Chinese banks - Luxembourg for Finance

Transcription

The Newsletter | Special Edition
Special Edition
Luxembourg
meets Asia
"Luxembourg has a competitive edge
and a sophisticated infrastructure.
That’s why I strongly feel the necessity
to explain Luxembourg’s attractive
infrastructure, especially its financial
framework".
T oru HORIE
Managing Director and CEO,
Mizuho Trust & Banking (Luxembourg) S.A.
Chinese banks
The Chinese invasion
Japanese banks
Advice in Japanese
Luxembourg at a glance
Luxembourg banks
BACK TO THE FUTURE
Private banks
FOLLOWING FORTUNE
Investment Funds
SO DIFFERENT, YET SO ALIKE
Clearstream
Clearing the way
3
6
9
11
15
19
21
Law firms
THIS IS NO SLAM DUNK
Big 4
FOUR REASONS
TO DO BUSINESS IN ASIA
PFS
SOME FLEW EAST
ATTF
THE AMBASSADORS
OF GOODWILL
Promotion in China
MOVING AROUND IN
THE WORKSHOP OF THE WORLD
Carbide industry
HARD MATERIAL MATTERS
Dredging
THE LANDMAKERS
Impressum E ditor: Luxembourg for Finance • 12, rue Erasme • B.P. 904 • L-2019 Luxembourg
Tel. (+352) 27 20 21 1 • Fax (+352) 27 20 21 399 • Email lff_communication@lff.lu
Responsible for publication: Jean-Jacques Picard. Editors: Elisabeth Adams (EA), Eleanor de Rosmorduc (ER), Christian Welter (CW).
Circulation: 7000. Photos: all rights reserved - January 2013
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The Chinese
invasion
Until the middle of the
19th century, Asia was the
economic centre of the
world. After the Opium War
and the Indian Revolution, it
was replaced by Europe and
the US. Since the beginning
of the financial crisis, the
pendulum is swinging back
to Asia once again. By 2050,
its GDP share is projected
to amount for 52% of the
world’s economic power.
During her visit to China at the beginning of
the year 2012, German Chancellor Angela
Merkel’s request for financial support for the
European rescue package was rejected by the
Chinese government. China, long being illreputed as a low cost country with questionable human rights and a flourishing imitation
industry, has been catching up rapidly. Ailing
Europe has become its main target market
and thus, the Chancellor‘s appeal for help
was not in vain.
Chinese Banks | P. 2|3
The current shift in power is also seen in
the fact that just lately, the world‘s second
largest bank by market value, The China
Construction Bank, decided to open a subsi
diary in Luxembourg. Chinese banks recently
complained in a letter to the UK Treasury
that opening a branch in London would be
too complicated and thus they preferred
Luxembourg to London.
The close relationship to the Luxembourg
government and the Ministry of Finance is
indeed one of the reasons the world‘s largest bank by market capitalisation, Industrial
and Commercial Bank of China (ICBC), has
a representative office in the Grand Duchy
since 1998, which was quickly upgraded to
a branch in 1999.
Xue JIAN,
Head/Senior Manager Corporate Banking
and Financial Institution Department,
Bank of China (Luxembourg) S.A.
"If the Chinese economy
continues to grow in the
coming years, the middle
and the upper classes will
be enormous. They will try
to find a good allocation of
their wealth. By then, I‘m
confident that the Chinese
government will loosen
capital control. People will
move more wealth out of
China to elsewhere in the
world. Luxembourg is a
very good place for them".
"Luxembourg offers an
attractive legal and business
framework with political and
social stability, a skilful and
multilingual workforce and a
favourable tax regime".
"Luxembourg offers an attractive legal and
business framework with political and social
stability, a skilful and multilingual workforce
and a favourable tax regime", says Gao Ming,
General Manager of ICBC Luxembourg branch
and Chairwoman of ICBC (Luxembourg) S.A.,
which was named ICBC (Europe) S.A. in 2011
and serves as the group‘s European continent
headquarters. "When our group’s head office
considered choosing an EU network expansion
platform in 2009, it was inevitable to think
of ICBC Luxembourg, from where we could
expand our EU network in the most efficient
way. In 2011, we opened five branches out of
Luxembourg, namely Paris, Brussels, Amster
dam, Milan and Madrid at the same time. In
2012, ICBC Europe set up two more branches
in Warsaw and in Barcelona".
Behind the background of more and more
European companies going to China and in
return, more and more Chinese companies
coming to Europe, ICBC Europe focuses on
its European customer base, especially those
that invest in China or have trade transac-
Chinese Banks | P. 4|5
tions with Chinese enterprises. "Chinese
companies with investments in Europe, es
pecially those companies which are ICBC key
clients in Mainland China are definitely our
major clients in Europe", Gao Ming explains.
"We try to give them better service and offer
them solutions for their investments and de
velopment in both China and Europe. On the
private banking side, we serve both wealthy
Chinese and local private clients who have a
special preference or need for RMB products
or products linked to the Asian economy".
THE RMB IS KEY
In 2011, the cross-border RMB settlement
and trade finance volume of ICBC Europe
accounted for 15bn in assets under management. As the group‘s key product, Mrs Gao
strongly welcomes and actively supports the
initiative of the Luxembourg government to
promote the local financial centre as Europe‘s
hub for RMB products. "We benefit from the
speed up internationalisation of the Chinese
RMB by expanding our offshore RMB financial
services. RMB products and services are our
strong edge and competitive advantage when
we enter into partnerships with the big local
companies".
Not being considerably affected by the European crisis, the best for the Chinese banks in
Europe is yet to come. Being more conservative and prudent in expanding new business
other than their core business than its European counterparties, Chinese banks successfully escaped from the recent years’ financial
tsunami relatively unscathed. "European
banks are more client- and market-oriented
and experts at high-value-added business such
as private banking and wealth management",
Mrs Gao illustrates. "What Chinese banks can
learn from Europe is how to explore new busi
ness opportunities with lower capital require
ments and an improved revenue structure".
"What Chinese banks can learn from Europe is how to explore
new business opportunities with lower capital requirements
and an improved revenue structure".
Gao Ming,
Chairwoman,
ICBC (Europe) S.A.,
General Manager,
ICBC Luxembourg branch
HEADING OFF
According to forecasts, China will overtake
the US as largest economy in the world by
the year 2020. Already, Chinese companies are
competing hard in the domestic market, causing them to search for new investment opportunities abroad. "This development will bring
more opportunities for our overseas branches
and also for Luxembourg to see more business
opportunities from China", Xue Jian, Head of
Corporate Banking & Financial Institution Department at Bank of China (Luxembourg) S.A.,
says. "They will use Luxembourg as a distribu
tion channel or even as the final destination of
investments. If the Chinese economy continues
to grow in the coming years, the middle and the
upper classes will be enormous. They will try to
find a good allocation of their wealth. By then,
I‘m confident that the Chinese government will
loosen capital control. People will move more
wealth out of China to elsewhere in the world.
Luxembourg is a very good place for them. The
private banking and the fund sector will directly
benefit from this trend".
Bank of China Luxembourg S.A. was the
group’s first bank in continental Europe when
they opened their branch in Luxembourg in
1979. Legally, the Luxembourg entity is both
a branch and a subsidiary. With the help of
the European passport, European branches
can be easily set up in other countries out
of Luxembourg. "We set up the branches in
Rotterdam, Brussels, Warsaw and Stockholm;
currently, we are setting up a branch in Lisbon.
If we were to set up from our head office,
it would take us a long time because of the
regulatory needs".
SIZE MATTERS
Similar to ICBC, Bank of China‘s main business is syndicated loans for overseas Chinese,
as well as European companies. Since for Chinese companies assets in Europe are getting
cheaper compared to the years before the
crisis, Bank of China has benefitted strongly
from this trend. "The strength of Luxembourg
is for instance that the government is very
close to business and it readily adapts itself to
the market situation and the changes going
on in the world. Luxembourg really listens to
the business community and supports their
development", Mr Xue says. According to his
experience, Luxembourg is not yet well known
in China. "The Shanghai Expo helped Luxem
bourg boost its image, but there is still a lot of
work to be done".
Despite the various relationships between
the Luxembourg financial centre and China
and the advantages a small country with a
strong economic sector can offer, Luxembourg will always remain the little brother of
the rising star. Mr Xue is confident that the
wave of success in the region will continue.
"China still is the most important market in all
of Asia because the Eastern coast is already
very developed. Shanghai is much better
developed than even New York or London.
In Mainland China, there is still a lot of land
available. In Vietnam and India, the population
is ready for the changes to come. The whole
population is very young and now that China’s
labour costs are rising, a lot of industry is
moving to these other countries. This will bring
them a big domestic market and educated
staff. Regarding the financial industry, in China
the strongest banks have always been the tra
ditional Chinese banks. I don’t think the foreign
banks can really compete with them. If we are
strong in China, we can also be competitive
overseas". EA
Advice in
Japanese
Speaking with a Japanese
person in times of the
European crisis is somewhat
reassuring. Since 1960,
Japan’s real GDP growth
rate has been continuously
declining. In 2013, it is projected to fall from 2.22%
(2012) to 1.23%, according
to the IMF. However, Japan’s
GDP per capita is, at over
40,000 USD, almost on the
same level as Singapore’s,
showing the maturity of the
country. Thus the Japanese
perfectly know how to cope
with difficult economic
situations over a long period
of time.
Japanese Banks | P. 6|7
While European and US politicians insist on
a quick recovery from the Eurozone crisis, to
the Japanese managing directors of Mizuho
Trust & Banking (Luxembourg) S.A. and Mitsubishi UFJ Global Custody S.A, it is obvious
that good things are worth waiting for.
banks have dramatically reduced their debt.
As of March 2012, the debt ratio of our group
accounted for 1.7% of total assets. In Euro
pean banks, it’s nearly 8%. They need to focus
more if they want to survive. European banks
should look at Japan as a case study".
"I personally think that in Europe, the crisis
will continue because government debt is not
easy to reduce", Hiroshi Minagawa, Managing Director of the Mitsubishi UFJ Global
Custody, notes. "This cannot be resolved in the
short-term. The Japanese economy has been
surviving for almost twenty years since the
depression started. As it stands now, Japanese
Toru Horie, managing Director and CEO of
Mizuho in Luxembourg, agrees that the EU
can learn from Japan how to recover from
a crisis. "The Japanese have the knowledge
necessary for effective risk management
because of the natural catastrophes that
have threatened the country in the past". In
recent years, Mr Horie noticed that Japanese
investors are watching the Eurozone situation very carefully. "However, they don’t shift
their money from the EU to other countries.
In Japan there are a lot of liquid assets, that’s
why they are preparing to reinvest the money
in Europe. Many Japanese companies are plan
ning to purchase European and US companies.
The Japanese want to invest outside of Japan
because of the strong yen".
ARMED WITH A STRONG YEN
According to a recent survey, the Japanese
private sector currently holds 1,500 trillion
yen in private assets. More than 50% of these
assets are cash deposits, a Japanese characteristic. Due to low interest rates, the probability that Japanese investors will take a risk
and invest money into European equity and
bonds is quite high, given that the situation
of the domestic economy is quite stable.
"At the moment, Japanese bond yield is lower
than 1%", Mr Minagawa underlines. "The
Japanese yen exchange rate is strong against
the dollar and the euro. If the Japanese bond
yield needs some additional premium, or if the
Japanese yen is starts getting weaker, that will
be a critical point".
Japan is also one step ahead when it comes
to the ageing of society, a development that
the country has already experienced and that
had a significant impact on GDP growth rate.
Over 72% of the national GDP comes from
the service sector, which makes the country
very dependent on the global economy.
Nevertheless, Japan recovered well after the
tsunami and nuclear disaster in 2011, thanks
to high levels of government spending. Even
though, as an already mature market, Japan
does not take part in Asia’s rapid growth,
it remains important due to its size. About
54.1% of all Asian HNWIs reside in Japan.
This makes the country by far the largest
HNWI market in the region (Capgemini/RBC
Wealth Management Asia-Pacific Wealth
Report 2012).
"Japanese investors are looking for the invest
ment opportunity into the global market due
to lower performance in the domestic market",
explains Mr Minagawa of Mitsubishi. "That’s
why we are expanding our business outside
Japan. Japanese investors have focused on
disaster recovery structures and investments in
new technologies. In Europe, our group works
on strengthening project finance. Due to global
warming, new infrastructure and new energy
sources will be needed. We are encouraging
such projects".
Toru Horie,
Managing Director and CEO,
Mizuho Trust & Banking (Luxembourg) S.A.
OUT OF LUXEMBOURG
In Luxembourg, Mitsubishi UFJ Global Custody
S.A. manages the securities and cash assets of
Japanese financial institutions. "Nearly 90% of
our clients are Japanese and main clients are fi
nancial institutions, assets managers or security
firms. They have retail clients and public funds
distributed in Japan and we are managing their
funds", the managing director says. "One of
the reasons we are doing business here is that
in Luxembourg there is a lot of expertise in fund
management. We utilise that environment and
infrastructure and also the human resources".
