DENMARK GOES GLOBAL
|Denmark has four state institutions which assist Danish companies on difficult growth markets: The Trade Council of Denmark, the Export Credit Fund, Danida and the Industrialisation Fund for Developing Countries/Investment Fund for Central and Eastern Europe (IFU/IØ). These four organisations have started a collaboration called GoGlobal, which is based on the specific needs of companies by strengthening consultancy across the products offered by the GoGlobal partners, and via the shared internet portal (http://www.goglobal.dk), that provides a complete overview of Denmark’s international business instruments. |
IFU forms part of the Danish international investment funds. IFU invests in developing countries in collaboration with Danish companies. In addition to offering capital and advice to joint ventures, the fund also participates as a partner and board member.
Due to IFU’s close contacts with Nordic, European, international and local financial institutions, IFU is often able to make complete financing arrangements on favourable terms.
Both large and small projects, including pilot projects, are eligible for IFU financing. This flexibility suits both the needs of developing countries and the structure of Danish trade and industry.
To be eligible, a project has to be financed in part by a Danish business partner and the project must be evaluated as a commercially viable project. Greenfield projects, expansion of existing projects and privatisation of state-owned enterprises are eligible. Host countries for investments must be on the OECD’s DAC list of development aid recipients, and per capita income must not exceed USD 5,295 (2005).
Since 1988 IFU has had involvement in 67 projects in India. The fund’s participation in projects has created more than 9,000 jobs in India.
The Export Credit Fund (EKF) primarily ensures that Danish companies get their money from foreign buyers. In addition, EKF helps Danish companies to become global via guarantees (insurance) against extraordinary risks which private banks and insurance companies cannot cover alone.
EKF accepts new transactions on India and the country is classified in premium group 3 (of 7).
To date, business in India has been in the following areas:
- Infrastructure (port and terminals, cement plants)
- Renewable energy (wind)
- Investment/globalisation (e.g. rubber plants, baby food etc.)
EKF expects to see future transactions in the wind sector, and in ports and terminals. Furthermore, the number of Danish companies setting up production facilities in India will increase and thus require support with investment guarantees.
EKF activities in India can be improved by issuing guarantees directly to an Indian bank and sharing the risk with them. This will typically be in local currency.
The pricing range for EKF’s involvement will be 0.75 – 1.4% p.a. and will depend on the risk profile and total tenor of the transaction.
EKF covers periods of credit up to ten years (minimum one year). EKF has accepted the following banks: ICICI Bank (The Industrial Credit & Investment Corp of India), State Bank of India, Standard Chartered Grindlays, IDBI Bank, Punjab National Bank and IDFC (Infrastructure Development Finance Co Ltd).
The largest Indian companies are typically active on the global scene and are very creditworthy conglomerates. Hence they appeal to the investment banks and the large local banks which provide them with long term financing at very low prices (both fcy and lcy). Activities with these companies will require a large degree of structuring. For smaller Indian companies EKF expects to be more active.
This page forms part of the publication 'FOCUS DENMARK' as chapter 5 of 22
Version 1. 09-06-2006
Publication may be found at the address http://www.netpublikationer.dk/um/6565/index.htm