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BACK             Issue No. 3/2004
 ECGA's Semi Annual Operational and Financial Results Disclosed

 ECGA of Oman signed Memorandum of Understanding with Exim Bank of Thailand

 Increasing number of exporters are availing domestic credit insurance services

 Claims paid made by ECGA for the first six months of 2004 revealed

 Two of ECGA’s officers attended Training Program and Workshop organized by SLECIC of Sri Lanka

 Training Workshop in Presentation Skills by Team Power UK

 Annual General Meeting of the Credit Alliance held in Paris

 Prague Club Meeting hosted by KUKE of Poland in Warsaw, Poland

 Country Profile of Buyers of Omani Insured Exports

 Questions & Answers

 Hint to Exporter

 ECGA's services have contributed in the remarkable growth of the Omani non-oil exports

 The Omani Insured Exporter by ECGA

 Congratulatory Message


 
ECGA's Semi Annual Operational and Financial Results Disclosed
Export Credit Guarantee Agency S.A.O.C has continued through the years to remain profitable and self sustaining while contributing in the development of Omani non-oil exports by extending its various credit insurance and guarantee services to growing number of Omani exporters. ECGA's half yearly operational and financial results for the year 2004 have improved compared to corresponding 6 months period of 2003 as provided in the Table below:-


6 months period (Figures in ''000 R.O)
% Increases
Operational Result
2003
2004
Credit Limist (in Million R.O.)
150.2

164.5

9.5%
Number of Credit Insured Exporters
147
155
5.4%
Number of Buyers
3220
3440
6.8%
Financial Results
Operating Income (in '000 R.O.)
253


444


7.5%
Gross Premium Income (in '000 R.O.)
122
192
58%
Net Income (in '000 R.O.)
98
238
142%
Capital & Reserves (R.O. Million)
8.0
9.8
22%


It is worth mentioning that ECGA of the Sultanate of Oman commenced its credit insurance operations more than twelve years ago. It is the only national ECA in the GCC countries. It provides both domestic as well as export credit insurance services to Omani exporters. As of the end of first half of 2004, the Agency issued total credit limits of RO.164.5 million compared to RO.150.2 million in 2003 to existing and new Omani exporters. The period covered exports to 3440 buyers in 92 countries compared to 3220 buyers for corresponding period of 2003. The Agency's financial results for the first half of 2004 compared to corresponding six months period of 2003 have been very encouraging. The Agency's operating income has gone up by 75%. The Gross Premium Income has increased by 58 % and its Net Income has increased by 142%. The Agency's contribution in promoting Omani non-oil exports through its various services extended to exporters can be supported by significant increases in non-oil exports (excluding re-exports) from RO.261.6 million in 2002 to RO.304.1 million in 2003 representing a significant rise of 16.2%..

 
ECGA of Oman signed Memorandum of Understanding with Exim Bank of Thailand
Export Credit Guarantee Agency (S.A.O.C) of the Sultanate of Oman signed Memorandum of Understanding (MOU) with the Export-Import Bank of Thailand (EXIM-THAILAND). The Memorandum include various areas of cooperation including exchanges of information on buyers and banks, assistance in recoveries, exchanges of experiences on claim payments, training, etc. Exim Bank of Thailand as with ECGA of Oman are both members of the Credit Alliance Network as well as the Prague Club.

 
Increasing number of exporters are availing domestic credit insurance services
Domestic Credit Insurance Service introduced by the Export Credit Guarantee Agency (S.A.O.C) since September 2003 has attracted a growing number of Omani credit insured exporters. The domestic credit insurance provides additional protection to the exporters against the risk of protracted default and insolvency of domestic buyers as well as ease the exporters cash flow constraints and liquidity problems. It assists the exporters in their liquidity and debt management as well as mobilize resources in their export efforts. The domestic credit insured bills can also be discounted by the commercial banks by assigning the benefits to them under the Domestic Credit Policy.

 
Claims paid made by ECGA for the first six months of 2004 revealed
The Agency approved claim worth RO.3043/760 for exporters during the first six months of 2004. This compared to RO.18910/660 for the corresponding period of 2003. The Agency paid a total of 28 claims to credit insured exporters since its inception.

 
Two of ECGA’s officers attended Training Program and Workshop organized by SLECIC of Sri Lanka
Two of the Agency’s officers - Mr. Saif bin Nasir Al-Mahdi the Underwriting officer & Mr. Imaad bin Soud Al-Harthy the Senior Claims Officer attended training program and workshop with The Sri Lanka Export Credit Insurance Corporation (SLECIC) during the period 21st June to 28th June 2004. SLECIC organized a Berne Union workshop on Short-Term Underwriting, Credit Scoring Risk Sharing on Short-Term Business Claims and Reinsurance. It is worth mentioning that SLECIC marks its Silver Jubilee i.e 25 years anniversary since its inception. It is also a member of Berne Union.

 
Training Workshop in Presentation Skills by Team Power UK
One of the Agency’s staff ¬ Mrs Sheikha Massood Al Marhuby attended the training workshop on Presentation Skills held on 21 to 23 June 2004.The Workshop was organized by the Oman Chamber of Commerce and Industry in conjunction with Team Power UK. Mrs Sheikha Al Marhuby commented “The workshop was very useful and well organized.