Mizuho’s Trust and Banking Luxembourg
business is in the custody, fund administration and security agent business. The bank has
successfully carried out a structural transformation by transferring the custody business
"The Japanese have the
knowledge necessary for
effective risk management
because of the natural
catastrophes that have
threatened the country
in the past".
"Japanese investors have focused on disaster recovery structures
and investments in new technologies. In Europe, our group works
on strengthening project finance. Due to global warming, new
infrastructure and new energy sources will be needed".
Hiroshi Minagawa,
Managing Director,
Mitsubishi UFJ Global Custody
from London to Luxembourg and in exchange,
moving the securities lending business from
Luxembourg to London. "We may be currently
one of the only banks expanding its business
and recruiting here in Luxembourg", says Toru
Horie. "In terms of custody business, most of
our clients are of Japanese origin; that is to
say, Japanese financial institutions, insurance
companies and manufacturing companies. Our
clients in the fund administration business are
Japanese investment managers, investor man
agement companies and securities companies.
Speaking of the security agent business, we get
a lot of our business from Japanese industrial
companies. But we don’t intend to limit to
Japanese clients on our business. We will be
able to capture more business in collaboration
with Mizuho’s other entities around the world".
During personal conversations, Mr Horie
notices that most Japanese professional financial investors are not familiar with Luxembourg. "They don’t know where Luxembourg is
located or what the most important industrial
sector is. Luxembourg has a competitive edge
and a sophisticated infrastructure. That’s why
I strongly feel the necessity to explain Luxem
bourg’s attractive infrastructure, especially its
financial framework".
Both managers agree that not only can
Europe learn from Japan, but Japan can also
learn from Europe, especially when it comes to
speaking several languages. What Luxembourg
is concerned, Mr Minagawa of Mitsubishi has
another piece of advice: "Luxembourg should
go more for the global view. The country is in a
good location to do global business. It should
focus on its geographic location. Luxembourg
banks should expand their global standard of
services using an international network". EA
Luxembourg
at a glance
The history of Luxembourg
is characterised by continuous battles for its liberty and
territory. Located in the heart
of Europe and surrounded by
France, Belgium and
Germany, it is obvious why
the tiny country has long
been an object of desire for
its neighbours.
Luxembourg city is first mentioned in a record
dating from 963, which refers to a castle called
"Lucilinburhuc". The castle, which was strate
gically positioned at the heart of the Frankish
empire, passed into the hands of the Holy
Roman Empire for many centuries. This period
ended when King Louis XIV of France took
Luxembourg from the Habsburg emperors and
asked his chief engineer, Sébastien de Vauban,
to turn it into an impregnable fortress.
Luxembourg history becomes more lively
after 1815, when it was declared a Grand
Duchy, held in personal union by the king of
the Netherlands. After a struggle for independence that lasted many decades, Luxembourg
finally managed to escape from the claws of
its neighbours. In the Second Treaty of London,
of 1867, Luxembourg was declared neutral and
luxembourg | P. 8|9
its fortress was dismantled. In 1890, the personal union with the Kingdom of the Netherlands had come to an end, in the absence of a
male heir to the throne. Since then, the Grand
Duchy has been led by its own dynasty, the
house of Nassau-Weilburg.
Today, Luxembourg is a parliamentary democracy in the form of a constitutional hereditary
monarchy. Grand Duke Henri is the Head of
State. His duties are largely ceremonial.
With an area of just 2500 square kilometers
and 524,000 inhabitants, the Grand Duchy of
Luxembourg is the second smallest country
in the EU. However, travelling from North to
South, the visitor can enjoy an astonishingly
varied landscape, beginning to the North with
the wooded Ösling region, in the foothills of
the Ardennes, down through rolling farm and
woodland, to the capital with its medieval
relics and ending in the South East with the
vineyards of the Moselle or to the South with
the so called "red earth" where the region is
still marked by huge iron ore production sites.
And all this within 82 kilometers.
The economic upturn began directly after
the Second World War, when Luxembourg
temporarily became headquarters of the
European Coal and Steel Community (ECSC).
At that date the iron ore industry had al
ready begun to shape the country, having
been discovered and extracted since the
middle of the 19th century. Nowadays, this
main industrial pillar has been replaced by
the finance industry. In the 1960s, the first
foreign banks moved to Luxembourg, settling
down in the Boulevard Royal, which rapidly
became the "Wall Street" of Luxembourg. As
the banks grew and needed more space, there
was a general move out of the city centre to
the Kirchberg. Over the years, Kirchberg has
developed into a pulsating quarter, where
almost every internationally operating bank
has a branch.
In order to diversify its economy, Luxembourg
has worked hard in recent years to develop
other business sectors. With success: Luxembourg has a thriving film industry and is internationally known in the telecommunications
sector through RTL and the SES satellite group.
It is a centre of excellence for intellectual
property issues, IT and biochemistry. Moreover,
one of the world’s ten largest cargo airlines,
Cargolux, operates from Luxembourg, stimulating the development of a major logistics hub.
With over 100,000 people working in the
financial sector, this industry is of special
importance to Luxembourg. Every day, more
than 150,000 commuters cross the French,
Belgian and German borders in order to earn
a living in Luxembourg. They present almost
one third of the national labour force. And it
is not only the neighbouring populations who
appreciate the favourable working conditions
in Luxembourg. Expatriates from all over the
world make the Grand Duchy a truly cosmopolitan country. Strolling through Luxembourg
City means submerging oneself in a cultural
melting pot, where different languages can be
heard at every corner.
The 1960s were also the beginning of Luxembourg as one of the capitals of the European
Union. Today, the Grand Duchy hosts five
European institutions: the secretariat of the
European Parliament, the European Court of
Justice, the European Court of Auditors, the
European Investment Bank and the European
Commission. And, of course, all these institutions attract numerous employees from all
over Europe.
It is not only the working conditions that
make Luxembourg an attractive place to
live. No other European city can offer such
a multicultural atmosphere in such a small
area. In recent years, the cultural scene has
experienced incredible development. With the
opening of the Philharmonie in 2005, Luxembourg City hosts the most prestigious concert
hall in the "Grande Région" and well beyond.
International stars from the classical music
world rub shoulders with jazz legends and
pop stars, appreciating the location and the
excellent quality of the sound. The younger
audience is served at the Rockhal, the biggest
national concert hall in the country, located
in the South of Luxembourg.
Besides music, there are several museums
that invite people to learn more about the
artistic and natural history of the country,
and the theatres offer a varied programme
of dance and drama – both domestic and
foreign - in four different languages.
Named a UNESCO World Heritage city, Lux
embourg has a special atmosphere that in
summer months is almost Mediterranean.
The remains of the fortress and the deep valley that cuts through the city, protecting it on
two sides, shape its character and appearance.
Gourmets, in particular, will love the Luxembourg way of cooking, where French and German cuisine blends to create delicious meals
that make the epicurean’s heart beat faster.
Luxembourg is the living proof that small
can, indeed, mean beautiful. Come and see
for yourself! EA
Area
2,586 sq km
Land boundaries
356 km
Ethnic groups
Luxembourger 63.1%,
Portuguese 13.3%,
French 4.5%,
Italian 4.3%,
German 2.3%,
other EU 7.3%,
other 5.2%
Languages
Luxembourgish (national language),
French (administrative language),
German
Population
524,900 (2012)
Government type
constitutional monarchy
Independence
1839 (from the Netherlands)
Real growth of GDP
1.0% (2013 est.)
Employment growth rate
1.3% (2013 est.)
Unemployment rate
6.5% (2013 est.)
Public dept (in % of GDP)
18.3% (2011)
Back to
the future
Asia is the world's largest and most populous continent with over four
billion people and a rapidly emerging middle class. Asian populations
also have a reputation for being passionate savers. There are plenty of
reasons for Luxembourg banks to be present in the Far East and several,
such as Banque LBLux, BNP Paribas Securities Services, BIL and HSBC
are developing strategies to expand on the Asian continent.
Frédéric Perard,
Head of Luxembourg & Offshore Centres,
BNP Paribas Securities Services
Today, China and India together account
for almost 40% of the world’s population.
Global demographic changes will bring us
back to where we were in the beginning of
the 19th century: according to United Nations
projections, by 2050 Asian countries will
represent more than half of the world’s GDP.
By nearly doubling its share of global gross
domestic product (GDP) to 52%, Asia would
regain the dominant position it held before
the industrial revolution.
BNP Paribas Securities Services provides
securities services and investment operations to the world's financial institutions.
The company employs more than 7,700 staff
in 34 locations around the world including
1,200 staff in Luxembourg and a strategic
presence in Asia. Frédéric Perard, Head of
Luxembourg & Offshore Centres, says that
BNP Paribas has had a strategic presence in
Asia for the last five years to ensure that
financial market opportunities in these fast-
LuxEMBOURG banks | P. 10|11
developing countries are captured. "Paribas
Securities Services is one of the few custodians
to have its own global custody network. This is
very critical, given the evolution of European
Directives, since the fact of having our own sub
custodian in key markets will be a factor for
safety for the depositary bank. That’s why we
have established a presence in Hong Kong and
Singapore", Mr Perard explains. Countries like
Indonesia, Malaysia and Taiwan, where BNP
Paribas Securities Services can provide its own
local custody service, are on the company’s
radar for other, obvious reasons. "Distribu
tion of investment funds is the other reason for
developing our presence in these countries. It
is crucial to be in Asia when it comes to tackling
the issues around KYC (Know Your Customer)
and AML (Anti-Money Laundering), for which
there is a slightly different approach between
European and Asian countries. If you want to
support your customers for global distribu
tion, you have to be present physically in these
locations".
Global footprint
Michael SchaaL,
Senior Vice President,
Private WealthManagement Asian Desk,
Banque LBLux
Nigel Fielding,
CEO,
HSBC Luxembourg
François Pauly,
CEO,
Banque Internationale à Luxembourg (BIL)
luxembourg banks | P. 12|13
Founded in 1865, HSBC is one of the world’s
largest banking and financial services
organisations with 35 years’ experience in
Luxembourg. Its four main activities – asset management, corporate banking, private
banking and securities services – are complementary. It is one of the largest foreign banks
in Luxembourg, with over 500 staff "offering
expertise in emerging markets from the heart
of Europe", as Nigel Fielding, Chief Executive
Officer of HSBC in Luxembourg, puts it. This
global player is fully committed to the Asia
Pacific region, which contributes over two
thirds of the group’s results today. In Luxembourg, one third of all new corporate business
comes from Asia, of which more than half
is from Greater China. "We have a strategic
presence throughout Asia", continues Nigel
Fielding, "and clearly a large footprint in Hong
Kong and Mainland China, as the company was
founded in Hong Kong and Shanghai and our
headquarters has been in Hong Kong for quite
some time, making it one of our most signifi
cant centres. Mainland China in general is very
significant and not just Shanghai: we have over
a hundred locations in Mainland China". HSBC
also has a big presence in India, Indonesia,
Malaysia and Singapore, which are also key
markets for the bank, along with its presence
in Australia, New Zealand, Taiwan, Korea, Thailand, Vietnam, Sri Lanka, Bangladesh, Brunei,
Japan and the Philippines. Basically, HSBC has
all the bases covered in the Asia Pacific region.
François Pauly, CEO of Banque Internationale
à Luxembourg (BIL), shares this enthusiasm".
Recent studies show that, in the next few years,
Asian wealth will grow faster than the rest of
the world’s wealth. Also, the number of mil
lionaires in Asia is expected to grow steadily
over the next five years". BIL is the oldest
private bank in the Grand Duchy, founded in
1856. The bank has over 2,150 employees and
is present in the financial centres of Luxembourg, France, Denmark, Switzerland and the
Middle East, with a presence in Asia since
1982. "Today, our Singapore branch is well
positioned in Asia. As you know, the ‘Lion City’
is commonly defined as the strategic financial
centre and regional hub for Southeast Asia",
Mr Pauly adds. He goes on to remark that,
a few years ago, it was easy to distinguish
between emerging markets and countries
that were economically advanced with highly
developed capital markets, high levels of
liquidity, meaningful regulatory bodies, large
market capitalisations and high levels of per
capita income.
"Recent studies show that, in
the next few years, Asian wealth
will grow faster than the rest
of the world’s wealth. Also, the
number of millionaires in Asia is
expected to grow steadily over
the next five years".
"However, in recent times, different bodies
have developed diverse definitions of what
constitutes a developed market or an emerg
ing market. South Korea is one such example.
According to the FTSE it is a developed market,
but to the MSCI it is an emerging market".
Accordingly, BIL does not differentiate bet
ween the two sectors per se: clients from
these markets are handled in line with their
investment objectives.
Welcome to paradise
Banque LBLux, a subsidiary of BayernLB, has
its head office in Luxembourg. The philosophy
of the group is that it does not need to be
present everywhere: the bank should be able
to operate from the best possible location.
