Strong new markets in the East
In Southeast Asia, economic growth in the Philippines, Indonesia and Vietnam continued at a level of more than 5 per cent in 2017. The countries aim to modernise their economic structures and to diversify their exports as well as to improve infrastructure and the living conditions of their citizens, which creates good export prospects for Finnish enterprises, too.
Indonesia, the largest economy in Southeast Asia and a G20 member, is the most important country in the region in terms of Finnvera’s exposure for export credit guarantees. Exports from Finland to Indonesia increased in 2017, whereas exports to a more traditional export destination, Vietnam, decreased. Vietnam is a well-known development cooperation partner for Finland, so concessional credits that utilise development cooperation funds have been widely used in project financing. However, financing is gradually moving towards commercial financing. At one time, the Philippines was an important country of exports for Finland, and now, after years of decline, trade is again showing signs of growth.
The countries belong to the region’s economic cooperation organisation ASEAN (Association of Southeast Asian Nations). The EU and ASEAN are seeking closer cooperation. Finnvera has good possibilities of granting export credit guarantees to Finnish enterprises for all three countries, and the Team Finland cooperation has good prospects in Indonesia and Vietnam, countries with Finnish embassies and Business Finland operations.
In 2017, Finnvera granted, for the first time in many years, export credit guarantees for exports to Iran and exposure increased clearly during the year. Trade to Iran continued regardless of the fact that the United States has been reluctant to ratify the Iran Nuclear Treaty, which creates uncertainty. The Treaty is multinational and the EU, for instance, believes Iran is in compliance with it. Banks are still exercising caution with regard to trade with Iran and each trade transaction requires a great deal of effort from all parties. The situation in the entire Persian Gulf region became more unstable in 2017 as the relations between Saudi Arabia and Iran are poor and the situation in Qatar has created more tension. The region seems high-risk at the moment, which may decrease Finland’s exports to the countries there.
The growth of China’s economy strengthened further and economic growth is expected to continue at the 6 per cent level as the country moves from a growth model that is driven by investments and exports towards growth that is more services and consumption driven. China has adopted a new role internationally, advocating free trade and environmental values that are beneficial to it. China and Finland strengthened their economic relations in 2017 when President of China Xi Jinping visited Helsinki in April. Demand for Finnvera’s financing for China has been low in proportion to the size of the market and has mainly been focused on short-term bank risk-taking, but especially demand related to corporate risk-taking in the wood processing sector took an upward turn in 2017. Finnvera’s China-related demand is not expected to change significantly in 2018 but demand related to individual projects may increase somewhat.