UK export credit  agency to provide further support for higher British investments in Sri Lanka

By Cassandra Mascarenhas

With the ever-increasing demand from British companies to invest in various sectors in Sri Lanka in the country’s post-war economy, the Exports Credit Guarantee Department (ECDG) has now taken the initiative to further these investments by increasing its level of global cover available for Sri Lanka from the £ 150 million to £ 200 million this year.

As the UK’s official Export Credit Agency, the ECDG works closely with exporters, project sponsors, banks and buyers to help UK exporters of capital equipment and project-related goods and services to win business globally.

“This is a very important time for Sri Lanka at the moment for Sri Lanka with the huge opportunities available within the country and the UK, understanding this strongly commends economic development. British companies are looking to invest in many sectors, including education – expanding operations here and even running campuses, the ICT field, infrastructure development, and tourism. The ECGD’s increased involvement in Sri Lanka has resulted in the increase of its cover for companies operating in Sri Lanka after accessing the country’s situation which will further encourage UK companies to invest in Sri Lanka,” affirmed British Deputy High Commissioner of Sri Lanka, Mark Gooding.

The ECDG has already provided guarantees for British firms operating in Sri Lanka, a notable example being the engineering firm Mabey Bridge which has undertaken several infrastructure projects in the country over the past couple of years, the latest being the construction of the Sangupiddy Bridge in the North Western Province this year.

The agency also has more firms queued up, seeking support for £ 250 million worth of business. Other projects include the Greater Colombo Wastewater Management Project, due to start at the end of this year, which alone is worth £ 200 million.

The UK, as Sri Lanka’s second largest trading partner received one billion dollars worth of exports and in turn exported goods and services worth $ 200 million to Sri Lanka in the last year alone. The UK’s heightened interest in Sri Lanka has also led it to bringing in FDIs amounting to $ 300 million into the country making it the second largest investor in terms of FDIs. Last year also saw over 100,000 British tourists visiting the country.

An ECDG backed financial facility enables a UK company to obtain credit, which is achieved by the credit agency providing a 100 per cent guarantee to a British based bank in respect of a loan extended. The majority of the work undertaken by credit agency, which comes under the purview of the UK Government, is underwriting. Working on a country-specific basis, the ECDG’s economist team accesses the credit rating of a country before setting a limit on the cover made available for each country.

“Global trade is important to upcoming developing economies and looking to obtain contracts in relation to capital and infrastructure development is incredibly important for such countries.

The ECDG will access the local economy here, especially certain key areas ripe for investment, in order to understand the challenges and issues faced in order to assist UK companies working in Sri Lanka better,” said the Country Risk Analyst of Asia and Americas, Olwen Renowden.

When questioned about issues that may be raised due to Sri Lanka’s external debt which currently amounts to over 80% of the country’s GDP, Renowden assured that this tends to be the case with many developing economies, and that the opportunities and the higher income prospects available in Sri Lanka in fact makes it more serviceable.

“The private sector is certainly there but they just aren’t willing to take a risk or will lend credit at such a high premium, the project just won’t happen. This is where we come in, by providing some insurance to mitigate the risk.

We are also looking to provide scope for SMEs to operate here and look to work with UK companies with long term interests in Sri Lanka,” Renowden added.