A view of the building in Seoul where Eximbank has offices. (Photo: Eximbank)

The Export and Import Bank of Korea will be able to provide loans to domestic firms undertaking economic projects in so called “dangerous countries” thru a special account set up in May this year.

The account holds 3.7 trillion won to be offered as loans to Korean firms that have the projects in economically risky nations, including Nigeria, Iraq, Myanmar, Turkmenistan, Angola and Tanzenia.

These countries are on a list of countries likely to qualify for the special Korea Eximbank loans, and they have either suffered from civil war, terrorist attacks or are in danger of having one sooner or later. The list includes the countries that already defaulted on their Korea Eximbank loans once, which is why they are called “the poisoned Holy Grail,” in the financial community.

According to the materials submitted to Rep. Choo Kyung-ho of the major opposition Liberal Korea Party and a member of the Planning Treasury Committee, on Oct. 10, Korea Eximbank is about to approve loans amounting to 589.1 billion won in support of construction projects, and exports headed to Nigeria and Iraq this year.

Net year, Korea Eximbank plans to approve loans totaling 2.506,2 trillion won for a dam construction project, the export of autos and other projects undertaken by Korean firms in such countries as Iraq, Myanmar, Turkmenistan, and Angola.

In 2021, the state-run bank is ready to offer financial support to transportation infrastructure projects in Iraq and Nigeria, which would bring total financial support from the special account to the risky countries to 3.749,8 trillion won and the bank will approve the financial support amounting to 1 trillion won soon.
Korea Eximbank got government approval for the special account in May this year.

The Ministry of Strategy and Planning said those countries with high risk have a great need for Korean firms to undertake various infrastructure projects on the way to rebuilding countries devastated by war and to recover their economies, and in order to win large infrastructural projects, you have to have competitive financial support that can be secured.

The ministry’s statement was included in one of the documents presented to the parliamentary committee.

The special account should include the government fund, and the funds made of the profits made by Korea Eximbank, with the approval from the Ministry of Strategy and Planning.

Most recently, the ministry approved 200 billion won for the special account. Iraq is destined get 2.8 trillion won out of the 3.7 trillion won in the special account, although it is still classified as unstable and its credit rating is far below standard.

Korea Eximbank’s own credit rating has Iraq on the 9th level, the lowest grade for its credit rating for foreign countries, meaning it is likely to default on foreign loans.

Rep. Choo said they have to conduct serious evaluation of those projects to be undertaken in those countries and set up the tough risk management system as huge amounts of funds are to be invested in those projects.

He added that the funds should not be provided in haste to make the projects successful as most of those countries either don’t have the ability to repay the loans or stay poor despite the years of their rebuilding efforts.

The ministry responded by saying that proper amounts of loss provisions will be set up accompanied by constant monitoring of the progress of the project and the special account was set up to control the risks more closely associated with the projects.