Govt boosts trade finance support for exportersFinance Trade
The Government is supporting exporters through two changes that widen the scope and accessibility of the New Zealand Export Credit Office's trade guarantees, Finance Minister Bill English and Trade Minister Tim Groser say.
"The Government is focused on lifting New Zealand's exports, so we can build a faster growing economy with higher incomes and more real jobs," Mr English says.
"In an uncertain global environment, exporters still face difficulty getting the trade credit and financial guarantees they need to maintain existing overseas markets and establish new ones.
"These changes widen the scope and accessibility of NZECO's trade guarantees, supporting more New Zealand companies to trade abroad," Mr English says.
NZECO's guarantees facilitate trade by providing a guarantee to exporters or banks against defaults on contracts. The changes will:
- Allow NZECO to underwrite its trade guarantees in a broader range of currencies, including China's Renminbi.
- Give NZECO more flexibility to support transactions with benefits to New Zealand over and above the level of local value-added content.
Mr Groser says the changes reflect the shifting nature of New Zealand's export trade.
"New Zealand exporters are increasingly under demand from their buyers to trade in the buyer’s local currency. This will give them greater scope to do so.
"Giving NZECO more flexibility to support deals with wider benefits to New Zealand responds to a clear demand for trade finance for local companies that use offshore subsidiaries.
“This is about the internationalisation of local companies, which generally operate outside the traditional primary export sector, have a strong local design component and bring profits and other benefits back to New Zealand.
"More and more of these companies are establishing offshore entities to support their export effort from a New Zealand base. They are participants in the global supply chain, which is where the bulk of global trade lies and where New Zealand needs to have a strong presence," Mr Groser says.
Under the current rules NZECO can only provide trade guarantees to companies exporting products with at least 30 per cent New Zealand content.
Under the change NZECO will apply a wider 'benefit to New Zealand’ test. However if its products are oversubscribed it will continue to prioritise exports with New Zealand-value added content.
The changes, which will take effect later this month, don't require extra funding.
The NZECO has a maximum risk exposure of $740 million for its products, but the only cost to the Crown is in the event of an unrecoverable default. This potential cost is offset by premiums.