Luxembourg, located in the heart of Europe, is
seen precisely as such. Consequently, Banque
LBLux does not have a strategic presence in
Asia yet. A small team of three experts with
high mobility travels around Asia three to
four times a year. Business within Asia started
about five years ago with German expatriates
based in the most vibrant cities like Hong
Kong, Shanghai and Singapore. That was the
group’s gateway to the Asian market. Today,
the bank has a solid customer base of expats
and Asians.
Michael Schaal is Senior Vice President, Private
Wealth Management Asian Desk at Banque
LBLux. In his opinion, Singapore is the ideal
hub due to its efficiency and perfect geographical location: once there, you can easily
react to developments and opportunities as
they arise. Mr Schaal and his team are evaluating how the bank can best serve its clients’
needs in Southeast Asia. "We have built a
network and people have begun to recognise
us because of our regular and stable presence.
What you need is your personality, intercultural
competence, a special brand and technical
know-how. Hong Kong and Singapore are the
wealth management and private banking capi
tals of Asia. The challenge, and our only chance
to succeed, is to find our own unique way and
offer quality services that others don’t in order
to survive in such a huge banking industry".
For him it is important to stay in places like
Singapore and give clients a personal touch to
show them that you are in it for a long-term
relationship.
The client profile varies from one financial
institution to the next. In the larger markets,
HSBC covers all client types from retail to
ultra-high net worth individuals; also from
small- and medium-sized companies to multinationals and other financial institutions.
In the smaller markets it is more focused:
private banking services are not offered in
some countries and in some others, there
is no retail banking.
HSBC’s ethos revolves around international
trade flows and wealth solutions, as Nigel
Fielding explains. "We ask our clients: where
are you going and how can we help you con
nect with that market? We are seeing a lot
of Asian companies, particularly companies
from Greater China (Hong Kong, China and
Taiwan) coming to Luxembourg and using it
as a base not only for Europe-based activity,
be it investment or selling products, but some
times these companies are even using Luxem
bourg to launch to other parts of the world".
BIL’s main clients are high-net-worth individuals, wealth managers and independent
financial advisors. With Singapore and Hong
Kong as its key Asian markets, the bank also
targets different sectors like real estate,
finance, commodities and others in Mainland
China and other parts of Asia. François Pauly
underlines that BIL’s main challenge is to get
to know the various Asian markets and better
understand customer needs. "For example,
family wealth management is becoming more
and more important to private clients; provid
ing them with standard financial investment
products is no longer attractive enough to
them. On the corporate level, for Chinese
companies for example, foreign mergers and
acquisitions, joint ventures and the like are
presenting growth opportunities".
Fast lane
Banque LBLux targets clients whose
wealth is substantial enough to require diversification all over the world. "That is the
ideal situation", Mr Schaal admits. Besides,
the bank’s goal is to build its base of company clients in order to offer a package
including family office services. This goes
beyond wealth management and private
banking solutions. One thing is clear:
Michael Schaal sees a lot of potential in
terms of Asian outbound investment. "You
have no idea how fast these countries are
moving; the number of new millionaires
every day is incredible. The prices for luxury
goods are much higher than in our regions,
yet the wealth is more openly visible in
places like Singapore. So the wealth is
there. What’s more, the Chinese would like
to come to Europe to buy real estate and
invest in companies and they need help.
There is no doubt that Southeast Asia will
continue to grow at an impressive rate in
the next ten to fifteen years".
BNP Paribas Securities Services targets
sovereign wealth managers and, of course,
asset managers. As investment flows go
both ways, it focuses on Asian managers
who want to set up funds in Europe to be
distributed globally and also on the more
traditional Europe-based clients who also
have their range of Luxembourg or Irish
domiciled funds and who want to sell
them in Asia. If you look at the statistics,
there is no doubt that UCITS is a brand
that is broadly recognised in Asia. At the
same time Asians are learning fast and
there is speculation as to whether they
should, or could, create a regional product
similar to UCITS. Frédéric Perard warns
that mature markets should not rest on
their laurels. "Asians have the critical mass,
they are cash-rich and they might take over
European companies by building up exper
tise in Europe or the US. We have to make
sure in Luxembourg that we create funds at
the pace they are needed, being faster than
Ireland. In terms of distribution, we should
take into account local regulation notably
regarding AML/KYC, if we want to increase
our market share".
Funds are good for you
For François Pauly, CEO of BIL, there is no
doubt that Luxembourg, the world’s second
largest player in the fund industry, presents a
real advantage to Asian managers who opt for
a Luxembourg structure. "In doing so, Asian
investors are using vehicles from a financial
centre recognised in the region for the easy dis
tribution of its funds, such as UCITS funds. This
advantage is the consequence of Luxembourg’s
excellent know-how and the recognition of the
country’s professionalism in the fund industry".
Nigel Fielding, Regional CEO of HSBC in
Luxembourg, echoes these sentiments stating
that with wealth growing in countries like
China, Luxembourg has an excellent card to
play, because the UCITS brand has worked for
25 years. He is convinced that Luxembourg
remains attractive for Asian investors, despite
the worries about current issues in the Eurozone. "Luxembourg doesn’t want to disenfran
chise from the European Union, it is stable and
perceived as neutral. It has a lot of double tax
treaties, and in Luxembourg, there are faster
decisions because there is easy access to
decision makers and good infrastructure".
A lot of Asian investors know that Luxembourg is located at the heart of Europe. They
know Prime Minister Jean-Claude Juncker,
who is at the head of the Eurozone group,
but they have no idea whether it is a small
or large country and what industries are at
the core of its economy. This is how Michael
Schaal of Banque LBLux sums up his experiences speaking with Asians about Luxembourg. But he knows how to solve the conundrum by conveying the similarities between
Singapore and Luxembourg. "I tell them that
Luxembourg is in Europe what Singapore is in
Asia; a strong financial centre, well connected
and at the heart of the continent. And people
from Asia, especially Chinese ones, are also
interested in our landscape, the vineyards and
the Moselle River".
Speaking of culture and customs, Chinese
people in general strive for harmony and are
group oriented; they also have a terrific sense
of humour and can laugh at themselves if
they have a comfortable relationship with the
other person. For Nigel Fielding, communication is key – that it is why it is important
to have a presence on the ground. Another
fundamental key for success is building
relationships. "Once you have the relation
ships, they tend to be very long-term", Nigel
Fielding notes. Michael Schaal of LBLux adds
that Western business people have to improve
on their intercultural competence. Patience is
one of the skills he recommends Westerners
to work on. "It can happen that you have three
dinners with them, talk about the weather and
your family without talking about business",
he remarks.
Time is on Asia’s side, although the rise of the
world’s most populous continent is not written
in stone. Multiple risks and challenges have
to be managed: decreasing inequality within
countries, improving governance and adapting
to climate change are only a few of them. CW
Following
fortune
Being the largest private banking centre in
the Eurozone does not
mean restricting business
to "Euroland". Almost all
Luxembourg private banks
have representative offices,
subsidiaries or branches in
Asia. LFF spoke to five of
them, representing different countries of origin, but
all active in Asia in private
banking and/or asset management. Starting with a
small representative office,
these banks have found that
demand for their services is
constantly growing.
Claude Pech,
Vice-Chairman, Executive Committee,
Banque Privée Edmond de Rothschild
"Our Geneva based Head office started with a
representative office in Hong Kong in 1992 that
was transferred into a branch in 2011", says
Claude Pech, Vice-Chairman of the Executive
Committee of Banque Privée Edmond de
Rothschild Luxembourg. "With our expertise
in private banking, we offer a value proposition
for Asian clients. We have to take into account
that Asian wealth is quite young. People in Asia
are growing in confidence with regard to the
preservation and protection of their assets.
They are increasingly interested in Luxembourg
structures and therefore we hired a person in
Hong Kong to promote Luxembourg solutions
through our local private bankers and more
generally in the Hong Kong and Singapore
asset management community".
According to Capgemini’s latest World Wealth
Report, the number of HNWIs in Asia-Pacific
rose 1.6% to 3.37 million individuals in 2011,
surpassing North America for the first time.
41% of Asian HNWIs are 45 or younger.
Private Banks | P. 14|15
Disillusioned by classical wealth management
products, they tend to take greater control of
their wealth themselves. There is also the fact
that the 2008 crisis caused them to lose trust
in private bankers. These were not the best
possible conditions for foreign private banks
to access this huge market.
"It is wrong to think that as a Luxembourg bank,
we can just go there with a flower in the barrel
of a gun and expect thousands of clients to
knock on our door. They have a different under
standing of private banks. The biggest mistake
a Luxembourg banker can make is thinking that
private banking in Asia means discretionary
management. In Europe, because the clientele
is more mature, we mainly sell asset manage
ment, discretionary management and invest
ment advisory services. In Asia, this strategy
doesn’t work. The clientele prefers to remain
hands-on, which means that most revenues
of local private banks result from brokerage
or club deals", Claude Pech says.
TAILOR-MADE SOLUTIONS
Thomas Keller,
Member of the Executive Board,
Pictet & Cie (Europe) S.A.,
Luxembourg
Keeping only a small percentage of their assets with wealth managers, Asian clients are
very demanding concerning products. Thomas Keller, Member of the Executive Board
at Pictet & Cie (Europe) S.A. in Luxembourg
agrees: "It’s not a question of discretionary
asset management, it’s mainly advisory and
execution-only activity. Clients are more
traders or even gamblers. They are very active,
requiring good execution levels and sophisti
cated, tailor-made products". At their branch
in Hong Kong, Pictet targets Asian HNWIs.
The Hong Kong office also oversees accounts
of Asian clients that are booked in Pictet’s
head office in Geneva or its subsidiary in
Singapore, depending on clients’ needs.
Mr Keller admits that opening the branch
has been hard work. "The market is very
tough. The requirements in terms of govern
ance, organisation and the service level we of
fer to clients are all very high. We had to put a
lot of substance into our branch in Hong Kong,
both in terms of client servicing and in terms
of back office and corporate functions".
Given the positive economic outlook of the region, these efforts will in all likelihood pay off.
With a GDP growth rate of 6.0% in 2012, Asia
outpaced the rest of the world. In 2013, the
growth rate is even predicted to rise to 6.5%.
Thomas Albert,
Managing Director International Sales,
Sal. Oppenheim
Private Banks | P. 16|17
Hong Kong is equally the market of choice for
Sal. Oppenheim. Being part of Deutsche Bank
group, they are represented in Asia via Deutsche Bank Wealth Management. "The market
that we target via Deutsche Bank is the family
office segment", Thomas Albert, Managing
Director International Sales at Sal. Oppenheim
says. "For the UHNWI segment, we have the
capability of launching SIF constructions or
individual fund solutions. Asian UHNWIs have
a different focus than European UHNWIs: most
of the wealth is first generation wealth. They
have much more of an entrepreneurial style in
terms of investing. Hence they require higher
returns, also based on the local returns that
you get in the fixed income space. The second
aspect, again, because wealth is young, is that
there is less of a focus on asset allocation with a
long-term view. Their view is more short-term,
and thus the requirements and demands in Asia
are different to the developed world in Europe
and the US".
AN ENTREPRENEURIAL SPIRIT
Many Asians have made their fortune in
hands-on markets like real estate and thus
have a different mindset compared to Europeans. According to the Knight Frank-Citibank
Wealth Report 2012, 31% of Asian-Pacific
asset portfolios are invested in property,
compared with just 16% in Europe.
"Asian HNWIs have often made their money
as entrepreneurs in a certain economic sec
tor and are increasingly interested in buying
companies, vineyards or real estate", remarks
Claude Pech of Rothschild. "Thus, with club
deals, a private banker can attract their inter
est. Don’t expect to convince them with the
sort of classical asset management we are
currently selling in Europe. You have to be very
prudent concerning your business plan if you
plan going to Asia".
Where the Asian market is concerned, Jhon
Mortensen, Chief Executive Officer at Nordea
in Luxembourg, is an old stager. "I opened a
branch in Singapore in 1987 and stayed there
for three years. In those days, it was a remote
corner of the world. But now it’s becoming
more and more the centre of gravity. Our pri
vate banking clients do not move to Asia and
move back again, they tend to stay there, they
grow wealthy and establish themselves there. I
see a tremendous future for Asia; it’s currently
growing much faster than Europe and obvi
ously we want to take part of that growth".
"I opened a branch in Singapore in 1987 and stayed there for three
years. In those days, it was a remote corner of the world. But now
it’s becoming more and more the centre of gravity. Our private
banking clients do not move to Asia and move back again, they tend
to stay there, they grow wealthy and establish themselves there".
Jhon Mortensen,
CEO,
Nordea Luxembourg
Nordea Luxembourg has a representative
office inside the group’s branch in Singapore,
selling and providing private banking services
to its Asian clients. "We are presently applying
to the MAS (Monetary Authority Singapore)
in order to upgrade this office to a branch.
We hope to receive a license during 2013, for
private banking purposes out of Luxembourg".
As the group’s centre for international private
banking, private banking services in Asia are
developed out of Luxembourg.
