EDCF Loans: Distribution by Transportation and storage

1. Transport & storage

1.1. Characteristics
The transport & storage sector represents the largest support sector for EDCF assistance. The accumulated amount of EDCF loan commitments to this sector is KRW 923 billion, accounting for 29.0% of the EDCF’s total loan commitments. In terms of disbursement, the sector outranked the rest with KRW 475 billion, accounting for 26.8% of total disbursements.

 In this sector, the EDCF mainly financed projects involving road construction, procurement of trains, and other transport infrastructures. The majority of road construction projects are development projects and the project scope includes detailed design, construction, and supervision. Establishing an effective and efficient road network linking the cities is essential in order for the government to effectively allocate its resources. Having put much emphasis on road construction, the EDCF strongly believes that assistance in this sector significently contributed to the establishment of sound and strong economic infrastructure for its partner countries.

The EDCF also sponsored 8 railway projects providing locomotives and passenger trains. These projects were equipment loan projects replacing old trains with new ones. Other transport projects included building airports, ports, and access roads to project sites.

Road
Road construction projects include building new roads, repairing old roads, and procuring construction equipments. The EDCF has so far financed 25 road projects amounting to KRW 513 billion, which represents 55.6% of total transport & storage projects.

Railway
The EDCF’s support for railways amounted to KRW 249 billion, which is 27.0% of its total support for transport & storage projects.
Those projects were mainly equipment projects modernizing trains.

Assistance Volume
Since 2003, EDCF loan commitments to the transport & storage sector have stayed at a stable level of 28.0%. During 2007, however, the total commitment amount reached KRW 214 billion, representing 38.5% of the EDCF’s total loan commitments in the same year, topping the rest of the support sectors.

Because economic infrastructures like roads, railways, and trains are essential to the development of any nation, a large share of EDCF commitments is being constantly concentrated into this sector. Most underdeveloped partner countries lack the necessary transport networks, and even those that are equipped with the infrastructure need repair works in many cases.

The average commitment amount in the transport sector accounts for about 28% of the EDCF’s total yearly volume in recent years and the average disbursement amount in this area is similar, outranking all other support sectors.

In light of the current trend of EDCF-financed projects, the disbursement portion of this sector is expected to record approximately 30% every year, for the next 5 years at a minimum.

1.2. Prospects
Other sectors, such as water supply & sanitation and health, may have more visible and immediate impact on improving the people’s quality of life compared to the transport & storage sector. For governments envisioning mid and long-term development plans, however, the transport sector is also critical as it allows the efficient allocation of national resources.


[Picture 1-1] Ralnapura-Bandawela Road ehabilitation Project, Sri Lanka

As many partner countries regard the transport & storage sector as their development priority, the EDCF expects to maintain the current support volume in this sector for the next several years

[Table  1-2] EDCF Projects in the Transport & Storage Sector (As of 2007)


Source: The Export-Import Bank of Korea. 2008. EDCF Your development partner 1987-2007, History book. Seoul.

 

2. Communication

2.1. Characteristics

The communication sector is one of the key industries for the national economy, serving as an important stepping stone for a nation’s economic take-off. The sector also has substantial impact on almost all other industrial sectors as well as on the everyday lives of individuals, contributing to the establishment of a favorable investment environment for businesses. Most of the EDCF’s support for the communication sector before 2003 concentrated on projects related to the supply of time division exchanging equipments. Since then, the scale of support grew into the construction of IT network infrastructures such as internet information network expansion projects or ICT development projects.

2.2. Assistance Volume

As of 2007, the EDCF has supported 22 communication projects, which account for 12.6% of the EDCF’s total loan commitments. The EDCF support volume in this sector ranks third following our assistance in the transport & storage sector and water supply & sanitation sector. Every year, a consistent number of EDCF support projects in this sector are approved and the share of EDCF loan commitments in this high priority sector is showing a steady rise. The growing record also reflects our partner countries’ high regard for Korea’s technological advancements and price competitiveness.

