My first months as EKN’s Director General have been an exciting and eventful time. Together with colleagues and partners I have met exporting companies all over Sweden - from Vindeln in the north to Trelleborg in the south. I have been impressed by the entrepreneurial spirit, creativity and tenacity we have found. These companies are not only good at developing products with demand all over the world but also at handling the challenges that business opportunities often bring with them.
I have also participated in trade delegations to India, the Philippines, and in spring EKN’s Board of Directors visited Iran. EKN was one of the world’s first export credit agencies to resume issuing guarantees to Iran after sanctions were eased. In June 2016, EKN upgraded Iran from country risk category 7 to 6. The country had by then repaid the greater part of EKN’s claims that arose after sanctions were introduced in 2012. There is great interest in Iran among exporting companies, but to date guarantees have only been issued for short credit periods. Banks have not yet provided long-term financing to Iranian buyers of Swedish exports.
During the latter part of 2016, prospects for global trade have become increasingly uncertain. Several political events have occurred that could affect global trading patterns and the trend towards increased trade liberalisation has ground to a halt. At the same time, global value chains are tending to increase interdependence. Exporting increasingly involves importing components and expertise from various parts of the world. Despite political turbulence, global economic growth has remained at approximately three per cent, as it has done since the financial crisis. However, the pace of growth in global trade of goods and services has fallen, which means that Swedish exports are facing increasing competition. Growth markets in Latin America and Africa, even the Middle East and Eastern Europe, have been squeezed by low commodity prices. It has become increasingly evident that Asia is consolidating its position as an important market for the future, with strong and stable growth.
Demand for guarantees from EKN has been high. The guarantee volume increased during 2016 compared with 2015, if we exclude SAAB’s Gripen transaction with Brazil in 2015, the biggest transaction ever guaranteed by EKN. The number of transactions guaranteed also increased during the year to a record 1,821, which is 264 more than the previous year. Demand remains high for Swedish companies’ competitive goods and services, from both emerging and high-income countries. The increase in guarantees issued to high-income countries is mainly explained by two very large transactions in the telecom sector, one to the USA and the other to Spain.
At EKN we constantly meet companies that export to markets all over the world. Our annual survey of exports shows that even more small companies are now grasping the opportunities in growth markets. Exports by small Swedish companies are far more multi-faceted than is often evident from the normal patterns. For example, EKN’s customers include companies selling ice hockey equipment to Russia, forestry machines to the Philippines, pilot boats to the United Arab Emirates and blood analysis systems to African countries south of the Sahara. However, there is still great potential for more companies to achieve success with exports and growth in new markets. During the year, to help reach out to more small and medium-sized enterprises, we have continued to strengthen EKN’s regional presence around Sweden and increase our marketing initiatives. Furthermore, EKN participates in the government’s regional export centre initiative: these have now been launched at six locations. The number of small and medium-sized enterprise customers continued increasing in 2016, with high guarantee volume to this target group - evidence that EKN’s initiatives benefit small companies’ export business.
The long-term approach is key to EKN’s task of promoting Swedish exports and companies’ internationalisation. Long-term commitment is also important when dealing with purchasers of Swedish exports. In December, EKN received the “Importers’ Choice 2016” award, in competition with the world’s other export credit agencies. The magazine TXF (Trade Export Finance) interviewed companies and banks on how well the various national export credit agencies live up to criteria such as flexibility, expertise, understanding of business, risk appetite, capacity etc. EKN has won many international awards over the years and it is thanks to our long-term relationships with exporting companies and banks, as well as our highly committed and competent employees, that we achieve these results.
EKN’s guarantees are in demand whatever the market conditions but especially in times of financial and economic crisis. As transactions agreed during the financial crisis now come to an end, the volume of EKN’s exposure decreases. During the year, like other globally export credit agencies, we have seen an increase in problem transactions and claims, which have a negative effect on the year’s profit. Years of falling commodity prices on world markets is one of the underlying reasons behind this. However, EKN has developed a strong financial position over recent years, which has enabled us to handle such losses with our own resources. Exporters and banks that insure themselves with EKN against default on payments, receive compensation for claims and can thus continue to create growth from new business. It is often possible for EKN to recover part or all of debts we have taken over as a result of claims.
I look forward to continuing to work with Swedish export companies and banks, Team Sweden’s export promoters and, of course, EKN’s employees to develop our business as a long-term guarantor for new Swedish export success all over the world.
Anna-Karin Jatko, Director General EKN