SPEECH DELIVERED BY: James A. Harmon Chairman, Export-Import Bank of the United States
FOR IMMEDIATE RELEASE April 11, 2000
Welcome to the Export-Import Bank's Annual Conference 2000. Since those three magical zeroes and the advent of a new millennium offer some license to take a broader view of things, I thought I would step back today and reflect on the changes we have seen in recent years and the challenges and opportunities that lie ahead.
When my children and grandchildren indulge me and ask what life was like growing up, I often tell them about the time I was seven or eight and the first family in my neighborhood got a TV set. My friends and I were given a slot at four o'clock on Sunday afternoons. We would race over and 20 of us would sit cross-legged in front of the TV. The only thing we could get was an old RCA signal. We didn't mind. We were so excited that we could push a button and there it was. We'd sit for 10 minutes, watching that signal and listening to the noise. Then I'd run home and tell my parents, 'I saw TV.' What a marvel half a century later to watch as TV satellites beamed millennium celebrations from around the world into our living rooms. How far we have come.
Today it's a cliché. From the fall of Communism to the rise of the Internet, we are exhausted from all of the change. In this new world, the old rules no longer apply. That's why we see multi-billion dollar companies rise up virtually overnight. That's why we see billions of dollars in capital pouring into markets around the world. That's why we see such tremendous opportunity in countries few people could find on a map just a few years ago.
This fundamental reordering of the economic universe is forcing deep changes around the globe. And, our competition is stepping up. They, too, are taking advantage of the technology that has propelled this strong U.S. economy. They, too, are developing more sophisticated exporting strategies. The United States will not be on top of the 21st century world simply because we were on top of the last one. We, too, need to evolve.
If I could leave you with one point today, it would be that we in the U.S. exporting community need to be far more responsive to change. We can lead this new world. But to lead, we need fundamental change, including fundamental change at the Ex-Im Bank. Today, I set two priorities for my remaining time here: (1) to begin harnessing the Internet's power to help more small- and medium-sized businesses sell in the global marketplace, and (2) to recommend structural changes to Ex-Im Bank to maintain our competitive position. These goals require a new approach to our partnership. They will also require nothing less than a new Ex-Im Bank.
WE HAVE REVOLUTIONIZED EX-IM BANK
I have been here for three years now. I hope that you've noticed a change. I came to Washington after 38 years in the investment banking community. I had no experience in government. In many ways I count that as a blessing. Coming from the private sector, I knew that to maximize Ex-Im Bank's potential we would have to introduce private-sector marketing and customer service to this government agency. We would also have to be more proactive both in taking risk and in changing programs and processes.
But changing this agency's culture was one of the biggest challenges I ever faced. When I arrived, we had a lot of work in front of us. Employees had been trained to be risk-averse. Government offers little incentive to initiate more risk. We changed that. We focused on becoming more user-friendly, responding to our customers in a fast-paced, fast-changing global marketplace.
If I had to pinpoint one watershed moment, it would be the Asian economic crisis. When currencies collapsed and stock prices plunged, triggering the withdrawal of the private sector, no one could be certain where it all would end. Few would have thought twice if Ex-Im Bank had retreated. Instead, we stepped up our presence in the region and stood by U.S. exporters.
And, we were right about the region, and we were right about the region's creditworthiness & in Korea, about $2 billion right. In 1997, the Ex-Im Bank financed 50 short-term transactions in Korea. In the nine months from April to December of 1998 after our new program became operational, we completed 2,460 transactions without one loss. We contributed to stabilizing the Asian economy during this very difficult period. When others saw that the sky didn't fall on us, many export credit agencies stepped up to support trade.
Suddenly, this low-profile agency was front-page news, and Ex-Im Bank was recognized for stepping up in Korea, Indonesia, Thailand, Brazil and Mexico. It was a proud moment. Not because of the recognition, but because our efforts confirmed what many of us passionately believe to be the true potential of this bank. This defining moment proved Ex-Im Bank's capacity to be not only a champion of U.S. exports, but a vital force for stable, sustained growth in the world economy.
This sense of purpose is at the core of a new Bank culture. So is a greater market orientation. In the Bank's 65-year history, we supported approximately $400 billion in exports. $100 billion came in the last 7 years. We are stepping up, but we are prudent with taxpayer dollars. Our losses have been modest.
We recognize the true potential that exists today in the developing world. Last year, despite the difficulties in the developing world, we supported $17 billion in U.S. exports - exports that would not have occurred without our help. This year, we hope to build from that base - by reaching more countries, working with more U.S. companies and supporting the export of a broader range of products. From multi-million dollar aircraft to $250 textbook orders, there is no case too big or too small.
There remains significant untapped potential around the globe. Take an obvious example: sub-Saharan Africa. For too long, the world has grossly underestimated the economic potential of the region.
We supported $600 million in exports to the region last year -- up from $50 million the prior year. We hope to support more than $1 billion this year. We also are expanding programs in Algeria, Brazil and India, to mention only a few countries. One billion people live in India. This is a major market, yet the U.S. accounts for only 9% of India's imports. The U.S. share is only one quarter of the European market share; hopefully our new programs will stimulate more business for U.S. exporters in India.
