- Focus Areas
倫敦和新加坡2018年11月13日電 /美通社/ —
PSA unboXed副總裁Elton Fong就此次交易表示：「我們非常高興投資Lucidity。
GTR Ventures信息總監Kelvin Tan稱：「
GTR Ventures 在倫敦、新加坡和香港設有總部，
From left to right- Poh Teck Tan EVP GTR Ventures, John Khaw CEO Lucidity Digital Pte Ltd, Rupert Sayer CEO GTR Ventures, Sopnendu Mohanty Chief Fintech Officer Monetary Authority of Singapore, Fazley Azhar Director iLoan Sri Lanka, Ningwa Lau Co-Founder iLoan Sri Lanka, Kelvin Tan CIO GTR Ventures
GTR Ventures Announces Three New Deals During Singapore Fintech Festival
Deepening Financial Inclusion Across Emerging Asia Through Fintech Partnerships
London/Singapore – November 12 2018: GTR Ventures, the world’s first investment and venture-building platform specialised in trade and supply chain, has announced three new deals with Lucidity, iLoan and RM-Tech. These three investments, representing an expanded pivot towards markets in China and South Asia, were announced on the first day of the Singapore Fintech Festival, the world’s largest fintech gathering.
Sopnendu Mohanty, Chief Fintech Officer of the Monetary Authority of Singapore (MAS), says: “Asia is going through a phenomenal digital transformation on the back of innovation led by fintech entrepreneurs, financial institutions, and the rise of digital trade and e-commerce platforms. I welcome GTR Ventures’ recent investee companies to our ecosystem, and look forward to greater financial inclusion for SMEs in this region.”
Lucidity is a trade finance documentation solutions provider that employs automation and machine learning to improve efficiencies in manual paperwork such as letters of credit, allowing exporters to get paid faster and improve their productivity. Lucidity also enables automation in trade finance compliance checks for banks, helping them to reduce operational costs as well as lower their risks against the global backdrop of increasing compliance oversight. Lucidity is backed by PSA unboXed, the corporate venture capital arm of Singapore’s global port operator PSA International.
Commenting on the deal, Elton Fong, Vice-President of PSA unboXed, elaborates: “We are pleased to have invested in Lucidity. Leveraging our access to the global trade community, we look forward to working with all stakeholders, including banks, to increase the digitisation of trade.”
iLoan provides blockchain solutions for loans to SMEs, wholesalers and distributors. Its technology allows lenders to reduce invoice fraud, lower processing costs and have efficient traceability of each transaction. iLoan is a part of John Keells X, which is a startup accelerator designed to support early stage startups, initiated by John Keells Group, Sri Lanka’s largest business conglomerate.
According to an Asian Development Bank (ADB) study, emerging Asia constitutes 40% of the global US$1.5tn trade finance gap. Meanwhile, a World Bank study on SME finance attributes the working capital gap at US$2.6tn. Adding to these finance gaps are the legal complexities, FX risk, and overall costs of cross-border payments that make it difficult for SMEs in emerging Asia to quickly and cost-effectively make payments globally.
RM-Tech is a fintech solution provider to banks, corporates, and business-to-business (B2B) portals. Its product suite allows for multi-channel payments and unparalleled connectivity to banks for clearing and settlement services. Connected to seven banks in China, it has over 300 Chinese customers and processes over RMB100mn of transactions each month. RM-Tech is working with GTR Ventures to offer cost-efficient cross-border B2B payment services from its existing network of banks and Chinese exporters.
Kelvin Tan, CIO of GTR Ventures, says: “These latest additions to our investment portfolio correspond with our vision to create a compelling network effect of digital fintech solutions in the world of trade and supply chain that can comprehensively cater to banks, non-banks and SMEs. Be it geographical reach, loan products, operational efficiency, settlements or asset distribution, we are on track to tackling different parts of the transactional value chain with a view to deepening financial inclusion for exporters and SMEs globally.”
PSA unboXed is the corporate innovation and venture capital arm of PSA International. PSA unboXed seeks to harness technology and innovation from startups with a focus on ports, maritime, logistics and containerised cargo flow. PSA International is a leading global port group handling about 64mn containers (TEUs) out of 700mn globally, with port projects spanning across Asia, Europe and the Americas.
Lucidity provides automation and digitalisation solutions for supply-side documentation, ranging from transaction origination to electronic bill of lading (BL) solutions for exporters and traders. Going beyond digitised documents, the company employs machine learning to solve one of the most important challenges surrounding trade documentation ‑ its deep reliance on human experience and comprehension. Lucidity allows financial institutions to compete and stay ahead of their competitors in today’s increasingly cost-conscious macro-environment.
John Keells Holdings PLC (JKH) is Sri Lanka’s largest listed conglomerate in the Colombo Stock Exchange. From managing hotels and resorts in Sri Lanka and the Maldives to providing port, marine fuel and logistics services to IT solutions, manufacturing of food and beverages to running a chain of supermarkets, tea broking to stock broking, life insurance and banking to real estate, JKH has made its presence felt in virtually every major sphere of the economy. JKH is a full member of the World Economic Forum and having issued Global Depository Receipts on the Luxemburg Stock Exchange, was the first Sri Lankan company to be listed overseas. With a rich history of over 150 years, since modest beginnings as a produce and exchange broker in the early 1870s, JKH has been known to constantly re-invent, re-align and reposition ourselves in exploring new avenues of growth.
About iLoan (Contact: email@example.com; website: www.iloan.ik)
Founded in 2017, iloan is an emerging fintech company that provides access to working capital for micro and SMEs in South Asian frontier markets. It has developed a proprietary loan aggregation engine and invoice verification protocol using distributed ledger technology to enhance transparency on underlying loan assets for financial institutions.
RM-Tech is a fintech company based in Guangzhou, China. Connected to seven banks in China, it provides enterprises and B2B portals with a payment, accounts and settlement platform, as well as enabling low-cost financing. RM-Tech has processed over RMB1bn of transactions to date and processes over RMB100mn-worth each month.
GTR Ventures has recently appointed Sébastien Bruyant as a Senior Advisor at GTR Ventures, as well as Aidan Beresford as the new fall analyst. They join a well-established team led by co-founders, Rupert Sayer and Kelvin Tan.
Sébastien Bruyant is a Senior Advisor at GTR Ventures. Sébastien co-founded and managed as CEO Alcora Global, a Fund Management Company in Singapore managing Alternative Trade Finance funds in Asia, investing in short term private trade financed debt issued by large and medium size materials player across the value chain, trade corridors, and industries.
Previously, Sébastien held various positions in public and private banks. He started his career working for the French State Investment Bank (Oseo) focusing on growing fast mid-cap companies in France before joining BNP Paribas in Singapore and then in Paris covering Natural Resources strategic projects and companies. Sébastien joined HSBC first in Paris to manage a the EMEA portfolio of Energy customers in the Commodity and Structured Trade Finance teams before being relocated to Hong-Kong SAR and prepare the ground for the deployment of the teams in Asia-Pacific. Lately, he was relocated to Singapore as Director (executive level) of the Strategic Energy Solutions Group at HSBC, and managed and developed a network of a strategic relationships with senior executives leading global and regional Energy enterprises in Asia-Pacific.
