Australia's export credit agency has signed a risk-sharing agreement with the Asian Development Bank (ADB) to guarantee letters of credit (L/Cs) for exports of Australian goods into certain Asian countries.

The agreement is made under the ADB's Trade Finance Programme (TFP) with Australia's Export Finance and Insurance Corporation (EFIC).

Risk sharing

Under the agreement, EFIC and ADB will share the risk of guaranteeing L/Cs for exports of Australian goods to Bangladesh, Pakistan and Sri Lanka.

The agreement aims to make it easier for some of Asia's developing economies to import Australian goods.

Least-developed countries

According to ADB, companies in the least-developed economies of Asia struggle to obtain the trade finance they need to buy key inputs for export production or end products from overseas, including from Australia.

The bank says this holds back business and means less job creation, ultimately restraining economic growth for developing Asian economies.

TFP operations

This is why the TFP does not support countries such as China, India, Malaysia and Thailand. Last year the most active users of the programme were Bangladesh, Pakistan, Vietnam, Sri Lanka and Nepal.

In 2010, the TFP supported 783 trade transactions worth US$2.8 billion, with most of that trade conducted in countries where international banks do little or no trade finance business.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.