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The Mekong InstituteEnhancing Entrepreneurship in SME Development and Export Consortia

Role of EXIM Bank’s Financial Service for SME Development in Thailand

Mr. Pramon Neramitmansookpramonn@exim.go.th

Senior Manager Export Credit Insurance DepartmentExport Import Bank of Thailand

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DiscussionTopic

1. About Export-Import Bank of Thailand

2. Roles of Thai EXIM and Thai’s Economy

3. Present and the future

4. Experience Sharing/ Q&A

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About Export-Import Bank of Thailand

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1961

1st Thai’s National Development Plan (1961-1966)

12 AprilYuri Gagarin 1st cosmonauts

13 AugustBerlin Wall

4 AugustBarack Obama

44th US President

20 JanuaryJohn F. Kennedy35th US President

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1992

• 7th Thai’s National Development Plan 1992-1996

• Establishment Special Financial Institution to support Thai’s Export and Import business.

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About us

• EXIM Thailand was establish under the Export - Import Bank of Thailand Act in 1993

• The initial capital of 2.5 billion

bath and started up its business

• In 1994 EXIM Thailand increased its capital twice in April and July 1998 with 2.5 billion bath and 1.5 billion bath respectively

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1934: US EXIM1993: Pres.

Bill Clinton

1994: Thai EXIM

1997: Econ. Crisis

2003: IMF Pay off

2003:Iraqi Freedom Op.

2001: Pres. George W.

Bush

2004: Tsunami

2000: ~70,000 MUSD Export value

1993: ~40,000 MUSD Export

Value

2007: ~152,000 MUSD Export value

2005: Katrina

1995: Export Credit Insurance

2004: Intl Project&Investm

ent

2007: EXIM Inter

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Roles of Thai EXIM and Thai’s Economy

• Thai EXIM and roles of Thai’s economic development

• In 1997 Thailand encountered economic crisis most of commercial banks ceased their lending.

• As of government body, EXIM Thailand responded to this challenge by accelerating credit extension to carter for exporters’ rapidly rising demand for credit.

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Thailand’s Export Volume

1993 37,324.8 million USD 1994 45,430.0 million USD 1996 55,941.4 million USD 1997 58,389.4 million USD 1998 54,490.1 million USD 1999 58,463.4 million USD 2000 69,624.2 million USD

2003 80,040.0 million USD 2007 152,095.2 million

USD 2008 70,944.5 million USD

2009 xxxxxxxxxxxxxxxxxxx(As of year end / Source : Ministry of

commerce)

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L/C

41%

B/C

15%

Other

38%

Adv.Payment

1%Offset

5%

Other68%

Offset7%

B/C6%

L/C18%

Adv.Payment1%

1993 2003

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What we doFinancing services• Working Capital Loans

– Pre-shipment Financing (Baht, USD, Yen)

– Export Supplier's Finance

• Term Loans– Term Loan for Business

Expansion– Long-term Credit for

Export of Capital Goods– Merchant Marine Financing

• Financing for Overseas Projects– Financing Facilities for

Overseas Construction Contracts  

– Financing Facilities for Overseas Investment

– Financing Facilities for Thai Restaurants Overseas

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Support Exporting

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Working Capital LoansPre-shipment Financing (Baht, US Dollar, and Yen) • A revolving line of credit provided in baht, US dollar, or

yen, directly to exporters of all kinds of products to meet their pre-shipment financial needs. (The yen-denominated facility is available to exporters possessing letter of credit (L/C), contract, or purchase order (P/O) in yen only.) The US dollar- and yen-denominated financing is aimed to lessen financial costs of exporters and to reduce foreign exchange risks since exporters can use US dollar or yen proceeds to pay back the credit.

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Term Loans

Term Loan for Business Expansion • A medium- to long-term credit facility to support

the expansion of exporters' production capacity, such as factory expansion, purchase of additional machinery, investment in other fixed assets or new domestic manufacturing plants. Businesses eligible for support are export-oriented manufacturing, those earning foreign currencies, or import substitution enterprises, both new or existing establishments

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Venture Capital

• Investment : on equity /capital typically provided to early-stage, potential, growth export or Thai’s overseas companies in the interest of generating a return.

• Through “Thai EXIM International Co.,Ltd.”• EXIM International ,Thailand Head office

Bangkok.• EXIM International, Moscow

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Support Overseas Investment

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Financing for Overseas Projects

A long-term credit to support Thai investors’ overseas investment projects.

