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RBS: Rebuilding trust and trade in Asia
07 September 2009
Pravin Advani, Head of Trade Asia, at RBS discusses how, as the credit crisis impacted Asia’s supply chains, trust was badly damaged. Global banks, with their cross-border expertise and trade finance tools, are playing an important part in the rebuilding process.
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RBS Asia trade
Pravin Advani
RBS head of trade Asia
supply chain finance Asia
Asia Letter of Credit
Estimates suggest that between 20,000 and 30,000 SMEs went out of business in southern China during the peak of the global slowdown. That pattern, if not the magnitude, was repeated right across Asia. Not surprisingly, trust evaporated as buyers and suppliers questioned each other’s ability to deliver their side of the bargain. Talk of sovereign defaults and bank failures in the developed economies forced exporters to consider counterparty risks that would have been almost unthinkable before. And just as it was needed most, trade insurance was reduced as risk rose and the appetite of financial institutions to fund it lessened.
Back to basics
Many suppliers and buyers returned to the use of letters of credit (L/C). This trend was even picked up by governments. The Indonesian authorities recently proposed legislation to make compulsory the use of L/Cs by exporters for commodities above a certain value. Buyers are...
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