Sébastien has been a regular speaker to industry conferences.
Sébastien’s education includes MAP from INSEAD and a LLM (DESS) in Business Law from Paris-Dauphine University.
Aidan Beresford recently graduated from Brown University, and has previous experience as a Derivatives Group and Business Intelligence Intern at State Street Global Advisors in Boston.
GTR VENTURES MAKES FIRST AFRICA INVESTMENT
VENTURE BUILDING FIRM BACKS DIGITAL TRADE AND INVESTMENT PLATFORM ORBITT
London/Singapore – October 30 2018: GTR Ventures, the world’s first investment and venture-building platform specialized in trade and supply chain, has announced an investment in Orbitt – a pan-African focused fintech deals platform.
Orbitt connects investors with trade and investment opportunities through its smart-matching technology. The company has facilitated over $100m of equity, debt and trade finance transactions to date and is digitising the African investment ecosystem.
While becoming GTR Ventures first Africa-focused investment, Orbitt joins a growing portfolio of tech-enabled companies that are delivering products for the global trade and investment community. GTR Ventures, based out of London, Singapore, and Hong Kong, will work with Orbitt to strengthen their trade finance capabilities from a product and innovation perspective as well as growing the platform’s relationships within the global marketplace of traditional and digital trade finance players.
“Our partnership with GTR Ventures comes at an exciting time for us,” said Lanre Oloniniyi, Co-Founder of Orbitt. “GTR Ventures’ network of trade and export organisations will be important in helping us attract major banks and funds across Asia, Europe and the Middle-East, to increase trade finance lending and investment into Africa.”
The announcement falls during the Global Trade Review (GTR) Africa Trade and Investment Conference in London, which has become a key annual gathering for international trade, export and project finance professionals interested in the continent. Key financial institutions present at the conference include Afreximbank, Ecobank, Standard Chartered, SMBC and BACB.
Singapore-based Kelvin Tan, Chief Investment Officer of GTR Ventures elaborated, “Africa-Asia trade today stands at $500 bn, annually. However, capital providers to Africa remain hampered by the lack of financial tools and access to data. Orbitt’s technology can help lenders manage their risks, and to complete timely transactions in otherwise disconnected markets. We welcome partnerships with all stakeholders to improve credit transparency on the continent. Collectively, our vision is to enhance the bankability of every firm, SME, and transaction in Africa.”
Peter Gubbins, Managing Director of GTR and co-founder of GTR Ventures, added: “Although the continent has a trade finance gap of over $100bn, we see an increasing amount of institutional and impact capital keen on doing more with Africa. Leveraging GTR’s tremendous African footprint – Nigeria, Kenya, Zambia and South Africa, we see Orbitt working alongside our partner banks and funds to bridge this gap.”
For the first time, alternative funders will be able to derisk invoice and receivable finance transactions – reducing compliance costs and fraud.
Singapore, October 16 , 2018 – Fintech global invoice discounting platform Incomlend has adopted Invoice Check – a blockchain application developed by Trade Finance Market (TFM) – to quickly and easily determine if an invoice on their platform is potentially being double financed on the outside.
Invoice finance fraud is a huge problem because a financier has no way of knowing if an invoice is fraudulent or has already been financed by another funder. The International Chamber of Commerce found almost 20 percent of banks reported an increase in fraud allegations over the past year – representing a major threat for businesses and organizations around the globe. When a default occurs, there may be several funders who all think they own the invoice or receivable. This problem is magnified in cross border transactions, especially when only paper invoices are used and in markets where there is no central registry with which to register a charge.
Using blockchain technology, Invoice Check encrypts transaction data whilst also providing information on whether an invoice is potentially fraudulent or being double financed. A key difference with Invoice Check is that it does not rely on a central registry – using instead the power of decentralized ledger technology. Data is protected from potential competitors and is tamper resistant once on the blockchain. Invoice Check works alongside existing technologies and can be easily deployed via an API, which keeps costs down and increases accessibility.
Founding Partner of Incomlend, Dimitri Kouchnirenko, sees this as an important development:
“Partnering with TFM on invoice fraud risk mitigation through practical blockchain technology is a major milestone for Incomlend. We are proud to be on the forefront of innovation with TFM’s Invoice Check deployment into our systems, reinforcing even further our cross-border risk management framework. We invite all the fintech invoice trading platforms and other financiers to join the TFM initiative to build the world’s first global immutable registrar of receivables finance transactions based on decentralized ledger technology, contributing to making international trade finance a safer place.”
“We are extremely pleased to be working with Incomlend – demonstrating how fintechs are taking the lead in pioneering practical use of distributed ledger technology.” said TFM Executive Director, Raj Uttamchandani.”The inability to validate invoices is an obstacle for SMEs in obtaining finance and slows growth. Invoice Check fills this gap and utilizes blockchain in a way that has never been done before – with the end goal of providing funders with security and SMEs with liquidity.”
Kelvin Tan, Co-founder and Chief Investment Officer of GTR Ventures, which has invested in both TFM and Incomlend, adds:
“We are very happy to see both our portfolio companies in the fintech lending space, working together to enhance their risk management processes. Multiple invoicing is a global, industry-level risk that afflicts not only alternative fintech lenders and factors, but also banks, insurers, and credit funds.
Such collaboration fulfills our vision to go beyond mere venture capital investing, and, as a venture builder, take proactive steps to solve structural pain points in the lending sector.”
Leveraging Singapore as a starting point as a trusted digital data hub, we welcome all lenders, banks, non-banks, and fintechs,to partner us in our vision to build an alliance to reduce risks in the lending sector, and mitigate fraud.”
Date: 26 September, 2018
Location: Orchard Hotel Singapore
Time: 10:30 AM
At the launch of the Networked Trade Platform (NTP), Minister of Finance Heng Swee Keat outlined key initiatives for the new organization.
NTP seeks to digitalize trade documentation and processes, transforming the trade landscape while raising productivity and creating new opportunities for digital trade service providers and the trading community more generally.
Heng Swee Keat also hopes to broaden and globalize the Singapore trading community by integrating B2B and B2G transactions.
He described NTP as a transformational platform that will give Singapore traders a “one-stop” interface for all trade related regulatory transactions. He believes NTP will help boost productivity and competitiveness, while unveiling new opportunities to traders.
Click below for a link to the speech.
