Transcript
Speaker: This is HSBC Global Viewpoint, your window into the thinking, trends and issues shaping global banking and markets.
Speaker: Join us as we hear from industry leaders and HSBC experts on the latest insights and opportunities for your business.
Speaker: A heads up to our listeners that this episode has been recorded remotely, therefore the sound quality may vary.
Speaker: Thank you for listening.
Speaker: I'm Sandeep Bukpal, Global Co-head of International Substitute Rebanking at HSBC based in Hong Kong, and I'll be your moderator for this session.
Speaker: We will kick off the key insights into our SEP from HSBC's trade economist, Shanela Rajaniga.
Speaker: This will be followed by a panel discussion, finishing with a Q&A where questions can be put through the chat function.
Speaker: We will have a hot stop at 14.10 Hong Kong time, so we'll have to keep it at pace.
Speaker: There will be some polls along the way and I do request for your participation.
Speaker: With that, I now welcome Shanela who joins us from London.
Speaker: Over to Shanela.
Speaker: Great.
Speaker: Thank you very much, Sandeep.
Speaker: So after eight years of negotiations, it is true the Regional Comprehensive Economic Partnership Agreement was finally signed at the end of last year.
Speaker: And broadly speaking, it is a big deal.
Speaker: So together the 15 RCEP economies, which comprise of the 10 ASEAN countries plus five of their FTA partners, together these economies comprise about 30% of global GDP, 30% of the world's population, and also around 30% of global goods export flows.
Speaker: So certainly a sizable deal in the Asia Pacific region.
Speaker: Also, if we do take a look at how intra-RCEP trade stands at the moment, trade linkages within the region are already strong.
Speaker: So they have strengthened over the past decade or so.
Speaker: Most of that is anchored by the role of mainland China and its linkages with other economies in the region.
Speaker: But as you can see from this chart here, it is a sizable trading block.
Speaker: So much larger than the CPTPP, which is also in the Pacific Basin, and also larger than the North American trade block, the USMCA.
Speaker: So certainly a lot of potential for businesses, but also for economies to make the most of these existing trade linkages within the region.
Speaker: As you can see here,
Speaker: The Asia Pacific has really been quite prolific in striking free trade agreements.
Speaker: But as you can see, this has led to a number of overlapping trade arrangements.
Speaker: So a number of FTAs struck between these partners, both at the bilateral, but also at the plurilateral level.
Speaker: And this can give rise to a number of added complexities because businesses and traders, they have to navigate these different trading arrangements.
Speaker: And oftentimes because there are different preferences under certain trade arrangements, it can make it a bit difficult for businesses to actually decide which FTA to send their goods under.
Speaker: So the key benefit of RCEP is really that it attempts to streamline all these existing trade arrangements and to attempt to align or at least harmonize some trade and investment rules within the region.
Speaker: So in terms of the actual details of the deal, RCEP does provide for moderate trade liberalization.
Speaker: So in terms of tariff cuts, parties will ultimately remove tariffs on around 90% of products traded within the block.
Speaker: And now that will be phased out over 20 years, which is a bit long for a standard FTA.
Speaker: And there are some added complexities around the tariff cuts in the sense that
Speaker: the different asset parties have different tariff liberalisation schedules for each party, so that could add another layer of complexity.
Speaker: Plus, some economies have chosen not to liberalise all tariffs, so for example mainland China will retain
Speaker: certain tariffs on vehicle parts from Japan and from Korea, and also Japan will retain some tariffs on sensitive agricultural products like pork, like beef, like rice.
Speaker: But overall, tariff liberalization is quite modest.
Speaker: But the key, key benefit of RCEP is really that it establishes this common rules of origin framework.
Speaker: And that essentially means that businesses can source inputs from any of the RCEP economies.
Speaker: So essentially a firm can locate in Vietnam, it can source inputs from mainland China, use it in its manufacturing and then export that product to Japan, all under tariff preferences.
Speaker: And because this is the first trade deal that links mainland China, Korea and Japan together in a single trade deal, that really is where that benefit comes from, the accumulation of rules of origin.
Speaker: And then beyond these provisions on goods trade, parties have also agreed a number of other facilitations, for example, around customs formalities.
Speaker: There are also provisions around services and investment.
Speaker: particularly around the protection of certain investments, also provisions around facilitating the movement of business people across the RCEP region.
