The Hindu Business Line : French insurance agency keen to set up shop in India

COFACE, the French export credit insurance agency, is eyeing the vast and emerging Indian market and is keen to set up shop in the country to facilitate risk-free export transactions, provided the UPA Government modifies the sectoral entry regulations to suit its requirements.

In an interview with Business Line, the Coface Chairman, Mr Francois David, who is on in India to attend a regional conference of the company's branches and offices in South-East Asia, said: "We would be very happy to play a more important role than today in promoting Indian exports abroad."

Coface, with operations in over 57 countries and a credit risk assessment database of about 45 million companies worldwide, "is essentially a trade facilitator that will guarantee Indian companies and exporters against the risk of non-payment."

Mr David has already held initial discussions on this issue with the Secretary, Economic Affairs, Dr Rakesh Mohan, and the Director-General of Foreign Trade (DGFT), Mr K.T. Chacko. "Their response seemed positive," said Mr David, and added: "We will send in a concrete proposal once we receive an official response from the Indian Government."

He said India's policy on foreign direct investment in the insurance sector (currently held in abeyance) limits the foreign equity stake to 26 per cent with a minimum investment level of Rs 100 crore, roughly about $20 million. For export credit insurance, Mr David felt it was too high a level of investment while the stake was too low.

He indicated that ideally, Coface would like to have a minimum stake of 49 per cent, if not absolute majority, coupled with a lower level of investment. "In our operations in Chile, we have a 67 per cent stake. But for India, we could follow what we have in Brazil where Coface holds 49 per cent stake and a consortium of banks and other institutions hold about 10 per cent each to make up for the balance 51 per cent," he said.

The Coface Chairman is confident of India's strong export potential for many reasons. "Today, India being a world economic power, still has only 1 per cent share of the global trade, and there is ample scope to increase this figure. This apart, another strong potential," he says, "is the phasing out of textile quotas and so the prospects of enlarging the trade volume is enormous."

Even today, Coface does have business in India. It works with the "monopoly agency, the ECGC, a company we work with and respect. But we feel that if we ourselves could be in the market directly, it would be interesting for Indian companies to choose between different export guarantee agencies. Besides, we have the best database in the world on credit risks," claims Mr David.

As to why a foreign agency would be in the larger interests of exporters as compared to a local agency such as ECGC, Mr David revealed that doing business with companies in many countries may appear risk free, but the actual situation may not be so.

"Not many know that Coface, which is in business all over the world, faces the largest number of defaults in an European country like Germany. The number of payment defaults in Germany over the last three years has gone up by over 40 per cent, the highest since World War II," he said. And that is not because of political risks but owing to company risks as a fallout of the burden of integration of Germany.

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