From Global Trade Review (GTR) | By Sanne WassJared Kotler has joined The Hartford as its new head of credit and political risk insurance (CPRI). He moves from Validus Group, where he was head of political risk and credit, Americas, in New York. Prior to that, he held credit and political risk underwriting and analyst roles at Chubb and Zurich. In his new role, which is based in Washington DC, he will be in charge of the direction, strategy and results of The Hartford’s CPRI unit. The unit provides country and credit risk solutions for financial institutions, multinational corporations, exporters, private equity firms and regional development banks, as well as risk-sharing solutions for export credit agencies. The post Validus head of credit and political risk makes move appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Sanne WassBarclays has launched a new trade centre in Birmingham, which will be dedicated to helping UK businesses export more. Staffed by 30 export and trade product specialists, the centre will provide export support to more than 1,000 firms across the Midlands. Its goal is to “make it easier for UK businesses to find their way in overseas markets, by providing the right finance and all-important advice and guidance”, according to Jes Staley, Barclays’ group CEO. Supporting firms in all sectors, the centre will focus particularly on export activity into India, Pakistan, Bangladesh, across Europe, the Middle East, Africa, as well as Far Eastern markets such as China, South Korea, Thailand and Vietnam. The announcement follows the launch of the UK government’s new export strategy, which sets out its ambition to raise exports as a proportion of GDP from 30 to 35%. It aims to reach this goal through a range of initiatives, such as promoting more peer-to-peer learning and creating an online tool for UK businesses to easily connect to overseas buyers, markets and other exporters. Many of the projects will be business-led, with the government intending to work closely with private sector players to drive exports. In a statement, Barclays says the launch of its new trade centre is “a great example of the private sector support that the department of international trade (DIT) is promoting as part of its new export strategy”. Staley adds that Barclays “is determined to play its part” in helping firms to become “superstar exporters”. “New research we have commissioned on this important subject, published with the Policy Institute at King’s College London, shows that one important way to boost UK exports is to create more ‘superstar exporters’, or UK firms who export 10 or more products to 10 or more overseas markets. Helping these businesses to export more in turn helps smaller firms in their supply chain to grow, and to create jobs,” he says. The post Barclays opens major UK trade centre appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Sanne WassMarkel Corporation has hired Jennifer Chang as underwriter and senior risk analyst in its trade credit and political risk operation in New York. Chang has nine years of experience in trade credit insurance, within both commercial and risk underwriting. She joins from Zurich in New York, where she spent four years as a senior underwriter, supporting the establishment of the firm’s excess of loss capabilities. Prior to that she held senior positions at AIG and QBE. Chang will report to Phil Amlot, Markel’s head of trade credit and political risk, Americas, and will work closely with underwriters Howard Lee and Christen Mizell. She will also support Arjan van de Wall, development director for the trade credit and political risk team globally. “Jennifer brings broad broker and client contacts to our operation and will play an important role in developing our US trade credit and political risk business,” says Amlot. Ewa Rose, managing director of Markel’s trade credit, political risk and surety operations, adds that the Americas region “remains rich in opportunities” for the firm’s trade credit and political risk business. “We look to capitalise on the cross-selling opportunities that exist within Markel’s broader portfolio. Jennifer’s broad underwriting experience will be a huge asset to our organisation,” Rose says. The post Markel expands Americas trade credit team appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Sanne WassKenyan trade finance bankers express concern that they are “losing the battle” with Chinese banks, whose expanding business in the country is increasingly leaving local banks out of the equation or in advising roles only. The concern is raised as China continues to up its stake in the African continent. Speaking on Monday at the start of the three-day Forum on China-Africa Co-operation in Beijing, China’s President Xi Jinping pledged another US$60bn for African development over the next three years. This funding will go towards agricultural modernisation, infrastructure connectivity, green development and healthcare projects. Xi also said China would implement trade facilitation programmes and hold free trade negotiations with interested African countries and regions. Reacting to criticism that Beijing is tangling African governments in a debt trap, he said: “Only Chinese and African people have a say when judging if the co-operation is good or not between China and Africa. No one should malign it based on imagination or assumptions.” In Africa, meanwhile, the Chinese dominance is very real: while financial support is generally appreciated, it’s not always deemed as good for the continent. In Kenya, for example, critics have for long warned against a “Sino-invasion”, as business reporter Dominic Omondi called the problem in an op-ed in Kenya’s Standard newspaper in May. Under the headline “Poor strategy dug Kenya into Chinese trade hole”, he argued that China has “stretched Kenya’s hospitality”, “taking advantage of the country’s open-door policy to flood the market with all manner of goods”. The numbers speak for themselves: as of June 2017, China controlled no less than 66% of Kenya’s total Sh722.6bn (US$7.2bn) bilateral debt, according to the Kenya National Bureau of Statistics in its 2018 economic survey. At Sh478.6bn (US$4.75bn), this is more than a seven-fold increase from China’s Sh63bn (US$625mn) debt to Kenya in 2013. And while Kenya imported goods worth US$7.38bn from China in 2017, it only exported US$114.5mn-worth of goods to the Asian country, according to estimations by Coriolis Technologies. Kenyan trade finance bankers are also worried that they are not getting as big a slice of the Chinese pie as they would wish. This is despite the fact that most Kenyan banks now have Chinese relationship managers, or have even created full Chinese departments, as recently reported by GTR. Timothy Mulongo, trade finance business development manager at Co-operative Bank of Kenya, says Kenyan banks are sometimes cut out of deals altogether by local Chinese branches, a trend he says is “a major cause of concern”. “We see a lot of the Chinese banks setting up locally, so instead of marketing their products from offshore, they would set up a local office and build customer relationships from there,” he says. “What that means is that there are less and less opportunities for local banks to do business. It becomes more or less like local Chinese trade: Kenyan banks would not even have an opportunity to intermediate.” This experience is shared by other banks. George Kiluva, head of trade finance at Commercial Bank of Africa (CBA), points to “the dominance of the Chinese business in the region” as an issue often raised at the Trade Finance Association of Kenya, a local professional body for Kenya’s 44 financial institutions launched last year to discuss challenges and harmonise practices. One challenge, Kiluva explains, is that local public sector construction agencies in certain instances have started to accept performance guarantees on local projects directly from China, rather than locally. “That is our business being exported. The Chinese banks are taking away a lot of our banking business, because we expect to issue these guarantees locally. We’ve continuously looked at how to lobby against this,” he says. Priced out of the guarantee market While Kenyan banks started to encounter the problem last year, Kiluva says it is now becoming “entrenched”. “Whenever there is a local project that Chinese firms are undertaking here in Kenya, we would get a counter-guarantee from a bank in China, and on the back of a that, we issue a guarantee,” explains Mulongo of Co-op Bank. “But Chinese counterparties are always looking at how to cut their costs. So we have seen that they send out a guarantee directly from a bank in China. It doesn’t make much sense, because you are accepting an instrument from a counterparty that you don’t know.” The trend means that guarantee business is increasingly run without involvement of the local banks, he adds. “They do not play their intermediation role in the industry. And when the local banks are utilised, it is for advising only, not for local issuance or confirmation.” The fact is that Kenyan authorities have gained a high level of comfort in Chinese contractors, after years of working together. “The Chinese say: ‘We’ve done so many projects in Kenya and nothing has gone wrong, you’ve not had the need to demand on the guarantees.’ So why bring in a local bank that will charge extra and make the cost high? You find local banks are losing the battle on that front,” says a trade finance banker who preferred not to be named. Kenyan banks are simply unable to compete with the price of the guarantees issued out of China. According to Janet Mulu, trade finance manager at Ecobank in Kenya, the average price for a performance guarantee by a Kenyan bank is about 2% per annum, whereas Chinese banks typically offer 0.8%-1%, and have even been known to go as low as 0.2%. It leaves banks in Kenya with the challenge to find other revenue streams that they can leverage from Chinese commercial activity, such as collection and payments. More banks are also looking at how they can grow their business through supply chain finance programmes and invoice discounting. In June, for example, CBA launched a new supply chain platform to finance more SMEs, built by Nairobi-based fintech firm Ennovative Capital (ECap). But China’s fast pace will undoubtedly leave some local banks behind. As Theo Osogo, director of business development at Sidian Bank, puts it: “Competition has come, and those who are surviving are the ones who are structuring things differently.” The post Kenyan trade financiers “losing the battle” with Chinese banks appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Sanne WassHSBC is looking to carry out its next trade finance blockchain pilot in the Middle East, according to the bank’s regional head of trade. Speaking to GTR for its upcoming Fintech Issue, Sunil Veetil says the Middle East will be the next region of focus for HBSC when expanding its recently successful trial for a blockchain-based letter of credit solution. The bank made big headlines in May when it announced it had conducted its first live, commercial trade finance transaction on blockchain together with ING for agrifood trading giant Cargill. The deal was completed using the R3 Corda platform, with a cargo of soybeans exported from Argentina to Malaysia. Corda’s letter of credit module, which has been developed by 12 banks, enabled the transaction time to be reduced from a standard five to 10 days, to 24 hours. According to Veetil, the announcement created great interest among clients in the Middle East, some of which HSBC is now looking to involve in the next stage of the trial. He did not give any further information on which clients the bank is in discussions with, but says the Middle East is an “ideal place” for testing blockchain, given the region’s growing importance as a trade hub between the East and West. “If you look at the region, there is a huge reliance on trade, so there are huge benefits that our clients can derive from this technology,” he says. Another “uniqueness” of the Middle East, he explains, is that there’s considerable push for change from the regulators. “There is currently a large focus on blockchain, fintechs are opening up, banks are encouraging fintech and accelerators, and we have our own hubs where we work with locally groomed startups. Definitely I can see that interest is very high in the region, within the government and the regulators. And they are quite nimble, they move quickly,” he says. He adds that HSBC is currently in discussions with UAE regulators, which are keen to provide the necessary support for the bank’s blockchain pilot. The UAE has thrown its weight behind fintech and blockchain more so than any other government in the region. In April, it launched its Emirates Blockchain Strategy, which seeks to transform 50% of government transactions into the blockchain platform by 2021. In doing so it expects to save AED11bn in transactions and documents processed routinely, 398 million printed documents annually and 77 million work hours every year. Meanwhile, Dubai has its own blockchain strategy, run by its Smart City Office. Ideal for trade finance technology HSBC has also had a great focus on the Middle East for piloting other trade and supply chain finance technologies. Last year, when HSBC and IBM introduced an AI solution to automate and digitise trade finance documentation, they selected the UAE as one the first countries (together with Hong Kong) to go live in. The bank also recently rolled out its trade transaction tracker, a smart-phone based application, which was first piloted in Qatar. And it has just launched a new supply chain finance platform in the region together with Kyriba, a financial software provider. HSBC isn’t alone in its quest: a growing number of global banks and software firms are starting to see the Middle East as a perfect location to test and roll out new trade technology. Standard Chartered, for one, announced last week that it had chosen the UAE to kick off an “industry-first client pilot” for blockchain-based smart guarantees in trade finance, together with Siemens Financial Services and blockchain firm TradeIX. TradeIX’s CFO Daniel Cotti specifically quoted the government’s “enormous drive for digitalisation and blockchain” as one important reason for choosing that location over others. This was followed by an announcement by Finastra, one of the world’s largest financial software companies, that it had joined Bahrain’s accelerator programme Bahrain Fintech Bay, with the goal to expand its open innovation platform FusionFabric.cloud to local fintech startups. Finastra went live with the platform earlier in June in order to accelerate innovation for its 9,000 bank clients by allowing them to easily connect to fintech applications within an open marketplace. “Now couldn’t be a better time to be part of this community as the Bahrain Fintech scene heats up,” says Wissam Khoury, Finastra’s managing director for the Middle East and Africa. While it’s still early days for fintech in the Middle East (in fact, the region had as of January 2017 only attracted 1% of the US$50bn raised globally by fintech startups since 2010, according to consulting firm Accenture), it seems that this is set to change. Fintech Hive, an accelerator which was launched last year in Dubai International Finance Centre (DIFC), kicked off its 2018 programme this week, after having received “overwhelming response” from applicants for what will be its second programme. It got more than 300 applications from around the world – three times more than in 2017. According to Raja Al Mazrouei, executive vice-president of FinTech Hive at DIFC, it is a “testament to the increasing demand for disruptive technologies in the region”. As for HSBC, it has not revealed the specific timeline for the roll-out of its blockchain solution for letters of credit. Vivek Ramachandran, the bank’s global head of innovation and growth for commercial banking, told GTR in May that we can expect to see another few live transactions on the platform, as the bank learns how it interacts with the systems of other banks and corporations. Then the primary focus will be on driving industry-wide adoption. “We’ve still got a few more steps to do before we get to widespread adoption,” he said. The post HSBC exploring Middle East for next trade finance blockchain trial appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Shannon MandersAt a time of rising protectionism, there are ways in which companies engaged in global trade can legally bypass increasingly restrictive policies. In fact, for over 100 years, international traders have been following legitimate rules to obtain favourable tariff treatment. With a slow-burning trade war now fuelling anti-globalisation sentiment, GTR speaks to Robert Silverman, partner at law firm Grunfeld Desiderio Lebowitz Silverman & Klestadt and a member of IR Global, about the opportunities available in global customs and trade laws to minimise the impact of new tariffs and quotas. The escalating tariff war is already having a very tangible impact on businesses and financiers around the world. Results of an HSBC Navigator survey, which incorporates the views of more than 6,000 businesses across 26 countries and was published in Q1, found that 61% of companies think that governments are becoming more protective of their domestic economies. The survey reported that, as a result, companies are focusing on trading with partners within their own