GTR Ventures News

Standard Chartered and Siemens pilot blockchain-based trade finance guarantees in UAE

From Global Trade Review (GTR) | By Sanne Wass

Standard Chartered and Siemens Financial Services, the financing arm of Siemens, are kicking off what they call “an industry-first client pilot” for blockchain-based smart guarantees in trade finance. They will do so in collaboration with blockchain firm TradeIX, a provider of a trade finance specific open-source blockchain platform, which allows financial institutions to develop their own trade finance applications with open APIs. Using TradeIX’s tools, Standard Chartered and Siemens started building the solution in March. It is among a number of proof of concepts that the bank has conducted on the open platform – and one which it has now decided to pilot with the purpose of commercialisation. Built on R3’s Corda framework, the solution will enable Siemens to digitise and automate its guarantee process – a traditionally paper-intensive business – for customers with large transaction volumes, from initiation of the bank guarantee to the claim handling. It utilises a decentralised ledger and auto-executing smart contracts to provides a streamlined communication tool between the guarantee issuer (in this case Siemens), the bank (Standard Chartered), and the beneficiary (Siemens’ customers). The pilot is expected to be fully completed later this year. “Unlike a letter of credit, which involves multiple parties, performance details and over 100 pages of documents, a commercial bank guarantee is a much simpler instrument to digitise,” Standard Chartered says in a statement. According to Michael Bueker, CFO at Siemens in the Middle East, having such a digital trade finance solution “is an important step” toward making the company’s trade finance operations “smoother, faster and more efficient”. “We are delighted to partner with Standard Chartered in leading such a game-changing transformation, which will help our customers go digital in their guarantee and claim processes and achieve higher efficiency,” he adds. The parties will pilot the solution in the UAE, which offers a good location for such an initiative, given the government’s “enormous drive for digitalisation and blockchain”, Daniel Cotti, CFO at TradeIX, tells GTR. He adds that most of the beneficiaries of the guarantees will be government entities. The UAE has thrown its weight behind 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 annually. Meanwhile, Dubai has its own blockchain strategy, run by its Smart City Office. Commenting on the pilot, Motasim Iqbal, Standard Chartered’s head of transaction banking in the UAE, says: “This is an industry-defining solution which we believe will transform the way guarantees are issued and processed in the UAE. Siemens Financial Services has been a key partner for us to build and develop this pilot on the distributed ledger and we believe that this technology can further be harnessed by the Dubai Smart City initiative.” A range of projects are currently being carried out on TradeIX’s platform. The most prominent one goes under the name Marco Polo and is a platform for open account trade developed with R3 and 10 international banks, also including Standard Chartered. Pilots for this project are currently being prepared and are scheduled to begin in October, before being commercialised next year. The blockchain firm has also worked with Standard Chartered and global insurer AIG on a project to develop a blockchain-powered invoice finance programme for DHL. Now implemented by the logistics company, the solution helps its customers extend their payment period whilst maintaining the company’s receivables at current terms. The post Standard Chartered and Siemens pilot blockchain-based trade finance guarantees in UAE appeared first on Global Trade Review (GTR).

Standard Chartered on trade war: “At what time does sanity prevail?”

From Global Trade Review (GTR) | By Finbarr Bermingham

standard chartered The US-China trade war can only have negative effects in the long run, even if the short term impact have been minimal for trade finance providers in Asia. Those are the views of Standard Chartered’s global head of trade finance, who has called for common sense, as trade tensions continue to escalate. In an interview with GTR in Hong Kong, Farooq Siddiqi voiced concerns over the negative effect the US-China conflict may have on trade and investment sentiment. Citing examples of trade wars in the 1930s and 1970s, Siddiqi says: “When you look at the benefits, did it protect employment or help GDP? The answer is all negative. In the long run, if you have this mutually-assured destruction, it doesn’t help anybody. The question is: at what time does sanity prevail?” Standard Chartered is one of the leading funders of trade in emerging markets and is extremely active throughout emerging Asia, including in China. A sizeable portion of the bank’s book comes from financing trade between China and the rest of Asia. In an earnings call after the bank reported a healthy profit over the first half of 2018, chairman Jose Vinals said: “Our direct exposure to the risks of US-China trade tensions is limited. We generate far more income financing commerce between China and other markets in our footprint — meaning we stand to benefit over time if that were to increase — than we do on trade between China and the US.” This sentiment was echoed by Siddiqi, who says that the US-China trade Standard Chartered finances is “not a material number”. However, it may lead to shifts in production bases, according to research the bank has done with clients in China. “We did research with some companies in the Pearl River Delta, asking them for their your response to the trade war. Some will try to figure out a separate sourcing strategy. In the medium term, they’ll look to move their manufacturing location to another country. The big theme is companies moving south to Asean, Cambodia, Myanmar, and so on,” he says. This research surveyed more than 200 companies working in the Pearl River Delta. Of these, 70% expect a high or medium negative impact from a trade war. This in part explains the shift towards other markets in Asia, a medium-term endeavour that may take three to five years to complete. However, these shifts are likely to occur regardless of the resolution of the trade war, due to the increase in labour costs in China. “Net-net I don’t expect anybody to benefit from the trade war. In the long term it will have a negative impact. In the short term I expect companies to look for tactical places to switch sourcing. In the medium term if it really stays, they will look at rebasing manufacturing into other locations,” Siddiqi says. His views are largely shared among Asia Pacific trade financiers: the industry is yet to experience a material impact from the trade war – with the caveat that the tariffs have only recently started taking effect. “When we think about the trade wars, from my perspective I am more concerned with the trade rhetoric damaging investor sentiment, investor confidence and sending markets lower,” said HSBC’s chief executive John Flint on an earnings call earlier this month. Siddiqi, meanwhile predicts that the future growth engine of global trade will be intra-Asian trade and domestic consumption in emerging markets in the region, namely China, India and Indonesia. This reshuffling of the traditional export model may help shelter the region from future scuffles between the US and China. It may also help banks such as Standard Chartered, which have domestic footprints in these markets. “Traditional factors which drove trade growth in the past were trade between Asia and OECD countries. The EU and US would consume, Asia would produce and sell to those markets. That model is fundamentally changing. Mostly, people will produce to consume it locally: look at markets like Indonesia. Yes, today is dominated by the trade war rhetoric, but these are green shoots that banks like ours are focusing on, because that’s where the revenue growth will be,” he says. The post Standard Chartered on trade war: “At what time does sanity prevail?” appeared first on Global Trade Review (GTR).

