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Week in Review

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January 4, 2021

EU agrees investment deal with China to rebalance ties. The European Union and China agreed on Wednesday to an investment deal that will give European companies greater access to Chinese markets and help redress what Europe sees as unbalanced economic ties. (Reuters)

New Year brings final UK-EU Brexit split. At 11 p.m. London time — midnight in Brussels — Britain will economically and practically leave the 27-nation bloc, 11 months after its formal political departure. (AP News)

In bullet points: The key terms of the Brexit deal analyzed. U.K. Prime Minister Boris Johnson’s post-Brexit trade deal is unique in that it will leave businesses facing more barriers to trade than they did while Britain was a member of the European Union. (Bloomberg)

Hacked networks need to be burned ‘down to the ground.’ It’s going to take months to kick elite hackers widely believed to be Russian out of the US government networks they have been quietly rifling through since as far back as March in Washington’s worst cyber espionage failure on record. (Business Mirror)

UK and Turkey sign post-Brexit trade deal. Britain on Tuesday announced it had signed an £18.6 billion (€20.5 billion) trade deal with Turkey that “lays the groundwork” for a more comprehensive post-Brexit agreement in the future. (EurActiv)

Where year two of the pandemic will take us. As vaccines roll out, the world will face a choice about what to learn and what to forget. (Atlantic)

Australia’s growth may ‘never return’ to its pre-virus path after trade trouble with China. Australia’s economy has been badly hit by escalating trade tensions with China — and its possible growth might “never return” to its pre-virus levels even when the pandemic is over, according to research firm Capital Economics. (HSN)

Price of international shipping triples because of container shortages. Entire supply chains in Europe are being threatened by a scarcity of shipping containers. This lack has led to prices tripling in 2020 and threatens to undermine the area's economic recovery from the coronavirus crisis. (DW)

The strange connections of isolation. Reflecting on a year when a virus closed borders and drove us all together. (Interpreter)

Killing the dollar: A side-effect of COVID and its cures? Since the end of World War II, the US dollar has consistently functioned as a safe harbor for investors caught by any sort of turbulence. Yet, the currency’s status and reputation have been weakening since the demise of the Bretton Woods Accord in 1974 to the point that, as a side-effect, COVID and its cures may be lethal for the dollar’s international dominance. (Global Risk Insights)

The complex post-Brexit path of pecorino to London restaurants. Britain’s departure from the EU threatens to make the journey more cumbersome, expensive, and slower—if it’s even possible. (AJOT)

How the world will change in 2021. As the world prepares to bid farewell to the year 2020, one question becomes glaringly evident: How will the world look like in 2021? (HSN)

The good news you might have missed as 2020 ends. Here’s a rundown of some bright spots this year and what we could look forward to in 2021. (Business Mirror)

 

 

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EU and China Near Deal

Chris Kuehl, Ph.D., NACM economist

There is not a lot of love between the European Union and China. For the most part, China is referred to as an “economic competitor” and a “systemic rival.” That said, there are thousands of companies in the EU that rely on that market for exports as well as a market for their output. It has been difficult for European companies to invest in China for years. There have been regulations and ownership requirements that have been prohibitive. The deal that has apparently been struck will reduce or eliminate some of these barriers, and the Chinese have agreed to some labor provisions that will make labor more competitive in Europe. These changes are still tentative, and much will depend on whether the Chinese follow through. The assumption is that China is now looking at the EU as more than just a destination for its consumer goods exports. The Chinese want to be active as an importer as well, and of course, they want access to EU technology and investment money.

China is well aware that many in the EU have been furious with the way they were treated by the Trump administration, and China has been trying to drive that wedge deeper. They are equally aware that Biden will be working to repair these frayed ties, so they need to move quickly. The Germans have been the most suspicious of China, and that has provoked Angela Merkel to make a new deal with the U.S. a high priority. The nations in the southern tier of Europe are far less antagonistic toward China and welcome the investment opportunities as well as Chinese money as a way to balance German influence.