Since the EDCF’s initial disbursement in the communication sector in 1991, disbursements in this sector steadily increased and the amount presently accounts for 18.0% of total EDCF loan disbursements, ranking second among all sectors supported by the EDCF, following the transport & storage sector.

As most communication sector projects in the past simply dealt 124 with the provision of equipments such as TDX, the disbursement period was much shorter than other development projects. Hence, the proportion of disbursement is higher relative to the commitment amount compared to other support sectors.

2.3. Prospects
Development in the communication sector will continue to be an essential need for most developing nations as it helps the country to make a successful transition into an information oriented society and to build an infrastructure base for its e-government system, which improves efficiency and transparency of the government administration

 [Table 2-1] EDCF Projects in the Communication Sector (As of 2007)


In the meantime, communication projects are very likely to be considered commercially viable, which may narrow down the scope of eligible projects. For the LDCs, EDCF assistance in this sector is expected to increase as the LDCs are not subject to the non-commercial requirement which is necessary to receive tied aid. The picture may be different for the other countries, however, depending on the income level of the recipient country.

Source: The Export-Import Bank of Korea. 2008. EDCF Your development partner 1987-2007, History book. Seoul.

 

3. Energy

3.1. Characteristics

The EDCF’s support in the energy sector mainly focuses on the construction of transmission lines, procurement of equipments for substations, construction of distribution lines, procurement of equipments for distribution lines, and construction of power plants.

So far, the EDCF has supported 17 energy related projects: 10 projects in the form of development project loans and 7 as equipment loans. The commitment amount varied depending on the project, ranging from USD 5.7 million to USD 49.0 million. The first EDCF assistance in the sector was provided to Bangladesh in 1993, which involved the procurement of equipments for transmission and distribution. Out of the 17 projects, 16 projects were electricity related projects whereas only one was on the construction of pipelines for petrochemical products such as oil.

Power Generation
The EDCF has supported 5 power generation related projects in 3 countries. This accounts for only 24.1% of the EDCF’s energy sector support. The first energy generation project was a power plant project conducted in Mongolia. The project was committed in January 1996 to build a 6MW cogeneration power plant. In October 2006, the second project, a hydroelectric power plant project in Nepal, was committed and in December, the Ba Ria power plant project in Viet Nam, the largest of all EDCF energy projects, was committed (USD 49 million).

Transmission and Distribution
The EDCF’s support in this sector aims to enhance the electricity supply environment through the construction of transmission lines, installation of substations or expansion of existing substations, and establishment of distribution lines between the substation and the end-users. The EDCF has supported 11 projects in this area, amounting to KRW 173.5 billion, which account for 60.1% of all EDCF projects in the energy sector.


[Picture 3-1] rocurement of Equipments of Combined Cycle at the Ba Ria Power Plant Project, Viet Nam

3.2. Assistance Volume

EDCF loan commitments to the energy sector were made at a steady rate of one project every year before 2000, except in 1995. Since then, however, only 2 projects were committed, one in Albania in 2003 and the other in Pakistan in 2007. The relatively low performance after the year 2000 can be attributable to the EDCF’s budget limitation, which became stricter after the Asian financial crisis.

 As of 2007, the amount of loan commitments to the energy sector reached KRW 288.8 billion, representing 9.1% of the EDCF’s total loan commitments. The support volume in this area ranks fifth following the transport & storage, water supply & sanitation, communications, and education sector.

 Since the EDCF’s initial disbursement in the energy sector was made in 1997, disbursements in this sector continuously increased, accounting for 12.3% of the total EDCF loan disbursements, following the transport & storage, and communications sector.

3.3. Prospects
Access to electricity and affordable and reliable energy sources are important prerequisites for the economic and social development of any nation. Developing countries will continue to have huge energy needs in order to maintain the rapid economic growth and reduce poverty. Against this backdrop, the EDCF’s role will gain greater significance in this sector as it continues to assist partner countries in meeting their growing development needs in this sector in parallel with Korea’s ODA expansion policy.

[Table 3-2] EDCF Projects in the Energy Sector (As of 2007)


Source: The Export-Import Bank of Korea. 2008. EDCF Your development partner 1987-2007, History book. Seoul.