Finexpo (financing and export) is a Belgian inter-ministerial advisory committee to support export equipment and services in compliance with the OECD rules.
The objective of Finexpo is to promote the image and reputation of Belgian companies abroad, as well as to reconcile free trade with the need to retain its exportersâ€™ competitiveness, while contributing to the economic and social development of the recipient country.
Finexpo has two types of instruments: One commercial instrument and several concessional instruments. The choice of an instrument is determined by the nature of the project, the country one wishes to export to and the preference of the exporter/the bank concerned.
Among the financing instruments, FinExpo provides two type of grants which are presented below.
The grant is an aid instrument for which Finexpo must meet the 35% minimum grant component requirement in accordance with OECD rules. This component of 35% of the amount of the contract is paid during the implementation period of the project in the form of a grant. The 65% balance has to be provided in the form of commercial financing or be paid in cash.
This instrument is interesting for companies wishing to reduce their administrative costs as much as possible. One of Finexpoâ€™s objectives is to support SMEs wishing to engage in major export activities.
Qualifying criteria for the grant
- Commercial non-viability of the project (no positive cash-flow from investment before a 10-year-period has expired)
- Relevance for development of the developing country
- Priority for the country receiving the aid
- Concurrent with aid
- Sufficient Belgian interest
However, while for the other aid instruments the burden on Finexpo is spread over a large number of budget years, in the case of a grant, payment is made in the very short term and immediately affects the budget of the year to which the grant is charged. This is why recourse to the grant is limited to small projects for which long repayment periods are not justified. While grants are not exclusively reserved for SMEs, they are earmarked for small contracts of up to 6.6 million EUR.
Grant for Technical assistance
Technical assistance is one of the instruments for which tied aid is allowed even in countries where one should normally untie aid. Technical assistance consists in financing services related to an investment project in a developing country.
These services give the opportunity to civil servants and employees from the recipient country to build expertise related to an investment project and to take the form of technical trainings, advice and support by personnel from Belgium.
Qualifying criteria for the technical grant are:
- The grant can only be obtained by a Belgian company;
- The client must be a public institution;
- Maximum amount of the grant: 1 million Special Drawing Rights (SDR) or 3% of the transaction amount (the lowest amount is taken into account). Belgian companies can only apply for the grant for technical assistance for services;
- Relating to investment projects executed by the same Belgian company that are financed by untied development aid;
- Relating to investment projects executed by the same Belgian company that are financed under commercial conditions.
Therefore the grant for technical assistance cannot be combined with an interest bonification or a tied State to State loan. However, it can be combined with an untied State to State loan or interest stabilization.
For instance, a Belgian company that wishes to export its buses on a commercial basis to a developing country can request a grant for technical assistance. With this grant the Belgian company can offer training sessions to local bus drivers without having to put the cost of training in the commercial contract. The company can thus lower its prices, which gives a competitive edge over other foreign competitors. The same can be done if the company participates in an international tender related to untied aid.
The company can take the training out of the offer and thus reduce its prices, giving the company a competitive edge.
Grant Application Procedure
For projects for which a grant is applied for, companies must compile a dossier on the basis of the standard questionnaire jointly drawn up by Finexpo and the ECA Office (Credencia). The economic aspects of the project and its relevance for development can be examined on the basis of this questionnaire. The Finexpo Committee will examine the dossier and provide an opinion to the Minister for Foreign Trade. The minister will then decide whether or not to grant an interest rate subsidy.
The ministerâ€™s favourable decision takes the form of a promissory note, which is a document that is sent to the bank and/or the exporter and guarantees state intervention for a period of one year, which can be renewed twice (i.e. totalling three years).
If the transaction is concluded within this three-year period, a Ministerial Decree is assigned to the exporterâ€™s bank to formalise the granting of an interest subsidy. The grant is settled in three instalments over the project implementation period.
Vice President CBL-ACP
PSLO World Bank Group