The EU as a whole is using this deal as leverage with the U.S. The message is that President Trump ignored and disrespected Europe, and this is going to cost the U.S. China can be exploited as an alternative to the U.S. if that pattern of behavior continues. The reality is that Europe needs the U.S. market and the U.S. needs Europe so deals will continue to be made. The agreement with China acknowledges the role of the world’s second biggest economy, but it also makes it clear that Europe does not appreciate being adversely affected by domestic U.S. politics.

 

 

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Digitising Indian Treasury and Trade Services

Ben Poole, CTMfile

Battered by the COVID-19 crisis, large Indian companies are looking to their banks for digital solutions that can make their supply chains more resilient to pandemic-related disruptions, according to a report from CRISIL Coalition Greenwich. These demands are speeding the transformation of trade finance—one of the banking industry’s last paper-based holdouts—into a digital business.

The global pandemic hit global trade flows harder than the global financial crisis of 2008–2009. Now, a second wave of COVID cases in the U.S. and Europe are dashing hopes of an early recovery. For large Indian corporates, that could mean a continuation of troubles experienced in the first half of this year, including supply-chain disruptions due to lockdown measures, industrial shutdowns and the resulting delays in shipping and transport.

“Facing these challenges, Indian companies have changed their ‘ask’ to banking providers,” says Gaurav Arora, Head of APAC & Middle East at CRISIL Coalition Greenwich and author of 'Corporates Look to Digital Solutions as COVID Disrupts Trade Finance in India'. “In the crisis, operational agility and digital solutions are taking precedence over the traditional priorities of financing trades and meeting liquidity needs.”

A desire for digitisation

Unlike most areas of banking and business, the vast and diverse world of international trade and finance still relies heavily on the physical exchange of paper documents to function seamlessly. However, the results of a Coalition Greenwich study suggests that the business in India is changing.

In 2019, 88% of respondents ranked 'competitive pricing' as a key criterion for trade provider selection, while only 11% considered quality of e-banking and digital platform a relevant metric. However, in 2020, we observed a sharp shift toward digital solutions, with 60% of the respondents ranking digitisation as a critical metric for evaluating a trade provider.

Although it is companies’ need for operational agility in the face of COVID-19 disruptions that is driving this increased demand for new solutions, the emphasis on digital will outlast the pandemic. Once the threat of the pandemic begins to dwindle, things like end-to-end supply chain visibility and digital interoperability will become much higher priorities for corporates that have now started down the digital path. This, in turn, will compel banks to evaluate their digitisation strategy and accelerate the digital transformation of trade finance.

“With corporates increasingly adopting digital solutions to interact with their customers and seamlessly deliver services, they will inevitably demand a similar level of digitisation from their banks and other service providers,” says Arora.

New online option for foreign companies setting up operations

Against this backdrop, ICICI Bank has announced the launch of an online platform for foreign companies looking to establish or expand business in the country. Called ‘Infinite India’, the platform offers banking solutions as well as value-added services such as incorporation of a business entity, corporate filings, licences and registrations, HR services, compliances and taxation among others. An industry-first initiative, the ‘Infinite India’ platform is designed to offer convenience to foreign companies, as it eliminates the need of coordinating with multiple touchpoints leading to a hassle-free experience of doing business in India.

The ‘Infinite India’ initiative is a part of the host of technology-enabled-services that the bank is offering to foreign companies and multi-national corporations (MNCs) coming to India.

"Over the years, India has emerged as a preferred destination for foreign investment," commented Vishakha Mulye, Executive Director, ICICI Bank. "In these improved scenarios, we are launching the ‘Infinite India’ portal, that brings together various banking and value-added services on one platform for foreign companies. It frees up their bandwidth from time-taking procedures and thus boosts their business growth by improving overall productivity and efficiency. The ‘Infinite India’ initiative is part of our strategy to further strengthen our technology-enabled offerings aimed to partner with foreign companies coming to India. We believe that our dedicated strategy for this segment will further simplify the journey of foreign companies looking to start or expand their business in India.”

