Observations from the Ups and Downs of Asia Through the Decades
The most important highlight of the past 20 years and the next 20 years is the continued evolution of the human capital in the industry.
Exactly 20 years ago, 1999 was the aftermath of what seemed like the end of the world. We were just rising back from the Asian Financial Crisis of 1997 when the Indonesian rupiah crashed from 2,000 to 19,000 to the US dollar and the Thai baht dropped from 26 to 55 to the US dollar. Almost overnight, we had gone from the heydays of the Asian Tigers to financial turmoil that led to political unrest.
Then almost 10 years later, the Global Financial Crisis (GFC) hit us in 2008. While the Asian crisis was mostly centred in Southeast Asia – Indonesia, Malaysia and Thailand – we could still look to other regions for comfort and a bit of positive news, there was nowhere to hide during the GFC.
Of course, it wasn’t all doom and gloom, as Asia’s average growth rate in the past 20 years has consistently outperformed the world’s average growth rate. The Asian economies have recovered from the two crises and the region still presents significant opportunities.
Looking back at 20 years of ups and downs in Asia through the decades, here are five key learnings that I would like to share with the new generation:
1. In times of crisis, you either make or break a relationship. Your clients look to you for advice and confidence in the market and the banking sector. Until the Asian crisis, banking was mostly based on lending activities. As the Asian currencies hit the floor and most lending had dried up, companies looked to their banking partners for advice and help, for a lifeline. BNP Paribas continued providing liquidity through the worse of the GFC for our clients in Asia, because they needed that lifeline.
2. The role of the corporate treasurer today has evolved significantly to adapt to the volatile environment. The primary role of a treasurer was traditionally to find financing. Today, the treasurer’s responsibilities have grown and their role has become more strategic in managing a company’s liquidity. The roles and responsibilities between the chief financial officer (CFO) and the treasurer are now more clearly defined than 20 years ago, with the CFO planning and shaping the overall balance sheet and the treasurer optimizing liquidity.
3. The role of the bank is changing more rapidly today than 20 years ago. Changes in the banking sector are accelerating, and the next decade will see more changes in the banking landscape than in the past 20 years. The pace of innovation, regulatory changes, the market environment and the shifts in the corporate treasurers’ role will continue to impact the banking sector.
4. Connectivity is a key driver for change. Connectivity means fast, real-time access to data and information. It signals the rise in electronic banking with platforms like Connexis Cash launching in 2000. Technology has connected the world more than ever. New technologies like artificial intelligence, machine learning and “internet of things” mean that companies can now forecast and plan based on their needs. However, this faster pace also means that economic cycles are getting shorter and therefore markets are getting more volatile.
5. Sustainability is a business imperative. Doing business the right way delivers a tangible commercial reward. Twenty years ago, corporate responsibility was more of a public relations tool than a business philosophy. We have since seen significant positive changes in perspective and behaviour. With the rise of consumer activism and the high cost of not switching to a low-carbon economy, we have witnessed a clear evolution of public trust and a company’s reputation in its supply chain and business practices. Sustainability and responsible social engagement are now a driver for business strategy. A transaction like the Tropical Landscapes Finance Facility (TLFF), for example, would not have seen the light of day 20 years ago. TLFF, which BNP Paribas structured in 2018, will help finance projects that will transform lives and environments in Indonesia.
In the next 20 years, innovation and sustainability will no longer be buzzwords but vital business practices. Discussing with our clients to help them become future proof is an essential part of how we see our role as banking partners to our clients, such as initiatives that will help create a platform for open peer discussions and help them navigate the wide landscape of fintech that can result in practical solutions.
To this end, we have set out a clear vision to collaborate with fintechs to build a new, innovative customer experience. By being a bridge that connects the dots between our clients’ needs and what fintechs can offer, we are in a better position to find value in the digital world.
Our conversations with companies are also increasingly about sustainability. We help them include sustainability in their supply chain and shift to a low carbon economy. In concrete terms, 15% of our corporate loans contribute strictly to the achievement of the Sustainable Development Goals (SDGs) set by the United Nations in 2015. We have invested x100 million (US$112 million) in energy efficiency and cleantech startups and have extended x15 billion in financing for the renewable energy sector.
None of this would be possible or even worth it if we forget about the human aspect of our history and our future.
The most important highlight of the past 20 years and the next 20 years is the continued evolution of the human capital in the industry. The generation of bankers we have nurtured, the ups and downs and the turbulence of the markets, the continuing evolution of product offering and value proposition we bring to the market ever so often, the emerging importance of Corporate Social Responsibility (CSR) and sustainable finance, the conduct issues the banking industry faces all have a common vein.
Our future lies in the values we install and nurture in the hearts and minds of our human capital. Amid the chaos and haste of transitioning to the digital world, the most important thing is being true to the very core value of banking, i.e. trust and responsible engagement with society – this is the ultimate pillar and embodiment of banking, yesterday, today and tomorrow.
Chye Kin Wee is head of transaction banking, Asia Pacific, BNP Paribas.