A Contractor-Arranged and Export Credit Agency-Based Financing Model

Dr. Emrah Ergelen and Prof. Stafano Gatti have recently completed this research about an innovative project financing model at Bocconi University.

Investments in infrastructure have huge economic and social benefits, but across the world such investments are insufficient. One of many reasons is the underutilization of funds from export credit agencies (ECAs) of developed countries by their national contractors.

We look at how contractors from developing countries can arrange financing for international construction projects from ECAs of developed countries by applying the traditional public procurement method. We identify four financing models by which contractors from developing countries arrange financing from ECAs of developed countries and we find significant associations between the selection of the financing model and the contractor’s (i) experience in the project type, and (ii) size.

Our findings show positive correlations between the selection of the ECA and the project type, the level of development of the ECA country, and the project country’s political alignment with the ECA country. Instead, the level of domestic content policy has a negative correlation. Our research results have important practical implications for the governments, project owners, export credit agencies, investors, contractors and equipment/material manufacturers.

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