Breaking down the offerings

Some of the ‘value-added’ offerings that ICICI Bank says the platform offers include:

  • Incorporation services: Especially curated for the set-up stage, it offers advisory on laws and regulations to incorporate business in India as a joint venture, wholly owned subsidiary, liaison office, branch office, project office or a Limited Liability Partnership (LLP).
  • Licences and registration: Foreign companies can apply and obtain licences and registrations in a timely manner on import/export code, FSSAI license, trade license, copyright solutions and patent registrations.
  • Taxation and compliance: Foreign companies can access to an array of tax and compliance related services such as filing annual returns of company, GST registration, income tax returns as well as corporate filings with the Ministry of Corporate Affairs (MCA) for registered office and amendment in memorandum of association (MOA).
  • HR services: Assistance in implementing HR related services including payroll processing, provident fund registration and return filing is also available.

The key banking services are:

  • Authorise set-up of office: As an ‘Authorised Dealer Category 1’, the bank can authorise the setup of Liaison Office (LO), Branch Office (BO) as well as a Project Office (PO) in India within the FEMA (Foreign Exchange Management Act) framework.
  • State-of-the-art digital channels: The Current Accounts holders get access to its Corporate Internet Banking platform with over 300 services as well as a mobile banking application. It enables businesses to complete almost all their banking requirements digitally such as payments, receivables, foreign exchange, tax payments among many others. They also get convenience of automatic bank reconciliation with ICICI Bank’s Connected Banking, which is featured with popular accounting / ERP platforms. Also, they get the facility to easily undertake integrations with the Bank by using the APIs readily available on ICICI Bank’s API portal.
  • Trade services with wide global network: It provides a wide range of trade finance solutions including Bank Guarantee (BG), Letter of Credit (LC), remittances among others. Also, it offers these through a comprehensive digital platform called Trade Online. Further, it provides outreach with correspondent network of over 400 foreign banks across 67 countries and foreign currency Nostro accounts in 26 currencies, ensuring that almost all international trade requirements are met.
  • Treasury services: The platform provides access to leading treasury operations in India with round-the-clock servicing. Also, it offers online booking of forex trades as well as a web-based treasury solution.

Any multinational from across the globe from any industry including IT, ITES services, manufacturing, pharmaceuticals, automotive, textiles among others can visit the ‘Infinite India’ portal and apply for the required service.

Reprinted with permission from CTMfile.

 

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Bangladesh Clothing Suppliers Lost $3.7 Billion From Pandemic

PYMNTS

The pandemic hit Bangladeshi clothing suppliers and the country's overall economy hard when British fashion retailers had to shut down, a report from The Times said.

The garment sector is the largest part of the country's economy, representing over 95 percent of it, the report stated. The total canceled globally came out to $3.7 billion, according to the Bangladesh Garment Manufacturers and Exporters Association. That number came from 1,931 global fashion brands nixing their orders.

Non-essential stores were forced to close in March, and canceled orders from fashion retailers totaled 730 million pounds (about $984 million), according to the report. Many of the retailers had just then taken their spring and summer collection deliveries.

Data from Traidcraft Exchange showed that U.K. suppliers, with the most prominent being Primark, Mothercare and Debenhams, had canceled $1 billion in Bangladesh orders by June, the report stated. By comparison, the U.S. canceled $500 million, and German, Swedish, Dutch, French and Spanish retailers canceled $100 million each.

There has been some initiative to help get things back on track, The Times reported, with Marks & Spencer, Tesco, Inditex and H&M committing to pay in full for orders completed and in production. Primark, meanwhile, rescinded its opposition and said it would pay for all outstanding orders.

That said, Traidcraft clarified that it still wasn't clear exactly when that would happen. The organization said retailers had demanded suppliers delay their shipments until the next season. That, according to the report, would make the companies incur extra warehouse costs.

The pandemic forced many businesses to make a shift in operations toward a B2C or a direct-to-consumer (D2C) model. Steve Denton, CEO of Ware2Go, told PYMNTS that the shutting down of many stores during the initial part of the pandemic made it necessary for clients using distribution channels to find new ways to get their materials out.

Reprinted with permission.

 

 


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 Week in Review Editorial Team:

Diana Mota, Associate Editor and David Anderson, Member Relations