NORDICS IN THE EAST
Contrary to other private banks, Nordea’s
main client base in Asia is Nordic expatriates,
who in general account for 60-70% of their
business. "We can see that the Nordic expatri
ate base in South-East Asia is growing quite
rapidly. At the last count, there are between
15,000 and 16,000 Nordics in Asia. Many of
those want to have a private banking relation
ship with somebody nearby. So, basically, what
we do is to provide the similar services that we
do here in Luxembourg, but out of Singapore
instead. At present we serve our Asian clients
out of Luxembourg. But we will change this as
soon as we have transformed the office into a
branch".
Doing business in Asia means entering a longterm commitment and being patient. "In a
growing economy, there are few opportunities
on a short-term basis", says Jean-Luc Neyens,
Business Development Director, Investment
Funds Services at Banque Degroof Luxembourg. "We still need to see long-term savings
plans put in place by Asian countries. Today,
Asian investors invest either directly on the stock
market or in real assets, including real estate.
They do not yet have the culture of investing
in investment funds and will do this only when
their governments put in place new regulation
for pension plans and long-term savings plans".
A GROWING FUND MARKET
According to recent PwC figures, Asian investors’ investments only account for 13% of
assets in the global mutual fund industry,
compared to 52% in the Americas and 35%
in Europe. Though the UCITS brand is well
known, especially in Hong Kong, Korea and
Taiwan, the low penetration of investment
funds opens another huge potential market
for Luxembourg banks. "You cannot only focus
on private banking", says Jean-Luc Neyens.
"Asian HNWIs don’t invest in funds yet, but
do a lot of trading including currency trading.
If one can provide those sort of services, I am
sure it will be very profitable: a low-margin
business, indeed, but a high-volume business".
Banque Degroof opened a representative
office in Hong Kong in 2011. "Our initial
purpose is to focus on existing customers we
gathered during the last few years in Hong
Kong, Singapore and Kuala Lumpur, and also
to target new prospects, focusing on asset
management boutiques that serve European
clients", Jean-Luc Neyens says. "The issue for
Asian managers is that they used to have off
shore funds from Cayman or BVI. Increasingly,
their clients in Europe request them to move
towards more regulated financial centres".
The office is thus supporting the sales effort
of Banque Degroof out of Luxembourg.
Targeting mainly asset management boutiques, Degroof has benefitted from former
asset managers of large companies that left
in order to set up their own boutiques. "Those
people started with Cayman products, selling
them mainly to EU- and Swiss-based custom
ers. Now that these boutiques have grown, they
recognise they have to find a better regulation
framework for their product, so they move to
Luxembourg".
Jean-Luc Neyens,
Business Development Director,
Investment Funds Services,
Banque Degroof Luxembourg
Regulation is the key issue when it comes to
future relationships between Asia and Europe.
"We have reached the limit of what is afford
able", Marc-André Bechet, Member of the
Management Committee, Director Investment Funds Department at Degroof says. "A
concern we hear quite often is that people are
not that much consulted regarding regulatory
matters. The same applies to FATCA, which will
affect Hong Kong or China like all other finan
cial centres and where nobody except the US
is getting the chance to co-manage or define
this development. Going too far into regulation
of course encourages Asian asset managers to
develop their own UCITS equivalent".
However, using Luxembourg structures still
offers an advantage, because of their focus on
cross-border distribution. "None of the other
Asian jurisdictions have that cross-regional
focus", Thomas Albert from Oppenheim says.
"This also refers to a specific set of clients who
require this multinational approach. The image
of Luxembourg is innovative, a well regulated
market that is going forward, especially re
garding AIFMD. We personally believe that this
(AIFMD) will have an enormous impact in Asia,
because it is the first international attempt to
control alternative investment wrappers. It is
well recognised by Asians that there is a control
over those products, contrary to British Virgin
Marc-André Bechet,
Member of the Management Committee,
Director Investment Funds Department,
Banque Degroof Luxembourg
Island or Cayman structures. The Euro crisis is
an issue and that puts a bit of a burden on our
reputation. But Luxembourg, being still AAA
rated, stands out because of that. However,
overall the focus is less on Europe; there is sim
ply no alternative in Asia at present. I believe
that we still have an advantage, but it won’t
be long before they pick up with their local
structures".
Luxembourg has already made a big effort
to promote its funds. "Though investment
fund activity is quite new in Asia, we think that
there is big potential for growth in selling Lux
embourg structures to Asian asset managers",
Thomas Keller of Pictet believes. "Pension
funds are not so developed in Asia. This could
offer opportunities for us to serve them as
a custody bank and as an administrator for
putting in place funds that help intermediaries
in Asia to develop pension plans for big com
panies or even public entities".
Luxembourg private banks and asset managers are well aware that Asia cannot be
ignored. All of the companies interviewed
have plans to strengthen their activity in the
Far East by opening more offices. Claude Pech
from Rothschild gets to the heart of it: "We
have to be interested in the rest of the world,
because that’s where fortunes evolve". EA
"Asian HNWIs don’t invest in funds yet, but do a lot of trading
including currency trading. If one can provide those sort of
services, I am sure it will be very profitable: a low-margin
business, indeed, but a high-volume business".
So different,
yet so alike
75% of the cross-border
investment funds
distributed in Hong Kong
are domiciliated in Luxembourg. This success is due in
part to the Association of
the Luxembourg Fund
Industry (ALFI), which
actively promotes
Luxembourg UCITS in Asia.
In 2010, ALFI opened an
office in Hong Kong in order
to strengthen the presence
of the Luxembourg
investment fund industry
in the region.
Investment Funds | P. 18|19
Ching Yng Choi,
Head of the Asia Representative Office,
Association of the Luxembourg Fund Industry (ALFI)
Ching Yng Choi is Head of the ALFI Asia Representative Office. "Our main work consists
of liaising with industry players. This could be
Luxembourg players with branches affiliated
with Asia who have specific questions and who
would like to raise them back in Luxembourg.
Or it can be new players in Asia, mainly asset
managers, who are interested in setting up a
fund in Luxembourg. For that, we have now
launched two working groups in Hong Kong.
One is the counterpart to the Transfer Agency
& Distribution Forum that has existed in Lux
embourg for twelve years now. This group
is more operational and technical. Then we
have a more general working group that
follows regulatory changes affecting Luxem
bourg investment funds and the regulatory
developments in Asia or in Europe".
Mrs Choi is working closely with the local
regulators and the Hong Kong Investment
Funds Association (HKIFA), with whom an
agreement of cooperation was signed two
years ago. However, the office’s work isn’t
limited to China, but has close relationships
with Taiwan, Singapore, Japan and South
Korea as well.
Although the UCITS brand is very well known
in Asia, active marketing is still important.
"With Mainland China you really have to work
things from a political perspective and in a
diplomatic way", Mrs Choi explains. "In Japan,
the regulator is open to all jurisdictions. After
the scandal with the Cayman funds, UCITS and
Luxembourg are very much on their radar".
"There is no standardised
strategy to be applied in
every jurisdiction. Distribu
tion channels are difficult,
because when you don’t
know the market, you need
to have those relation
ships in order to be able to
distribute your products.
The other way around, it’s
a similar situation. For an
Asian player coming to Eu
rope, it’s difficult as well".
Working in a dynamic and growing region
like Asia, which consists of several jurisdictions, each with its own respective regulations has its challenges, of course. "There is
no standardised strategy to be applied in every
jurisdiction. Distribution channels are difficult,
because when you don’t know the market,
you need to have those relationships in order
to be able to distribute your products. The
other way around, it’s a similar situation. For
an Asian player coming to Europe, it’s difficult
as well. The ways the channels are built are so
different".
Another significant difference is that private
individuals in Asia don’t usually invest directly
in investment funds. "In a lot of countries, the
mindset is still at savings. And when it comes
to investment, most prefer to speculate on the
stock exchanges rather than thinking about
long-term investments", says Mrs Choi. With
the rapid growth of the region, the need
for capital investments will grow as well.
"There is some interest in the alternative side;
the Specialised Investment Fund (SIF) works
pretty well. It’s still a regulated product, but
with fewer constraints. Private equity is much
sought-after, too".
Even though things are shaping up well,
Luxembourg investment vehicles will face
increased competition in the near future.
"The jurisdictions where the market is suffi
ciently mature would like to strengthen their in
dustry by developing an Asian passport, which
is understandable. In the last two years, there
have been two main initiatives that have gained
a momentum. They are APEC (Australia and
Asia Pacific Economic Cooperation) and ASEAN
(Association of Southeast Asian Nations). Since
then, Singapore and Thailand have agreed to
the standardisation of regulatory develop
ments. Hong Kong would like to have more
in common with Mainland China and started
focusing on product innovation such as RQFIIs
(Renminbi Qualified Foreign Institutional Inves
tors), QFIIs (Qualified Foreign Institutional
Investors) and ETFs (Exchange Traded Funds),
which are nominated in RMB. There has been
also discussion around a mutual recognition of
investment funds between the Mainland and
Hong Kong, or even a Greater China passport
lead by the two jurisdictions. But the markets
are still fragmented and the level of expertise is
too different. I don’t think they are quite there
yet, but it’s definitely something that we need
to look at carefully".
Mrs Choi is confident that in the future Luxembourg funds with the European passport
will remain a success in the region. The efforts
of the Luxembourg government to boost
Luxembourg as an offshore renminbi centre
surely bear fruit then as well. EA
"In a lot of (Asian) countries, the mindset is still at savings. And
when it comes to investment, most prefer to speculate on the stock
exchanges rather than thinking about long-term investments".
CLEARING THE WAY
LFF: What role does
the Asian market play
for Clearstream?
LFF: Do you have
competitors in Asia?
HT: Asia has always played a significant
part in the fabric of Clearstream’s business
whether it be helping Asian firms bring their
Eurobonds/International debt instruments to
market or in helping our non-Asian clients to
access most of the domestic securities market
across the region. Naturally, over time, Asia
has become a cornerstone of Clearstream’s
strategy and contributes significantly to our
revenue stream. Going forward, we believe
that our solutions can support the growing
levels of intra-regional investment across
traditional domestic borders and this is where
we can add value. In a nutshell, Clearstream’s
goal is to stay the preferred international central securities depository (ICSD) in Asia and to
support CSD interoperability within Asia and
to the rest of the world.
Hersh Tegala,
Head of Business Intelligence,
Clearstream
clearstream | P. 20|21
LuxembourgforFinance
Why did you
choose Hong
Kong for your
first Asian office?
HT: As in every region of the world we are
facing growing competition from our peers.
The dedication and ambition of many of our
partners – financial institutions across the
region – and the success this has engendered
has given rise to many varied opportunities;
service providers that can provide all-round
solutions with a local touch are likely to gain
and retain market share. Our strategic approach to the region over a sustained period
of time is one that many are now looking to
emulate.
Hersh Tegala
Very early on, Clearstream recognised the advantage of
being present in the rapidly growing Asian markets and
traditionally Hong Kong has had an important role to
play as a trading centre, a financial market and geopolitically across the region. However, in such a diverse and
dynamic continent, it is natural that a number of regional
centres have also evolved over time. Our commitment
to the region reflects this with our office in Tokyo that
opened soon after Clearstream inaugurated its first office
in Asia (Hong Kong) in 1991 and we recently set up of a
full operational hub in Singapore. Based on discussions
with our partners, we strongly believe that we have been
proven right in our approach; our Asian clients appreciate
being served by our "local" experts in their timezone(s)
and in their language(s).
What is your
main target
client group?
Hersh Tegala
Our principle client target groups
include banks (including central
banks, local, regional and global
custodians), universal banks, investment banks, asset/investment
managers and brokers and we are
proud to number many influential
institutions from these categories
among our existing client base.
For Asia we have also been taking
a close look at a number of areas
that have been growing in importance and that have characterised
the region over the past few years
such as the private banking and
wealth management sector.
LFF: What services can you
offer to Asian clients?
HT: In order to satisfy their exacting demands and attention to detail, our Asian clients benefit from the same range of services
we offer all over the world: strong settlement
and custody services, supported by fund services, world-class collateral management and
securities lending products all benefiting from
a high degree of automation.
For example, in order to meet growing
demand across Asia, our Vestima suite of
services provides a single access point to
global funds solutions from order routing,
settlement and asset servicing to collateral
management.
Our product offering also includes bespoke
Asian Issuance services which helps to shape
an efficient cross-border issuance market in
the region. We believe that the experience we
have in this regard is invaluable to the growing number of issuers across the region that
intend to issue international debt instruments
and are seeking the expertise of an institution
that is able to provide tailored distribution
solutions.
LFF: Do you rely on
partnerships in the Asian
market?
HT: Partnership is at the core of
Clearstream’s business strategy, no matter
where. As part of our strategy-based approach to Asia, we understand that building
long-lasting partnerships is the most effective
way to achieving both our goals and those
of the institutions with which we partner.