Speaker: In addition, parties have also agreed commitments around protecting intellectual property, so for example around copyright, geographical indications, and they've also agreed provisions around e-commerce and facilitating
Speaker: digital trade.
Speaker: However, I will note that they did not agree a permanent solution about banning customs duties on electronic transmissions, but there are some provisions around banning data localization, although that does exclude for the financial services sector.
Speaker: So overall, given these existing trade linkages in the region, the RCEP deal should go quite far in strengthening these existing
Speaker: trade links, but it should also provide a platform for further liberalization and also to facilitate more regional cooperation between these economies.
Speaker: And just lastly, in terms of how the deal might impact the various asset economies, and this is modeling by the Peterson Institute.
Speaker: Overall, they expect intra asset trade increase by about $428 billion.
Speaker: up to 2030.
Speaker: Now much of that will be gained in mainland China, Japan and Korea.
Speaker: Again, it's because this is the first time those three economies are linked in a single trade agreement.
Speaker: but also they have fairly complementary trade profiles.
Speaker: So expect to see a boost in trade in advanced manufacturers.
Speaker: So for example, electronics and vehicles, but also across the region, there could be opportunities to strengthen textiles production and trade as well.
Speaker: And just to wrap up, I will say the RCEP trade deal, it is great for the region, but it also has implications for economies that are not party to the deal.
Speaker: So India withdrew from negotiations at the end of 2019.
Speaker: Also, the US is notably missing from the deal.
Speaker: So there are consequences for these parties that are not engaged or linked into these deeper regional trade deals.
Speaker: However, the door does remain open for India to rejoin at a later date if it wishes.
Speaker: In terms of when the deal may enter into force, it will take effect after it has been ratified by at least six ASEAN parties and three non-ASEAN economies.
Speaker: So that could come sometime this year, if not early next year.
Speaker: Other economies outside the region may also choose to exceed the deal after it has been enforced for 18 months.
Speaker: So certainly a lot of potential to expand trade linkages.
Speaker: It makes the region certainly more attractive as a
Speaker: as a destination for foreign investment.
Speaker: And it comes at this time where trade policy turbulence has been ongoing and there has been a lot of trade policy uncertainty.
Speaker: So it should give some reassurance to businesses.
Speaker: So with that, I think I will leave it there and hand back to Sandy.
Speaker: Thanks, Shanila.
Speaker: That was a really useful context and clearly a passion for our set comes through quite clearly despite the 5 a.m.
Speaker: UK start.
Speaker: So thank you very much.
Speaker: Moving swiftly to the panel discussion.
Speaker: We have a high-powered panel today, which includes representatives from an iconic multinational, Asia's premier multilateral bank and world's leading international bank.
Speaker: May I now request the panel to briefly introduce themselves, starting with Manu, if I may.
Speaker: Thank you.
Speaker: Manu, you're on mute, please.
Speaker: Thank you, Sandeep.
Speaker: Hello, everyone.
Speaker: I'm Manu Manmendrupadhyay, and I manage Dyson's Asia Pacific Treasury based out of Singapore.
Speaker: Thanks, Manu.
Speaker: Steven, over to you.
Speaker: Hi, thanks, Sandeep.
Speaker: I'm Steve Beck.
Speaker: I head the trade and supply chain finance businesses on the private sector side of the Asian Development Bank.
Speaker: And I'm joining you from Canada, just north of Toronto.
Speaker: Pleased to be here.
Speaker: Thanks.
Speaker: Lastly, my esteemed colleague, Tim.
Speaker: Yes, thank you, Sandeep.
Speaker: So my name is Tim Evans.
Speaker: I'm the CEO of HSBC in Vietnam.
Speaker: I arrived about 14 months ago and we've just celebrated 150 years in this market.
Speaker: And the view is that Vietnam is an inflection point and that the next five to 10 years will be amongst its most exciting.
Speaker: It's a good state of play with the representatives from Singapore, Hong Kong, Canada and Vietnam.
Speaker: So let's just dive into the discussion straight away.
Speaker: Now we heard about RCEP.
Speaker: Now, if it's an opportunity, as with most opportunities, there's always a first mover advantage.
Speaker: The question is, how quickly can companies leverage the benefits of RCEP?
Speaker: And more importantly for the audience, what can they do today
Speaker: to really harness this opportunity.
Speaker: So Manu, as you're from the private corporate sector, I'll probably request you to kick off.
Speaker: Thanks.
Speaker: Sure, Sandeep.
