APPENDIX 2
Memorandum by the British Consultants
and Construction Bureau (BCCB)
INTRODUCTION
This memorandum on ECGD is submitted by the
Chief Executive, BCCB, at the request of its 300 plus exporting
consultants and contractors who are actively involved in overseas
project work in virtually every country of the world.
BACKGROUND NOTE
ON BCCB
BCCB is an independent non-profit making organization
funded by members' subscriptions. Its objective is to help British
consultants and contractors, and indeed British exporters as a
whole, win work overseas. It has strong political and commercial
links around the world and regularly liaises with foreign governments
and the private sector to identify commercial opportunities for
its members. BCCB's expertise and reputation are fully endorsed
by HM Government, and it has excellent liaison with UK Trade and
Investment, the Foreign and Commonwealth Office, the Department
for International Development, and the Department of the Environment,
Transport and the Regions. It also has an ongoing relationship
with professional bodies such as the CBI, the Institution of Civil
Engineers, the Royal Institute of British Architects (RIBA) and
International Financial Services, London (IFSL).
The strength of BCCB lies in its membership
embracing 18 sectors of export comprising over 200 different disciplines
working worldwide. It is therefore in a good position to offer
comment, based on practical experience among its members, on the
functioning of ECGD both in terms of its strengths and shortcomings
in the support offered to British exporters.
ECGD
ECGD was established to help British exporters
win business overseas and in general has performed admirably over
the years; indeed up until some five years ago it was considered
the leading ECA and the envy of virtually all our international
competitors. But more recently, and notwithstanding recent redefining
of its role—in particular the potential establishment of
a pilot Trading Fund—it would appear, as far as the private
sector is concerned, to have lost the plot and a great deal of
effectiveness in meeting its stated objective: the support of
exporters. A constant series of reviews has created, among exporters,
an atmosphere of frustration, uncertainty and a perceived lack
of commitment. ECGD is no longer the pioneer or the role model
among its peers either in the eyes of those it purports to serve
or our international collaborators and competitors. We should
emphasize that our criticisms are not directed at the internal
management and staff of ECGD. They have a very positive attitude
to briefing and assisting our members. How they have managed to
maintain any semblance of morale in the face of so much uncertainty
is difficult to understand.
Of most frustration to BCCB members today, is
the reluctance to go on cover in the newly emerging markets especially
in post conflict/post crisis situations. Commercial credit guarantees
proposed as an alternative are too expensive or not available.
While acknowledging that ECGD, in seeking to
achieve a level playing field, was instrumental in the development
of the International Consensus, there is no evidence that other
ECAs have followed UK's lead. The trust or assumption that others
will follow suit is both naïve and dangerous, leading, as
we believe to the detriment of UK business and an inability to
compete. Closer monitoring of the principles by which our competitors
work is needed; all the evidence suggests that they are uniformally
more aggressive in supporting the activities of their exporters.
Our members consider that there is insufficient
political support at the highest levels, stifling innovation and
flexibility—ECGD has on many occasions been one of the last
to go on cover in new or emerging markets. Serbia was a good example.
Such factors have greatly undermined confidence in its capabilities.
Despite protestations to the contrary there is a suspicion that
senior Ministers have distanced themselves from the debate. Furthermore,
we have the clear impression that Government is pursuing a deliberate
policy to eliminate any financial support for exporters, of which
perhaps ECGD is the clearest example.
ECGD management appears to have become overly
institutionalised. The strategic policy direction is dictated
by senior Ministers with the views of the private sector only
taken into account well down the consultative chain. That said,
we welcome the appointment of a retired eminent City figure as
Chairman. However, there remains a great deal of frustration that
economic theorists rule at the expense of export practicalities:
"The Treasury Nanny knows best." We believe firmly
that "Nanny has got it wrong"!
In past years the Advisory Council always had
a good proportion of experienced business people on board. While
we accept the need to guard stringently against vested interests,
there is surely a strong case for utilizing the business experience
of those who have retired from the private sector, with first-hand
knowledge of the challenges which the exporter faces. A good example
of this appears to be the Advisory Council's pre-occupation with
environmental and corruption issues; these are of course essential
factors to be taken into account, but are not in themselves goals
in the provision of export credit guarantees.
While we must emphasize that a number of BCCB
members report good experience in their dealings with ECGD, the
main criticisms relate to ECGD having become much too risk averse.
Surely the main objective of an ECA is to assist its exporters
in the more risky markets where commercial cover is not generally
available nor cost effective? Additionally, while ECGD claims
also to support the smaller exporting companies, in reality the
majority of their trading relates to the major players involved
in very large projects eg defence sales or projects such as the
Nigeria LNG project which between them represented around 80%
of the £3.5 billion of guarantees issued in 2002-03. We fully
support the principle, but ECGD should also help medium-sized
companies a great deal more in their exporting endeavours.
It is a sad fact that all too rarely senior
Ministers emphasize the need to maintain or indeed improve British
competitiveness, exports and jobs, but when they do, there is
an unwillingness to provide the collateral financial support.
In some markets especially for major or technical assistance projects,
it has been our experience that a financial stake from the bidding
contractor's or consultant's own government remains almost a prerequisite
for winning. ECGD cover can help to demonstrate the UK government's
commitment.
BCCB also has concerns at the scant recognition
of the simple correlation between exports and job/wealth creation;
UK "productivity" is the obsession. A dichotomy also
exists in the support given to those setting up business in the
UK from overseas and the support provided for exporters. Ministers
constantly underline the importance of attracting inward investment
and its resultant job creation (eg the Nissan factory in Sunderland),
and we recognize the importance of this. However, there is no
comparable emphasis given to the downstream value added following
the award to a British company, for example, of a major infrastructure
project overseas. The Chep Lap Lok Airport in Hong Kong created
an estimated 50,000 man years of UK jobs (equivalent to £3
billion). Such projects also stimulate many more local jobs with
profits arising to UK firms and potential tax revenue to the Exchequer.
Ironically, the Treasury seriously restricts ECGD under the guise
of "protecting the taxpayers' interests". Successful
investment in export, be it in services or goods, is also in the
taxpayers' interests!
Before any further action is taken on ECGD and
its future, we would like to see the Treasury and the Ministries
involved working to a common export support policy, pulling together
and not seemingly year after year having diametrically opposed
objectives.
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