Bangladesh a key market for trade finance
BANKING giant HSBC terms Bangladesh a growth market as the country, with a booming economy, offers huge business opportunities.
“Bangladesh is an important market for trade finance within Asia Pacific and within the group,” said Stuart Tait, head of global trade and receivable finance of the British bank.
Tait began his career with HSBC more than 30 years ago and has held a variety of roles in trade finance, commercial banking, retail banking and wealth management, among many other departments.
During his visit to Dhaka last week, he met a number of leading business leaders in the areas of apparel, pharmaceuticals and others.
“Corporate Bangladesh is very optimistic. The conversations were very open. People talked about their plans and optimism as well as the challenges they face,” he told The Daily Star in an interview.
Tait said any company that is growing faces some common challenges across the globe.
A lack of adequate skilled people, problems with access to finance and poor infrastructure are the key challenges for Bangladeshi businesses, he said.
HSBC is the only international bank with a presence in all of the eight export processing zones of Bangladesh, facilitating trade.
The bank helps exporters ship products to more than 100 countries each year.
HSBC is also the first bank to offer low-cost financing solution to onshore apparel exporters and to facilitate trade settlement based in the renminbi.
The international trade volume of Bangladesh was $21 billion in 2005 and the amount went up to more than $70 billion in 2015. More than 10 percent of Bangladesh’s global trade is channelled through the bank.
“Our customers in Bangladesh are growing. It is solid growth, not sporadic. They are investing for the future,” Tait said.
He is very bullish about Bangladesh. The country records the highest ‘trade confidence score’ in HSBC’s latest survey of 25 countries. Respondents were particularly positive about the outlook for trade volumes and trade with Europe, buoyed by lower costs for logistics and materials and higher profit margins.
“It says so much about the country.”
He said HSBC’s global footprint and its presence at both ends of the world’s biggest trade corridors means the bank is uniquely positioned to help customers profit from this wave of change and capitalise on emerging growth opportunities.
Textiles and garments account for more than 80 percent of Bangladesh’s exports. But HSBC says the future is not just in clothing for Bangladesh.
Chemicals, machinery, mineral fuels, transport equipment and raw materials are set to grow at a double digit pace from 2016-20 with the only one growing slower is likely to be agriculture, which largely reflects the economy is upgrading.
The London-based bank expects export of clothing and apparel to contribute three quarters of the increase in exports from 2021-30.
Tait said there is a slowdown in the advanced economies and the demand is not picking up. But volumes are still growing.
“What is apparent to us as we operate with so many companies in so many countries, in recent years there has been growth in the east and the south, and we expect that to continue.
“If you look beyond the West, for example in China, individual consumption is growing.”
He said the shift in the flow of trade to South and East from traditional developed markets over the coming years will transform international supply chains and give a major boost to emerging economies.
Tait also talked about the oil price which has started to rebound in recent months after hitting a historic low.
“There is a question whether it will continue. Our view is any excess in supply relative to the level of demand will work its way through. We believe the commodity prices will continue to recover.”
The bank’s first quarter results were published recently. Its net profit in the quarter fell to $4.3 billion from $5.26 billion a year ago. Revenues declined 5.8 percent in the first quarter to $14.98 billion.
Without going into details, Tait said: “It is a positive set of results relative to expectations.”
He said some of the bank’s products that are strategic to growth have performed well compared to the market.
Businesses in Bangladesh are expecting double-digit growth in a world where both trade and GDP growth are sluggish, said Tait.
Bangladesh is becoming competitive in the garment industry for a variety of reasons, including standards and accreditation received by many corporate firms, its geographic location between China and India and strong relationships built with big buyers and retailers.
“It is not just cost of labour.”
Growth of the apparel sector is a success story for the country and it should not be overlooked. “All companies and governments look to diversify revenue streams. Often, we need an engine for growth. A particular engine at a particular time can be harnessed and that’s a good thing.”
But industries in Bangladesh are far more diverse than just garments, he said.
According to Tait, growth is hard to come by in some of the largest economies at the moment, and much of the attention in the corporate world is around costs.
At the same time financial technology or fintech companies have emerged which can help cut costs. Partnerships are being created between trading companies, banks and fintech firms to look at ways to streamline trade.
He said HSBC is working with fintech companies and also to digitise trade. The bank is constantly working to bring ease to doing business for its clients.
Infrastructure is a big area for companies to invest in, and this is true for many countries, particularly in Asia. “We also see the demand for better infrastructure in Bangladesh.”
HSBC has arranged about $1.12 billion to implement four major power projects, of about 1,300MW, for the government in the last three-four years.
“We will continue to do that. We have the capability in project financing and are keen to do business with those who are active in the sector. We make expertise available from around the group.”
He said economic growth of more than 6 percent year after year puts strains on any infrastructure.
“In Bangladesh, it is encouraging that the government is investing in energy for the large unmet demand and HSBC would like to partner with relevant parties to make that happen.”
Once a sprawling bank across 87 countries, HSBC has exited swaths of businesses across the globe to improve profits and now has operations in 71 countries.
Its main regions now are Asia, the UK and North America. In February, HSBC decided to stay based in London after considering a return to its original Hong Kong base.