Speaker: And I've been often blamed by many people that whenever somebody asks me a question, I start my answer with, it depends.
Speaker: And with this question, I think my answer would have to start with those two words.
Speaker: Because it really depends on where your market is.
Speaker: If I talk about my own company, our market is quite heavily Asia-focused.
Speaker: We started from UK, but we developed different markets, and we have been in Asia for many, many years.
Speaker: And currently, Asia kind of contributes almost 40% to 50% of our overall revenue growth.
Speaker: Now, with that in mind, I don't know whether RCP was on our thought process or not, but in general, there are several other similar trade agreements like ATIGA, like CPTPP and others.
Speaker: So we always thought that this region is going to be quite important for Dyson, and we kind of created a bigger supply chain base over here and our manufacturing base over here.
Speaker: Now, RCP covers 15 countries, which are primarily Asia-Pacific focused.
Speaker: One of the major things that I believe changes here is that China is part of it, and most probably in some time, if all goes well, then India might also become a part of it.
Speaker: This is probably the world's biggest market right now for a variety of companies.
Speaker: If people want to cater to this kind of market, then they need to think about setting up shops, setting up their supply chain base in this region.
Speaker: We have several other trade agreements as well, but what RCEP does is that it can potentially further consolidate different things.
Speaker: One is, of course, the rules of origin, which is probably one of the biggest feature of this agreement.
Speaker: then it can increase your supply base because now your rules of origin can be covered by various countries, 15 here, and then probably if you're using other agreements, then it covers a much larger supply base.
Speaker: And then it also simplifies the customs procedures in terms of what forms and what kind of different licensing and all do you need to have to import in different countries.
Speaker: So from all that perspective, I think RCEP,
Speaker: if not a game changer right away, but it will definitely kind of push towards the right direction.
Speaker: Another thing that I feel that, you know, because China is a part of this disagreement and, you know, when we think about the US-China trade war, US would want to at least try to restrict China's influence overall, you know, in this region.
Speaker: So they might also kind of do some sort of revival for
Speaker: let's say TPP, which was Trans-Pacific Partnership, or other such agreements.
Speaker: I mean, we have already heard that UK has applied
Speaker: to be a part of CPTPP recently.
Speaker: I mean, you never know whether with an administration, which has come in now, they can also think of it differently than Trump, and they might also want to be a part of it.
Speaker: So I think it's a good direction in which things are going.
Speaker: So if somebody wants to use them, if somebody has a big market base in these countries, then they should act and probably think of...
Speaker: expanding, if not establishing, but at least expanding their supply chain in this region.
Speaker: Thanks, Manu.
Speaker: Really useful.
Speaker: From what I gather is that it's still early days, but it's a good time to just kind of get your thoughts organized and be well prepared as it rolls out.
Speaker: And I did pick up on the fact that you mentioned what's very difficult to say it out at times, which is CPTPP.
Speaker: And I'm just going to move to the poll question, which I have.
Speaker: And I'm sure the audience has been told how to access the poll question for some voting.
Speaker: So the question we have is, and you mentioned the Biden administration.
Speaker: So the question is, would the CPTPP, which is Comprehensive and Progressive Agreement for Trans-Pacific Partnership, be revived under the Biden administration?
Speaker: Clearly, as you recollect, it was pulled out.
Speaker: away by the Trump administration.
Speaker: So the question to the audience is, would it be revived under the Biden administration?
Speaker: So the polls open, if you're able to poll, please do.
Speaker: And while we wait for the poll, I guess, Manu, the question on people's mind is that is that a high on agenda?
Speaker: So I think that's what will determine which way we head.
Speaker: Yeah, absolutely.
Speaker: Okay, now while we wait for the polls to get pulled together, I'll probably just move on to the next question.
Speaker: And that's what Chanela referred to that they didn't, we have the polls.
Speaker: So this could complicate it because the audience 84% believe that CPTPP will get revived.
Speaker: So clearly our set will have competition.
Speaker: So that's interesting, but we'll leave that for another session.
Speaker: Just moving on to the next question, and Chanel, I did reference to the 30% number for RCEP, so that's percentage of global trade, global population.
Speaker: Clearly, from a banking perspective, regulatory perspective, it becomes a hugely attractive market.
Speaker: Now, the question in people's mind is, Manu spoke about corporates, but how banks position themselves for it.
Speaker: So maybe if I ask Steve for you to kick off, thanks.
