The new Sector Understanding on Export Credits for Rail Infrastructure adapts the OECD’s widely-accepted rules on export credits to the sector-specific financing conditions of new railway infrastructure projects. The innovative and unique new framework is designed to meet the variable needs of public authorities and exporters, in both advanced and emerging economies, while helping promote the use of rail as a viable alternative to road and air transportation, in the context of energy scarcity, fuel prices and climate change.
The Rail Sector Understanding (RSU) lengthens repayment periods for contracts involving an overall value of more than SDR 10 million ($15.3 million). Terms provide for repayment up to 12 years for transactions in High-Income OECD countries, subject to conditions aimed at complementing the private sector, and of up to 14 years for transactions in all other countries.
The RSU is applicable to export contracts for essential rail infrastructure assets, including rail control, electrification, tracks, rolling stock, and related construction and engineering work.
“Offering wider terms for the use of export credits in the rail sector will contribute to the creation of new railway projects, as well as the rehabilitation of existing rail infrastructure, which will reduce road traffic congestion and related carbon emissions and help countries achieve their sustainable growth objectives,” said David Drysdale, head of the OECD export credit division.
The new Rail Sector Understanding took effect on 1 January 2014, for a four-year trial period. Its terms are applicable to an estimated accessible market – projects not reserved exclusively for domestic suppliers – expected to top $120 billion annually over the 2015-17 period.
The OECD is at the centre of multilateral efforts to harmonize state financing of exports. The Arrangement on Officially Supported Export Credits, which came into force in 1978, plays an important role in the multilateral trading system. It helps ensure that both OECD and non-OECD exporters compete on the price and quality of their goods and services, not on the support received from governments. The OECD export credit rules serve as a benchmark for governments, industry and the financial sector, and are embedded into WTO subsidy rules.
The Participants to the Arrangement on Officially Supported Export Credits are: Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland and the United States. Beyond the new Rail Sector Understanding, sector-specific export credit rules also exist for aviation, climate change projects, nuclear power plants and shipbuilding.