Bank of America Merrill Lynch gets global trade head

From Global Trade Review (GTR) | By Shannon Manders

BAML_logo_on-the-move Geoffrey Brady has been named Bank of America Merrill Lynch’s head of global trade and supply chain. He moves from JP Morgan, where he was managing director and Americas region executive in its global trade and loan products division. At BofAML, where he started yesterday, Brady reports to Hubert JP Jolly, global head of financing and channels, who joined from Citi in June last year. Brady has more than 20 years of experience in banking and has held management roles in a variety of businesses, including portfolio management and payments, as well as trade finance. He is BofAML’s first formal global head of trade in almost a year. Percy Batliwalla – who took over from Bruce Proctor when he retired in 2015 – held the position until September last year and then moved to become managing director, strategic initiatives within global transaction services. Jolly has been leading the team in the interim. At the end of last year the bank announced the expansion of roles for two executives who now report to Brady. Fiona Deroo took over leading trade product sales specialists (PSS) for North America global commercial banking in addition to her current role leading PSS for North America large corporate. Her title became head of North America trade and supply chain finance product sales. Lesley McNamara, head of strategy, took on an expanded responsibility as head of global product management, assuming the title of head of global product management and strategy for trade and supply chain finance   The post Bank of America Merrill Lynch gets global trade head appeared first on Global Trade Review (GTR).

Canopius’ credit and political risk hiring spree continues

From Global Trade Review (GTR) | By Shannon Manders

Canopius has appointed Sean Redden as underwriting counsel for its specialty division, with a specific focus on credit and political risk. This is a new London-based role, which reports to Bernie de Haldevang, head of specialty. Redden, a qualified lawyer, joins from Chubb Insurance, where he was the global political risk and credit claims manager. He previously held positions at Signature Litigation, Aspen Insurance, Clyde & Co, Allens and Minter Ellison. At Canopius, he will support the credit and political risk underwriting team, to “help reduce operational risk, increase efficiency and enhance client support in loss mitigation and potential claims scenarios”, according to the insurance firm. He will also assist in managing the legal aspects of debt restructuring and refinancing. “I am delighted to welcome a legal mind of Sean’s calibre to our growing speciality team,” says de Haldevang. Canopius has been steadily growing its London trade credit team since de Haldevang was brought in to lead the specialty division in mid-2016. Underwriters Scott Morrison and William Clark both joined from AIG at the start of last year. Clark leads the trade credit team, reporting to de Haldevang. Mid-2017 then saw the arrival of underwriters Claire Davenport, Daina Muceniece, Stephen Pike and Tim Phillips, senior underwriter Yvonne McCormack and credit and political risk analyst Bruce Shepherd. More recently, Rebecca Marsden left her position as credit and political risk underwriter at AXA Africa’s specialty risks department to take on the same role at Canopius. The post Canopius’ credit and political risk hiring spree continues appeared first on Global Trade Review (GTR).

Crowell & Moring appoints trade partner, establishes California presence

From Global Trade Review (GTR) | By Shannon Manders

Crowell & Moring has hired David Stepp as a partner in the firm’s international trade group in Los Angeles. He joins the firm from Bryan Cave Leighton Paisner. Stepp, a global customs and trade compliance lawyer, has more than 30 years of experience. His arrival expands the presence of the firm’s international trade group into California, further broadening its reach to serve clients across the Pacific Rim. “David’s global customs experience represents a wonderful addition to our international trade group,” says Philip Inglima, chair of Crowell & Moring. “Further building our highly-regarded trade practice is a firm priority, and David’s presence in California presents new opportunities for us. He has a well-earned reputation as a trusted advisor, and his experience will be a tremendous benefit to many of the firm’s clients.” Stepp’s remit is focused on customs compliance and counselling, including tariff classification, valuation, country of origin marking, free trade agreements and other international trade regulatory requirements. He also advises companies on their e-commerce strategies globally, conducts global customs and international trade audits, and counsels clients on improving compliance programmes across borders. He also has experience in advising on trade remedies and co-ordinating government investigations. With a particular focus on Asian trade, his clients span a range of industries, including retail, e-commerce, aerospace and a broad range of consumer goods. According to John Brew, chair of the firm’s international trade group, the hire now allows Crowell & Moring to expand its capabilities to provide counsel on “emerging trade issues worldwide”. “Given the current trade wars and uncertainties of the global trade environment, clients are hungry for deft guidance to minimise tariffs, resolve supply chain disruptions and secure market access. David has a strong trade practice and skill set that meets all of these client needs,” he says. Stepp has practiced in California, Singapore and Washington. He joined Bryan Cave as a partner in 2005, and later served as managing partner of Bryan Cave’s Singapore office. His previous experience includes working with a major US customhouse broker, where he advised the company’s importing clients on US customs practices and procedures. The post Crowell & Moring appoints trade partner, establishes California presence appeared first on Global Trade Review (GTR).