Speaker: Steve, you're on mute.
Speaker: Thanks, Sandeep.
Speaker: The Asian Development Bank.
Speaker: No, I'm not.
Speaker: I don't think.
Speaker: Can you hear me, Sandeep?
Speaker: Perfect now.
Speaker: Thank you.
Speaker: Sandeep, I'm with you.
Speaker: Okay, great.
Speaker: So the Asian Development Bank's trade finance business, we provide guarantees and loans to banks to support trade.
Speaker: So we just assume bank risk on that particular business.
Speaker: And last year,
Speaker: We supported over 7,000 transactions valued at almost $6 billion.
Speaker: And most of that is intra-regional.
Speaker: And most of that supports SMEs.
Speaker: So one of the things that I think we're going to see coming out of this RCEP, I think everyone agrees, is that we hope to see enhanced trade, certainly within the region.
Speaker: And I think we're very well poised to do that.
Speaker: ADB is very keen on interregional trade.
Speaker: It sees a great deal of sort of development benefits coming out of interregional trade.
Speaker: And we'd be very happy to work with all of our partners and those of you in the audience
Speaker: who want to position yourself in such a way that you are able to support more of those flows.
Speaker: So we'd be happy to provide any kind of information or introductions and so on in that sort of traditional trade finance space that'll help ensure that financing is available to support some of this increased activity.
Speaker: Another aspect, Sandeep, I'd like to mention is our growing supply chain finance business.
Speaker: As you probably know, supply chain finance is not well developed in most parts of Asia and certainly in many of the RCEP countries, developing RCEP countries.
Speaker: And I think that supply chain finance could offer
Speaker: a fantastic opportunity to support a lot more SME activity, especially in the supply chain, in the value chain.
Speaker: As we heard from Shanela, the common rules of origin are going to provide a lot of opportunities for
Speaker: companies, including SMEs, to become more active in these supply chains.
Speaker: But if we don't provide sufficient financing, of course, those opportunities are not going to be able to get maximized.
Speaker: So like with the trade finance business, we'd be very happy to work with people watching.
Speaker: We've already been ramping up our business with HSBC quite nicely on the supply chain side in Asia.
Speaker: And there's a lot more scope for growth, especially coming out of agreements like these.
Speaker: There are regulatory challenges.
Speaker: in some of the countries and we're working on that front as well with our public sector colleagues.
Speaker: But the RCEP certainly is exciting.
Speaker: There are lots of opportunities and working together, I think we need to ensure that we maximize those opportunities, especially for the SMEs and the segments of the economy that don't always get the support that they need to take full advantage of these kinds of opportunities.
Speaker: Steve, thanks.
Speaker: What I picked up and in fact been discussing with others as well is that clearly our set will drive up into Asia.
Speaker: It's a trend which will only gather pace.
Speaker: And that's really good news for, I guess, everyone on the screen and probably in the audience because that will lead to more trade and more financing.
Speaker: And you did mention supply chain.
Speaker: Shanela mentioned supply chain.
Speaker: So that comes up quite strongly.
Speaker: And the common rules of origin is something people have really focused on.
Speaker: And one of the questions to the panel is, how do we see businesses organizing themselves around these common rules of origin and supply chain?
Speaker: So Tim, if I can just kick off with you, anything you're seeing on the ground in Vietnam on how some of the corporates could organize themselves around supply chain under RCEP?
Speaker: Thanks.
Speaker: Yeah, thanks.
Speaker: Thanks, Sandeep.
Speaker: We're not, to be very honest, we're not seeing any material changes in the way people are organizing their supply chains.
Speaker: And partly that is Vietnam has been inaccessible for a lot of people given the restrictions around COVID.
Speaker: But what we are hearing is customers talking about it.
Speaker: And their view is that absolutely the rules of origin are a substantial positive from RCEP.
Speaker: By and large, their view is that RCEP is evolutionary rather than revolutionary.
Speaker: It's a positive shot in the arm for trade liberalization, especially in Asia at a time when protectionism was clearly on the rise.
Speaker: And the one area that really does stand out for them is the area around rules of origin, because by and large, they view that the free trade agreements, the bilateral free trade agreements that Vietnam has signed, and most recently with the EU and the UK, are far more far reaching and also quicker to implement.
Speaker: But the important thing on rules of origin, and as was said at the beginning of this session, is the ability to source, whether it's
Speaker: you know, electronic components from China manufacture here and then sell back is significant.
