Making sense of Belt and Road – The Asean bank: UOB
For UOB, the announcement of One Belt, One Road in 2013 was welcome vindication. Two years earlier, the Singapore bank had set up a foreign direct advisory unit based principally on Chinese overseas direct investment into southeast Asia. “The great beneficiary of our service over the last five years has been Chinese corporates,” says Sam Cheong, head of the unit. “This trend is just beginning.”
Banks in Asean are all trying to get on the right side of Belt and Road flows. Earlier this year, UOB announced two memoranda of understanding (MOUs), one with the Chinese Chamber of International Commerce and the other with Qingjian Group, the largest construction conglomerate in Shandong. At that point the bank had facilitated business flows of more than S$43 billion ($31.5 billion) from Chinese companies in the region since the unit’s foundation in 2011, most of it through Singapore and then into southeast Asian markets.
And the most distinctive thing about this business unit? “We do it free of charge,” says Cheong.
Cheong and his team spend their time on the road in China (he is just back from Qingdao when he meets Euromoney), communicating through WeChat as all mainlanders do these days and signing MOUs with the next generation of clients. The theory is that by giving free advice on the cultural and legal quirks of individual southeast Asian markets, this eventually leads to further business.
“Our team shares with them the best corporate structure, how it can tap Singapore government incentives, where there are attractive taxes, how they can leverage Singapore for their technological development and their regional ecosystem,” he says. “By doing so, we will gain new customers who will then bank with us. If we help them get into new markets successfully, they will need a bank when they get there.”
Cheong says UOB has acquired more than 1,200 FDI customers just by providing them with this connectivity.
Singapore banks see a few cards they can play. One is the solid argument that any Chinese company active in southeast Asia ought to use Singapore as a hub. The second is the fact that all three Singapore banks – and at least two Malaysian, for that matter – now boast solid, entrenched operations across multiple Asean markets, from Indonesia to Myanmar. And the third is that Singapore is also an established offshore centre for renminbi. Chinese companies will need to send renminbi out for capex and acquisition and to retrieve renminbi should they remit profits home from overseas expansion.
|Sam Cheong, UOB|
Still, nothing Cheong has said speaks specifically to Belt and Road, so much as Chinese outbound activity, a trend that was well underway already. This raises a question that crops up a lot in discussion of Belt and Road – has it actually made any difference to anything, or just provided a slogan to an existing theme?
“The most concrete result of Belt and Road is that it really helps to build awareness among many Chinese companies that the best way forward for them is overseas,” Cheong says. “That outbound investment is a great opportunity to us.”
Very little of the work UOB has gained from its FDI advisory unit could be said to be Belt and Road projects. But, then again, does it matter? Work is work.