UKEF backs country’s largest export deal with Israel

From Global Trade Review (GTR) | By Shannon Manders

Boeing 787 Dreamliner Take-off UK Export Finance (UKEF), the country’s export credit agency, is providing a guarantee for a US$125mn loan from Citi to El Al Israel Airlines to finance their purchase of one Rolls-Royce-powered Boeing 787 aircraft. The deal is part of Rolls-Royce’s contract to supply engines for 16 such aircraft for the Israeli airline. According to UK international trade secretary Liam Fox, this contract is “the largest single export deal the UK has had with Israel, and a marker of the strength of the trade relationship between the two countries”. “British goods remain in global demand – this is the first time that UKEF has supported an aircraft delivery to El Al and clearly shows the value of support from the UK’s export credit agency to the UK’s aerospace engineering sector,” says Fox. This is the sixth aircraft to be delivered as part of the contract. UKEF is considering extending its support to cover future deliveries of Rolls-Royce-powered Boeing aircraft to El Al. The announcement comes days after the UK government launched its new export strategy, which lays the foundation for how the government plans to support exporters in the years ahead. The strategy sets out the government’s ambition to increase exports as a proportion of GDP and to produce “more tailored support” to UK companies. Key elements of this support will be peer-to-peer learning to encourage more businesses to export; the development of the department for international trade (DIT)’s website into a “single digital platform” for practical advice and assistance on exporting; and the creation of an online tool to enable UK businesses to easily connect to overseas buyers, markets and other UK exporters. The response from the UK trade community has been mixed, with one source telling GTR that the new strategy is a sign that the government has acknowledged that its lack of communication forms part of its shortcomings and is simply “passing the buck” on to UK companies themselves to engage in peer-to-peer learning. The plan comes into play immediately and with no fixed deadline. “We are considering next steps in terms of an implementation plan and its governance, including monitoring and tracking progress against each of the measures,” a spokesperson from the DIT told GTR this week.   The post UKEF backs country’s largest export deal with Israel appeared first on Global Trade Review (GTR).

CargoX goes live with blockchain-based bill of lading

From Global Trade Review (GTR) | By Sanne Wass

Blockchain startup CargoX will roll its blockchain-based bill of lading solution into production next month, having carried out its first live pilot. The trial saw the shipment of garments from Shanghai in China to Koper in Slovenia, where it arrived on Sunday, using CargoX’s Smart B/L service. It involved Metro d.d (the importer), Hangzhou Doko Garments (the exporter) and was shipped by a large freight forwarder, whose name has not been disclosed. According to CargoX CEO and founder Stefan Kukman, other trials are currently underway, and the product will be made available to clients next month. The Slovenia-based blockchain firm raised over US$7mn in an ICO in January. The platform, which digitises the issuance and transfer of bills of lading, targets freight forwarders and NVOCCs (non-vessel operating common carriers), who will then be able to offer the solution to their customers. In the first live pilot, which the startup announced completion of today, the bill of lading was successfully processed in minutes, and at a cost of US$15, with the help of a public blockchain network. That’s a significant improvement from the days or weeks that a conventional, paper-based process usually takes, and which costs up to US$100. “This will give us the opportunity to lower the cost of importing goods significantly,” says Miloš Košir, logistics manager at Metro d.d., the pilot’s importer, which runs a network of 200 MANA clothing stores throughout Central and Eastern Europe. “We import hundreds of TEU [twenty-foot equivalent unit] from the Far East, and we are always trying hard to optimise our supply chain. If it raises the safety and reliability of the document transfer, that is an added value for us as well.” Zongyong Lin, CEO of Hangzhou Doko Garments, a manufacturer, and the exporter on the pilot, points to the option of overseeing the flow of the bill of lading, while always having access to an archive, as “advantages that we really think could bring a great benefit to us. We are looking into the opportunity and the effect it would have for our company as a whole”.   A tight race to digitise shipping CargoX is not alone in its aim to help firms involved in global trade digitise and streamline documentation using blockchain. Just earlier this month, Maersk and IBM announced they are live with the early adopter programme for their blockchain-powered global trade platform, called TradeLens, involving 92 participating organisations from across the globe. The platform connects all parties in the trade ecosystem and enables them to interact efficiently and access real-time shipping data. It also allows participants to digitalise and exchange trade documentation – anything from packing lists and shipping instructions to bills of lading and certificates of origin. The announcement followed a 12-month trial phase where more than 154 million shipping events were captured on the TradeLens platform, which will be made fully commercially available by the end of the year. Meanwhile, CargoX has dedicated its efforts to “solving one problem at a time”, says Kukman. In the first instance, the firm is focusing only on the bill of lading, but it plans to later expand its platform to the letter of credit. “Looking at the current situation, we made a proper decision and sticking to our game plan is paying out,” Kukman says. “By successfully completing the official test shipment we are concluding our development and testing phase of our CargoX Smart B/L solution, which will now be available to all logistics and shipping companies.” The firm says it is currently onboarding other large freight forwarders, NVOCCs and their customers. One client that has been named is Swiss freight forwarder Fracht AG. Kukman tells GTR the solution is now “stable from the development point of view”, but that “there might be some product tweaking as we gather feedback from customer trials”. The feedback has so far been positive, but rolling it out across all of the freight forwarder’s customers will take time, he says. “Forwarders of this magnitude are huge and globally dispersed entities, so it is not possible for them to roll out the solution in a very short time. They will evaluate how to integrate our solution into their processes, and we expect that to happen in the coming months. But the calculations of time and money saved speak for themselves – and this might help them improve their fiscal earnings really quickly and efficiently. And with less risk to their customers, too.” The post CargoX goes live with blockchain-based bill of lading appeared first on Global Trade Review (GTR).