geographic region rather than exploring opportunities further afield. But there are “self-help” techniques that companies can adopt to ensure ongoing profitability in trade, says Silverman. In this exclusive Q&A, he explains how firms can mitigate trade barriers via commercial contracts and take advantage of free trade zones when agreeing contracts, and why it’s important to understanding import/export regulations across jurisdictions. GTR: Is the world economy becoming more protectionist? Silverman: Not really. Sovereign nations have always protected certain ‘sweetheart’ business sectors with high duty rates or quotas to permit those industries to flourish without interference from foreign producers. Over the years we have seen a trend for countries to enter into free trade agreements to reduce customs duties on products that have not been blessed with protection. In the past year, however, the US administration has imposed additional customs duties and quotas to rectify what it claims to be unfair trade practices by Chinese exporters and flooded steel and aluminium markets from most of the US’ trading partners. President Donald Trump’s theory is that additional duties or quotas can be used to boost US production of certain products, and eliminate unfair behaviour by its trading partners. In addition, the US department of commerce has created a domestic producer-friendly market which has encouraged a plethora of antidumping duty (ADD) and countervailing duty (CVD) cases which have also taken a large bite out of the profits of importers of certain products. We don’t see this type of activity by other countries, except that they are passing retaliatory tariffs to strike back at the ever-growing list of US-protected companies. GTR: Is there anything that an international trader can do to avoid these new protectionist policies? Silverman: In addition to the slow moving political route or filing claims at the World Trade Organisation, international companies can use the opportunities available in the customs and trade laws to minimise the impact of these new tariffs and quotas. Remember, most of the world works with the same tariff classification and valuation codes, so the rules are available to everyone. We are suggesting relying on old chestnuts to provide self-help:
From Global Trade Review (GTR) | By Shannon MandersThe US and Mexico last week bilaterally agreed the basis of a renegotiated North American Free Trade Agreement (Nafta), putting pressure on the third Nafta member, Canada, to follow suit. Talks between Washington and Ottawa failed to reach agreement by Friday’s US-imposed deadline, but will continue this week. Paul Maidment, director of analysis and managing editor of Oxford Analytica, a global advisory and analysis firm, answers nine critical questions about the process thus far, and what we can expect going forward. GTR: In the bilateral agreement with the US, what has Mexico given up? Maidment: Mexico has conceded significant ground over the auto sector, notably over the rules of origin. The current Nafta agreement calls for vehicles to contain 62.5% North America-made content. While the US wanted to raise this to 85%, Mexico has agreed to 75%. Around 30% of cars exported by Mexico do not meet the new figure, but producers will have a transition period of up to five years to reach it. Vehicles that fail to reach the limit will still be exportable to the US, but subject to a 2.5% tariff. What will have a more significant impact on the Mexican auto industry is the new requirement that 40%-45% of automobiles be manufactured in countries where workers earn at least US$16 per hour – a stipulation that will only affect Mexican factories. The average hourly wage in Mexico’s auto industry is estimated to be US$7-US$8 (compared with US$29 in the US). The extent to which that requirement will affect Mexican producers has yet to become apparent, but it is likely to hinder the manufacturing of auto parts. Another important concession by Mexico – and one that is particularly likely to frustrate Canadian negotiators – was the cancellation of Nafta’s independent dispute resolution mechanism. Trade disputes between member countries are now to be resolved in US courts. This will be a huge sticking point for Canada, and may force Ottawa into an unwanted choice between making diary concessions and saving the dispute resolution mechanism. Mexico also failed to get the increase in Nafta visas for Mexican nationals it sought. GTR: What has the US conceded? Maidment: Washington rowed back from its initial demand for a ‘sunset clause’ that would see the agreement expire automatically after five years unless all parties confirmed its continuation. Both Mexico and Canada oppose such a provision due to the uncertainty it would create among investors. Instead, the accord will be valid for 16 years, with reviews taking place every six years from 2024. US negotiators also dropped their demand that Mexico could only export specific agricultural products at certain times of the year. Agrarian trade will remain free of any tariffs or subsidies. US aims to curtail exports of textiles were conceded, but in the pharmaceuticals sector, 10-year patent protections were introduced for drug manufacturers. The absence of them from the original Nafta agreement was a particular pain point for US pharmaceutical companies, and now likely to become one, not so much for Mexico, but for Canadian pharma. GTR: What are Mexico’s priorities in the final renegotiation of Nafta? Maidment: First, to protect Nafta in the face of President Donald Trump’s belligerent rhetoric by ensuring new arrangements that would provide certainty, and to end the threat that Trump might either impose stiff tariffs on Mexican exports (notably automobiles and agricultural products) or withdraw the US from Nafta by executive order. Second, to have the renegotiation – with or without Canada – concluded before the president-elect Andres Manuel Lopez Obrador (AMLO) takes office on December 1. GTR: What are the advantages for AMLO if Nafta is renegotiated before he takes office? Maidment: The proposed six-year term agreed with Mexico dovetails with both the duration of the fixed one-term Mexican presidency and with what would be the end of a second Trump term. This will let AMLO simultaneously endorse the deal and distance himself from it. It would also take one highly contentious issue in US-Mexican relations off the table, and in that sense provide some economic certainty, if not necessarily stability, for Mexico. AMLO has made several early appointments to his team designed to demonstrate its economic competence to ease concerns about his populist left-wing economic policies more generally, which suggests he wants to send signals of economic stability to international investors. One such nomination was that of Jesus Seade, a respected economist and trade official, as his top Nafta negotiator and who participated in the latest negotiations. GTR: Who will ultimately decide if Nafta is revived or laid to rest? Maidment: Trump can end Nafta by pulling the US out by executive order, but he has to get the approval of the US congress for amendments to it. If ultimately there is a three-way accord on a reformed Nafta, rather than new bilateral deals, the legislatures of all three signatory countries would have to approve that. The US house of representatives, as a general matter, has to ratify all trade agreements that it has delegated the US president to negotiate. In this particular case, congress gave Trump the authority to pursue a renegotiated trade agreement with two other countries, not one. Legally, therefore, congress cannot at this point consider voting on a bilateral US-Mexico deal that excludes Canada. GTR: What is the risk of Trump pulling out of Nafta? Maidment: That would be the nuclear option, but the risk that Nafta collapses remains a severe risk. If Trump issued an executive order ending US participation, it would likely be challenged in the US courts, and damage to the economies of all three countries would probably be felt before legal cases were resolved. Mexico’s President Enrique Pena Nieto will hail the avoidance of such a scenario as a political victory, citing economic certainty as the primary justification for his government’s actions, which at least in some respects will look like a significant climbdown for Mexico. GTR: Where does Canada now stand? Maidment: The Trump administration’s tactic was to peel off Mexico with a separate agreement and then use that to press Canada to fall in line. Washington has much more economic leverage over Mexico City than it does over Ottawa. Friday’s deadline for Canada to join was self-imposed by the Trump administration. It was not met, but negotiations continue. Trump needs the deal