The international export credit insurer Coface says it is chasing at least ?60 million owed by local firms to their export partners.
Local firms owe millions of euros to overseas suppliers
The international export credit insurer Coface says it is chasing at least ?60 million (Dh299.7m) owed to overseas suppliers by companies based in the UAE, as orders and projects are cancelled because of the economic slowdown. Coface, which insures exporters against non-payment and collects debts, has seen a rapid increase in claims because of the distressed property sector. "There are easily half a dozen big incidences here where foreign suppliers are owed around ?10m each," said Jerome Cazes, the chief executive officer of Coface. "This compares with absolutely nothing at this time in 2008."
The cancellation of property projects and shrinking bank lending have led to an increase in late payment and bad debts throughout the construction industry supply chain. "In most of the cases local developers are failing to pay international suppliers," Mr Cazes said. "We have unpaid debts on cancelled projects." Coface has been working in the region since Sept 2007 when it set up a regional office in Dubai. Most of the company's customers are foreign suppliers to GCC countries, but it also insures re-exporters or multinationals selling their products through UAE regional offices.
The economic crisis is boosting the credit insurance business in the region, Coface said. "People just don't trust the companies they are shipping to," said David Venediger, the managing director of Coface Emirates. Credit insurance is one of the main alternatives to letters of credit. Credit insurers will initially urge their clients to renegotiate the outstanding claim, before moving to debt collection. If everything else fails, credit insurers will indemnify the claim after five months and pay the client about 90 per cent of the outstanding amount.
Coface mainly insures exporters against non-payment, but also offers other services such as providing company information to exporters. From next month, Coface will also offer credit rating services in the UAE, France, Germany, UK and China. In the UAE, the company works through local partners such as the Export Credit Insurance Company of the Emirates (ECIE), which it re-insures. firstname.lastname@example.org