Speaker: And Vietnam is, if you look at its trading partners, China is its second largest trading partner.
Speaker: If you take Asia together, it's also, it's the third, the US is currently the first, but that's only for a short period of time.
Speaker: So the opportunities are there.
Speaker: Are people taking advantage of them right now?
Speaker: No.
Speaker: Are they talking about them?
Speaker: Absolutely.
Speaker: And is the view that RCEP is positive?
Speaker: Yes, because it gives trade liberalization another sort of bit more positive momentum, which is something that Vietnam has been pursuing for the last sort of 10, 12 years.
Speaker: Thanks, Stephen.
Speaker: It looks like from a country perspective also, we could see a V-shaped recovery coming out of RCEP.
Speaker: Manu, hearing what Tim had said, and I'm sure you look at many other countries, I'm well aware that Dyson has manufacturing across a number of countries in Asia.
Speaker: Whether you or your counterparts in other companies, what's your view on supply chains given the rules of origin?
Speaker: Thanks, Sandeep.
Speaker: I think what Tim was referring to that now with the direction that RCEP is given and with the other trade agreements that we have in place between all the different countries, China being in the play, it becomes easier for companies like Dyson or even for other companies who are manufacturing
Speaker: or who are even thinking of manufacturing in Vietnam or Philippines or Thailand, that they can source goods from electronic parts, et cetera, from China.
Speaker: and then manufacture in Vietnam or Philippines and then send it back to China.
Speaker: So this opens up new doors.
Speaker: It opens up new vistas for people to think around how their supply chain is planned.
Speaker: And it also provides people who think about diversification of their supply chain.
Speaker: So it gives people even more opportunities to diversify their supply chain where you have multiple countries participating in these trade agreements.
Speaker: The only thing is that we have to see how the implementation goes and how quickly individual countries can set up rules around these trade agreements.
Speaker: So let's say one thing that comes quite frequently is that with the rules of origin and with things coming from various different countries, how are IPs going to be protected?
Speaker: So how do countries kind of legalize and put legislation around those things?
Speaker: how do they standardize custom project procedures and also yes it will help people to think around the broader supply chain but it needs to be seen how it is implemented over the next year or two years.
Speaker: Manu you've spoken like a true CFO, the devil's in the detail that's what you're looking forward to.
Speaker: Banks are saying let's just get on with it.
Speaker: Sorry Steve you're going to say something.
Speaker: Yeah, thanks, Sandeep.
Speaker: I just wanted to sort of further to what Manu is saying.
Speaker: There are a lot of details to be sorted out.
Speaker: No doubt, you know, the countries have some work to do there.
Speaker: But beyond that, I find that a lot of these agreements, they're exciting, it's the right direction, it's the right thing to do, lots of opportunities, but so often they're not well communicated.
Speaker: You know, I mean, the big players, no doubt, have been involved with the negotiations and have been consulted left, right, and center from respective governments and so on.
Speaker: But, you know, it's all the others that could benefit from these things, but really don't have any idea exactly how to do that.
Speaker: And I think often in the past, there's been a...
Speaker: to sort of not enough effort on the communications and explanation side.
Speaker: ADB is going to be doing a study now, and I'm hoping it's going to end up being a very practical, a user-friendly guide for SMEs and others on, you know, exactly how can one take advantage of what's coming in this agreement as we've discussed.
Speaker: recognize it's not implemented yet, but once it is, how can we take full advantage of that?
Speaker: Thanks.
Speaker: Steve, you make an excellent point, and that's been an experience that some of the large corporates are very good at appointing external consultants and get organizations to really back it up, but it's really the SME who would benefit from some
Speaker: off-the-shelf guidance, if that may come, and if ADV provides, that's great.
Speaker: So listen, I think it's time for another poll.
Speaker: And Chanel, I did refer to that, and it's an interesting question.
Speaker: So the question for the audience is, do you expect India to join RCEP?
Speaker: And it's a simple yes and no.
Speaker: I have my views, but I do not wish to influence the outcome.
Speaker: So I will hold that back.
Speaker: Manu's smiling because I'm sure Manu's also got a couple of insights into that, but let's see what comes up.
Speaker: And while the poll is being worked, I'll probably at least introduce the next question if I may.
Speaker: It's quite a mixed bag.
Speaker: Still, yes, 67%, no, 33%.
Speaker: So there is hope.
Speaker: And to think of it, there's 30% of your population without India.