settled quickly for domestic political reasons, notably the midterm US congressional elections in November, which will be a test of ‘Trumpism’, even though the president will not be on any ballot. Trump wants to be able to campaign for his fellow Republicans as having kept another of his pre-election promises. It should also be remembered that if the Democrats retake control of the house in the midterms, that could alter the political arithmetic in the US congress on Nafta. GTR: How much domestic US political support is there for Canada and Mexico’s positions? Maidment: The US-Canada trade relationship is stronger and more deeply intertwined with the overall US-Canada relationship than the US-Mexican one is. This is true not only at the federal level but also at the state, city and corporate levels in the US. It is thus one that has a lot more political protection from US legislators, governors and business groups than Mexico can rely on. Mexico’s position is further complicated by the immigration issue, which is at least as important for Trump’s political base if not more than ‘unfair trade’. GTR: Will a renegotiated Nafta cut the US trade deficit? Maidment: Not materially and not immediately, given the extended transition period for the auto sector changes. However, at this point, these renegotiations are about securing political wins for Trump ahead of the midterms. The post Nafta’s renegotiation in nine questions appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Sanne WassInvestly, a UK-based invoice finance fintech firm, has appointed Wayne Hughes as its new CEO. A seasoned working capital executive, Hughes brings over 25 years of experience working in the UK’s financial services industry, including senior roles with leading alternative financiers such as Demica and Bibby Financial Services. He joined Investly in May as consultant chief commercial officer. Now appointed the firm’s CEO, Hughes has been charged with “making Investly the leading receivables finance platform across the UK and rest of Europe”, the company writes in a statement. Investly launched its invoice finance platform for working capital and e-invoice providers last month. The platform, which allows businesses to sell their invoices, employs emerging technology to improve the speed and drive down the cost of financing, while expanding the reach of businesses that can be served sustainably. For example, the platform utilises open banking APIs to allow businesses to onboard seamlessly by connecting it to their bank accounts. The APIs also help the fintech firm to perform up-to-date monitoring for changes in credit risk to prevent fraud and overextension of limits. In a statement, Hughes says that while market and media commentary tend to focus on fintech’s disruption of incumbent players, he will rather seek to establish “mutually beneficial partnerships across the industry”. “I believe the true value exists in cooperative B2B relationships between fintech partners and existing market participants,” he says. And so instead of going after banks’ businesses directly, Investly is focusing on making its technology available for large origination partners which can then extend invoice discounting to their customers without having to build it in-house. Siim Maivel, founder and the previous CEO of Investly, now assumes the role of chief data officer. He says: “Working with the significantly larger pools of customers of our partners opens up further tools for data-driven credit decisioning, fraud prevention and automation. I will be carrying our long-held vision towards machine assisted credit decisioning engine in our next phase of growth as chief data officer. Credit intelligence will be key in becoming a market leader and sustaining healthy credit model.” The post Seasoned alternative financier becomes CEO of fintech firm appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Sanne WassSwift has hired Dave Scola as its new head of North America, based in New York. He joins from Barclays, where he worked for almost seven years, most recently as global head of financial institutions. Prior to that, he spent seven years at Deutsche Bank, and previously worked at BNY Mellon. In his new position, which he will take up on October 1, Scola will be in charge of Swift’s innovation and growth strategy in the US and Canada. He will have a particular focus on driving growth in Swift’s global payments innovation (gpi) service and financial crime compliance portfolio. Swift’s gpi was launched last year to speed up settlement time and improve transparency for international payments. The service has so far been adopted by more than 200 financial institutions globally, but Swift recently announced it will move towards universal adoption of the gpi, meaning that all 10,000 banks on its global network will use the service by 2020. Commenting on the appointment, Javier Pérez-Tasso, Swift’s chief executive, Americas and UK, says: “With a proven track record of leadership in the Americas and Europe, Dave is ideally positioned to deliver innovation and growth in North America. We are delighted to welcome him on board as we accelerate our strategy in the region.” The post Swift recruits Barclays executive to grow gpi in North America appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamSwift is looking to bring cross-border payments times down to “instant” in a new trial that it has begun in Asia Pacific, focusing on settlements into Australia. It will pilot an improved version of its global payments innovation (gpi) service, which was launched in January 2017 to bring faster cross-border payments to its network. So far, Swift has managed to reduce payment clearing times to under 30 minutes in more than half of gpi use cases. Now the company will seek to reduce this further. Swift’s new “gpi real-time service” will be tested using Australia’s new payments platform (NPP), an instant payments platform that went live earlier this year, and which has so far been used to process domestic payments. Swift was commissioned by the Reserve Bank of Australia (RBI) to design and build this solution in 2015. This move to improve the gpi service will involve banks from Australia, China, Singapore and Thailand. These are: ANZ, Bangkok Bank, Bank of China, China Construction Bank, Commonwealth Bank of Australia (CBA), DBS, ICBC, Kasikornbank, National Australia Bank (NAB), Siam Commercial Bank, Standard Chartered and United Overseas Bank (UOB). The banks had previously been involved in workshops around instant payments with Swift. Whether or not the new gpi service replaces the existing one is undecided: Swift is waiting for the results of the trial, which it plans to announce at Sibos, its annual banking, finance and fintech conference, which takes place in Sydney this October. “The gpi real-time service is a critical step in delivering cross-border instant payments. The commitment and support we have from Asia Pacific’s leading banks is a strong indication that they understand the immediate value of partnering with Swift to realise a fast, secure and seamless cross-border real-time payment service that scales globally,” says Eddie Haddad, managing director at Swift in Asia Pacific. Already, the gpi is being used to settle US$100bn in payments every day, according to Swift. It has been gaining traction in Asia Pacific. In June, 10 Chinese banks went live with the gpi service, with 17 others in the process of implementing it. In July, Swift announced that all 10,000 banks on its global network will use gpi by 2020, after Swift was impressed by the progress made with the technology since its launch. Sun Shangbin, deputy general manager in Bank of China’s clearing department, says the instant gpi would “substantially enhance cross-border payments efficiency, providing high-quality service experience for our customers”. Silawat Santivisat, executive vice-president of Kasikornbank in Thailand adds: “The keen competition amongst payment channels, competitive transaction fees and transaction speeds offered by new entrants, mean that a faster Swift gpi service is crucial to driving international payments. While real-time payment is common for domestic transfers, it is an innovation for international payments.” He may be referring to competition from outfits like Ripple, which have been able to reduce payment times to instant – or close to it – by using blockchain technology. Swift, for its part, has trialled blockchain for nostro account reconciliation, but has not been convinced that it is a technology ready for use at the required scale. At an event in Hong Kong in June, a Ripple executive dismissed the gpi service as being only a marginal improvement on the traditional Swift offering. “Swift was built 40 or 50 years ago, before the internet