Rising temperatures to threaten oil, agriculture and manufacturing exports

From Global Trade Review (GTR) | By Sanne Wass

Rising temperatures could “substantially undermine” export markets across emerging economies, new research from global risk analytics company Verisk Maplecroft finds. The firm’s newly-released 2018 Heat Stress Index assesses countries’ exposure to temperature and humidity conditions. It identifies four regional hotspots expected to bear the biggest economic brunt of rising temperatures over the next 30 years: West Africa, Central Africa, Middle East and North Africa (Mena) and Southeast Asia. In all, 48 countries are rated as being at ‘extreme risk’ from rising temperatures, with African countries accounting for almost half that number. Expected losses all come down to the fact that heat stress slows worker productivity by causing dehydration and fatigue. In extreme instances, Verisk Maplecroft notes, it can also cause death. The risk is therefore particularly high in the agriculture, mining, oil and gas and manufacturing sectors, as work is highly intense and often outdoors. West Africa is the most vulnerable region, given the importance of the extractives and agricultural sectors to the region’s export economy. The research finds that 10.8% of export values from West Africa are projected to be at risk from heat stress by 2045. This compares to 7.9% in Central Africa, 6.1% in Mena, 5.2% in Southeast Asia and 4.5% in South Asia. Using current values of exports, Verisk Maplecroft has translated this into an estimated loss of almost US$10bn per year for West Africa and US$78bn per year for Southeast Asia. Oil outputs from Nigeria and cocoa exports from Côte d’Ivoire and Ghana are “particularly vulnerable”, it says. In Central Africa, Angola and Gabon, where oil accounts for around 95% and 80% of their total exports respectively, are at high risk. The research also points to the manufacturing sector in Southeast Asia as being “under threat”, particularly in Vietnam and Thailand – key exporters of machinery and electrical components – which account for almost two thirds of the region’s total manufacturing export value. Meanwhile, strains on electricity infrastructure from rising demands for air conditioning to combat extreme temperatures will pose a major threat to reliable electricity supplies, particularly in countries that lack robust energy infrastructure. Again, Africa faces the greatest risks of disruption. With the continent’s urban population expected to expand by 235% by 2050, power capacity increases are “unlikely to keep pace with growing demand”, according to Verisk Maplecroft. The impact of rising temperatures could be dire – not just for the exposed economies, but also for global supply chains. “Taken together, the risk of disruption for companies operating in, or sourcing from, affected countries will substantially increase unless climate adaptation measures are implemented,” the company warns. According to Alice Newman, environment and climate change analyst at Verisk Maplecroft, these labour capacity losses could mean price rises for importers if product availability drops or production costs increase. “Supply chain disruption may also drive businesses to consider sourcing from lower risk locations, which would have a major knock-on effect on regional economies,” she says. Verisk Maplecroft’s estimates are calculated based on projected daily temperatures for the period 1980-2045 and data on the current values of exports. The research does not take into account future growth or diversification of export sectors, meaning it could serve as an important reminder of what is to come if exposed countries and companies turn a blind eye to the risk. “Forward-looking companies can mitigate heat stress risk through a range of measures, including sector diversification, changing work patterns, seasonal adjustment of output targets and climate control,” the firm says. But, it notes, such efforts will require “significant investment”, which many developing economies will struggle to mobilise. While this summer has seen Europe gripped by a heatwave, it remains the region most insulated from the economic impact of heat stress. The 10 lowest risk countries for heat stress are predominantly located in Europe, including the UK and Ireland and the Scandinavian countries. The post Rising temperatures to threaten oil, agriculture and manufacturing exports appeared first on Global Trade Review (GTR).