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Hotel De La Paix, Cambodia

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Laos: Nam Nugm Hydropower plant

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Myanmar: Mandalay Intl Airport

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What we do

Non-Financing services•Export Credit Insurance D/P, D/A and

O/A Policy•Export Credit Insurance L/C Policy•Medium- and Long-term Export Credit

Insurance• Investment Insurance •Buyer/Bank Risk Assessment Service

(BRA)

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What is Export Credit Insurance

?Account Receivables insurance

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Why! Trade Credit

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IMPORTER EXPORTER

Less risk+++Risk

Less risk+++RiskADVANCE PAYMENT

LETTER OF CREDIT

D/P SIGHT

D/A

OPEN ACCOUNT

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Export Credit Insurance

Credit Manager(Underwrite buyers/banks credit line for policy holder)

Loss Minimize(Indemnify policy holder for their loss)

Risk Sharing(Take the larger portion, up to 90%, of all bad debts collecting costs)

Legal Consultant(Advise policy holder the appropriate legal actions)

Export Adviser(Monitor international trade situation)

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Export Credit Insurance

Commercial Risks• Buyer is insolvent/bankrupt • Buyer refuses to pay • Buyer refuses to take delivery Political Risks• Remittance of hard currency restricted or

prohibited by authorities • New regulation prohibiting importation • Occurrence of war, revolution or riot that

obstructs payment

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Buyer’s Credit Check

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Recommend buyer’s credit terms

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Indemnity for covered loss

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Debt Collecting networks

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องค์�กรติ�ดติามหนี้��

CI CommercialIntelligence

Consultants Ltd.

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Investment Insurance• Insurance coverage against political risk of

losses relating to overseas investment i.e. losses from imposition of laws or any action taken by host government that adversely affects project investment or the investor’s repayment ability.

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1993 Russia Rebellion :

Thousands of Muscovites protest against Russia's government as hard-line opponents of President Boris Yeltsin occupy the parliament building.

482003 GULF WAR episode 2

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Investment Insurance• Equity Insurance covering losses o

n assets, profits or other monetary be nefits derived from the insured invest

ment.

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Investment Insurance• Loan Insurance covering the original principal an

d interest amount according to the repayment schedule under a loan agreement.

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Investment Insurance• Insurance coverage against political risk of

losses relating to overseas investment i.e. losses from imposition of laws or any action taken by host government that adversely affects project investment or the investor’s repayment ability.

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Buyer/Bank Risk Assessment Service

•  To check the credit information of each buyer/issuing bank. EXIM Thailand will purchase the credit information from Credit Information Agency located in each country. After receiving information of each buyer/issuing bank, EXIM Thailand will analyze and assess the information and then make the report to exporters

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What we do

Thai’s Business man capacity building • Training/Seminar/Business matching• Export and Investment information• Consulting service

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Present and the future

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Enhancing SME’s

• SME’s– Finacing– Non-financing

• Financial system– Modern Banker– Modern system

• Credit Information

- Knowledge

- Money

- Environment

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Others

Training

• Forex Risk Position

• EXIM Forum yearly seminar

• International Credit Term

• “Overseas Investment” How to

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Where we are going to

Present Mission• To support and promote Thai exporters and

investors for national development purpose • To foster collaboration among financial

institutions and countries in the Greater Mekong Sub region.

• To promote and support trade and investment in the Greater Mekong Sub region.

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How to get there

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Sub region Logistics Development

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1967196719891989 19921992 19931993 19961996 19971997 2 2002002 2 2003003 2 2005005 20072007

JTEPJTEPA A

ASEANASEAN (Association of (Association of Southeast Asian Southeast Asian Nations ) Nations ) APECAPEC (Asia-Pacific (Asia-Pacific

Economic Economic Cooperation) Cooperation) GMSGMS (Greater (Greater

Mekong Sub Mekong Sub region)region)IMT-GTIMT-GT (Indonesia-Malaysia-(Indonesia-Malaysia-

Thailand Growth Triangle)Thailand Growth Triangle)

ASEMASEM (Asia-(Asia-Europe Europe Meeting)Meeting)

BIMSTECBIMSTEC (Bay of Bengal Initiative for Multi (Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation)Sectoral Technical and Economic Cooperation)

- FTA Thai-- FTA Thai-ChinaChina

- FTA Thai-- FTA Thai-AustraliaAustralia

- FTA Thai-India- FTA Thai-India

- ACMECS- ACMECS

(Ayeyawady-ChaoPhraya-Mekong (Ayeyawady-ChaoPhraya-Mekong Economic Cooperation Strategy)Economic Cooperation Strategy)

FTA Thai-New FTA Thai-New Zealand Zealand

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Happy Exporting

7171

ปี� 2539 ปี� 2549

ที่��มา : ธนี้าค์ารแห�งปีระเที่ศไที่ย

1%

66%

6%27%

L/C

O/A

Advance Payment

42%

%

44%

1%

L/C

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D/P,D/A

O/A

Advance Payment

D/P,D/A

แนี้วโนี้�มเง �อนี้ไขการชำ#าระเง�นี้แนี้วโนี้�มเง �อนี้ไขการชำ#าระเง�นี้

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Experience Sharing/ Q&A

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2009International Market Risk during Crisis

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Crisis• The decline in the value of the collateral used by the

banks to secure the loans.• The reduction in the general availability of loans (or

credit) or a sudden tightening of the conditions required to obtain a loan from the banks.