Clearstream’s partnership approach is wellperceived and is welcomed as the right way
Clearstream | P. 22|23
forward in this heterogeneous region: it is
worth noting that Clearstream does not only
maintain custody relationships, but we also
continue to explore innovative ways in which
we can partner with local entities such as the
Hong Kong Monetary Authority in Hong Kong
and the ASX Group in Australia to deliver local collateral management solutions based on
our awarding-winning technology platform.
Another good example is our decision to
partner with the Hong Kong Exchange in
their new Ecosystem project which focuses
on providing market participants with access
to HKEx market data, trading and clearing
systems. From this perspective, we are able
to offer a unique value proposition.
LFF: Is the fragmentation
of the Asian market an
issue for Clearstream?
HT: As we focus increasingly on delivering a harmonised post-trade environment in
Europe – a project that began over a decade
ago – the term "fragmentation" is being used
increasingly in the Asian context. There are
many reasons why this term is valid, but it
should not necessarily be used pejoratively:
Asia is a continent that is composed differently with a number of diverse markets that
are at different stages along their respective
paths. Therefore, we would not call it an issue,
but there is still some work to do to improve
harmony across different jurisdictions that
would lead to further cross-border transfers
and services. Clearstream has been actively
engaging with pan-Asian groups to address
issues that contribute to the fragmentation of
the market as a whole and to look into ways
to further standardisation. Great progress has
been made in the International debt markets
with regard to harmonisation of practices and
How many currencies FROM
THE ASIAN-PACIFIC REGION do
you cover?
Hersh Tegala
The 27 Asian currencies covered
by Clearstream are as follows:
Asia
AUSTRALIA
Korea
Sri Lanka
Jordan
Dollar AUD
Won KRW
Rupee LKR
Dinar JOD
CHINA
Macao
Taiwan
Kuwait
Yuan Renminbi CNY
Pataca MOP
Dollar TWD
Dinar KWD
Hong Kong
Malaysia
ThaiLAND
LebanON
Dollar HKD
Ringgit MYR
Baht THB
Pound LBP
India
Mongolia
Vietnam
Oman
Rupee INR
Tugrik MNT
Dong VND
Rial OMR
Indonesia
New Zealand
Rupiah IDR
Dollar NZD
Japan
PhilippineS
Bahrain
Saudi ARABIA
Yen JPY
Peso PHP
Dinar BHD
Riyal SAR
Kazakhstan
Singapore
Israel
UAE
Tenge KZT
Dollar SGD
Shekel
Dirham AED
Qatar
Rial QAR
Middle East
in Europe across markets and there is a great
deal of accelerated learning from which Asia
can benefit going forward; our belief is that
there is a willingness for this to take place.
together, however many specific hurdles in
the post-trade layer need to be overcome in
order to achieve an effective outcome that
will deliver end-to-end efficiencies.
LFF: How heavy is the
regulatory burden in Asia?
What is on Asia’s agenda in
terms of regulation?
For the time being, some Asian CSDs have
bilateral linkages but, generally, cross-border
investment is limited. Creating a favourable cross-border environment will boost
investment by providing predictable requirements that reduce operational, credit, foreign
exchange and regulatory risk. This will avoid
additional costs and resource-intensive
activities which impact foreign investors
and intermediaries. From a trading perspective certain initiatives have been successful
recently in bringing various platforms closer
In parallel, Clearstream continues to maintain
its extensive Asian network through local
agent banks in Australia, China, Hong Kong,
Indonesia, Japan, Malaysia, New Zealand,
Singapore, South Korea, Thailand and the Philippines. Where potential for expansion of the
network to new markets exists, Clearstream
remains committed to engaging with local
authorities and sub-custodians who would be
able to meet our needs and requirements.
HT: The Asian markets have displayed certain robustness since the onset of the recent
crises that have spread to many parts of the
global economy since 2008. By demonstrating
the ability to cope in this environment, the
sense of urgency for broad regulatory change
has been reduced. With many of the market
infrastructures operating as "national utilities",
highly capitalised commercial banks generally
operating to high prudential standards and a
lower level of interconnectedness between
markets to slow any "contagion" from external
typical trade settlement transaction
New Instructions
Suspense
Unmatched
Matching (if required)
Forthcoming Settlement
Settlement Date
Suspense Provision
Provisions
MT537a Statement of Pending
Transactions/
MT548 Settlement Status and
Process Advice
MT536a Statement
of Transactions
MT535a Statement
of Holdings
shocks, Asia has been able to take a wait-andsee approach towards much of the intense
discussions regarding regulation being held in
other regions.
LFF: What role do
Luxembourg-domiciled
investment funds play
for your business?
In terms of the immediate regulatory agenda,
certain Asian markets such as China, Australia
and Singapore have moved quickly to detail
regulations to implement Basel III requirements. Generally, it is expected that as part
of these regulations, many regional banks
will be required to hold more than the capital
prescribed under Basel III and that given the
relative strength of these institutions, that
many will be ready ahead of the stipulated
timeframe.
HT: Luxembourg is the second largest fund
market in the world by assets size. Most of
the funds manufactured in Luxembourg are
bought by investors located all over Europe
and Asia. Vestima, our funds execution
product, offers those distributors an execution service in over 100,000 funds. Some
50% of those funds available on Vestima are
domiciled in Luxembourg. So Luxembourg
domiciled funds play an important role in
the development of our business. EA
This is no
slam dunk
Investable assets have been building up in China, Hong Kong,
Singapore, Japan and Taiwan over the years. Institutional investors
from these jurisdictions make strategic investments all over the globe,
but will the money train also stop in Luxembourg? What makes the
country attractive to Asian investors? How do Luxembourg law firms
position themselves in Asia? Representatives of Allen & Overy, Arendt
& Medernach, Bonn & Schmitt, Bonn Steichen & Partners, Elvinger,
Hoss & Prussen and Loyens & Loeff give us their insights.
Katia Panichi,
Partner,
Elvinger, Hoss & Prussen
Hong Kong office
Today, Luxembourg is second largest centre
worldwide for investment funds; the statistics
are impressive. There were 2,329.65 billion
euros of net assets under management in
Luxembourg investment funds at the close of
October 2012, an increase of more than 11%
from 31 December 2011. These assets are
held in more than 3,800 funds with, between
them, close to 13,500 sub-funds. A significant
portion of these investment funds has been
registered for distribution in one or more of
the Asian countries.
Business relationships between Asia and the
Grand Duchy are of long standing. The first
Luxembourg investment fund created for
public offering in Japan was authorised by
the Luxembourg and Japanese authorities in
1973. The law firm Elvinger, Hoss & Prussen,
founded in 1964 in Luxembourg, acted as
a legal adviser in the structuring and setup
of this fund. It was the start of a successful
law firms | P. 24|25
relationship between both countries, with
340 Luxembourg domiciled sub-funds re
gistered for public distribution in Japan by
the end of 2011. Gast Juncker is a partner at
Elvinger, Hoss & Prussen (EHP). He says that
the firm has noticed the shifting of economic
power, which is why EHP has been active in
Asia for the last 20 to 30 years. Times are
changing and in 2012 the law firm opened an
office in Hong Kong, "a natural move consider
ing recent developments in Asia", says Katia
Panichi, a partner working at the Hong Kong
office. "Our clients are asset managers, private
equity houses, multinational companies and
local law firms with whom we are in contact
in or outside Asia and also local banks who
have questions on Luxembourg law. So I can
answer their questions without them having to
ask someone in Luxembourg directly". Hong
Kong was chosen because it is the gateway to
Chinese investors and Chinese asset managers
and is centrally located in Asia.
Thierry Lohest,
Partner,
Loyens & Loeff
Nicolas Papavoine,
Lawyer,
Allen & Overy Hong Kong desk
Lionel Noguera,
Partner,
Alex Schmitt,
Partner,
Bonn & Schmitt
Bonn & Schmitt
Arendt & Medernach, the largest independent
Luxembourg-based law firm, opened Hong
Kong in 2009 and is now expanding with new
offices in August and with additional staff.
Stéphane Karolczuk, previously in Arendt
and Medernach’s offices in Luxembourg and
New York, is head of that office, and which is
also led by Guy Harles and Claude Niedner.
"Hong Kong is really the most strategic place
to be in relation to our activities which focus
on investment funds, tax, banking, multi
national companies and corporate M&A. It
is also convenient to cover the region from
Hong Kong and this is why we established our
headquarter there; we frequently visit clients
in Singapore, South Korea, Tokyo and Taiwan;
as well as Shanghai and Beijing, which are
only a few hours away", indicates Stéphane
Karolczuk who set up the office in 2009. Paul
Mousel and Guy Harles are two of Arendt &
Medernach’s founding partners. They have
been travelling across Asia since the 1980s.
Over three years ago, they decided to open
an office in the region. Guy Harles points out
that over the years they’ve been doing business in Hong Kong, three different types of
clients have developed: "Asset managers from
the region who are using Luxembourg vehicles
to attract foreign investors; they are definitely
the most important part of our clientele. Then
we have quite a number of strategic buyers
from the region, multinational companies who
are buying into European industry and who
frequently use Luxembourg intermediary hold
ing companies as well. Last but not least, we
have seen interest from wealthy private clients
using Luxembourg as a means to diversify their
worldwide holdings".
Change your mentality and
save money
Loyens & Loeff is a Benelux law firm with
large offices in Belgium, the Netherlands and
Luxembourg, but also in the main financial
centres outside of Benelux. The firm has had
offices in Tokyo and Singapore for 10 and
15 years respectively. "Hong Kong was really
missing on the map", Loyens & Loeff Partner
Thierry Lohest admits. He heads the Luxembourg Corporate Law Practice in Luxembourg
and Hong Kong. Another partner and four
associates work in tax, banking and fund matters. The profiles of their clients fall into two
main categories: large corporations and financial institutions. Serving clients who invest in
the Benelux is one approach. Another one is
to assist clients who are using either Dutch or
Luxembourg structures to invest worldwide. It
is about putting Luxembourg on the map,
Thierry Lohest explains. "We are trying to cre
ate awareness among not only Chinese clients,
but also lawyers, accountants and tax advisers
that even if they have an investment close to
home, like the Philippines or Mongolia, it might
make sense to use a Luxembourg holding com
pany. They are not yet used to the fact that if
you structure your investments efficiently, you
will save money at the end of the day".
Allen & Overy has been in Asia Pacific for
over 20 years with offices in 11 countries.
With 470 lawyers, including 190 in Greater
China, they help Western clients develop in
Asia as well as Asians on their "going global"
projects, as the lawyer Nicolas Papavoine puts
it. He is in charge of the Hong Kong desk,
with the objective of providing services to
the Asia-Pacific region by fostering cross-
"Now we see more private equity fund houses developing in the region
that are following the exact same pattern as the retail fund managers".
Guy Harles,
Partner,
Stéphane Karolczuk,
Head of Arendt & Medernach
Arendt & Medernach
Hong Kong office
border exchanges between the Asia-Pacific
region and Europe. Like its competitors, Allen
& Overy has seen a shift in the economic
balance of power from the Western world to
the East and the rise of global powerhouses
like China. Asia offers tremendous opportunities to investors and companies look to tap
into this market. Nicolas Papavoine highlights
the different levels of maturity that exist in
the world’s most populous continent. "For
decades, business hubs like Hong Kong and
Singapore have been the locations of choice
for businesses to start their Asian development.
Mature markets like Japan, Taiwan, South
Korea or Australia are characterised by a sizable
middle-class, well-developed infrastructures
and well-defined foreign direct investment
rules. Finally, developing powerhouses like
China and India, and also Indonesia and Viet
nam, represent important reservoirs of growth
but may present restrictive foreign investment
regulations".
Bonn & Schmitt is a fully independent
Luxembourg law firm with an extensive
international practice. Alex Schmitt, Partner
of Bonn & Schmitt, says that the firm doesn’t
have an office in Asia, but can rely on an
excellent network of friendly law firms in
that region of the world. He speaks about the
firm’s pioneering experience in the venture
capital area. "Historically, we set up the first
SICAR (Investment company in risk capital)
which was Chinese-European; that was back
in 2006-2007. It has run very smoothly and we
are now in the disinvestmemt phase. It was the
first landmark presence in the private equity
area here in Luxembourg. It has become so
successful that we have just launched ‘Manda
rin II’, which targets entrepreneurial investors".
Mandarin Capital Partners is a Luxembourg
SICAR. Two advisory companies, one based in
Italy and the other in Hong Kong and Shanghai assist the management company. Lionel
Noguera, Partner of Bonn & Schmitt adds
that he has seen Chinese investors coming
to Luxembourg on a regular basis, especially
since Luxembourg signed a double tax treaty
with Hong Kong in 2007, earlier than the
United Kingdom (2010) and Switzerland
(2011). This "first mover" advantage has enhanced the country’s visibility in the market
and is now paying off. "At the end of 2011,
the Chinese state-owned company operat
ing the Three Gorges Dam, the world's largest
hydropower project, came to us to organise
the acquisition of a 20% stake in EDP, which
is the main Portuguese energy producer, for
a total consideration of 2.7 billion euros. This
was entirely structured through Hong Kong and
Luxembourg. The acquisition was completed
smoothly in May 2012".