Trump’s sanctions halt trade credit insurers’ return to Iran

From Global Trade Review (GTR) | By Shannon Manders

Two weeks after renewed US sanctions against Iran, it appears trade credit insurers are winding down the little business they had reinstated in the country since 2016. US President Donald Trump’s decision to reimpose sanctions for non-US persons doing business with Iran, just over two years after they were officially lifted, came as yet another blow to the hope for commercial normalcy in the country. Since the implementation of the Joint Comprehensive Plan of Action (JCPOA) – also known as the Iran nuclear deal –  in January 2016, many global companies worked to resume activities with their Iranian counterparts, and trade insurers reopened their Iranian cover to support this business. Now, reports have emerged about the difficulty in continuing to provide insurance lines for the country. In a Reuters article, Lloyd’s of London chairman Bruce Carnegie-Brown said the re-imposition of sanctions meant insurers “probably” would not be able to process Iran-related business through the Lloyd’s IT platform. Meanwhile, oil tankers have also expressed fears of not being able to access ship insurance. Speaking to GTR, Katayoon Valizadeh, a senior consultant in credit insurance and risk management in Tehran, says she has seen first-hand the withdrawal of most trade insurers from Iran as a result of the sanctions. “After the announcement of the US sanctions, all private credit insurers who had some interests in dealing with the US stopped their cover on Iran. Now as far as I know, only export credit agencies (ECAs) continue to give cover to Iran,” she explains. Technically speaking, cover cannot be cancelled retrospectively, so companies should be able to use the insurance they have already subscribed to in case of default due to the re-implementation of sanctions. Rob Nijhout, executive director of the International Credit Insurance & Surety Association (ICISA), explains: “As far as I am aware sanctions do not apply retroactively, so any delivery prior to new sanctions is subject to the pre-sanction situation. If goods or services were delivered in line with policy conditions, namely in an insured manner when cover was in place, any non-payment resulting from that is covered and paid by the insurer. If exports are made after cover has been withdrawn, either on a buyer or on a country, these are not insured and cannot be claimed if a non-payment occurs.” Based on local observations, it shouldn’t take too long for insurers to wind down their Iranian business, because they are largely only involved in short-term deals, explains Valizadeh. “Some of the big credit insurers, which had claims on Iran because of the blockage of channels of payments due to ex-sanctions, could all recover all their debts [after the JCPOA]. So they reopened their cover for Iran. But on the whole, both businesses and insurers had a tendency to be involved in short-term, rather than medium and long-term transactions or projects.” Statistics on the amount of trade credit and political risk insurance cover in Iran since 2016 are hard to come by, as insurers do not report country-specific data to a central organisation such as ICISA. Individually, representatives from JLT, Lloyd’s, Marsh, Willis and Gallagher all declined to comment on this story. The reticence could suggest that credit insurers are fearful of Trump’s harsh rhetoric against Iran. Talking to the current levels of insurance cover in Iran, Arash Shahraini, board member and deputy CEO of the Export Guarantee Fund of Iran (EGFI), says that he while he observed the return of large private credit insurers in the past two years, it was “not as fast as expected after the JCPOA”. He believes this is because European banks continued to be cautious of working with Iran, despite – in theory – being allowed to do so under the Iran deal. As a result, there has simply not been much business for credit insurers to cover. According to him, the majority of bilateral finance agreements signed between Iran and other nations since the JCPOA, which totalled over US$30bn, “have not been practically implemented due to banking problems”. Iranian companies that have made use of private insurance will now have to turn to other options, such as ECAs. “Right now, I am in the process of negotiations for some transactions and projects for getting cover from ECAs for Iranian projects and transactions,” notes Valizadeh. And while trade with large corporates with interests in the US will likely be interrupted, trade between smaller regional companies still presents opportunities, albeit banking issues will make this trade mostly cash-based, and a lot more expensive. Valizadeh’s consultancy, for example, is currently working with Iranian SME importers to help them build a credit profile and negotiate credit terms with foreign sellers. On the export side, Iranian credit insurers, as well as EGFI, are still extending cover for transactions, both letters of credit and open account. “Iranian traders will find appropriate ways to continue business with their international counterparts, but the costs of foreign trade transactions are expected to increase considerably,” adds Shahraini. The post Trump’s sanctions halt trade credit insurers’ return to Iran appeared first on Global Trade Review (GTR).

Malaysia leads “blowback” against China’s Belt and Road Initiative

From Global Trade Review (GTR) | By Finbarr Bermingham

Amid mounting debts and fears over China’s perceived expansionary intentions, more and more countries are becoming disgruntled with the much-vaunted Belt and Road Initiative (BRI). Malaysia’s Prime Minister Mahathir Mohamad this week used a state visit to Beijing to announce he was shelving plans for two major infrastructure projects that fall under the BRI umbrella. “I believe China itself does not want to see Malaysia become a bankrupt country,” Mahathir said, referring to Malaysia’s high level of sovereign debt, upon announcing his plans to scrap the projects The previous day, standing alongside Chinese Premier Li Keqiang, the recently returned veteran leader had said: “We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries.” Mahathir has cancelled the East Coast Rail Link and the Trans-Sabah Gas Pipeline projects, which were due to cost US$20bn and US$2.3bn, respectively. In doing so, he has echoed the concerns of many other politicians and analysts about the potential debt trap that the BRI could potentially create, as well as the conditionality that could come as a result of being unable to repay these debts. “I would totally agree that there’s blowback occurring on all fronts regarding China’s state-centric soft power, including BRI. I think there’s pushback on all fronts on China Inc’s ambitions to promote Chinese firms and technology,” Alex Capri, visiting senior fellow at the National University of Singapore’s business school, tells GTR. “On BRI, the debt model that Beijing has been pushing for to emerging countries, it’s increasingly seen as a honeytrap that has backfired,” he adds. The situation is laid bare in a recent study by the Centre for Global Development (CGD), a US think tank. Researchers evaluated the current and future debt levels of the 68 BRI countries, finding that 23 of those are at risk of debt distress today. The study found that for eight of those countries, future BRI-related financing will significantly add to the risk of debt distress. These countries are: Pakistan, Djibouti, Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan. The situation in Pakistan has come under intense scrutiny following the election of new Prime Minister Imran Khan. Pakistan is rated by the CGD as “by far the largest country at high risk”, with US$62bn in additional infrastructure debt, 80% of which is owed to China through big ticket BRI projects. While Khan is set to review some of China’s energy and infrastructure investments, the early signs are that he will maintain close economic ties with Beijing. In Sri Lanka, anti-China investment sentiment predates BRI itself. The country was the recipient of a series of high interest Chinese loans which helped build highways, a cricket stadium, a deep-water port and the massively under-utilised Mattala Rajapaksa International Airport, which has a capacity for one million passengers a year, but which sees only a dozen passengers every day. “Some countries are growing increasingly wary about the financing structures associated with Chinese infrastructure investments. There are worries about potentially high levels of debt. In cases of debt-for-equity deals – as with the Hambantota port in Sri Lanka, for example – critics raise concerns about political leverage and territorial integrity,” Joydeep Sen, South Asia analyst at Oxford Analytica tells GTR. Tonga’s Prime Minister Akilisi Pohiva, meanwhile, last week said that Pacific island nations should lobby China to forgive the debts owed to it for infrastructure projects. The country is reportedly US$160mn in debt to China, including a 2007 loan from China Exim to rebuild the capital city Nukualofa following a spate of rioting. “One issue for certain is that we don’t want the Chinese government to take the assets used as collateral for the loan, and when we don’t request for loans, we will not be aligned with the developments of the world it is today,” Pohiva told the Samoa Observer. Even while the pushback gathers pace, however, enthusiasm for BRI remains strong among the banking sector. In a recent glowing report on the BRI, German bank Commerzbank wrote: “Despite these challenges, Commerzbank is confident that, for BRI countries and companies – including those from Europe – as projects increase, so will the opportunities, trust, expectations and rewards.” Citi, meanwhile, has just appointed a head of banking and origination in Hong Kong, dealing exclusively with BRI-related work. The post Malaysia leads “blowback” against China’s Belt and Road Initiative appeared first on Global Trade Review (GTR).

