via the annual activity report of <strong>Finexpo</strong>.<br />
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5 Calculation of the Belgian Interest<br />
The FPS Economy analyses the Belgian interest for every project that applies for either<br />
concessional or commercial support and presents its conclusions to the <strong>Finexpo</strong> Committee.<br />
Explanation of the thresholds<br />
50% for the concessional program. The concessional program of <strong>Finexpo</strong> has a significant<br />
budgetary impact and contains a considerable reputational exposure for the Belgian state, so the<br />
project should consist of at least 50% Belgian interests.<br />
30% for the commercial program. Compared with the concessional program, the commercial<br />
program of <strong>Finexpo</strong> has less of a budgetary and reputational impact. Nevertheless, one should<br />
prevent relevant but relatively unsubstantial factors (such as profit margin and transport costs)<br />
artificially driving up the Belgian interest. Therefore a minimum of 30% is applied.<br />
Methodology<br />
The analysis of the Belgian interest has a quantitative and a qualitative component.<br />
1) The quantitative component consists of an analysis of the gross value added of the<br />
project, and has to be at least 30 or 50%. The project is broken down in its smallest parts<br />
and the nationality of these separate parts is determined: the different (raw) materials<br />
used, labor costs, profit margin, transport costs, design, etc. With regard to (raw)<br />
materials, it should be specified that “relevant” refers to where the materials come from<br />
and to what degree they are processed in <strong>Belgium</strong>. A certificate of origin is not sufficient<br />
to <strong>Finexpo</strong> standards since it merely guarantees the fact that the last processes to<br />
achieve the product took place in <strong>Belgium</strong>. Royalties that the applying company might<br />
have to pay can never qualify as ‘Belgian interest’.<br />
On a yearly basis and per applying company, the FPS Economy also keeps track of the<br />
proportion between the claimed Belgian interest in the project(s) and the turnover<br />
assignable to production 4 on Belgian territory. If this ratio surpasses the 100% mark,<br />
this means that either the stated facts are wrong or that distribution costs are taking up a<br />
too important a place in the projects.<br />
2) The qualitative analysis checks following issues:<br />
- Does the applying company actually have a production activity on Belgian territory?<br />
- Are there other relevant elements that could contextualize the result of the quantitative<br />
analysis: the quality of the technologies used, the level of R&D involved, etc.?<br />
- Is the export strategy of the applying company sustainable and does it fit the broader<br />
long-term perspective of the company?<br />
- Does the project fit within the export strategy of the company?<br />
The result of this analysis is then presented to the applying company, which has the chance to<br />
react, introduce new information or propose changes in the project to be able to meet the<br />
minimum requirements.<br />
4 Production turnover = gross turnover – turnover assignable to distribution.<br />
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The result of the analysis and the consultation with the applying company is then presented by<br />
writing to the <strong>Finexpo</strong> Committee, which will assess the Belgian interest as an important<br />
component of the final advice it delivers. The <strong>Finexpo</strong> Committee can decide for example that a<br />
small shortfall with regard to this minimum percentage could be compensated by a clearly<br />
demonstrable strategic benefit for the Belgian economy (an R&D-department in <strong>Belgium</strong>, a<br />
vested interest in the sector in a particular country...).<br />
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