Importing power to Europe
Bonn Steichen & Partners (BSP) is an
independent Luxembourg law firm and its
intentions are clearly to remain local. Alain
Steichen, Partner of BSP, stresses that the law
firm’s strategy is not to follow their clients
into a foreign jurisdiction. "To us it makes more
sense to forge alliances with local law firms,
rather than trying to compete with them even
in a niche market. Nevertheless, Asia will be a
clear focus for us in the years to come. China
is the first country that comes to mind". Fabio
Trevisan, Partner of Bonn Steichen & Partners
adds that Singapore is a very important financial centre too, used very often by Chinese
investors to channel out investments from
China into Europe because of the double tax
Fabio Trevisan,
Partner,
Bonn Steichen & Partners
Gast Juncker,
Partner,
Elvinger, Hoss & Prussen
"We have seen, in meetings
with Hong Kong law firms,
that there is a clear interest in
the (Luxembourg) Specialised
Investment Fund (SIF) as an
alternative to the Caiman
Islands and other offshore
centres.
treaty between Singapore and Luxembourg.
"I have a lot of Asian firms using Luxembourg
investment vehicles as their platform to Europe
through Singapore. Hong Kong is also a very
important player and recently I have also had
clients from Taiwan, mainly IT and energy firms
which use Luxembourg to distribute IT related
products and invest in solar power in Europe,
especially Italy".
At the same time, Asian asset managers are
looking to develop outside their national or
regional markets. The long-term strategy is to
expand their distribution networks overseas.
In order to be global players, points out Nicolas Papavoine of Allen & Overy, Asian asset
managers need to develop their reputation
and launch products that are widely accepted
in the global market. He is convinced that
Luxembourg has all the right cards to play.
"Through its creative and flexible legal, tax
and regulatory framework, Luxembourg has
become one of the best-positioned jurisdic
tions to capture the increase in investments
between Asia and Europe. The wide range of
Luxembourg investment vehicles and company
structures offer Asian investors the solutions
their businesses need for global development".
When Arendt & Medernach opened the
Hong Kong office three years ago, their first
strategy was to target retail asset managers.
Guy Harles says that his firm anticipated that
these managers would look at the vehicles
large players were using to develop their
activities globally. In the meantime, the scope
of its clients has broadened. "Now we see
more private equity fund houses developing in
the region that are following the exact same
pattern as the retail fund managers. We are
also talking to banks and multinational
companies in the region, and Luxembourg
is definitely on their radar when they start
growing their business in Europe".
Alain Steichen of Bonn Steichen & Partners,
echoes these thoughts by stating that Asian
countries, needing regulated products thorough which to channel out investment money, are interested in Luxembourg, where the
approval process is speedier than in France
or Italy. They also need a stable market and
a reliable banking system. But Luxembourg
players are also aware that the competition
has become fiercer. "We see more of a future
in the Specialised Investment Fund (SIF) than
in retail products. If Asian investors or funds
ask us to do something intelligent with their
excess cash, that’s where we have to put things
together in the typical Luxembourg manner
of pragmatism, with easy access to decision
makers, and sophistication in terms of fiscal
engineering; it is a whole package rather than
one element. You need the place, the people,
the brains and the time zone, among other
things. But we have quite a few competitors,
so it is not a slam dunk".
A local friend for your
global brand
Alain Steichen,
Partner,
Bonn Steichen & Partners
Waiting for the markets to
move up
Thierry Lohest of Loyens & Loeff emphasises
the current lack of sophistication of Chinese
investors, who so far have not been exposed to
structured investments. They put their money
in the bank and they buy property, at home or
abroad. "When you open Chinese newspapers,
the number of advertisements about property
is astonishing. We have to convince people that
there are other ways of investing their money
where they can get better returns, which is not
an easy task right now. But as soon as mar
kets recover, there will definitely be a case for
Luxembourg funds to be marketed to Chinese
investors".
Alex Schmitt of Bonn & Schmitt is convinced
that if China opens up a little bit, there are a
huge number of people likely to buy Luxem
bourg domiciled funds. He is sure that in five
years the penetration of Luxembourg fund
products will have increased. "The big fund
industry players who are located here will con
tinue to concentrate their efforts on Luxem
bourg products. We might not gain all of the
additional business, but an Asian UCITS will
not be a threat because we have the expertise,
the reputation and a track record too".
Gast Juncker of Elvinger, Hoss & Prussen does
not beat about the bush. Luxembourg cannot
rest on the laurels of the UCITS success, he
warns. Fortunately, there is an appetite for
alternative products. "We have seen, in meet
ings with Hong Kong law firms, that there is a
clear interest in the (Luxembourg) Specialised
Investment Fund (SIF) as an alternative to the
Caiman Islands and other offshore centres.
It all depends on the Alternative Investment
Fund Managers Directive (AIFMD); if it works
out well for us, we can replicate the success
of UCITS in other products, as Luxembourg is
a hub for cross-border funds".
In terms of investments going into Asia,
certain Asian countries have enacted rules
regulating foreign direct investments. Nicolas
Papavoine of Allen & Overy thinks that these
rules could be used to protect local industries
from international competitors. "Foreign
investors may also be required to set up joint
ventures and conduct business with local
partners. Typically, local partners would own
a majority stake in the investments. Often,
in practice, it proves to be a way to favour
technology transfers".
Katia Panichi of Elvinger, Hoss & Prussen
states that the level of openness depends very
much on the country. "According to an inter
national survey by the World Bank, Singapore
and Hong Kong come out on top for countries
where it is easy to conduct business. Both juris
dictions do a lot to attract foreign investors. You
see that in the number of companies that settle
down in Hong Kong. In China, it is a bit more
complicated to settle down and to get permits;
the country ranks 91st in the survey".
Stéphane Karolczuk of Arendt &
Medernach notes that the Asian point of
view in terms of restricting foreign capital
has changed: because it is in their interest
to allow more foreign capital to come in,
they have relaxed the rules. "In quite a
number of jurisdictions, it is theoretically
possible to do business without a local
partner, but practically it is quite impos
sible. In China you still have the rule that
you need a local partner to do certain
types of business in banking, finance and
insurance. But if an Asian company wants
to have a successful business in Europe, the
same criteria apply; you also need a local
partner who has the connections and the
brand you don’t have".
Fabio Trevisan of Bonn Steichen &
Partners thinks that one of the future
challenges in China will be the exchange
rate of their currency. Once that issue
is cleared up, there will be many more
investments both ways and the floodgates will open, he predicts. "The Chinese
have proven that communism can go
hand in hand with business, openness and
a certain form of capitalism. One of my
Chinese clients said to me: ‘You Europeans
don’t understand what it is like to manage
a province that has more than 100 million
inhabitants. So we cannot compare the
European Union with a country like China".
Doing business is people’s business,
Thierry Lohest of Loyens & Loeff sums up.
"The big error that many people make in
the Western world is to be arrogant. Most
people in key positions in China are highly
intelligent and attended the best universi
ties. The key is to understand their culture
and avoid the mistakes others have made
when going to these countries".
Alex Schmitt admits that he likes one of
the ideas put forward by US President
Barack Obama during his first term: "He
tried to organise the world on the model
of the Congress of Vienna: you have big
powers that are not fighting each other".
The message is clear as water: Western
economies shouldn’t feel threatened by
the rise of Asian countries. CW
Four reasons to do
business in Asia
The "Big Four" audit firms
play a role in creating the
global village – not least
in the complex Asia Pacific
region.
"Typically, we assist our
clients in implementing their
distribution strategies in Asia".
Yves Knel,
Partner,
Deloitte Luxembourg
It comes as no surprise. Deloitte, Ernst &
Young, KPMG and PwC – often referred to
as the Big Four - are everywhere you look
in the Asia Pacific (AP) region, in the sort
of numbers that are hard to get your head
round: 43,000 at Ernst & Young, 37,500 at
Deloitte, and so on. These companies are one
of the great service exports of the Western
economies. They are also a Good Thing for
Luxembourg, channelling large business flows
in both directions.
A wide range of business is conducted between the Luxembourg offices of these firms
and the AP markets, including trade, logistics,
intellectual property management and direct
foreign investment. However, the bulk of business is in financial services, specifically in the
investment fund area.
big 4 | P. 30|31
"Typically, we assist our clients in implement
ing their distribution strategies in Asia", says
Yves Knel, Partner at Deloitte Luxembourg.
Michael Ferguson, Head of Asset Management Practice at Ernst & Young (EY) Luxembourg, agrees. "The recognition of the Luxem
bourg UCITS brand in most important Asian
markets is the key factor bringing managers
to Luxembourg and attracting Asian investors.
A number of Chinese, Hong Kong and Japa
nese asset managers have also domiciled their
UCITS funds in Luxembourg and established
a presence here".
"Asian Sovereign Wealth Funds in the region use Luxembourg
to channel investments into Europe and the same is true of
corporate investors. Another example is Asian fund Managers
setting up equity raising vehicles in Luxembourg to attract
European and US investors wishing to invest into Asia".
Georges Bock,
Managing Partner,
KPMG Luxembourg
Michael Ferguson,
Partner,
Head of Asset Management Practice,
Ernst & Young Luxembourg
"The recognition of the
Luxembourg UCITS brand
in most important Asian
markets is the key factor
bringing managers to Lux
embourg and attracting
Asian investors".
Another big group are the institutional asset
managers who use Luxembourg to set up
alternative investment structures, particularly real estate funds (REIF). "As a global
real estate centre, Luxembourg is constantly
interacting with most countries in the world
for both inbound and outbound investments",
says Georges Bock, Managing Partner at
KPMG. "Asian Sovereign Wealth Funds in the
region use Luxembourg to channel investments
into Europe and the same is true of corpo
rate investors. Another example is Asian fund
Managers setting up equity raising vehicles in
Luxembourg to attract European and US inves
tors wishing to invest into Asia".
Business is clearly going both ways. REIF clients based in the US and the EU, particularly
the UK, are investing in all the major Asian
and Pacific markets from China to Australia.
"The key factors bringing Asia real estate funds
to Luxembourg are the reputation of Luxem
bourg’s asset management industry, efficient
tax structures, broad double tax treaty network
and competent service providers", summarises
Ferguson at E&Y. Capturing business also
requires hard work and dedication. "It takes
much longer to develop strong client relation
ships", comments Mark Evans, Partner at PwC
Luxembourg.
All four firms see major opportunities rising
out of the AIFMD1. "We anticipate that from
2013, many Asian asset management com
panies will replace their Cayman funds with
1
Luxembourg SIF to better facilitate distribu
tion", says Evans. Knel (Deloitte) explains why.
"Firstly, it is a directive that regulates managers
and not products: AIFMD is not concerned with
made in Europe so much as doing business in
Europe. Secondly, AIFMD opens the way to a
form of reciprocity that has been lacking in the
past". The long-awaited Directive has already
made an impact in AP markets, it appears.
"Investors are already showing an interest",
says Ferguson "and Asian fund managers are
expressing interest in establishing European AIF
products, either by establishing a presence in
Luxembourg or by using one of the ready-made
Luxembourg "plug and play" options". He is
referring to the management company services offered by many firms in Luxembourg.
Implanted as they are in the local economic
fibre, all four companies are careful to stress
the heterogeneous nature of regional markets.
Japan and South Korea both have decades
of experience as globally active economies
whereas in China and India this is a recent
development. Australia and Japan are domestically focused, whereas Hong Kong and
Singapore are international hubs. "The legal,
regulatory and tax environment in each of the
AP jurisdictions are different and Luxembourg
solutions must be adapted and tailored to the
needs of different types of investors from each
country", comments Yves Knel.
Alternative Investment Fund Managers Directive: this EU Directive will grant a cross-border passport to
alternative investment funds, similar to the UCITS passport.
"The key factors bringing Asia real estate funds to
Luxembourg are the reputation of Luxembourg’s asset
management industry, efficient tax structures, broad
double tax treaty network and competent service
providers. It takes much longer to develop strong
client relationships".
Marc Evans,
Partner,
PwC Luxembourg
One of the consequences for these global
advisory firms is a strong focus on staff
development. "It is crucial to have staff that
have been exposed to the East and the West"
says Bock (KPMG). "Exchange programmes
"Firstly, it is a directive that
regulates managers and not
products: AIFMD is not con
cerned with made in Europe
so much as doing business in
Europe. Secondly, AIFMD
opens the way to a form of
reciprocity that has been
lacking in the past".
are supportive in creating such skilled workers.
Staff move within and between regions to
alleviate misperceptions, enhance the global
mindset, develop the right people connec
tions within the firm and learn about different
markets". This attitude is shared by the other
firms. PwC uses staff secondments, Ernst &
Young has its "ambassadors" programme and
Deloitte has established a Luxembourg office
in Hong Kong as part of its international
tax initiative: the office is independent from
group firms in the region though they work
closely together.
thinking: one company admits that AP has
been the fastest growing region in terms of
group revenue for the last eight years, with
India in a pole position.
