A Contractor-Arranged and Export Credit Agency-Based Financing Model: A Solution to the Global Infrastructure Finance Paradox?

Investments in infrastructure have huge economic and social benefits, but across the world such investments are insufficient. One of many reasons is the underutilization of funds from export credit agencies (ECAs) of developed countries by their national contractors. We look at how contractors from developing countries can arrange financing for international construction projects from ECAs of developed countries by applying the traditional public procurement method. We identify four financing models by which contractors from developing countries arrange financing from ECAs of developed countries and we find significant associations between the selection of the financing model and the contractor’s (i) experience in the project type, and (ii) size. Our findings show positive correlations between the selection of the ECA country and the project type, the level of development of the ECA country, and the project country’s political alignment with the ECA country. Instead, the level of domestic content policy has a negative correlation. This paper, beside academic implications, has also an important practical one: finding a partial solution to the global infrastructure finance paradox.