The Taiwan Banker

Southeast Asia is an increasingly important market for Taiwan. It offers great potential for Taiwanese firms to grow internationally. With that in mind, the Financial Supervisory Commission (FSC) will encourage the banking sector to provide more financial support to Taiwanese companies who are doing business in Asean. About 70% of Taiwanese banks are doing business in Asia outside of their home market. At present, the most important market for them is Southeast Asia. In those ten countries, Taiwanese banks earned NT$8 billion before tax in 2016, up 9.5% from a year earlier. In the quarter ended March 2017, Taiwanese banks posted record-high net profits of NT$1.72 billion, the result of fruitful efforts to expand their client base. To ensure these strong results continue, the banking industry should step up its efforts to recruit and train new talent - this process should be standardized. To help the banking sector perform better overseas, particularly in Asia, the FSC and the Bankers Association of the Republic of China invited the following guests to speak: Liu Birong, a political science professor at Soochow University, Chen Kuan-che, vice director of the international marketing team in Taitra, Tan Choon-hin from Thailand, the UOB GM, and Shi Ching-fu, a director and South Asia specialist at CTCB Bank. Warming relations between China and Asean There is usually an economic rationale behind political moves, said Liu Bi-rong, reminding banks to first understand the overall environment and trends before entering Asean, to ensure the best results. For instance, the US, China and Asean have been focused on the South China Sea for political reasons. Southeast Asia can be divided into islands and oceans. China has been trying to dominate the South China Sea and control islands there because it wants to install rigs for deepwater oil drilling. Taiwan's bilateral ties with the Philippines and Vietnam are improving, while China's ties with Asean are also getting better. Even Singapore, which had opposed Beijing's actions in the South China Sea, has struck a conciliatory tone with China recently. In Liu Bi-rong's view, these changes are linked to China's One Belt, One Road initiative. China is a major source of FDI for many countries in Asia. Southeast Asia's large population will drive its demandChen Kuan-che, vice director of the international marketing and consulting division of Taitra, believes that among Asean countries, Singapore and Brunei can be considered developed nations as meansured by per capita GDP. Each of these country's GDP per capita exceeds US$30,000. Malaysia, Thailand and Indonesia are fast-growing emerging markets with GDP per capita below US$10,000 and above US$3,000. With GDP per capita less than US$3,000, the Philippines, Vietnam, Myanmar, Laos and Cambodia can be considered developing countries.For the banking industry, Asean and India's relatively young population augurs good prospects, in contrast to Taiwan and China, where the birth rate is low. In Indonesia, the Philippines, Vietnam and Malaysia, because of the high birth rate, 90% of the population in each of those countries is young. Meanwhile, according to a UN report published in June, in 2024 India will surpass China to become the world's most populous nation. In Chen Kuan-che's view, population is fundamental to driving domestic demand. In Asean, strong domestic demand has led to the region being named "the new world market. The young middle class in those countries does not have a high savings rate. In the Philippines, overseas worker remittances account for 10% of GDP. Consumers in Southeast Asia are willing to spend money on well-designed, innovative products and the region has 11 of the world's 20 largest shopping centers. Chen Guan-che, who was stationed in Jakarta, Indonesia when the Asian financial crisis began in 1997, has observed Asean countries experience a significant reduction in financial leverage since then. Both the cash-to-equity and banks' bad debt ratios have risen. Meanwhile, most European nations as well as the U.S. are investing in the global south, and are willing to provide large loans for public infrastructure. Although Taiwan has a smaller banking industry than the U.S., Europe or Japan, it can still participate in international financing projects. Taiwan should not be deterred by the fact that it has less resources than these countries. Fintech will meet the demands of Taiwanese businessmenIn the view of Shi Ching-fu, a major strength of the domestic banking industry in the Asia market is Taiwanese businessmen. Other advantages are the ability to provide cross-border remittances and asset management capabilities. As the Taiwan banking sector expands overseas, it will continue to serve its existing corporate customers. It will be important to offer online banking services to them, including mobile banking, to move beyond traditional financial services. This will bring value to customers, helping them run their businesses more efficiently.Banks need to be well prepared for the push into Asean, especially in terms of product development. It's going to be a challenge, however. By 2030, Asean will be the No. 4 economy globally. How can Taiwan banks gain an advantage there, given that they are not as competitive in some areas as other banks? Their cost structure is less competitive than local banks, while their compensation packages are lower than what foreign banks offer. Implementing fintech The Singapore government has been aggressively promoting fintech in Asean. That includes integrating the operations of physical bank branches, digital finance and call centers to boost operational efficiency. There must also be an adequate supply of capital. Brand building is important, as is developing a local customer base. As a result, Singapore is now able to meet the requirements of major global banks like Standard Chartered and Citibank. While digital financial services can reduce costs for some banks in Asean, they cannot completely replace traditional banking services. Retail banks can also attract customer deposits. Indeed, banks without physical branches may find that their cutomers leave them. It's important for digital banking services to be integrated into the overall services offered by a bank. Having an effective mobile platform is especially important as many people spend a large amount of time on their mobile devices. Integrating different banking services requires a large investment of both time and money. The FSC supports banks expanding to Asean The FSC is working actively to support the New Southbound Policy by encouraging Taiwanese banks to expand in Asean. The FSC aims to approve three banks annually to expand to Southeast Asia. Currently, there are four key related policy measures.. Help domestic banks improve their credit rating in the target overseas markets. Banks which have a favorable loan balance sheet will be offered access to funds guaranteeing their overseas credit as well as favorable financing terms.Strengthen the financial sector so that it is more competitive overseas. This includes simplifying the overseas branch application procedure. Supervise the Bankers Association of the Republic of China as it works to build information resources focusing on Asean, including market conditions. These resources will serve as a reference for member banks as the expand into Southeast Asia.Work together with the Bankers Association of the Republic of China and the Taiwan Academy of Banking and Finance to help banks cultivate global talent. This will include the introduction of courses focusing on Asean, as well as the recruitment and training of people with knowledge of the region and the ability to speak Southeast Asian languages.