Published: April 01, 2014
In this month’s Executive Interview, we feature Vikas Arora, newly appointed as Deutsche Bank’s Head of Trade Finance and Cash Management for Corporates, ASEAN. Vikas joined the Bank in 1994 and has held a variety of positions at Deutsche Bank, most recently Regional Head of Trade Finance for Financial Institutions – Asia Pacific. In this interview, Helen Sanders, Editor, talks with Vikas about his new role and Deutsche Bank’s commitment to the ASEAN markets.
When people think of Asia, they typically think first of the economic powerhouses of China and India. Less is said about the enormous growth potential of ASEAN. With a population of more than 600 million, stable growth above 5% over the past few years and flourishing intra-regional trade, ASEAN offers considerable, and in many cases untapped, opportunities for corporations across a wide range of industries. As a result of this strong growth so far, and the scale of the opportunity, ASEAN is a major focus region for Deutsche Bank, and we are investing heavily in deepening our franchise and expanding the breadth of our footprint. We have a long-standing presence in six ASEAN countries, with a focus on servicing the evolving cash management and trade finance needs of both foreign and large local corporations, within the wider spectrum of the bank’s activities.
From a personal point of view, having built a successful financial institution business in Asia, it was an exciting opportunity to drive our corporate business forward in this region. In particular, the diversity of both foreign and large local corporates and the ability to build the Deutsche Bank franchise both in-country and regionally are compelling propositios. Our strong cash management and trade finance for corporates service offering is pivotal to our customer relationships, and the right solutions and services are key drivers for our customers’ success.
In addition to my appointment, Deutsche Bank is investing in a number of senior appointments in ASEAN, for example, for our Direct Securities Services franchise, and also within the bank’s Corporate Banking & Securities division. This division works closely with Global Transaction Banking to offer cohesive, comprehensive solutions and relationship management to our customers.
We are also seeing a growing number of companies setting up regional treasury centres as they expand their Asian operations, not only in Singapore but in other locations as well.
The need for an efficient, robust financial supply chain is a priority that resonates with both local corporates and foreign multinationals operating in ASEAN. Financial supply chain integration and optimisation is one of Deutsche Bank’s key value propositions. For example, receivables financing has an impact on both trade finance and cash management. It improves balance sheet ratios and enables treasurers to manage working capital cycles more effectively. We essentially help to create and implement solutions tailored to our customers’ needs leveraging their financial assets and flows to finance their working capital needs without the need for bilateral loan facilities. A recent non-recourse receivables financing arrangement, for example, included integrated credit insurance, thereby enabling us to manage our own risk profile and to provide a competitive solution to the client. Another solution we designed to extend payment terms included a provision that the bank would pay the supplier on time, but debit the customer on an agreed future date. The benefits to the client included working capital optimisation and an enhanced suppliers’ experience.
We are also seeing a growing number of companies setting up regional treasury centres as they expand their Asian operations, not only in Singapore but in other locations as well. As part of this process, a number of corporate customers are coming to us to identify and implement best practices in areas such as cash management, trade risk and centralised FX risk management.
China remains a key growth engine in Asia and will probably continue to be the dominant trade partner for most ASEAN countries for some time to come. As China’s regulatory environment evolves, and the use of renminbi cross-border increases, we are likely to see an impact on the way that companies based in, or doing business with ASEAN operate.
In addition, there is a notable increase in trade between ASEAN countries as regional and foreign multinationals seek to leverage opportunities in each country. For example, Laos and Vietnam are becoming increasingly important bases for low-cost manufacturing; Indonesia has enormous potential as a consumer base in addition to rich national resources such as iron and coal.
Opportunities for regional liquidity management are dependent on the regulatory environments, and these can differ considerably according to the financial landscape and economic objectives of each ASEAN country. For example, countries such as Myanmar remain largely cash-driven while Singapore is one of the most sophisticated economies in the world. This diversity does create constraints in terms of regional liquidity management, but there is a concerted effort between ASEAN countries to increase economic co-operation through the ASEAN Economic Community (AEC). This journey will evolve over the coming years, but now is the time for banks such as Deutsche Bank to engage in dialogue, as well as identify and develop opportunities that resonate with our customers.[[[PAGE]]]
The trend towards supply chain financing is as apparent in ASEAN as in other regions, with companies across a wide range of industries seeking to leverage financial assets to finance working capital, and improve the resilience of their financial supply chain, which is a key differentiating value proposition for Deutsche Bank in ASEAN. For example, a Thai chemicals company exporting to Indonesia on an open account basis recently set up USD non-recourse financing facility with Deutsche Bank from its Indonesian entity. We structured the solution to include highly competitive USD financing from Singapore, where rates are lower than in Thailand. Another example of an interesting financial supply chain solution we’ve implemented is one for a large Malaysian conglomerate in the petroleum sector that exports to Thailand. The client was seeking to hedge its risk to Thailand. To address both the commercial and risk management concerns within the company, we provided a silent parent guarantee to the Malaysian company. Therefore, in case of default, the bank would step in. This arrangement had the advantage that the company managed its risk to its Thai counterparty without impacting the relationship.
ASEAN countries have had strong GDP growth in recent years and there is a clear trend towards economic co-operation, which is likely to be very positive in encouraging cross-border trade and cash flows. How this will materialise is not yet clear, but corporations can expect new opportunities to emerge as a result of continued growth, co-operation and regulatory change. We are investing heavily in ASEAN markets to enable our multinational customers, whether headquartered in the region or beyond, to leverage growth and take advantage of new opportunities as they emerge.
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