Looking ahead, there is broad consensus that
the biggest growth will come from China,
through Hong Kong. Other key future markets include Singapore, Indonesia, Thailand,
Vietnam, India and – surprisingly - Mongolia.
Georges Bock throws the spotlight on Japan,
citing the strong Yen and investment opportunities in Europe. This list is not just wishful
The verdict? Small as it is, Luxembourg has
a lot to offer the AP markets and vice versa.
There is also consensus that one of the
outstanding competitive threats is the need
to conclude, or re-negotiate, a number of
local double taxation treaties. Gaps include
the Philippines and Australia. More than one
company cites increasing barriers to European funds, including slower authorisation
times. Rapid cost growth is a challenge.
As for the Big Four, probably their greatest
contribution of all is the day-to-day practice
of globally accepted business practice. The
global village is partly of their making. ER
Some
flew East
Victor Buck Services (VBS) provides composition, information distribution and publishing
services to companies that are distributing
UCITS1 in Asia. It was one of the first companies to spot this opportunity. "A lot of the
large industry players were thinking of setting
up local support for their underlying TA busi
ness. We pre-empted that move", explains
Edith Magyarics, CEO. The company established an office in Singapore in 2008 and
operates through partners in Hong Kong and
Taiwan. It was an important strategic move.
"In the fund business, many of the big decisions
are taken outside Luxembourg; this enabled us
to increase our contribution to the value chain".
Edith Magyarics,
CEO,
Victor Buck Services
Can Western service
providers compete in Asian
countries that more or less
defined the term "customer
service"? LFF interviewed
three companies that are
not only servicing the Asian
investment fund community but are bringing jobs to
Luxembourg.
KNEIP went East to support existing clients in
Asia, opening an office in Hong Kong in 2011.
"Our clients were distributing UCITS into Hong
Kong, Singapore and Taiwan and they wanted
more help on the ground to get their data and
documents into the right places, primarily
from a regulator perspective but also from a
statutory marketing perspective", explains Lee
Godfrey, deputy CEO and point man for business in Asia. "In Hong Kong, for instance, it is
still a legal obligation to publish all your NAVs
in a newspaper. We still have thousands of lines
of data published every day". This is no longer
a requirement in the EU.
"A lot of the large industry play
ers were thinking of setting up
local support for their underlying
TA business. We pre-empted that
move".
MDO Services offers Asian asset managers
the substance required to domicile a UCITS
in Luxembourg. They offer UCITS management company (ManCo) services or, for a
PFS | P. 32|33
1
self-managed SICAV, conducting officers
and the support required for them to carry
out their duties. The company is active in
Singapore and Hong Kong, where clients
include Mainland Chinese banks. They chose
not to open a local office because clients
visit Luxembourg regularly and this is the
seat of the service they offer. Another reason
is that the potential volume of clients does
not justify such a move. "There are Asian fund
managers who want to sell their expertise via a
UCITS wrapper" points out Martin Vogel, CEO
of MDO Services, "but their number is limited.
We’re talking 30 or 40 companies".
KNEIP came to the same conclusion. The company expected to pick up business from local
funds, but 90% of their business remained
UCITS, some of it from Chinese banks using
Luxembourg to sell back into Asia. "The Chinese
banks are not necessarily doing ManCo work in
Luxembourg: they seem to prefer to outsource",
points out Godfrey, adding: "This brings most
of them to Luxembourg. Since these clients
come from different countries, we decided to
bring our Hong Kong office manager back to
Luxembourg to service them.
Doing business in Asia has its challenges. VBS
chose Singapore partly because of its Western,
English speaking environment. "We had very
little business in the first 36 months", comments Magyarics, but having a foot on the
ground eventually paid off. "Patience is key".
Adapting to local cultures is important but
does not get in the way of business so long
as you focus on getting the job done. In
Hong Kong, Lee Godfrey comments that it is
important to respect the difference between
Hong Kong, American, British and China born
Chinese. For Magyarics, in Singapore, staff
retention is the challenge: "It’s a competitive
ndertaking for collective investment in transferable securities: retail investment fund that has
U
a passport for sale throughout the EU
market and money is a driver". Another factor
is the level of detail that new clients will go
to, to test a new relationship. "They’re very
thorough", comments Magyarics, adding that
the Luxembourg PSF2 label does not help.
"You are just another vendor. You’ve got to
persuade people that you’ve got a competitive
service offering and you understand them".
Martin Vogel,
CEO,
MDO Services
"There are Indian
managers who want to
sell their domestic mar
ket expertise in Europe,
but very few Indian
banks are big enough to
realise this ambition. The
Chinese banks are huge,
but in Europe they mostly
serve the expatriate
Chinese population".
"In the fund business, many of
the big decisions are taken out
side Luxembourg; this enabled
us to increase our contribution
to the value chain".
Godfrey agrees that the PFS label does not
create an impression with clients, but he insists
that the Luxembourg label is a door opener.
"Most Asian companies are looking to Luxem
bourg and not yet to Dublin; we had a real first
mover advantage", He is echoed by Vogel;
"UCITS is liked with Luxembourg, because of the
trade missions and because Luxembourg has a
reputation for strong regulation".
All three companies comment that the fund
industry in Asia is primarily domestic. The big
volumes are in China, India, Taiwan or Japan.
"However big these grow" notes Magyarics
"UCITS will remain a relatively modest per
centage of the market". Martin Vogel agrees.
"There are Indian managers who want to sell
their domestic market expertise in Europe, but
very few Indian banks are big enough to realise
this ambition. The Chinese banks are huge,
but in Europe they mostly serve the expatriate
Chinese population".
The UCITS wrapper clearly drives business,
whether funds are distributed in Asia or in
Europe. This makes business vulnerable to an
Asian UCITS. However, none of the companies sees this happening soon unless Europe
loses the market by adding too much complexity to the UCITS. Vogel is confident that
there is "a strong dialogue" between Hong
Kong and Singapore and Brussels, adding that
it is in everybody’s interest. Asia is also a valuable market for London, Paris and Frankfurt
because that is where asset management
takes place.
The consensus is that Asia is an important
market and there is a job to be done, but
in a region where domestic business is the
driver there is no automatic link between
GDP growth and business volumes for Luxembourg. Asian investors have many other
alternatives.
When I ask what they would wish for from a
genie in a bottle, Edith Magyarics would like
a crystal ball to see where Asia would be in
five years. Lee Godfrey makes a practical wish:
life would be easier if treatment of the KIID3
were standard across all markets in Europe
and if agreement could be reached concerning its use in Hong Kong. Martin Vogel eyes
a map. "I would like to have a treaty with
Russia", he says. ER
"Our clients were distributing UCITS into Hong Kong, Singapore
and Taiwan and they wanted more help on the ground to get their
data and documents into the right places, primarily from a regula
tor perspective but also from a statutory marketing perspective".
Lee Godfrey,
Deputy CEO and point man for business,
KNEIP Asia
2
3
" PSF" (Financial Sector Professional) status is granted by the Luxembourg financial sector supervisory
authority, the CSSF
KIID: Key Investor Information Document
The Ambassadors
of Goodwill
LFF: What are the aims and
missions of ATTF?
LFF: What kind of
audience do you target?
PW: The Financial Technology Transfer Agency spearheads the technical assistance offered
by Luxembourg to countries with a need for
the acquisition of financial knowledge.
PW: Training takes place both in Luxembourg and abroad, in the form of seminars,
workshops, conferences, coaching or consulting on banking and financial matters. The
programmes are directed at banking sector
employees, most often at the lower/middle
management level. Participants in Luxembourg-based seminars are selected on the
basis of an application but the same doesn’t
hold true for local seminars where our partner
(typically the central bank, bank association,
bank training institute or the Ministry of
Finance) doesn’t apply such a process.
Sharing the expertise that the Luxembourg
financial centre has built up over recent decades has long been a goal of the Luxembourg
government. It led to the creation, in 1999, of
an agency whose sole purpose would be to
deliver training programmes to bankers across
the world on a purely cooperative basis, building on the collective experience and support
of the shareholders.
Patrick Wallerand,
International Programmes Director,
ATTF
One government agency
has followed in the footsteps of Marco Polo: ATTF,
the Agence pour le transfert
de la technologie financière
(Financial technology transfer agency) has been active
for the last thirteen years
in parts of Asia that most
people have never visited.
LFF interviews ATTF International Programmes Director,
Patrick Wallerand
ATTF | P. 34|35
ATTF is a public-private partnership whose
shareholders are the State of Luxembourg,
the Central Bank, the Chamber of Commerce,
the financial supervisory authority CSSF, the
Institute for Training in Banking (IFBL), the
University of Luxembourg and the Federation
of the Professionals of the Financial Sector
(PROFIL). Our programmes are financed by
the government.
LFF: How do you promote
the Luxembourg Financial
Centre?
PW: The promotion of the Luxembourg
Financial Centre is a by-product of our
activity. Demonstrating the expertise of
our marketplace through the excellence of
our training programmes does not translate
into a quantifiable economic outcome but
I know it brings goodwill. I cannot estimate
the economic impact of our activity but I am
aware of Luxembourg-based firms that were
approached by foreign companies as a result
of contacts we created.
LFF: Have banks changed
their attitude towards
training since the
beginning of the financial
crisis in 2007/2008?
PW: The banking sector faces many challenges these days, yet too many entities have
not yet realised that training will become
more and more important if they want to
preserve their intellectual capital. We have
registered a fall in the number of candidates
and that seems to be a direct result of the
crisis: even training programmes are for free,
not everyone can easily be detached from his
or her job. However, recent indications show
three major trends: the request for practical,
as opposed to theoretical, courses, the importance of risk management and a demand for
training programmes that deliver, or lead to,
an internationally recognised certificate.
What topics are most
in demand?
Patrick Wallerand
We have just conducted a training needs analysis with all our partners in
order to set the 2013 programme. Risk Management (credit, liquidity, market
or operational) is in very high demand, followed by Internal audit/control and
IFRS. It is very indicative of the issues faced by all banks, whether in Europe or
in emerging countries.
LFF: What does the
financial sector look
like in Vietnam?
LFF: You cooperate with
more than 50 partners in
37 countries including a
project in Vietnam. Can
you describe this?
PW: Vietnam has long been a beneficiary
of Luxembourg development aid. In that
context there are several medium term
projects, including one with the State Securities Commission SSC (the capital market
supervisory authority) aimed at developing the capital markets. ATTF has provided
expertise in that area since 2008, bringing about some real achievements. These
include the drafting of decrees and circulars
on the establishment and management of
open-ended investment funds, real estate
investment funds and ETFs, the organisation and operation of fund management
companies, regulations on securities offerings and public company disclosure, the
development of a derivatives market and
recommendations on a restructuring of the
market infrastructure.
Additionally, the project is financing market surveillance and information disclosure
systems that enhance the surveillance
function of SSC.
PW: The banking sector is not in very good
shape (non performing loans are on the increase) and the central bank has already taken
several measures to deal with that. The country
is now entering a Financial Sector Assessment
Programme with the World Bank and the IMF,
the results of which should come through in
mid-2013. In fact, we might integrate part of
those results in another medium-term ATTF
project that would follow on from the one we
are now finishing with SSC.
With regard to the capital markets, these are
developing slowly since individuals must first
build their savings capacity before entering
those markets.
LFF: According to forecasts, China will overtake
the US as largest economy
in the world by the year
2020. What impact does
China’s rising influence
have on training programmes designed for
Chinese professionals?
PW: In addition to our activity in Shangahi,
each year we welcome to Luxembourg some
20 representatives of the People’s Bank of
China (the central bank) to whom we present
the financial center. We believe this offers
an excellent opportunity for the delegates,
who come from regional headquarters all
over China, to understand European financial
regulation and financial products.
LFF: What other plans do
LFF: In 2010, ATTF signed a
you have in Asia in the near
Memorandum of Underfuture?
standing (MoU) with the
Shanghai Financial AssociaPW: In spite of a slight reduction in our
tion (SFA). What is the objec- budget we will maintain our activities, not
tive of this agreement?
only in Vietnam and China, but also in Central
PW: It was during the World Expo 2010 in
Shanghai that I had the pleasure of signing the
MoU with the Shanghai Financial Association on behalf of ATTF. Luxembourg is keen
to develop a strong relationship with China
and its financial sector. SFA, together with our
consulate in Shanghai, helps us to organise
some four training seminars every year. These
sessions showcase our expertise in investment
funds, wealth management or risk management and have stirred up real interest, as
evidenced by the 70 people who registered for
our most recent seminar on investment funds.
Asia: Mongolia, Kazakhstan and Uzbekistan.
There is no plan to stretch our remit beyond
the 37 countries with whom we have the
honour of working. CW
Moving around
in the workshop
of the world
LFF: What is your role
and what is your mission
as Consul General of the
Grand Duchy of Luxembourg and as Executive
Director of the Luxembourg Trade and Investment Office Shanghai?
