The Middle East accounted for much of the huge rise in underwriting of defence business by the UK’s Export Credits Guarantee Department (ECGD) in the year ending March 1993. The trend is likely to continue into 1994 with several large Middle East contracts in prospect, ECGD’s recently released annual report says.
ECGD’s defence business jumped to £1,591 million ($2,371 million) in 1992/93, up from just £276 million ($411 million) the previous year. The Middle East, particularly Saudi Arabia, the UAE and Qatar, accounted for 43 per cent of this new business, with the remainder going to the Far East. The main sectors supported were naval vessels, accounting for 39 per cent of business, military aircraft (32 per cent), and munitions and missiles (27 per cent).
Regional claims and recoveries improved slightly. Iraq, Egypt and Jordan were still among the top 10 claims markets in 1992/93, but their share had fallen to 29 per cent of the total at £199.4 million ($297 million), from 34 per cent of claims the previous year. Morocco dropped out of the list. On the recoveries side, Jordan and Morocco repaid a total of £20.8 million ($30.9 million) during the year, much of which was due to the recovery of a series of Gulf war-affected contracts in Jordan. Medium- term cover was resumed on a limited basis in Morocco in February to back economic development projects.
Egypt was the eighth biggest market for ECGD exposure by March 1993 at £798.3 million ($1,190 million), of which 56 per cent was accounted for by amounts at risk.
Turkey remained an active market, with considerable demand for cover, the ECGD report says. It supported about £100 million ($149 million), with potential for more. However, trade financing prospects may be affected by the turbulent lira (see Turkey).
The high level of applications for Iran since cover resumed in 1991 continued throughout the year. However, lack of progress on talks regarding sovereign guarantees and loan conditions, and short-term payments problems meant ECGD deferred action on all Iranian applications.
Apart from the defence applications, the Gulf provided comparatively little business. However, Kuwait has made considerable use of the renewal of the £500 million ($745 million) memorandum of understanding in early 1993, the report says. Qatar produced a number of potential project finance cases, but they did not result in firm business.