Friday Sep 20, 2024
Friday Sep 20, 2024
Tuesday, 30 September 2014 01:00 - - {{hitsCtrl.values.hits}}
Q: What was the purpose of your visit?
A: I have had a busy schedule. I met senior management to discuss what short-term plans are and how we want the business to grow. I met top customers to find out what’s happening and get a sense from the customers how the economy is and what challenges they see. I also met regulators to find out whether they are happy with what we are doing as the leading foreign bank in Sri Lanka and advising them on what our future plans are.
Q: You oversee 12 countries in the Asia Pacific. What is HSBC’s take on Asia/emerging markets at present?
A: I have direct accountability for 12 markets. Though I don’t manage the five big Asian markets – China, Hong Kong, India, Singapore and Australia – from a strategic perspective I look at all markets in Asia Pacific. The last 12 months have been interesting. China is going through a redefinition of what its economic forecasts are. I don’t think it is sustainable for China to continue to grow at 10% year-on-year, so they are recalibrating on what they want to do. I think that has an impact in rest of the region.
Additionally we have had elections in India and Indonesia. Six months before the elections there is always a period of wait and see. So a lot of infrastructure projects, etc., had been on hold till elections were over. The West is going through its own issues. Almost all market expectations are that sooner rather than later the US and others are going to tighten monetary policy and what impact it will have on countries that have a current deficit. Prior to this Asia was used to high year-on-year growth. So everyone took a step back and re-evaluated where the world is heading. So clearly growth prospects have been stable but subdued for a variety of factors.
Q: Within the 12 markets, which are on growth mode?
A: On the one end I have New Zealand and the other Mauritius. From developed markets, I have Japan and Korea as well. In emerging markets, I look at Bangladesh, Sri Lanka and Vietnam, etc. Everyone is in different phases. I think Sri Lanka and Bangladesh have a very good economic story at the moment. Vietnam is going through a correction. Japan is getting very active again with its banks going cross border. We also saw the Japanese Premier visiting Sri Lanka and the region. Korean companies too are going cross border. New Zealand just concluded an election with the incumbent re-elected for a third term.
Each one is in a different phase. In some countries; there has been significant double digit growth and in some other markets maintaining the same levels is a big achievement. But everywhere HSBC continues to gain market share. That is the key. It is not that the economy is growing at 10% and we are growing slow or losing share to others. If we are flat, our competitors might be 5% behind previous year. That is the other matrix we look at because you have to grow in accordance with what happens in the economy. Economies in the subcontinent have done well. Sri Lanka is well poised to grow and I think now is the time.
Q: What are the key challenges for the countries in the region?
A: The challenge will be to persist with low inflation, a low interest rate environment and enough encouragement of the private sector to continue with their investments. What all these countries need to do is enhance connectivity, a key initiative that HSBC is also championing. For example, Sri Lanka is an island but it cannot afford to be an island or isolated. It is listening very much to see what some of the large trade partners are asking for, what some of the key people who are looking to invest in the country want, what makes the economic environment attractive for foreign investors. If it is a welcoming policy at present, then it will pay dividends in the medium- to long-term.
The fact is that everybody is competing with each other. People have a choice now. As long as it is a welcome regime for foreign investors and domestic private sector investment increases, prospects remain bright. Sri Lanka has the advantage because it has the infrastructure growth earlier on as well new ones coming in. That is important from a foreign investor perspective. So overall the fundamentals are there, but keeping interest rate low and keeping a tight grip on monetary policy are important. It must be ensured there are no hiccups along the way, because foreign investors get very spooked by hiccups.
In all countries, the geopolitical situation is important as well. Whether one likes it or not, in any country during pre-election you will see things slowing down, depending on what is expected. If there is any uncertainty or surprises, people will hold back. It is not just foreign investors; even domestic investors behave the same way as all wait and see. Uncertainty always has a big impact. For example, in Thailand, because of uncertainty, we have seen a real slowdown. The ‘business as usual’ approach carries on; but people have held back any proactive investments. So a stable geopolitical situation, tight monetary policy low inflation and interest rates are important.
Q: What will be the key challenges for HSBC?
A: In most of the 12 countries, HSBC is positioned very well. What we as a bank need to do is continue to focus on our customers. It is not about expanding the business rapidly and going after new-to-bank customers. In most markets we have the right market share. We need to make sure that we are following the business very closely.
Everyone looks at trade with the West but if the West is slowing, it has a big impact in Asia. But more and more what we are seeing is intra-region trade in Asia. An obvious example is trade in and out of China and every country is running a trade deficit with China. However, more and more within ASEAN region there is growth in trade.
You have very interesting trade corridors that are emerging. A lot of Thai businesses are expanding to Vietnam. I know a number of Sri Lankan firms are exploring Vietnam. Bangladesh companies are moving cross border too. The whole dynamics of trade are changing and that plays to our strengths. It is not about GDP is slowing down and there are no opportunities. I think there are different types of opportunities and the whole picture of intra-region trade continues to develop. We will continue to explore emerging trade corridors and add value to our customers in this respect.
Q: In a region which had seen several elections and is likely to see more in the future, how has HSBC managed to maintain its growth momentum?
A: Luckily or unluckily, in most of these markets we have been in there for more than 100 years, so we are used to these conditions. We are not short-term; have been in these markets over the long-term. If for two years a market doesn’t grow, I am not re-evaluating but we will look after and stay close to our core customers as they will continue to expand. The pace of growth may slow for a couple of years, but that is okay. If the economy is growing at 7%, we are not looking to grow by 25%. If I do it will be short-term gain but two years later I am going to pay the price where you have bad debts, etc. During short-term blips we ride with it, lowering our expectations, and grow accordingly.
