New perspectives on trade finance from Dubai

News | 19 April 2012

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When former UK chancellor of the exchequer Alistair Darling reminded delegates of the recent Falcon Group annual trade and corporate finance forum in Dubai how close the banking system came to collapse in 2008 – around three hours from ATMs being closed – a shudder could almost be heard around the elegant Madinat Jumeriah conference hall.  

The ensuing financial crisis remains something, according to Darling, that will “take some considerable time to get out of unless we can bring the slowdown to a conclusion more quickly”. He said he was “optimistic we will all get through this” but was worried that, as a guest speaker, he might appear as something of a prophet of doom (he calls himself an ‘optimistic pessimist’).

Alistair Darling on the economy post-crisis

Alistair Darling, the 'optimistic pessimist'

Abheek Burua, chief economist at HDFC Bank, said that the main macroenomic risks delegates needed to assess in terms of impact to their businesses were: a hard economic landing in China, deepening credit problems in Europe, fears of a Greek exit from the euro, persistently high energy prices, lower global growth and a reversal in the US trajectory of recovery. “For me, I operate in Asia, so China is turning out to be a big risk,” he commented.

Darling’s message was basically a realistic one of “there is less money in the banking system to lend”. This theme was replayed with different variations during the course of the talks and some of the offline conversations. Another speaker, Alhamarani Group director Mark Giles shared with delegates how they had to find alternative sources of consumer finance for their Saudi car finance business. He observed “banks are coming back into the consumer finance market but they are fickle – here today and gone tomorrow. As a corporate we need continuity and a more diversified strategy.”

Wilson Group chief executive Manish Nagpal told TFR that his winning Deal of the Year nominated by WestLB – a revolving bilateral finance facility of US$70m and a banker’s guarantee of US$30m – was something he would dearly like to repeat with other lenders but he cannot get enough credit lines. And with WestLB in the process of restructuring their Asian operations, the Indian fertiliser and petrochemical corporate it was looking at a number of alternative financing options. Like Alhamarani Group, Wilson is already a client of Falcon.

 As a specialist financial institution, Falcon prides itself on being able structure corporate and trade finance for niche requirements that don’t fit into larger banking pigeon-holes, although it works closely with some of them (HSBC and Deutsche Bank) in partnership arrangements. Chair Kamel Alzarka explains: “What we have learnt from the last four years is that people need another source of finance. We complement and do not replace the banking industry. I think the next few years will be very good for us.”

Left to right: Michael Spiegel, Mark Giles, Will Nagle, Abheek Barua, and Alistair Darling before the panel session

Deutsche Bank’s Michael Spiegel commented on how corporate attitudes to sourcing and distributing products were changing for the better: “In the past the large companies primarily looked at maximising their margins. Now they are getting more concerned about the sustainability of their partners ­­– hence the mushrooming of supply chain finance”, he said.

 Dubai, an important south-south trading hub, has shot up the ‘World’s largest container ports’ rankings to seventh place (Containerisation International and The Economist), having not been on the radar in 1999.  Ten years on, it saw throughput of 11.9 twenty-foot equivalent unit containers (TEUs). So it was an appropriate venue for the third year of Falcon’s annual conference which was held on 15 April.

Nima Abu-Wardeh with Kamel Alzarka

 Moderated by BBC World’s Nima Abu-Wardeh, the line-up included Abheek Barua, chief economist at HDFC Bank, Michael Spiegel of Deutsche Bank, Mark Giles of Alhamarani Group, and the Rt Hon Alistair Darling MP. Falcon chair Kamel Alzarka joined the speakers for a lively panel session at the end of the proceedings.

 TFR will be providing more detailed coverage of the event and the speeches in the June edition.

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