Japanese media reported that Nippon Export and Investment Insurance (NEXI), an insurer wholly funded by the Japanese government, will introduce a new type of trade insurance. When emerging countries invite Japanese companies to bid for infrastructure construction projects, loans borrowed from Japanese banks and other institutions to pay the first insurance premium will also become eligible for coverage.

        According to a July 15 report by Japan's Yomiuri Shimbun, this measure can prevent Japanese companies from abandoning bids on the grounds that emerging countries cannot afford the insurance premiums. The Japanese government intends to use this measure to expand Japan's infrastructure exports.

        When companies in emerging countries invite Japanese companies to bid for infrastructure construction projects, they must first pay insurance premiums to NEXI. If the emerging-country company pays the premium, the winning Japanese company can claim trade insurance from NEXI when it has difficulty receiving project payments from the emerging country. It is said that the number of Japanese companies bidding without insurance is almost zero. In fact, in capital-scarce countries in Central Asia and Africa, there are many cases in which bids to Japanese companies are abandoned because it is difficult to raise insurance premiums of several billion yen.

        Therefore, the new trade insurance also covers loans that emerging countries take out from Japanese banks to pay insurance premiums. Under this mechanism, when an emerging country has trouble repaying, the Japanese bank that cannot recover its loan is compensated for its loss. As a result, it becomes easier for emerging countries to raise insurance premiums through bank loans, and the obstacle to inviting bids from Japanese companies will be removed.

        The fertilizer production project being built by Mitsubishi Heavy Industries and Mitsubishi Corporation in Uzbekistan is expected to be the first subject of the new trade insurance. The several billion yen in insurance premiums paid by Uzbekistan will be covered.

        In Japan's infrastructure exports, the high initial costs borne by emerging countries, including trade insurance premiums, had previously been a bottleneck.

        In the 2015 bidding for Indonesia's high-speed rail construction project, Japan lost to China, which proposed a plan with zero burden on the Indonesian government.

Source: Cankaoxiaoxi.com  2017-07-18