was created. So their architecture is very old. They realise that this is a big problem and they consider us a big competitor. They’re also trying to make a big improvement based on the existing architecture, called Swift gpi. We consider it just a marginal improvement of their existing architecture,” said Ripple’s director of joint venture partnership, Emi Yoshikawa The market, however, will welcome another move from Swift to reduce payment times. It is used across the board by banks around the world and the likelihood is that most would prefer to use a payments service from a company they know and trust, rather than using a new player. “Swift’s new instant cross-border payments service is an important industry initiative that will complement our efforts to provide clients more control of and insight into their transactions,” says So Lay Hua, head of group transaction banking at UOB. The post Swift trials instant cross-border payments in Asia Pacific appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamAfter the US and Mexican presidents celebrated a breakthrough in the arduous renegotiation of the North American Free Trade Agreement (Nafta), analysts claim that the pressure is now on Canada to save its place in the deal. Earlier this week, US President Donald Trump announced that a deal had been struck with its neighbour to the south. The deal resolves long-standing sticking points in the automotive sector, where the US has negotiated a requirement that 75% of a vehicle be made in North America (a hike from the previous 62.5%). Of that 75%, between 40% and 45% must be made by workers earning at least US$16 an hour – placing the benefit firmly in US hands, where workers earn a higher wage. Furthermore, the US has agreed to a more relaxed 16-year lifespan, with a review every six years. Previously it had insisted on a five-year renewal clause, a scenario both Canada and Mexico have been keen to avoid, due to the uncertainty that would bring. Trump has suggested that the “US-Mexico trade agreement” replace Nafta, while his Mexican counterpart Enrique Pena Nieto has said he hopes that Canada could be included. Either way, the onus has shifted to Canada, with foreign minister Chrystia Freeland cutting her tour of Europe short for trade talks in Washington DC. “This agreement puts Canada under pressure and brings a breakdown of Nafta a step closer. Pena Nieto will gain nothing politically from the deal which, if ratified, may prevent meddling by Mexican President-elect Andres Manuel Lopez Obrador, but will also absolve him of all responsibility for any of its negative impacts for his entire six-year term, which starts in December,” says William Arthur, North America analyst at Oxford Analytica. Trump has said that talks with Canada are “going well” and expressed confidence that a Nafta deal could be concluded this week. Canadian Prime Minister Justin Trudeau, however, was less effusive about the progress, saying that his negotiating team would hold out for an agreement that suits Canada. “We’re seeing if we can get to the right place by Friday. We’re going to be thoughtful, constructive, creative around the table but we are going to ensure that whatever deal gets agreed to is the right deal for Canada and the right deal for Canadians,” he told reporters. Other analysts have downplayed the significance of the US-Mexico deal, saying that while the reaction of the financial markets has been positive, thus far, it does not alleviate wider concerns about the protectionist bent of the US government. They point to the ongoing trade war with China: on August 23, the US began implementing an additional 25% tariff on a second list of Chinese products. “At the same time as US negotiators were formalising the pact with Mexico, trade talks with China came to nothing and no dates were announced for further talks. Public hearings on proposed US tariffs on US$200bn of Chinese imports also ended yesterday. And our working assumption is still that the US will ultimately go ahead and impose these tariffs,” says Oliver Jones, markets economist at Capital Economics. He added, however, that the fact that the US administration is willing to negotiate and accept a compromise on trade will be welcomed in China. It is also likely that should this deal see the light of day, it will force auto manufacturers to rejig their supply chains if they wish to operate tariff-free in the region. The Mexican government estimates that 30% of the cars it makes and sells to the US would not contain sufficient North American content to meet the requirements. “They [manufacturers] will have to take on new costs — which cars made outside the region will not — whose only benefit is continued access to the zero tariff. And these are not the kinds of costs leading to tangible consumer gains — ie, don’t expect increased fuel efficiency, safer vehicles, or additional creature comforts,” writes Chad Bown, senior fellow at the Peterson Institute of International Economics. Bown predicts that some manufacturers in the US may benefit from less direct competition from makers in Europe and Asia. However, the downside may be passed onto the US consumer. “But these ‘gains’ are more than likely offset by their economic downside. Rising costs imply higher prices for American consumers. Equally important is North America’s deteriorating competitiveness as a global export platform for carmakers. As consumer growth in North America slows, these companies are evaluating where they can produce competitively in order to access emerging markets in Asia, South America, and elsewhere. Clunky new rules and higher costs make America, Mexico and Canada a considerably less attractive hub,” Bown says. The post US-Mexico trade deal “puts pressure on Canada” to save Nafta appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Finbarr BerminghamDespite suggesting they would restrict their funding for coal projects, the project pipelines of Japan’s three major banks suggest they are still heavily involved in the sector. Mizuho, MUFG and SMBC all updated their coal-funding policies in May and June of this year. The move was welcomed by environmentalists, given that these banks are among the heaviest funders of dirty coal projects in Asia. However, new research from Market Forces, a lobby group, shows that each is set to fund large projects that would be in contravention of their updated policies. Combined, these projects will emit 1.6 billion tonnes of CO2 over their lifetimes. The study shows that if they were to follow their policies to the letter, Mizuho would be ruled out of 40% of their pipeline projects by capacity. MUFG would be ruled out of 31%, while SMBC would have to scrap 31% of these projects. Mizuho’s policy brief states that “primary considerations is whether the use of greenhouse gas-producing technology is appropriate due to economic necessity when compared to feasible alternative technologies which offer similar levels of energy efficiency”. The MUFG document reads: “MUFG Bank and Mitsubishi UFJ Trust and Banking refer to international guidelines such as OECD arrangement on officially supported export credits, when considering the provision of financing for new coal-fired power generation.” These guidelines restrict funding for the majority of coal-fired projects. Those that can be funded are those that require “ultra-supercritical technology”, which rules out most of the pipeline, according to Market Forces. SMBC’s updated policy also refers to ultra-supercritical technology, defined as power plants which “require less coal per megawatt-hour, leading to lower emissions (including carbon dioxide and mercury), higher efficiency and lower fuel costs per megawatt”. The bank’s policy reads: “Our policy for new financing will be stricter, limiting financial support to only coal-fired power plants that use ultra-supercritical or more advanced technologies which are considered highly efficient”. None of the banks were willing to comment on the report, however an MUFG representative raised the bank’s positive ranking with regard to clean energy financing, stating that while 50% of MUFG’s portfolio of power-related project finance worldwide is in the renewable sector, less than 10% goes to coal. The projects in question span five countries: Botswana, Bangladesh, Myanmar, Mongolia and Vietnam. Almost 50% of the coal-fired plants will be built in Vietnam, which has been investing heavily in power plants, the majority of which are coal-fired. SMBC was among the lenders on the S$1.87bn syndicated loan for the Nghi Son 2 coal-fired power plant in Vietnam, which reached financial close in April, despite claims that it will generate “twice as much” CO2 per every unit of power generated as the average generating plant in Vietnam. Meanwhile, Sumitomo