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Operations of EDC should be streamlined, C.D. Howe reports


December 12, 2007   by Canadian Underwriter


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The federal government should streamline the operations and priorities of Export Development Canada (EDC) by narrowing EDC’s activities to improve competition in the export insurance business, according to a recent report by C.D. Howe Institute.
C.D. Howe also advocated the privatization of EDC’s short-term insurance portfolio. However, government may continue to play a role in long-term insurance and trade financing, the institute says.
EDC is a Canadian, government-run export credit agency that offers exporters and investors looking to break into new markets credit and contract insurance. This allows them to access working capital while still protecting assets.
Narrowing EDC’s activities would improve competition in the export insurance business, C.D. Howe reports in a release. Unlike most OECD countries, Canada’s short-term credit insurance market is dominated by a state-owned enterprise. In many other countries, state-backed providers’ mandates do not allow them to actively compete with private insurers.
“EDC does not have any such restriction,” C.D. Howe notes in the release, “and EDC’s presence likely ‘crowds out’ private entry.”
The playing field could be leveled, and a more robust private credit insurance market would develop, if the government-backed insurer were withdrawn, according to Canada’s Exports: The Case for Reform at Export Development Canada, a commentary released by C.D. Howe.
“Although this commentary concedes the inevitability of government involvement in some export financing and insurance principally due to political considerations a restructuring of a portion of EDC’s activities would constitute a first step in ensuring a more vibrant credit insurance industry in Canada to the benefit of exporters and the economy,” the commentary presents.


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