Although it was about presentation skills, yet we came out with more beneficial information on planning, organizing, developing visual aids, practicing and delivering”

 
Annual General Meeting of the Credit Alliance held in Paris
The annual general meeting of the Credit Alliance was held in Paris from 24th to 25th June 2004. Apart from COFACE and its owned subsidiaries, the Alliance consists of a number of ECAs from the emerging markets. ECGA of the Sultanate of Oman joined the Credit Alliance in 1996 when the Alliance had only 16 members and since then it has grown to over 60 members worldwide with the total market representing more than three quarters of world trade. Apart from the annual meeting, both the Regional Committee and General Steering Committee Meetings were held for which the General Manager of ECGA Mr. Nasir bin Issa al Ismaily attended as Chairman and Regional Coordinator for Africa-Middle East and member of the General Steering Committee of the Credit Alliance. He was re-elected as Regional Coordinator for subsequent term period 2004/05.

 
Prague Club Meeting hosted by KUKE of Poland in Warsaw, Poland
The Prague Club held its first bi-annual meeting of the year in Warsaw, Poland hosted by the Export Credit Guarantee Agency of Poland (KUKE) from 23rd to 26 May 2004 in coordination with the Secretariat of the Berne Union. The General Manager of the Export Credit Guarantee Agency ¬ Mr. Nasir bin Issa Al-Ismaily participated in its workshop and meetings along with representatives from Export Credit Agencies (ECAs) in other countries. The Prague Club is an association of national ECAs from a number of countries in Eastern & Central Europe, Arab World, Africa and Asia. It also includes multilateral ECAs such as the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), Inter-Arab Investment Guarantee Corporation (IAIGC) as well as African Trade Insurance Agency. The Club operates under the auspices of the Berne Union that is the International Union of Credit & Investment Insurers. ECGA of the Sultanate of Oman became the first ECA from an Arab country to be qualified and became a member of the Prague Club in the year 2000. The updates of developments of respective ECAs following its last meeting in Vilnius, Lithuania last year were reviewed by its members. In addition, the highlights of the performance of the ECAs members for the year were discussed which included underwriting matters, payment of claims, collection and trading experience by the members to various markets, etc. In addition, updates of international financial institutions that is IBRD, EBRD and OECD were presented to the ECAs members as it relates to the current state of affairs of the credit insurance industry.


 
COUNTRY PROFILE OF BUYERS OF OMANI INSURED EXPORTS - YEMEN
Yemen is situated in South-West of Arabian Peninsula. The total land area is 527,970 Sq Km. The capital is Sanaa. The population of Yemen as per the estimated statistics for 2003 is 19,349,881 million inhabitants. Export Credit Guarantee Agency (SAOC) has insured Omani exports to various products to Yemen. These include aluminium profiles, fences, ceramics tiles, pvc pipes, plastic products, sweets, electrical cables, filters etc. The total credit limits issued by the Agency to May 2004 amounted to R.O.5,762,450/- to 64 buyers. Of total credit limits issue by the Agency to Yemen, R.O. 5,385,100/- or almost 93.5% are under letters of credit and remaining 6.5% or R.O. 377,350/- are on open account terms. The Agency has not paid any claims on buyers in Yemen. During the year 2003, total on Omani exports to Yemen were R.O.23.8 million compared to R.O.19.3 million for the year 2002 or a significant increase of almost 23.4%. Imports in 2003 were RO.5.06 million. Thus, Oman maintains a net trade surplus with Yemen 18.74 million. The Omani exports and imports to Yemen for the last 5 years are listed as follows:-

1999
2000
2001
2002
2003
Exports
35,020,786

58,409,648

17,949,210
19,261,594
23,764,931

Imports
959,144
759,423
1,416,113
2,305,835
5,058,868
Surplus
34,061,642
57,650,225
16,533,097
16,955,759
18,706,063


 
 


As per the publication of International Trade Finance Magazine, October 2002 , Issue No. 414 , in its survey highlights in Yemen it states as follows:- “ Although all importers are required to either pay in advance or present L/CS, usually shippers will not receive banks transfers of foreign exchange for five months”. The usual minimum terms of payment are confirmed letters of credit between 90-120 days. A number of ECAs provide short term cover for Yemen including US Eximbank, Atradius, ECGD, Euler Hermes UK.


Questions and Answers 

Q-What are the advantages of taking ECGA's export credit insurance policies?
A-By giving credit to overseas buyers, exporters may be exposed to possible loss of not being paid. ECGA's export credit insurance policies allow Omani exporters to diversify into new and unfamiliar markets and extend credit terms for better competitiveness. The additional advantage of these policies is that they can be assigned as additional security to commercial banks in the country for export financing.

Q-How does ECGA underwrite short-term business to exporters?
A-
ECGA underwrites short-term business on a comprehensive basis by issuing Standard Export Credit Policy under which individual buyers are then normally underwritten subject to individual credit limits, which are usually valid for more than one shipment or contract. ECGA underwrites each individual buyer after assessing the buyer's credit worthiness and risk.