Speaker: And if you add India, you're probably getting into 50%.
Speaker: So that should be really positive.
Speaker: Great.
Speaker: Next question.
Speaker: And that's really about getting into the specific sectors.
Speaker: So Manu, clearly you come from a specific sector, but a thought we have is that clearly a lot of different sectors may approach the asset opportunity in different ways.
Speaker: So maybe Tim, if I just come to you, from a Vietnam perspective, are you seeing any kind of specific sectors which people are talking to from an RCEP perspective or is it across sectors?
Speaker: Thanks.
Speaker: So Sandeep, it's very broad, but if you were to focus on specific sectors, clearly electronics is one.
Speaker: Vietnam, 25, 24% of its GDP is Samsung.
Speaker: So it's all related to electronics and the benefits that they will see from RCEP are significant.
Speaker: You will also see textiles and garments.
Speaker: Vietnam vies for second place globally after China with Bangladesh.
Speaker: And the view is that that will continue and that will benefit, especially if you can start sourcing from the likes of China, Korea, Taiwan, et cetera.
Speaker: And then to a lesser extent, footwear and then also machinery.
Speaker: So they're the sectors that are probably the most bullish about what RCEP offers.
Speaker: But for us, it's very difficult, Sandeep, to sort of segregate RCEP from everything else that's been happening, right?
Speaker: If you look at Vietnam since 1986, when they started Doi Moi, which was their renovation, they've moved towards a market-oriented economy, and they've already signed 14 free trade agreements.
Speaker: They have, I think, another one or two in the pipeline that they're looking to sign.
Speaker: So...
Speaker: That momentum from all those free trade agreements continues to feed through the Vietnamese economy, and that has been helped by the recent tensions between the US and China.
Speaker: So the whole China plus one strategy has played very favorably for Vietnam.
Speaker: So for us here, it's very hard to sort of just segment RCEP and say, right, is RCEP really the big kicker?
Speaker: Clearly, it's a positive, but...
Speaker: There are so many other positives happening for the economy here, despite the external environment, that it's hard to isolate the benefits purely from RCEP.
Speaker: So, Timmy, you make a good point that it's really the complication of supply chains which offers itself to RCEP.
Speaker: So, if you see electronics, and Manu knows it, that you can cut across literally 5, 10 countries to produce a single product.
Speaker: But when it comes to footprint, it's quite often one market and it doesn't matter then from an asset perspective.
Speaker: So it seems that it will be the more complex supply chain industries who would benefit the most.
Speaker: Steve, just to kind of come across to you, is that something you've observed from an ADB perspective?
Speaker: Sorry, Sandeep, observe from what perspective?
Speaker: Sorry, I don't follow the question.
Speaker: Sure.
Speaker: Now, I was just saying, looking at the various industries, it seems to be the industries with complex supply chains will benefit the more from RCEP.
Speaker: Is that something you're seeing from your working at the institution?
Speaker: Yeah.
Speaker: Yeah.
Speaker: Yeah, you know, I...
Speaker: I think it really depends on the economy.
Speaker: I mean, Vietnam is, I mean, I've often thought that it's going to be the next South Korea.
Speaker: I mean, it's unbelievable the sort of the FDI that's going into that economy and from so many different sectors, whether it's electronics, manufacturing, textiles, whatever it is, it's broad.
Speaker: It's quite amazing.
Speaker: So, I mean, if, and one of the things that's, that's so interesting about the RCEP is it's got such a mixed bag of countries, you know, that are already developed countries that are, that are, I mean, we've got Cambodia, Myanmar, some of these countries, and then, and then you've got, and then you've got Vietnam, which is maybe a class of its own.
Speaker: So it'll be very interesting to see, you know,
Speaker: as the countries go on this sort of journey towards increased integration economically, just how far it's going to go.
Speaker: I mean, you know that there's been talk about common currency and all that kind of stuff.
Speaker: I mean, I think some of that is pretty hard to fathom at this point.
Speaker: And I don't think that the Asian...
Speaker: that sort of region would ever go with this sort of EU route of a political union.
Speaker: But seeing just how far this sort of integration is going to go over the next couple of decades is going to be fascinating.
Speaker: But no question that certain segments of the economy like electronics and auto and so on are just going to become increasingly intertwined between the countries.
Speaker: Great, Steve, thanks.
Speaker: I can see some questions come from the floor and let's open it up and get the audience into the discussion.