Mitsui Trust Bank, part of the same group as SMBC, told Reuters in July that it “would stop providing project finance for new coal-fired power stations as a basic rule”. The post Do Japanese banks’ project pipelines conflict with shift in coal policy? appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Eleanor WraggIn 2016, US President Donald Trump told Americans: “Ladies and gentlemen, it’s time to declare our economic independence once again.” But less than two years later, the United States International Trade Commission’s (USITC) Year in Trade 2017 report shows little evidence of the ‘America first’ policy’s impact on trade, and American trade finance bankers remain sanguine about their prospects – at least for now. Despite Trump’s mercantilist aim to boost exports across the board while cutting imports, the US saw an increase in the value of both exports and imports of goods in 2017, according to the figures released by the USITC this month. Exports were up US$95.7bn, or 6.6%, and imports up US$155.1bn, or 7.1%. The growth in export value was mostly driven by the crude price increase and the removal of the US government ban on most exports of crude to countries other than Canada in December 2015, which pushed energy-related product exports 45.5% higher to US$143.2bn. According to the USITC, the value of merchandise exports to all major trading partners increased, with the exception of Taiwan, which saw a decrease of 1.1%. India saw the biggest rise, of 18.7%. “It’s really value change that we saw in the US, not increased volume. The cost of oil affected both sides of the ledger,” says Michael Quinn, managing director of global trade and loan products at JP Morgan. “A rising tide raises all boats.” In a year which saw the fastest economic growth in three years and four Federal Reserve rate hikes in 12 months, “the macroeconomic aspect is supporting positive performance more than any specific policy”, says Michael McDonough, JP Morgan’s head of corporate trade and supply chain. Trump has made cutting the US trade deficit one of the cornerstones of his trade spats with major partners, but this new data shows that only the agricultural sector experienced a trade surplus in 2017, with US$5.7bn more in exports than imports. This actually narrowed from 2016, where agricultural exports were worth US$129.7bn versus imports of US$113.1bn. The energy-related products sector’s deficit fell to US$4.5bn, but the trade deficit in other sectors of the US economy widened. There are structural reasons for this. As a recent Oxford Analytica Daily Brief pointed out: “A permanently higher dollar due to the desire of investors to buy US assets will keep the US goods balance in deficit despite trade policy.” “The impact of individual policy changes hasn’t penetrated yet,” explains Quinn. He believes that 2017 was in general a “better year” in US trade finance than prior years, largely due to global economic strength. However, with the US pushing forward with plans to impose further tariffs on China, the implications for lenders could be serious. USITC figures show the value of imports from China were the biggest gainer in 2017, up 9.3%. “If tariffs kick in with any permanence then I think sourcing patterns would change. US steel or aluminium, because of reciprocal tariffs, would become more expensive and a European Union importer could then turn to China or India for the same product,” says Quinn, although he believes it is still “too early to tell for the future if tariffs are going to be sustained”. So far, then, America’s trade finance banks are yet to see any material implications of the ‘America first’ policy. “Ultimately, our business will change if and when our clients change their sourcing and their selling patterns. If we were to see a wholesale shift away from manufacturers importing input to then manufacture and export, that would impact our business. But as of yet, we have not. We haven’t seen any substantive, longer-term shifts in clients’ behaviour that we weren’t seeing already,” says McDonough. For now, despite sabre-rattling from the US president, it remains business as usual for trade finance in the country. “Looking at the future, I think the changes we see are more dependent on longer-term trends such as the continued shift to open account, which drives an increase in supply chain finance or other related open-account financing activities. We are also seeing an increased shift towards digitalisation or electronic trade,” says McDonough. “Those are both long-term trends, and frankly I don’t think that change in trade policy has much impact on them.” The post Trump’s ‘America first’ policy yet to impact US trade flows appeared first on Global Trade Review (GTR).
From Global Trade Review (GTR) | By Shannon MandersBroking firm Marsh is providing what it calls a “sophisticated” surety structure for the construction of a Tanzanian railway line, which it says could be attractive to banks and contractors on other African projects. Marsh collaborated with the African Trade Insurance Agency (ATI) on the US$95mn unfunded bank surety solution, which is being provided to Turkish construction company Yapi Merkezi. It guarantees Yapi Merkezi’s contractual performance-related obligations and the repayment of advance payments for the construction of a new high-speed electric railway in Tanzania. The solution is backed by a consortium of reinsurers: TrustRe (lead reinsurer), BarentsRe, AfricaRe and ZepRe. The structure works as follows: Yapi Merkezi, which was awarded the contract by the Tanzanian state-run railway firm Tanzania Railways Corporation, was obligated to use local Tanzanian banks to comply with project requirements. As this was not an option immediately available to the contractor, the Tanzanian government initially accepted Turkish bank guarantees as an interim solution. Meanwhile, Marsh – which has a long-standing relationship with Yapi – together with ATI as the risk sharer, arranged what they refer to as an “innovative syndication structure”, which enabled two local Tanzanian banks, CRDB Bank and NMB Bank, to issue guarantees to replace the Turkish bank guarantees. “What we’ve done has allowed two domestic banks to issue guarantees with pretty big limits – certainly much bigger than they would have been able to do otherwise – and we’ve backed those guarantees up with insurance,” explains John Lentaigne, chief underwriting officer at ATI. “If Yapi defaults and there’s a call on the guarantees, the local banks would pay, but they would have recourse through ATI.” Crucially, the structure has also allowed Yapi to free up its domestic Turkish banking lines, releasing its overall risk limit and ultimately enabling the company to take on more project risk in Africa. Bringing surety to Africa Both ATI and Marsh agree that with this solution, contractors working in Africa now have a new way of getting local banks to offer guarantees for their projects. “Having guarantors involved is critical for contractors to be able to do big ticket projects,” says Lentaigne. Although surety solutions are well-established in more advanced markets, such as the US (where they originated during the Great Depression in the 1930s) and Europe, they have been less present in Africa. But this may be set to change. According to Manuel Lopez, who set up and runs Marsh’s global surety bank syndication desk, the solution is both applicable and scalable, and “something that will work in other countries”. Lopez tells GTR that the feedback from African banks about adopting the solution has been positive. “Local and regional banks have limited risk appetite, and that’s what we think is a big opportunity: to fill this gap with sophisticated insurance solutions,” he says. Lentaigne agrees that this is something ATI can help to develop further. “We think there is appetite for it: this will kick things off.” Nevertheless, the complexities of local regulatory environments mean that the solution is not one that can simply be duplicated across different countries. “It’s not a copy and paste solution, especially when it comes to the guarantee markets,” says Lopez. “Everybody is initially suspicious of these solutions, and it takes some time to make them comfortable.” The solution in Tanzania was three months in the making. To be able to qualify for such solutions, projects need to be of strategic importance to the host country. In Tanzania, the first phase of the 300km railway line from Dar Es Salaam to Morogoro will replace a century-old track and have the capacity to transport 17 million tonnes of cargo each year. It is expected to be completed by the end of 2020. The post Innovative structure for Tanzanian project to “kick off” surety in Africa’s credit insurance market appeared first on Global Trade Review (GTR).