Q- Are credit limits issued to buyers by ECGA supersede earlier limits?
A-
Credit limits issued by ECGA usually supersede all earlier limits but do not necessarily invalidate them. At Date of Ascertainment of Losses only one is judged applicable.


Q- How does ECGA set the credit limits?
A-
ECGA has access to various sources of information on the financial standing of millions overseas buyers. The sources of information vary. In some cases it is accessed on-line within seconds through its international contacts. In others it may take a number of days. Thus the credit information report received on the buyer as well as any trading experience the exporter can provide enables ECGA to set the credit limit accordingly.

Q-What is the Credit Limit issued by ECGA?
A-
It is the maximum permanent exposure on a foreign buyer that ECGA is prepared to insure. Unless and until otherwise agreed by ECGA in writing the amount of the credit limit for any particular buyer will be the amount approves in writing by the Agency on application for that purpose by the exporter.

Q-What is the credit risk and why it is necessary to insure it with ECGA?
A-
It is the risk that the insured will be unable to recover all or part of the receivable due to the occurrence of a cause of loss. ECGA credit limits stipulate for each overseas buyer the maximum amount that the exporter may have outstanding at any one time for goods dispatched. It is necessary to mitigate such risk through export credit insurance. The Export Credit Policy of ECGA will minimizes the risk of non-payment due to both commercial and non commercial or political risks.

Q-How is credit insurance premium paid by the policyholder?
A-
At the end of each month the exporter is required to declare his export contracts/shipments to ECGA. Premium will be invoiced at a pre agreed rate on the value declared and is payable immediately on receipt. The premium rates are predicated by the modes of payments and country risks grading.

Q-What are the risks covered by ECGA?
A-
Two major classes of risks that is Buyer Risks (or Commercial Risks) and Country Risk (or Political Risks). Buyer risks include insolvency or bankruptcy of the buyer, protracted default in payment for goods he has taken delivery of and repudiation of sales contract after the goods have been exported. Country or political risks covered include blockage or delay in the transfer of foreign exchange, import ban and cancellation of import licenses already issued, war, revolution, civil disturbances and any other event of loss normally insured by general insurers and beyond control of both the policyholder and the buyer arising from events occurring outside the Sultanate of Oman.

Q-What is meant by whole insurable turnover and why is it necessary all such export business should be insured with ECGA?
A-
Whole insurable turnover means the policyholder must declare to ECGA all his exports to all his overseas buyers thus in conformity with the whole turnover principle. The only exceptions are the shipments to those buyers on whom ECGA Has refused to cover.
 
Hint to Exporter
Credit insurance allows you as an exporter to secure a more competitive market position by offering aggressive open credit terms that can enhance the ability to meet a buyer's need. This is because as competition in the marketplace heats up, more and more companies demand open credit. By utilizing credit insurance of ECGA to hedge the risk of loss, exporters can extend open credit that will permit foreign buyers to more easily purchase the quantity of product that they truly desire. Hence credit insurance is very essential to exporters and others in extending liberal terms of payment to buyers such as open account.


 
THE OMANI INSURED EXPORTER BY ECGA
ALI & ABDUL KARIM TRADING CO. LLC

M/s. Ali & Abdul Karim Trading Co. LLC is one of the major exporters in the Sultanate of Oman. The company is engaged in production of food items such as Tomato Ketchup; Sauces, Mayonnaise and dressings etc. under their own brand i.e. Barka, Khaboura, Delicio and Al-Bustan. M/s. Ali & Abdul Karim Trading Co. LLC exports its products to 15 countries worldwide. It is relevant to mention that the company was one of the three finalists for the Oman Excellence award of "Exporter of the Year 2003" and the founder directors of the company M/s. Abdul Karim and Ali Hassan Suleiman were awarded with "The Emerging Entrepreneur of the Year Award" for the year 2003. Moreover, the subject company possesses ISO 9002 and HACCP certification which provides double assurance of world class standards of quality and hygienic food production.

M/s. Ali & Abdul Karim Trading Co. LLC has been availing the export credit insurance services of ECGA very effectively for the past 10 years since 1994.

The graph below depicts the level of the company's exports during the last seven years since 1997.
M/s. Ali & Abdul Karim Trading Co. LLC
 
CONGRATULATORY MESSAGE
"Insure Exports with ECGA for safe export business. As credit insured exporters, while you reap the profits … ECGA will bear the risks."

ECGA is here to help you minimize your risks


BUYER’S RISK
COUNTRY RISK
   buyer’s insolvency/bankruptcy

   buyer’s failure to pay

   buyer refusing delivery of goods


   foreign exchange transfer delay

   import bans or cancellation of import licence

   payment moratorium

   war, civil disorder, natural disasters



Other benefits of service provided to credit insured exporters include domestic credit insurance, post shipment financing through bills discounting by commercial banks as well as issuance of guarantees to commercial banks for pre-shipment financing needs of the exporters.

 


   
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