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BD a viable hub of cos leaving China

StanChart official tells the FE

FE Report | December 12, 2018 00:00:00

Farooq Siddiqi

As more and more companies look to relocate production bases away from China, Bangladesh can be a major alternative for global supply chain, said a senior Standard Chartered banker.

But it needs more investment in big infrastructure while ensuring a congenial investment climate to reap potential benefits, he observed.

Farooq Siddiqi, global head of trade and transaction banking of Standard Chartered, said this during an exclusive interview with the FE in Dhaka recently.

"Recently, we've done a survey of a number of companies in the Pearl River Delta region of China," he added.

He said, "The survey found that many of these companies are thinking of setting up fresh capacities in other locations since labour cost in China is growing up."

In fact, Mr Siddiqi said, Bangladesh is one of the top five destinations where they would like to move their capacities-the survey found.

"So, I think Bangladesh presents itself as a very good destination for attracting some of those investments."

The StanChart official observed that the country needs to foster its infrastructure and investment climate to keep growth momentum and benefit from this relocation.

"Bangladesh's recent growth performance is quite impressive. However, to sustain this growth, the country needs a few things," he said.

"It needs to ensure that the country's investment climate is positive. At the same time, it also needs to continue to invest in building infrastructure".

The senior banker also emphasised the growth of small and medium enterprises (SMEs) for sustainability.

"Ultimately, it is the SMEs which drives the big part of any economy," he said.

About the ongoing trend of trade finance, Mr Siddiqi observed that trade financing globally is moving away from documentary mode to a more 'open account' mode.

"In most markets, we're witnessing a major shift towards open account trade as a cost-saving measure."

"It doesn't mean that documented trade is dead or will die any time soon. But certainly the shift towards open account is happening," the official said.

"The second trend we're seeing is a transformation from paper to digital. And when I talk about paper to digital journey, essentially it is about enriching some new technology and using it to reduce the cost."

"Thirdly, we're witnessing the emergence of a deeper and more complex cross-border supply chain," Mr Siddiqi said.

"And in the world of trade finance, the bank's ability to understand this complex supply chain is very crucial," he observed.

Mr Siddiqi also identified this global funding gap for SMEs as a potential focus area for trade financing.

"A recent report from Asian Development Bank found a global funding gap of $1.5 to 1.6 trillion for SMEs-roughly 60 per cent of which comes from Asia."

"The ability to fill up this funding gap can actually be a very important focus for trade financing globally," he mentioned.

The banker also identified the growing importance of domestic trade in Asia as a major focus for future trade financing.

"Normally, when we talk about trade, we think of cross-border trade. However, as Asian economies grow, there will be a rise in domestic consumption in these economies which would result in a rise in domestic trade in this part of the world."

Mr Siddiqi said emerging technology like big data, blockchain, artificial intelligence and cloud computing will define the future of trade financing and banking activities across the world.

"Everything around the world is going digital. It has also started to impact the business of our clients. This means banks also need to respond to it with a series of digital offerings."

He said, "New products will come as digital version of existing products. Big data, blockchain, artificial intelligence, cloud computing-all these will define the trends of the future."

"In the future, how banks in Bangladesh and other countries work with the regulators to allow this digital landscape to flourish is going to be really important", Mr Siddiqi observed.

StanChart officials identified technology, leather, pharmaceuticals as well as food and beverage as areas where Bangladesh's next wave of export growth can come.

"We've already seen how the combination of cost advantage and excellent workforce has resulted in the success of ready-made garment for Bangladesh," said Apurva Jain, head of transaction banking of Standard Chartered Bangladesh.

"Now we believe sectors like technology, leather, pharmaceuticals as well as food and beverage can see the same degree of growth in near future," he added.

"We're pretty sure that over the next five to eight years, exports from all these four sectors are going to grow dramatically."

Mr Siddiqi said, "Bangladesh is a key market for us and we're very optimistic about its future."

"We're not dealing only with big companies here but we are also vigorously promoting the SMEs."

"As Bangladeshi businesses become more global-we, as a global bank, will support them in meeting their needs in new markets," he added.

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