Lenders flock to huge Peruvian project financing

From Global Trade Review (GTR) | By Finbarr Bermingham

mina justa Peruvian miner Minsur has secured US$900mn in project financing for its Mina Justa copper mine. The lenders come from across the world, with over a dozen commercial and development banks joining a group of export credit agencies (ECAs) from countries with strong mining industries. The lenders are: BBVA Continental, BBVA, Banco de Crédito del Perú, Crédit Agricole, Export Development Canada (EDC), Export Finance and Insurance Corporation (EFIC, the Australian ECA), ING, KfW Ipex-Bank, Natixis, SG Americas Securities, Société Générale and the Export Import Bank of Korea (Kexim). Law firm Sullivan and Cromwell represented the borrower, Marcobre SAC, a subsidiary of Minsur, one of the world’s largest tin miners. Mina Justa is set to produce 100,000 tonnes of copper a year when it comes online in 2020. Total project cost is expected to run to US$1.77bn, with Minsur providing the rest of the capital. The mine will be located in the district of Marcona, which is in the Nazca province, in the Ica region of Peru. The deal represents the first greenfield mine project financing to sign in Latin America this year, according to Sullivan and Cromwell. It comes just months after Minsur sold a 40% stake in the project to Alxar Internacional, a subsidiary of Chilean company Empresas Copec, for US$200mn. Kexim, the Korean ECA, is to finance US$200mn of the debt from its own book, with Korean-Japanese consortium LS-Nikko Copper purchasing 30% of the copper output for the next 10 years. Kexim has been growing its presence in Latin America in recent years in a bid to solidify South Korea’s supply of raw minerals. In 2015, it signed onlending deals worth US$3.2bn with five banks in Brazil, Chile and Peru. This followed a state visit by former Korean president Park Geun-hye in the same year, which saw a range of investment deals signed. The most high-profile deal was a US$13bn agreement between the Peruvian energy ministry and Kexim to collaborate on a petrochemical complex. The post Lenders flock to huge Peruvian project financing appeared first on Global Trade Review (GTR).

German development bank KfW supports Indian renewables

From Global Trade Review (GTR) | By Finbarr Bermingham

kfw KfW Ipex-Bank, a German development bank, has loaned €200mn to support renewable energy production in India. The borrower is Rural Electrification Corporate (REC), a government agency that will onlend the finance in the form of low-interest loans, to investors in the solar and wind power sectors. Borrowers must contribute 30% in equity to any project supported by the REC scheme, while it is also hoped that other banks can join financings through syndication. It fits in with the Indian government’s plans to produce 175GW of renewable energy by 2022. This would represent around 50% of total energy generation. 100GW would come from photovoltaic energy under this plan, with a further 60GW coming in the form of wind energy. The rest would come from smaller sources, such as biomass and small-scale hydropower. This KfW Ipex package will see enough power generated to support 270,000 Indian homes, offsetting some 285,000 tonnes of carbon emissions each year. It marks the fourth line of credit REC has received under the Indo-Germany Development Co-operation, a bilateral initiative designed to support renewable green energy projects in India. KfW Ipex has a history of supporting rural electrification in South Asia. Since 2016, it has provided support for Myanmar’s rural electrification programme, culminating in a financing package in 2017. The post German development bank KfW supports Indian renewables appeared first on Global Trade Review (GTR).

Bank of America bankrolls Texan wind farm

From Global Trade Review (GTR) | By Finbarr Bermingham

engie Engie North America has secured US$320mn for a wind project in Texas. The lender is Bank of America Merrill Lynch, with US$147mn of the funds coming in the form of construction finance, and US$155mn in project finance. Rabobank provided a letter of credit, while BofAML provided a power hedge. The funds will help build the 200MW Live Oak wind farm, part of a renewables portfolio recently purchased by Engie. The farm will come online at the end of the year. The project will use 76 Siemens-Gamesa 2,625MW turbines with 120-metre rotors, and the balance of the facility will be constructed by Blattner Energy. Engie acquired the Live Oak project from Infinity Renewables, which began developing the site in 2009. Senior vice-president and head of US wind development at Engie, Matt Riley, described it at the time as “the strongest wind portfolio in the US”, saying that “Live Oak is just the first of many successes we expect over the coming years”. Upon the announcement of the financing package, Riley said: “We’re pleased to enhance the Live Oak project’s value with a competitive financing package and long-term offtake agreement. We look forward to replicating both elements in our future projects as we grow our large-scale renewable portfolio here in the US.” The post Bank of America bankrolls Texan wind farm appeared first on Global Trade Review (GTR).