Q: What is your outlook on Asia?
A: A lot of people talk of the 21st century as Asia’s emergence but if you go back in history it is correct to say it is Asia’s re-emergence. In the past it was Asia which led the world. Leaving that aside, I think all roads and all economic indicators suggest the 21st century will be Asia’s. This is not to discount the West, but rather a rebalancing. So dominance of the West will probably reduce. When you say emergence it means more balance.
China and India will figure prominently in this scenario and Asia will take centre stage. However, one has to be mindful of geopolitical tensions in the region as well. If there is political stability, it is difficult to imagine the new century is not Asia’s.
Q: How do you see Sri Lanka’s outlook?
A: Sri Lanka is quite a positive story at the moment. This is because the optics around the story are excellent. There has been a significant spend in infrastructure over the last few years. Sri Lanka has an ideal strategic location. Clearly the business environment in the last three to four to five years has been attractive to foreign investors.
Earlier on I spoke about connectivity. I think now is the time for Sri Lanka to really connect the domestic story with the regional and global economy. It is about how Sri Lanka makes itself relevant. There are several high growth and high potential sectors such as IT/BPO, financial sector, etc.
It is a two-pronged focus. One is to stimulate the domestic economy and assess and deliver on what role Sri Lanka can play regionally/what value Sri Lanka can bring, which is better than the rest. It is that connectivity – each one spurs the other. More foreign investment spurs domestic activity, which in turn spurs domestic consumption. This in turns spurs more FDIs. If Sri Lanka can emerge as a regional centre for some of the select activities, that again spurs further investment and makes Sri Lanka part of the global supply chain.
The value for Sri Lanka first is to look at Sri Lanka and not South Asia and see how Sri Lanka can add value to a regional financial centre like Singapore. If Sri Lanka wants to move up regionally, see what Singapore has done. My personal view is that rather than going with a bloc with all other different countries in the region, it is best for Sri Lanka to go it alone after identifying core competence and move forward than waiting. If attractive, others will tag along. If you wait and try to build consensus within the region before you embark, it may take a longer time and perhaps the window of opportunity may pass.
Q: Post-war Sri Lanka is rapidly opening up and forging new relationships in the Asian region. What role will HSBC play in spurring intraregional trade for Sri Lanka and investment flows into Sri Lanka?
A: The current state of the economy in Sri Lanka actually plays to our strength. There has been a lot of infrastructure built with Chinese assistance and HSBC, being the largest foreign bank in China, has been able to facilitate a considerable part of this development. Equally we have been part of every sovereign bond issued by the Government to date. This has made us take Sri Lanka to the world and help Sri Lanka raise debt and capital. We have also helped our customers forge into new markets and trade corridors.
In terms of foreign investors coming into Sri Lanka, especially from Asia, we have played a key part. We have educated our customers overseas amongst who are current and prospective investors in Sri Lanka. As Sri Lanka becomes more attractive to foreign investors, continuing to provide the right information about Sri Lanka and facilitation will be persisted with. The more cross border Sri Lanka goes, the stronger it is for us. Domestically, as Sri Lanka continues to prosper, we have the most comprehensive suite of products to offer, encompassing corporate, trade, consumer and retail banking.
Q: You mentioned some of the key criteria – low inflation, interest rate, encouraging the private sector and geopolitical stability. What else should Sri Lanka get right in terms of policy?
A: From a policy perspective, Sri Lanka is fine. So is the stability aspect. This good track record must be continued with, as investors like certainty. The Central Bank has done an excellent job so far and there has been continuity and credibility. People like certainty and as long as certainty is there, growth will take place. With elections around the corner, I am sure investors will be watching that space. More of the economic policy perspective will be good. So people can separate the two i.e. elections can take place, but the economic trend and direction is quite clear and straight.
Q: Are HSBC customers bullish?
A: They are optimistic. We bank a lot of internationally-connected companies and the feedback they get from their customers is positive as well. Even in a period when credit growth is challenging, our balance sheet continues to grow because we are serving the right segments.
Q: What is your take on the rc egulatory regime in Sri Lanka?
A: Sri Lanka’s regulatory regime is very robust. You have a very proactive regulator, very consultative approach. We are taken to task as well when we don’t comply. It is progressive and they have been quite firm as well. Overall Sri Lanka has a strong regulator.
Q: What are future plans of HSBC in Sri Lanka?
A: We are very well represented across all segments of the market. Whether you look at commercial banking franchise, corporate banking – debt and capital market, retail banking and wealth management – premier, cards, etc., we are very well positioned and we have key relationships with key customers.
We will continue to provide investments, continued certainty about our plans in Sri Lanka, enhance trade finance as need grows, giving the connectivity element to our customers as they expand locally or overseas, and facilitate foreign investments working closely with the Central Bank.
We will continue to play a leading role in the economy in Sri Lanka. We have been in Sri Lanka for over 100 years; we are very proud of our association. Sri Lanka is also a key source for world-class human talent for HSBC.
Colombo also hosts our global resource centre, employing over 1,500 people. We value what Sri Lanka gives the HSBC Group. By all accounts Sri Lanka is a very successful market for us. We will continue to grow as the country is well poised to grow as well.
