Before 1997, worldwide trade and investment were growing at double-digit annual rates. Global foreign direct investment was increasing by 20 percent a year between 1986 and 1995. U. S. exports and imports have grown to make up about 25 percent of our economy, up from about 17 percent in 1985. But all this impressive growth stopped in 1998.
The total cost of the crisis last year was estimated by the U. N. Conference on Trade and Development at $260 billion-equal to about 1 percent of global output.
Ex-Im Bank took rapid and effective action as soon as the nature and scope of the Asian crisis became evident. The crisis, the credit crunch, the effects on trade, and their impact on millions of people, have made Ex-IM Bank's mission more important than ever.
That mission is to support the export of goods and services to challenging markets for which commercial financing is limited or unavailable, and to help provide a level playing field for U. S. businesses to compete in the global market.
In the area of project finance, Ex-IM Bank has supported 26 major infrastructure projects in the last five years, with a total cost of approximately $25 billion.
Many countries that Ex-IM Bank is currently considering may restructure their power sector and privatize their national utilities. Although Ex-IM Bank encourages countries to privatize when the time is appropriate, we have concerns about the creditworthiness of the newly privatized companies, and the stability of the regime for payment of power. Ex-IM Bank is willing to be an active participant in discussions with local governments to achieve a workable and financeable arrangement for all parties. However, countries, may not always want to hear that privatization is not a "quick fix,"but rather an endeavor that requires time and careful planning.
We know that countries will recover, but we need a recovery that can be sustained for long-term development. To do that, we need appropriate reforms. In the project finance area, there are now a number of challenges that we believe are worth addressing. One of the most difficult concerns U. S. dollar financing of infrastructure projects, which only earn local currency. Inadequate local capital markets, with limited financing resources, and the unwillingness of international lenders to cover soft currencies, are the principal reasons that local currency financing was never seriously explored for the bulk of the IPP projects. The reality is that no one anticipated Asia's recent economic downturn. Undertaking a sensitivity analysis with a 30-percent currency devaluation seemed conservative; little did we know.
To address this problem, we have been exploring the possibility of providing support for local currency transactions. We are now working with other U. S. government agencies to determine the cost of guaranteeing loans in local currencies. Having at least a portion of the financing in the local currency of a power plant would relieve the burden on the country and increase the likelihood that the debt will be repaid.
Trade is vital to both the developing world and continued American growth. Trade has never been more important to the U. S. economy. U. S. exports increased 10 fold between 1973 and 1997. The U. S. population represents just 4 percent of the world's people, but with the recent surge in our equity markets, the U. S. may have at least 25 percent of the world's wealth. Yet, in the next millennium, virtually all of the world's population growth and much of its productivity growth will occur in the developing world. We need to help the developing world recover with appropriate reforms for long-term growth in order to build future markets for U. S. goods and services, and to bring prosperity to more of the world's people.