We are also expanding with new products. We are following the money in today's economy, branching out from our traditional base of capital goods to include new high-growth areas, such as technology and environmental products. We also recently launched a program to assist with the export of independent U.S. films.
We are broadening our marketing approach -- be it through sub-sovereign guarantees for cities like Buenos Aires - or through local currency guarantees which now extend to India and South Africa.
On the customer service side - most of you should know that we simplified our short- and medium-term credit criteria to deliver a maximum turnaround time of 20 days for transactions of $5 million or less. We also have a Medium-term Express Program that can deliver a decision in two days to commercial banks willing to assume a larger share of the risk.
We have major efforts underway to reach out to more U.S. businesses. Our Trade Association Partners Program, while still in the pilot phase, already allows us to reach hundreds of companies that our 420-person agency could not otherwise contact. Thanks in part to this network of 52 partners, I am proud to note that this conference boasts the most first-timers. About 250 new companies are attending their first Ex-Im Bank conference. Welcome. This is one small step in the right direction. But all of these steps combined illustrate a significant shift for the Ex-Im Bank.
A 21st CENTURY EX-IM BANK
It couldn't come at a more critical time. We face significant challenges. Since the end of World War II, the global economy has grown more than 7 fold. Global trade in that period has grown more than 14 fold. Support for exports by the Ex-Im Bank has increased 30 fold during this period. Also, it is interesting to note that the number of staff at the agency is up from 200 to 420 since 1950 - so we have dramatically increased productivity in the past 50 years. But our competition also is growing and becoming more sophisticated. I have just returned from a meeting in Berlin of the chairmen of the G7 export credit agencies. It was clear to me that the Ex-Im Bank of the United States has not kept pace in a number of areas: automation and use of technology, developing new tools for our trade arsenal, and tailoring our export strategy to tomorrow's opportunities. We, too, need to focus on the future and restructure our efforts to keep our footing on this more competitive landscape.
Export credit agencies will play a larger and larger role in funding trade with the developing world in the future. There is little question that the competition will only heat up, as export credit agencies double and triple the amount of funds they invest to maintain or expand their nation's export competitiveness. Without question we face a hotly competitive race as more companies and countries seek to expand their own trade.
Countries that can get the greatest number of their businesses involved in the global economy will be in the strongest position. Today, the U.S. has close to 300,000 companies exporting. Yet this represents less than 5% of U.S. businesses, and most of these exports are going to the developed world, despite the fact that the developing world is where most of the growth will be in the future.
I made several recent trips to Silicon Valley. It surprises me how many successful software companies don't think much about the developing world. In the next year, many of these companies will use Ex-Im Bank financing to move into markets that were not on their radar screen before. This will benefit them and the developing countries because in today's world technology is infrastructure.
Yet with all the opportunity that exists around the world - our greatest challenge is here at home. That challenge is how to involve this large community of small- and medium-sized businesses in the global economy. Today, less than 1% of the 7.5 million U.S. small businesses export. They could make a significant dent in the U.S. trade deficit if we got them thinking not just Boise but Buenos Aires, not just Chicago but Shanghai. But how do we accomplish this? Today, Ex-Im Bank deals with less than 2,000 companies each year. To dramatically increase the number of companies exporting, we need a revolution in how we do business. That revolution is the Internet.
At the close of the 20th century, 'high-tech' for a government agency meant having a website and an e-mail address. We at Ex-Im Bank are going to step into the 21st century. We plan to build a dynamic website that will bring together buyers, sellers, banks and other lenders who are all there for one purpose: to get the deal done. We have high hopes for harnessing the power of the Internet to grow U.S. exports and reach more small- and medium-sized businesses and help them tap into the global economy.
We have experimented over the past year with on-line letters of interest. It has gone well. Ultimately, we expect to process many applications on-line. We can finance a car and get a mortgage on-line. Why not finance an international deal over the Internet? We believe this virtual Ex-Im bank will allow us to serve far more customers and do a better and faster job. A high-tech reinvention of the way we deliver services will be a major change for this agency. But it's one this more competitive environment demands.
Now, we want more ideas. Ex-Im Bank is in the midst of a yearlong, strategic focus on the agency's future. We have a conference set for next month on this subject. We have a private-sector advisory committee feeding us ideas. Now I ask you - as our customers and partners - what could, what should the Ex-Im Bank become? I am proud of our progress to date. But given the competitive environment and given the dual explosions of globalization and the Internet, it is clear to me that what we have done so far is lay the groundwork. Now, it is time to press forward and build a 21st century Ex-Im Bank.
65 YEARS FROM TODAY
In closing -- I don't pretend to have all the answers for this agency's future, but I do hope that 65 years from today, the country and the world can look back and reflect positively on what we built here in this time together. I hope they see that we continued to focus on the core mission given to this agency by the Congress during the past 65 years. If we do, we will help ensure our country continues to set the bar for export competitiveness & continues to fuel its robust economy through exports & and continues to lead the world toward a more stable and strong global marketplace and the many dividends it promises to all the people of the world. Thank you.