Citi creates banking role for Belt and Road Initiative

From Global Trade Review (GTR) | By Finbarr Bermingham

citi Beibei Li is to become Citi’s head of banking and origination for China’s Belt and Road Initiative (BRI), an initiative geared towards constructing infrastructure along the old Silk Road route. She will be based in Hong Kong, reporting to Gerry Keefe, head of corporate banking for Asia Pacific. Li relocates from New York where she is currently managing the Chinese institutional client portfolio in North America. Li has worked at Citi since 1999, initially as a management associate. She has subsequently worked in a number of consumer and corporate banking roles. She begins her new role at the start of September. This will be viewed as an attempt by Citi to capitalise on the expected growth in trade spurred by the BRI. The bank is present in 60 of 70 BRI markets. To date, most of the financing has been done centrally by Chinese policy banks and government lenders. However, Keefe says that Li’s appointment will help position the bank as a funding partner for BRI projects. “The BRI is a strategic imperative for all of our major corporate, public sector, financial institution and global subsidiary clients operating along the Belt and Road – both global and local names. As such we have created a new leadership position to help align the firm’s strategic priorities, connect product and coverage partners, and drive further business opportunities across the BRI economic corridors,” he says in a bank statement. The post Citi creates banking role for Belt and Road Initiative appeared first on Global Trade Review (GTR).

Standard Chartered trade finance banker joins AIG

From Global Trade Review (GTR) | By Sanne Wass

Olga Berlinskaya has left Standard Chartered to join AIG’s supply chain and trade finance team. At Standard Chartered she was an associate director within the capital structuring and distribution group. There she worked with the distribution of financial institution and corporate trade assets into the secondary market, and risk participation in supply chain and receivables finance programmes, covering a European and Sub-Saharan African portfolio of financial institutions and alternative investors. She previously worked at Bank of America Merrill Lynch, HSBC and Olam International. At AIG, Berlinskaya has taken on the role of senior business development and relationship manager. Heading up AIG’s supply chain and trade finance team is Marilyn Blattner-Hoyle, who was promoted to the role last year after Scott Morris moved to Sompo Canopius. With her move, Berlinskaya joins a growing number of trade finance bankers who have left banks and taken the leap into insurance. A relatively recent example is Chris Hall, who moved from Lloyds Banking Group to become a senior underwriter at Liberty Specialty Markets earlier in the year. In 2015, Silja Calac took on an underwriting role in Swiss Re’s credit and surety team, and spoke to GTR recently about changing track almost two decades into her banking career. The post Standard Chartered trade finance banker joins AIG appeared first on Global Trade Review (GTR).

UK’s new export strategy draws mixed response from trade community

From Global Trade Review (GTR) | By Shannon Manders

The UK government’s new and much-anticipated export strategy sets out its ambition to increase exports as a proportion of GDP and to produce “more tailored support” to UK companies. Key elements of this support will be peer-to-peer learning to encourage more businesses to export; the development of the department for international trade (DIT)’s website into a “single digital platform” for practical advice and assistance on exporting; and the creation of an online tool to enable UK businesses to easily connect to overseas buyers, markets and other UK exporters. Response to the new strategy – which was launched today by international trade secretary Liam Fox – has been mixed. The British Exporters Association (BExA) says it is “extremely encouraged” by the new plan and welcomes the “challenging growth targets” that have been set. BExA co-chair Marcus Dolman calls the government’s export target of 35% of GDP “ambitious but achievable”. In 2017, this number was 30%, amounting to £620bn-worth of goods and services exported by British companies. It’s the first time the government has used this measure to quantify its exports. “It’s preferable to a nominal value target as it more accurately reflects changes in the UK’s underlying export performance,” a DIT spokesperson tells GTR. No time frame on the target was provided. According to DIT estimates, as many as 400,000 businesses believe they could export but don’t – and these form the focus of the new strategy. Demand for British expertise and goods overseas, meanwhile, is growing. The strategy’s business-led approach –in which the government intends to work closely with the private sector to drive exports – has been hailed by some market players as crucial. Speaking at the launch, Adam Marshall, director general of the British Chambers of Commerce, said that the right day-to-day support for exporters is “as important as efforts to negotiate new trade deals”. “Trusted, face-to-face support is key to export success. When firms get the information and connections they need to develop new markets and find new customers – that is when we see confidence, investment and results,” he explained. Others are less encouraged by this approach. One source tells GTR that the new strategy is a sign that the government has acknowledged that its lack of communication forms part of its shortcomings and is simply “passing the buck” on to UK companies themselves to engage in peer-to-peer learning. The new strategy stipulates that there will be an “increased focus on amplifying the voice of existing exporters to inspire other businesses and facilitating peer-to-peer learning”. It does not outline how the government will incentivise companies to support their peers in this regard. “It’s not going to work,” says GTR’s source, a former UK banker with close ties to the government, who prefers to remain unnamed. “Most UK companies are lethargic. Those that are proactive and have this knowledge know exactly how much energy, cost and time it’s taken to get hold of that information and keep it up to date. Often this knowledge is gleaned from having in-country capability. They’re not going to give that away for nothing.” The DIT tells GTR that it will be creating a “community of new UK Export Champions” as one way of overcoming this hurdle. “Our consultations with businesses have concluded peer-to-peer is a more sensible way of engaging with business rather than dictation from government,” the spokesperson says. The new strategy – which comes into play immediately and with no fixed deadline – lays the foundation for how the government plans to support businesses in the years ahead. The next phase will see the DIT work across government to review what further measures could help improve its export performance and meet the 35% goal. “We are considering next steps in terms of an implementation plan and its governance, including monitoring and tracking progress against each of the measures,” the spokesperson explains. “It’s a long-term aspiration.” The post UK’s new export strategy draws mixed response from trade community appeared first on Global Trade Review (GTR).