• Tightening business activity: Payment/Investment

“Credit Crunch”

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3.0

5.0

3.4

2.1

-1.8

1.5

0.6

1.12.0

-3.2

1.1

-0.6

-4.5

0.7

2.6

1.00.3

2.4

-0.7

-6.4

-8

-6

-4

-2

0

2

4

6

2550 2551 2552 2553 2554

%

Source : The Economist Intelligence Unit (EIU) 19 May 2009

USA

WorldEuro ZoneJapan

GDP Growth

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• Consumtion/ GDP = 70%• Unemployment April 2009 8.9% (highest in 26 years)

• Consumtion/ GDP = 38%• Unemployment March 2009 8.9% (highest in 3 years)

• Consumtion/ GDP = 60%• Unemployment April 2009 5.0%(highest in 5 years)

7777

2008 Bankrupcies2008 Bankrupcies

ที่��มา : The Economist Intelligence Unit (EIU)

Germany2 8,50

0 :3 /hr.301

00 : 3 /hr.

UK

USA 41200,

: 5 /hr.Franc

e56,0 00 :6 /hr.

Avg. 3 minAvg. 3 min

7878

2009 (Forecast)2009 (Forecast)

ที่��มา : The Economist Intelligence Unit (EIU)

Germany382,

00 : 4 /hr.338

00 : 4 /hr.

UK

USA 60200,

: 7 /hr.Franc

e62,7 00 :7 /hr.

Avg. 2 minAvg. 2 min

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The Three Rules of Work

1. Out of clutter, find simplicity.2. From discord, find harmony.3. In the middle of difficulty, lies opportunity.

Albert Einstein 1879-1955

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New Market

Add some Creativity in the business (dis. Adv. on labor/Pricing++ if creativity hit)

Understanding “Social Changes” of old market

Opportunity

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Risk Managementfor Non LC trade

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Internal

• Company financing plan

• Company policy on given out credit to buyers

• Company payment monitoring

• Company policy on overdue Account

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Company financing plan

• Non LC trade such as DP DA and OA are less liquidity than LC

• Effect to company cash flow – shortest

• Financing plan eg. Review on preshipment and postshipment credit line/facilities via banks

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Company credit policy

• Policy for new buyer & Policy for old buyer

• Maximum credit periods: 90 days, 120 days

• Maximum outstanding at one time: Level of whelthiness of buyer

• Credit rating system: self rating or outsource rating

Note: Credit = ability + willingness to pay

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Outsource rating

• Buy credit report: Credit Information Agencies

• Buyers Risk Assessment report: EXIM Thailand

• Export Credit Insurance: Credit rating and responsible (coverage) as per rating

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Credit Information Agencies• D&B

– www.dnb.com

• INRA – www.inra.co.th

• Graydon – www.graydon.co.uk

• Tekoku data bank – www.tdb.co.jp

• Credit Guarantee – www.creditguarantee.co.za

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Company payment monitoring

• Ageing report: Ms Excel or better

• Report as monthly, Quaterly, yearly

• Analyze trend of payment via buyer, country (statistics & forcasting)

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Company policy on overdue Account

• Standard procedure

• Overdue accout committee: – decission– Legal action– Reserve and loss

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Summary

• Trend of International Payment Method– Quality/Price/Terms of payment – Thai’s banking system is ready

• International Market Risk in 2009– More prop of buyer defult/bankruptcy– Buyers have tight cash flow/ limitation of credit line from their

bankers

• Risk Management– Policies on risk mgt.– Hedging

• Experience Sharing/ Q&A

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Financing

• The science of managing money

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Planning on Export financing

• What do you need it for?

• How much do you need?

• When do you need?• Where to get money? *refer to the given table

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Exporting

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• Cash flow: The balance between the money you have coming in and the money you spend.

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Financial Tools

• Working Capital– Short Term– Medium-Long Term

• Leasing

• Factoring

• Credit Insurance– Short Term– Medium-Long Term

SupplierCredit

-Foreign Currency Deposit : FCD -Forward Contract

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How cash flow goes off-balance

• Lack of cash flow planning1. Internal Management e.g. stock too much goods

2. Business go so well

3. Buyers problems

4. Political issues

• Forgetting of risks on– Selling on credit, too much account receivable

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www.themegallery.com

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Planning Export Financing

• Lets start with one month

• The money you have coming in– Cash

– Selling on Credit

• The money you spend on exporting business– Buying goods, Raw materials

– Overhead

– Pay the bills; Electricity, Warehouse, Trucking, Freight etc.

– What else?

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Getting the Money from a banker

• Be ready to answer questions about your business, highlight your financial performance both in the past and in the future.

• Be prepared to tell why you need the money. "I just need the money,"

• Propose a repayment plan.

• Don't try going to a commercial bank if you've just started in business. Banks normally make loans only to businesses with operating histories*.

*Check out alternatives in the given table.

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Interest Rate• Interbank rate

– LIBOR 5.437% +?– SIBOR 5.422% +?

• Domestic Market– MLR : Min. Loan Rate 7.68% +?– MOR : Min. Overdraft Rate 7.75% +? – MRR : Min. Retails Rate 8.25%+?– Prime Rate EXIM 7.75% +?

* Sample of avg. on 2006

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Documents for financing

• Business financial statements

• Business Plan with budget or projection

• Business history

• Collaterals

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THANK YOUTHANK YOU