Speaker: So the one which my eyes are rooted on is interesting.
Speaker: It's about Taiwan.
Speaker: So the question is, and I'll just read it out for everyone's benefit, that Taiwan is a key electronics player in the regional supply chain ecosystem.
Speaker: However, as they're not part of RCEP, what are the wider implications to Taiwan and to the regional supply chain ecosystems?
Speaker: Not sure who also have a crack at it, Manu?
Speaker: Well, I'm just trying to...
Speaker: I understand the question.
Speaker: Taiwan is an important player, especially for companies who are in the electronics sector like us.
Speaker: We do source a lot from Taiwan.
Speaker: If Taiwan were to be a part of such an agreement, then it will definitely help companies like us and other players who are in the semiconductor electronics area.
Speaker: I mean, it would be good, but given the overall political environment that we have, I'm not sure whether that is immediately possible.
Speaker: Sure, Manu, I agree.
Speaker: I guess for some of the sectors where Taiwan is a key part of the supply chain, not having Taiwan within us is thus complicated.
Speaker: So it's an interesting question, but I guess more for the specific sectors.
Speaker: Lived with that is also another question which has come through, which is do we expect more countries to join RCEP and what's likely to be the impact?
Speaker: Steve, maybe I come to you for this.
Speaker: Well, we've heard that there's been interest by a variety of different countries and as Shanela outlined, I think that it opens up the possibility for those discussions to take place a bit more seriously after 18 months of implementation of RCEP.
Speaker: So certainly I think there's going to be some interest and maybe in part,
Speaker: is gonna depend on just how well the agreement performs.
Speaker: I mean, how well is it gonna be implemented?
Speaker: How transparent is that gonna be?
Speaker: How fluid is it gonna be?
Speaker: And what sort of competitive advantages is that going to afford various industry sectors?
Speaker: And if you've got a competitor being outside of the RCEP,
Speaker: that sees that they're losing out, they're going to start putting pressure on their government to have a serious look at it.
Speaker: So I think, to go back to Manu, it depends.
Speaker: Any thoughts on that?
Speaker: Any discussions in Vietnam where the competition can come from new countries joining Assad?
Speaker: No overt discussions around that, Sandeep.
Speaker: I like Steve's comment that he thinks Vietnam is potentially the next South Korea.
Speaker: If you talk to people in Hanoi, their view is very much that's the model that they are pursuing.
Speaker: And they have done, they believe that they have done enough to make Vietnam hugely competitive, regardless of what the external environment is.
Speaker: So whether it is
Speaker: stable currency, whether it is a relatively cheap but effective workforce, whether it's inflation under control, whether it is a consistent political environment with clear direction that doesn't lead to huge oscillations in policy.
Speaker: The Vietnamese view is very much bring it on.
Speaker: So I don't think they look at it as who is our next competitor.
Speaker: It's very much the outlook is we feel it's our time now.
Speaker: And one thing I've learned with the Vietnamese is you underestimate them at your peril.
Speaker: If anyone knows much about Vietnamese history, you'll understand why.
Speaker: But another example is I think Vietnam was a net import of rice and the government said within two years will be a net export of rice back in, I think, 86, 87, when they did land reform.
Speaker: And within two years, they became the third largest export of rice.
Speaker: I'm kind of backing them on this one.
Speaker: Thanks.
Speaker: Just conscious of time and I'm being prodded by my executive producer, but the last one, Manu, if you could literally answer it in two sentences, no supply chain discussion stops without discussion on financing.
Speaker: So do you think that needs to be augmented to really support RCEP because without financing, supply chains will not really get oiled.
Speaker: I would think so that banks and maybe even regulators might need to look at how the cross border trade happens because this will eventually open up more cross border trading that we are sourcing raw materials from one country and to the other.
Speaker: So it definitely needs to be looked at and it is a huge opportunity for banks to kind of design solutions around it.
Speaker: Manu, thanks for that.
Speaker: Very succinct as ever.
Speaker: I know brought the panel discussion to a close.
Speaker: So please join me in thanking our engaged panel.
Speaker: Thank you.
Speaker: Thank you, Sandeep.
Speaker: Thanks, everyone.
Speaker: All the best.
Speaker: Thank you for listening today.
Speaker: This has been HSBC Global Viewpoint Banking and Markets.
Speaker: For more information about anything you heard in this podcast or to learn about HSBC's global services and offerings, please visit gbm.hsbc.com.