Argentina’s SMEs to get better loan terms with new deal

From Global Trade Review (GTR) | By Shannon Manders

Argentinian SMEs will benefit from a US$55mn loan that the International Finance Corporation (IFC) is providing to private bank Bind Banco Industrial. More than 70% of Argentina’s SMEs have difficulties accessing financing. Through this funding the Bind Banco Industrial will be able to offer SMEs longer-term financing than currently available in the local market. “With IFC’s partnership, we will strengthen our support to SME clients, which represent our main market segment,” says Javier Popowsky, the bank’s CFO. Bind Banco Industrial has a strong focus on SMEs, mainly in the agribusiness, services and manufacturing industries, as well as wholesale trade. It became an IFC client in May 2018 when it joined IFC’s global trade finance programme, which facilitates trade flows through guarantees and includes a network of more than 70 banks in Latin America. “Bind Banco Industrial has a solid track record supporting smaller businesses in Argentina, and with this new funding we want to help the bank extend the tenor of its lending to SMEs,” says David Tinel, IFC regional manager for the Southern Cone. “Longer-term credit is crucial to plan, seek growth and hire new employees.” Over the past 18 months, the IFC has committed approximately US$1.7bn to support sustainable private sector projects in Argentina. The post Argentina’s SMEs to get better loan terms with new deal appeared first on Global Trade Review (GTR).

Mizuho Americas takes on new transaction banking head

From Global Trade Review (GTR) | By Shannon Manders

Jan-Erik Andersen has joined Mizuho as managing director and head of global transaction banking department Americas (GTBDA). He makes the move from Exvere, a Seattle-based mergers and acquisitions advisory firm, where he served as managing partner and COO. He previously held positions at Fifth Third Bank and Standard Chartered. Andersen is based in New York and reports to Takeshi Ohashi, general manager of the global transaction banking department in Singapore. Within GTBDA, Andersen is tasked with leading the group’s expansion of trade and cash management product capabilities. He will also lead the Mizuho Americas’ working capital solutions initiative, to create more multi-product, cross-regional opportunities for clients, a spokesperson for the bank tells GTR. The post Mizuho Americas takes on new transaction banking head appeared first on Global Trade Review (GTR).

PIB TradeRisk Solutions expands team

From Global Trade Review (GTR) | By Shannon Manders

PIB Insurance Brokers has made another appointment to expand its TradeRisk Solutions team, hiring Maria Antonia De Carli as an account executive. The move follows the appointment of Nicola Salmon as an account executive last year. De Carli previously worked within the political risk and structured credit team at Aon and is based in London. Like Salmon, De Carli will have an international remit to provide political risk and structured credit insurance solutions to clients in the SME, corporate, commodity trade, banking and financial institution sectors. Her current focus, De Carli says, is on LatAm markets. “This region has a great potential, and due to its more stable geopolitical and economic scenario, it presents great opportunities for our clients.” Richard Miller, head of TradeRisk Solutions, comments on the hire: “Maria’s geopolitical and economic research and analysis will help our clients trade and compete on the global stage. Maria is well respected by underwriters and her focus on client service and delivery expands our offering and further deepens the expertise of our team.” The team’s main strategy is focusing on development as well as PIB Insurance Brokers’ presence and expansion, says De Carli. “We aim to grow nationally and worldwide and become an international reference for new clients and underwriters.”   The post PIB TradeRisk Solutions expands team appeared first on Global Trade Review (GTR).

BNP Paribas reshuffles Asia transaction banking team

From Global Trade Review (GTR) | By Finbarr Bermingham

French bank BNP Paribas has made a series of senior appointments to its transaction banking team in Asia Pacific. Mahesh Kini (pictured) joins as head of cash management for the region. He moves from Deutsche Bank, where he was most recently head of global transaction banking for China. During his time with the German bank he also held the roles of head of corporate cash management for Greater China and head of cash management for corporates, Asia. Kini joined Deutsche Bank from HSBC in 2007 and has also worked for ABN Amro, Bank of America and HDFC Bank in India. He is based in Singapore and reports to Chye Kin Wee, head of transaction banking for Asia Pacific. Zoran Lozevski is now BNP Paribas’ head of global trade solutions, Asia Pacific, also based in Singapore. He was most recently head of transaction banking for Australia and New Zealand for the bank. He joined BNP Paribas in 2007 from George Weston Foods Group. He is replaced in Australia by Michael Reid, who joins the bank from Citi and is based in Sydney. Louise Zhang has been named head of transaction banking for China, based in Shanghai. She joins from Deutsche Bank, where she spent 11 years, most recently as deputy general manager for the Shanghai branch, and head of cash products for the Greater China region. Zhang previously worked for HSBC in Hong Kong and Shanghai. She reports to Timothy Lee, who is the new head of transaction banking for Greater China. This role is based in Hong Kong. Lee will be responsible for connecting the bank’s China business with the rest of the Asia Pacific region. He has worked for BNP Paribas for five years, and joined from JP Morgan. Lee has also worked for HSBC, Citi and Deutsche Bank. “We are pleased to welcome so many senior hires to our existing, deep pool of talent. Their extensive experience will strengthen our position as a leading transaction banking business in the Asia Pacific region,” says Chye Kin Wee. The post BNP Paribas reshuffles Asia transaction banking team appeared first on Global Trade Review (GTR).
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