International trade is changing under the impact of the conflict in Ukraine and this is also affecting the V4 region. The fact that the world of exporters from the V4 countries is constantly evolving is confirmed by the results of the individual portfolios of export credit agencies from the region over the past year. For many exporters from the V4 countries, countries such as Ukraine, Belarus and Russia have been traditional sales markets due to historical ties and language affinities. With the war in Ukraine, this is no longer the case. This is due to international sanctions against Russia and Belarus, as well as objective risks in the case of Ukraine. This means that exporters from the V4 region, who have often competed in these markets, are now in a situation where they have to find alternatives in more distant and often riskier markets where there is a demand for more complex solutions and are thus forced to cooperate rather than compete. And it is the linguistic, mental and geographical proximity within the V4 region that makes such cooperation viable.
Many companies from the V4 countries offer complementary services to each other. I will mention two of the most frequently occurring examples. The first is when they manufacture a product in the Czech Republic and a company from Slovakia supplies them with components or partial solutions, or vice versa. The second is ownership interdependence, where a Slovak-Hungarian group has cross-border overlap and its companies are able to complement each other in production. In this case, it makes sense for the owner of the group to take advantage of the market in Hungary, lower interest rates in Slovakia and export the joint Slovak-Hungarian product to other countries.
However, when it comes to larger projects, such as infrastructure projects in Africa or Central Asia, the Visegrad exporters are generally too small to do so. Therefore, consortia are formed, which are managed by a larger project leader – a company that provides complete project management. This is where there is room for companies from our region to become a subcontractor of a large project. For a large, for example French project leader, it may be more economically advantageous to take advantage of the potential of the V4 region with its skilled workforce, technology and export credit agencies, and last but not least, the certain recognition of our companies and their good reputation from the times of Czechoslovakia.
A large investment unit worth hundreds of millions is usually too big a bite for our domestic companies, but in the case of subcontracting of components or technologies, the situation is quite different. We probably cannot build an entire large power plant somewhere on another continent with our own domestic forces (sorry – if I am underestimating someone’s capacity), but as suppliers of technology our producers are very competitive. And certainly even more so with the support of EXIMBANKA SR.
The involvement of individual national export credit agencies can be proportional in the case of participation in projects under a consortium – depending on what part of the contract is secured by the exporter from an individual country. For example, if an exporter from the Czech Republic covers CZK 8 million of a CZK 10 million transaction and a Slovak covers CZK 2 million, the respective export credit agencies will be involved in the same proportion. I am not only referring here to conventional loan financing or the issuing of guarantees, but the support scheme from our export agencies can also operate in the form of insurance and mutual reinsurance.
Export credit agencies are increasingly involved in national strategic initiatives, such as strengthening the energy stability of our countries or promoting the joint purchase of inputs for energy production. In response to the current rather unstable geopolitical and economic developments in the world, we and our partners from Prague, Budapest, Warsaw and Vienna agreed at our recent joint conference that risk sharing in the form of mutual insurance or reinsurance or co-financing of projects is in the common interest of exporters.
We see the prospect of involving exporters, with the support of export credit agencies, in joint projects, but also in consortia, for example in the framework of EU development cooperation programmes or in the reconstruction of Ukraine. Bridges, railways, water treatment plants or energy infrastructure are examples of projects that are being jointly implemented by Czech, Polish, Hungarian and Slovak companies, especially in developing countries, with the support of export credit agencies. For Slovak exporters, the formation of consortia is beneficial and meaningful not only because of the linguistic, historical and economic proximity of the V4 countries, but also because of the possibility to participate in larger projects.
Photo source: Eximbanka (photographer: Silvia Slafkovská)