Thursday, January 17, 2013

HSBC bullish on Lanka: Economic prospects exciting

* Global banking giant’s Colombo trade finance unit records phenomenal growth, despite BOP pressure

* Sees Lanka trade growing with China, India, Bangladesh and Vietnam

A visiting top official of global banking giant HSBC says the country’s economic prospects are exciting and the bank’s trade finance business has grown each year since 2009 with top corporates increasing their trade in 2012 despite a slump in the country’s overall trade on policy measures to contain a balance payments problem.

The Global Trade and Receivables Finance division of HSBC Sri Lanka has seen phenomenal growth since 2009, with growth rates three times higher than the country’s GDP growth for 2010 and 2011; and despite trade falling as Sri Lanka countered a balance of payments problem, HSBC Colombo had a better year in 2012.

"The team here in Colombo has done a fantastic job and we have seen strong growth in trade. I am here to see how this fantastic performance came about. Sri Lanka is in a new era of economic growth and I am here to assess the opportunities for HSBC going forward," HSBC Head of Asia Pacific International Global Trade and Receivables Finance Huynh Buu Quang said, speaking to The Island Financial Review at HSBC Colombo upon his arrival to the country for a four day visit.

The economy which grew at 8 percent in 2010 and 8.3 percent in 2011, slowed down to 6.5 percent last year, still impressive considering the global economic slump.

The global banking giant has provided S$ 3.5 billion worth of financing for various projects in the country ranging from aviation, maritime and infrastructure development. HSBC is also a sovereign ratings advisor to the Central Bank.

A balance of payments problem emerged during the second half of 2011 resulting in a slew of policy measures to contain it in 2012, which saw external trade contract. Cumulative export earnings during the period January to

November 2012 fell 6.6 percent to US$ 8,991.4 million while import expenditure fell 4.5 percent to US$ 17,574.3 million.

Until 2009 HSBC Colombo’s trade finance division had seen "very" static growth. After 2009, growth "jumped very high". 2010 and 2011 were very good for trade in Colombo, but 2012 was better.

"This must have come from our existing customer base. They may have captured more market share. Our clients in Colombo our industry leaders so they definitely sustained themselves despite changes in the macro-economy last year," Quang.

Garments and tea have been traditional sectors serviced by the bank; but, since 2009, tourism, telecommunication, infrastructure development and oil bunkering sectors have increasingly accessed HSBC Colombo for trade finance.

"The industrial and manufacturing sectors continue to be strong sectors for us as well with good prospects for the future," Quang said.

Quang could not share any financial details as the HSBC Group was in the process of finalising its financial accounts, but he assured us the performance was phenomenal.

HSBC has tended to focus more servicing high net worth individuals and corporates, capitalising on the principle that 80 percent of a country’s wealth rests with 20 percent of the population.

"Another thing worth sharing is that we see a trend where trade is increasing between China, India, Bangladesh, Sri Lanka and Vietnam. Sri Lanka is increasingly playing an important role and this is a very important market for HSBC.

"I am excited about the prospects for the country and we want to make sure we can continue strengthening our position in Sri Lanka, and make sure we are ready to provide updated trade solutions to customers in Sri Lanka," Quang said.

The bank offers Receivables Finance whereby traders can bypass conventional trade practices such as the need to open letters of credit. This is supposed to be cost affective and allows flexible credit periods.

Sri Lanka’s exports to India and China however, barely warrant any jubilation.

"It’s common for emerging markets to export to developed economies. It is not uncommon for emerging market to export to other emerging markets because they share a lot of similarities. There is no negative issue with that. One of the trends we see is the internationalisation of commodities and the emergence of global supply chains to improve efficiencies. Sri Lanka can certainly play a part, by finding areas where Sri Lanka has a competitive role. Like I said, we already see increased activity between China, India, Bangladesh, Sri Lanka and Vietnam."

Quang said growth in global trade would outstrip global economic growth with Asia leading the way.

In the Asia Pacific region, intraregional trade accounts for 50 percent of the region’s total trade and 18 percent of global trade, which would increase to 39 percent by 2030. "Trade is growing strong."

"Sri Lanka’s trade is certainly growing and as the county accelerates economic growth and improves conditions for foreign investors we will see more trade. Sri Lanka is already doing this and is among the top ten improvers in the World Bank Doing Business Index. HSBC is well placed to facilitate and partner in this growth. We are the number one global trade financier, accounting for 9 percent of global trade finance, which amounted to half a trillion US dollars. We can help Sri Lankan companies expand overseas or help external companies to enter Sri Lanka," Quang noted.

The HSBC Group is on a drive to increase its revenue from global trade to US$ 5 billion in the medium term. "We are well on target. We achieved US$ 1.8 billion during the first half of last year," Quang said.
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