Trade Minister, Mark Vaile, today announced the outcomes of the recent Review of Export Credit and Finance Services, emphasising an initiative for the Government's Export Finance and Insurance Corporation (EFIC) to enter into an alliance with a private insurer to maintain internationally competitive services for Australian exporters.

"Credit insurance has now internationalised, forcing market consolidation as companies seek the scale to operate on a worldwide basis," Mr Vaile said.

The market is now dominated by a small number of large international companies that are chasing each other in massive investments in IT databases and e-commerce products for deeper and faster market penetration, including for smaller exporters.

"This is good news for exporters but only if they can access these services.  Standing alone, EFIC cannot compete with these developments, and that is ultimately to the disadvantage of Australian exporters.

"EFIC is not alone in this situation, smaller insurers around the world are linking with the large insurers to benefit from their global networks, databases and IT services."

Mr Vaile has directed the Department of Foreign Affairs and Trade and EFIC to begin discussions with a range of private insurers to seek an alliance by end 2001 to improve services available to exporters, without any reduction in EFIC's current services.

Mr Vaile said the EFIC Board was fully supportive of the outcomes of the review and EFIC's future direction.

Mr Vaile said EFIC would structure its short-term business as a separate entity within EFIC to assist evaluation of reinsurance possibilities and facilitate progress towards an alliance.  The alliance would involve extensive collaboration which could include sharing systems, underwriting expertise and risk sharing and reinsurance.

The alliance partner would have an opportunity to demonstrate its ability to cater to the full range of credit insurance requirements of Australian exporters.  Through this process the Government would eventually look to withdraw from the clearly commercial elements of EFIC's business as the alliance partner would be better placed to keep Australian exporters plugged-in to the rapidly evolving credit insurance market.

This period would also provide an opportunity to establish frameworks for whatever continuing role the Government may need to have, including possible continuing support for smaller exporters, exporters in rural and regional areas and in times of trading difficulty such as the recent East Asian economic crisis.

Mr Vaile said this approach would allow a process of transition to fully test the appropriateness of the Government withdrawing from credit insurance within the complete safety net of only taking this step if it demonstrated sustained advantages for Australian exporters.

"With an alliance in place, Australian exporters would be benefiting from access to cutting edge export credit services and global networks."

EFIC's medium-long term export finance services would not be affected by these decisions as there remains limited private market capacity in this area.

Mr Vaile said the Government would shortly be releasing a report  detailing the outcomes of the review and the findings of the consultants' reports that contributed to the review.

Contact:         Bruce Mills 02 6277 7420 mob 0418 273 475