More safety nets are in place for Singapore companies which are looking to break into emerging Asian markets.
According to a Straits Times article titled “Trade financing scheme to boost Singapore exports to emerging markets”, local firms which want to export goods to emerging markets in the region will have easier access to trade finance.
A new programme, the Trade Facilitation Scheme (TFS), launched by International Enterprise Singapore will provide credit guarantees to Singapore banks against non-payment risks of banks in markets like Myanmar and Central Asia.
The TFS attempts to address market gaps in trade financing for local companies which are expanding into emerging markets. Under the TFS, IE Singapore will share the risk with the Asian Development Bank and Swiss Re Corporate Solutions to provide credit guarantees against non-payment risks of overseas issuing banks.
According to IE Singapore, Singapore is the single largest beneficiary of ADB’s Trade Financing Programme, which is a credit guarantee programme that provides guarantees and loans to partner banks to support trade in Asia.
“This new scheme is expected to benefit 250 Singapore companies per year, and support additional exports of US$1 billion annually from Singapore to emerging Asian markets.”
Singapore firms sometimes face the risk of trade transactions falling through if local banks are not willing to take the risk of accepting letters of credit from their counterparts in foreign countries. This is considered a constraint on trade as the risk of transacting with foreign financial institutions is difficult to assess.
This new scheme is expected to benefit 250 Singapore companies per year, and support additional exports of US$1 billion annually from Singapore to emerging Asian markets.
Rikvin acknowledges that this scheme will facilitate Singapore exporters’ receipt of payments for transactions with buyers from emerging markets.
Statistics from IE Singapore show that the island-state’s trade with emerging markets has increased at a compound annual growth rate (CAGR) of 15% from 2009 to 2012, exceed that of advanced economies such as Japan, the US and EU27, at 5.5%. Bilateral trade with Asia grew at a CAGR of 10.5% in the same period. Within Asia, trade with emerging regions has grown at a rate of 9%.
Mr Satish Bakhda, Chief Operating Officer, Rikvin, said this is another sign of how the Singapore government is supportive of entrepreneurial trade ventures.
“The Singapore government has been very encouraging towards cultivating entrepreneurship and aiding companies to develop overseas. This is just one example of the strong support which local companies can look forward to getting from the authorities.”
Such an accessible financing scheme will also increase trade flow and investments between Singapore and emerging Asian markets, according to Mr Bakhda.
“Firms which set up in Singapore can become more competitive globally by accessing easy liquidity. Such access will support their new business ventures into unfamiliar new environments. Companies in the commodities, agriculture, IT, construction and automotive sectors, and trading in markets such as Bangladesh, Pakistan and Vietnam will benefit a lot from this new financing scheme,” he said.
Related link: Entrepreneurship in Asia »
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