Nicolas Mackel,
Consul General of the Grand Duchy
of Luxembourg in Shanghai,
Executive Director,
Luxembourg Trade
and Investment Office Shanghai
Luxembourg has an excellent
reputation in China. There
is no doubt about that.
Nevertheless, promotion
efforts in the most populous
country in the world have
to be intensified to better
convey Luxembourg’s more
specific advantages. Nicolas
Mackel is not scared of this
major challenge. In an interview with LFF, the man with
two captivating positions
speaks about promotion in
China, a humming economy
and rewards outweighing
hindrances.
Promotion in China | P. 36|37
NM: I am in the very fortunate position of
having two fascinating positions at once. As
Consul General, I have the privilege of representing Luxembourg in Shanghai as well as
in the provinces of Jiangsu, Zhejiang, Fujiang
and Anhui, totaling a population of 255 million. In this capacity, I represent Luxembourg's
authorities, citizens and companies with the
Chinese authorities. We also issue Schengen
visas for people from these provinces who
travel to Luxembourg and Europe. This how
ever is only a very small part of my daily
activity, which is mostly spent on my second
job, i.e. Executive Director of Luxembourg's
Trade and Investment Office (LTIO) in China.
In this latter capacity, we promote Luxembourg’s economic interests all over China by
either helping Luxembourg companies who
want to do business in China or talking to
Chinese companies to get them interested
in choosing Luxembourg as their gateway
to the European single market.
LFF: What kind of companies haVE a presence in Luxembourg and what firms
plan to do so in the near
future?
NM: In the field of financial services, I don't
need to recall the presence of the two biggest
actors, Bank of China and ICBC. A third bank,
China Construction Bank, has announced
its decision to also set up its European HQ
in Luxembourg and we are in discussions
with others. Some Chinese asset managers
were already present via the partner companies with whom they have set up a joint
venture in China, but more recently we also
see individual Chinese FMC's, such as China
AMC, China Southern Fund. Others are in the
pipeline... In the corporate sector, the largest
presence is that of Huawei, China's telecom
giant. A little known fact is that one of China's
biggest car producers, Shanghai Automotive
Industrial Corporation, has set up its European HQ in Luxembourg as well last year to
manage its network of clients and providers
from there. Chinese companies have only very
recently started to go out to actually do business as opposed to simply produce in China
and sell overseas or invest in the acquisition
of technology, resources and brands. Both in
the financial as in the corporate sector we are
aiming to position Luxembourg as an ideal
platform for Chinese companies who want
to do business in Europe.
Nicolas Mackel
What is the image
of Luxembourg
and its Financial
Centre in China?
Luxembourg has an excellent reputation in China. Since my arrival here last year, I have not met a
single Chinese who did not know about Luxembourg. A great debt of gratitude for this is due to all
those who contributed in making our Pavilion during the World Expo the stunning success is was with
7,2 million visitors. Their tireless efforts have laid a very solid foundation for the promotional work we
are doing today. The general level of knowledge among Chinese businessmen about Luxembourg as
a major financial centre is quite good, yet we need to better convey the more specific advantages
Luxembourg can offer to Chinese investors, bankers and asset managers. We thus work a lot on promoting Luxembourg not only directly with economic actors but also in the Chinese media. Recently,
the LTIO Shanghai has sent, in cooperation with LFF and the Ministry of Economy and Foreign Trade, a
group of five Chinese journalists to Luxembourg. In Shanghai, we also work very closely with the local
financial authorities in cooperation with Luxembourg’s ATTF, which holds training seminars for young
bankers and asset managers. ATTF also runs a program for Chinese central bankers in Luxembourg.
We are building up a network of relations with various actors in China. For instance, we are presently
running a series of contributions from Luxembourg actors to the quarterly publication of Shanghai’s
PE Association.
LFF: What about Luxembourg as a logistics hub?
LFF: What makes Luxembourg attractive
for Chinese investment into Europe?
NM: Chinese people have excellent geography skills and thus their first thought in terms
of logistics is for countries with ports rather
than land-locked ones like ourselves. However, once given the opportunity to explain
the more subtle details, we manage to get
them interested in Luxembourg as a potential
logistics hub in Europe. They always learn with
great interest that Luxembourg’s airport is
among the eight biggest cargo airports in Europe, Cargolux operates such a large fleet and
network and they are highly interested in our
no-VAT-prefinancing advantage. We are looking forward also to promoting Luxembourg’s
freeport among Chinese investors.
NM: The vast majority of China’s outbound
investment is channelled through Hong Kong,
a jurisdiction with which we managed to
negotiate a very advantageous bilateral nondouble taxation agreement. This, combined to
our large network of other NDTA's has helped
us in attracting to Luxembourg major Chinese
players such as China Investment Corporation,
Sinopec, CNOOC, as well as other companies from the Middle Kingdom who invest in
Europe and elsewhere through Luxembourg
structures.
Promotion in China | P. 38|39
Beyond this, there are of course the more
general arguments which we like to put
forward in the promotion of Luxembourg:
central location, multilingualism, efficient
and pragmatic authorities, high level of
expertise and competence, competitive
tax regime, and so forth.
LFF: Investment works
both ways. How easy is it
to do business in China?
NM: China is a complex and interesting
country in many ways but judging by the
enthusiasm with which companies from every
corner of the world set up presences in China
the rewards certainly outweigh any perceived
hindrances. While China has certainly been and
still is known to be the workshop of the world,
more and more companies are operating there
not because of cheap labour but because of
China's own market place with a growing
number of middle to high-income consumers.
In the financial sector, the Chinese authorities
operate quite a tight game but we increasingly
see them liberalising the various channels and
schemes by which investment flows can cross
into as well as out of China. They are keenly
aware of their interest in attracting investment
to help Chinese companies turn into international actors and keep the economy humming
along at impressive rates.
LFF: What role does the
Chinese government play
in approving foreign direct investment and regulating proposed merger
and acquisition activities
by foreign investors?
NM: The Chinese government obviously has
a major role to play in approving any investment projects into China. Various agencies
will have a say depending on the subject matter of the investment. In the financial sphere,
China has put in place the Qualified Foreign
Institutional Investor (QFII) scheme which
will allow, as it is being further expanded, an
increasing number of foreign institutions to
invest into China’s capital market. For example, we have been in contact with a major
Luxembourg-based fund, which is in the pro
cess of applying for a large quota to be able
to invest more in Mainland China.
The mutual fund
penetration per
household IN ASIA
remains relatively
low with 8% (global
average is 16%). What
potential do you see
to be explored?
Nicolas Mackel
Because the mutual fund penetration
per household remains low, Chinese
asset managers increasingly look
outside their own frontiers and some
are already responding to European
investors’ appetite for an exposure to
the mainland economy. As mentioned previously, several Chinese
managers have already set up funds
in Luxembourg and we believe now
is a crucial time to position the
Grand Duchy as the ideal platform
from where to tap into a large pool
of RMB-hungry European investors. RMB denominated products
are increasingly attracting investors
in Europe who are looking both to
diversify their holdings as well as
to get a ride on the red-back's rise.
Luxembourg’s stock exchange has
already listed a number of dim sum
bonds and actually was the first to
do so outside Hong Kong. Luxembourg could ultimately position itself
to serve as an RMB offshore hub in
Europe. CW
Hard material
matters
Just recently, CERATIZIT, a
Luxembourg-based pioneer
and global player in the
carbide industry, opened a
second subsidiary in Kolkata,
India. As a globally active
company, CERATIZIT supplies
the automotive, engineering
and construction industries,
to name but a few, with hard
metal components.
The CERATIZIT Group employs 5,500 people
in 25 production facilities and about 50 sales
subsidiaries around the world. Although traditionally the company is focused on Europe,
Asia is one of their core markets. "We are cur
rently producing in China and India and are also
pushing into the Japanese market", Jacques
Lanners, Representative for the Executive
Board of the CERATIZIT Group says. With the
recent takeover of an existing facility in India,
the group now possesses seven production
sites in the Eastern hemisphere, five of them
at or near the Chinese coast.
Carbide industry | P. 40|41
"Asia offers two main advantages: 70% of the
commodities we need come from China. Our
production is very personnel-intensive, and
we can benefit from their competitive labour
costs". With a total staff of around 1,600,
the Chinese production sites are even bigger
than the three facilities in Luxembourg which
altogether account for 1,200 employees.
Jacques Lanners,
Representative for the Executive Board,
CERATIZIT Group
"The euro crisis is a crisis of
the financial system, so of
course it has its repercussions on the economy.
But since we market our
products worldwide and
produce outside of Europe
as well, we try to wind our
way past the crisis".
"In China, we prefer working with locals not only
at the manufacturing level, but at the manage
ment level as well", Mr Lanners explains. "Our
representatives at the Chinese production sites
are locals that have been trained in Europe".
Contrary to the situation in Luxembourg, finding qualified staff in China and India is not an
issue. "In Luxembourg and in Europe in general,
craftsmen and specialised engineers are a dying
breed".
Starting out as a joint venture in China,
CERATIZIT has now converted its business into
a wholly foreign owned enterprise (WFOE)
incorporation. "Nowadays, it is absolutely not
a problem anymore to set up a WFOE in China.
The authorities are happy to have foreign
high-tech companies in their country. China is
opening up more and more every day". Despite
its rapid growth, Mr Lanners is not afraid
that China might steamroll over the rest of
the world in the near future. "In the eighties,
people were already saying that China would
flood global markets. Now, thirty years later,
this is still not the case. This process will take a
few more decades".
European companies benefit from Asia’s
stable position on the world stage, especially
during the present euro crisis. "The euro crisis
is a crisis of the financial system, so of course
it has its repercussions on the economy. But
since we market our products worldwide and
produce outside of Europe as well, we try to
wind our way past the crisis".
In order to stay competitive, CERATIZIT
reaches out to markets like Vietnam and
Cambodia, which are rich in resources and
will soon replace China as the new low-cost
countries. "At the moment, we are still focused
on the European market. The aim is to diversify
our business geographically and to increase
shares in Asia, India and the US", Mr Lanners
declares. This would help make European
companies less prone to crises as well. EA
The Landmakers
What do the Dubai Palm
Islands and the beaches of
the German island Sylt have
in common? Both are popular
destinations for a well-heeled
clientele and owe the continued existence of their lovely
beaches to the Jan De Nul
Group. The group is a familyowned company with its
head office in Luxembourg.
David Lutty,
Manager,
Business Development & Governmental Affairs,
Jan De Nul Group
Their core business is dredging, that is to say
building reclaimed land and deepening ports.
Large environmental and civil projects such
as the construction of wastewater treatment
plants are also part of the group’s portfolio.
One of their most renowned projects in Asia
is the Hong Kong airport Chek Lap Kok, which
was built outside the city in the Pacific in the
1990s or more recently the reclamation of
2,000 ha of land for a steel mill complex in
Vietnam. The dredging business has its origins
in Belgium and the Netherlands, where the
maritime sector is very strongly represented.
Dredging | P. 42|43
Jan De Nul’s main expertise are its vessels,
which contrary to the fleet of its competitors,
are designed by a group of 100 internal engineers. Most of the vessels are registered under
the Luxembourg flag. 500 of the group’s 6,453
staff are on the Luxembourg payroll, the majority of them being the vessels’ captains. With
a turnover of 2 billion euros generated in Luxembourg, Jan De Nul is an important player in
the Luxembourg non-financial industry.
"The main reason(to set up
our headquarters in Lux
embourg) was the custommade solutions Luxembourg
players are able to offer in
various fields of the financial
world. The know-how of the
finance industry is impor
tant for us, since the group’s
treasury is managed in
Luxembourg. Here, we found
a competitive fiscal frame
work. Other reasons were
the easy access to decision
makers in the government
and the good service we
get from the Luxembourg
maritime administration".
David Lutty of Jan De Nul explains why the
group decided to locate its head office in
the Grand Duchy in 1995: "The main reason
was the custom-made solutions Luxembourg
players are able to offer in various fields of the
financial world. The know-how of the finance
industry is important for us, since the group’s
treasury is managed in Luxembourg. Here, we
found a competitive fiscal framework. Other
reasons were the easy access to decision mak
ers in the government and the good service we
get from the Luxembourg maritime administra
tion". A fact that is very little known is that
one third of Luxembourg non-life insurances
are active in shipping. Apart from treasury, the
Luxembourg head office is responsible for decision making, consolidation, accounting and
ship management, as well as internal services
like public relations, travel management and
trainings for staff and crew.
Asia is one of the group’s core markets. "Our
clients are mainly port authorities or govern
mental bodies that need our services in order
to modernise their infrastructures. Apart from
dredging, the offshore business for oil, gas and
renewable energy is an important pillar".
Jan De Nul controls its activities in the SouthEastern Asian region out of Singapore. As a
subsidiary of the Luxembourg head office, the
Singapore bureau is constantly observing the
Asian market in order to land new projects in
the region. If necessary, small offices in the
country where a project is finally realised can
be opened. Another Luxembourg subsidiary
is located in Malaysia. "Currently, we are fol
lowing some interesting projects in Indonesia.
It’s a very important market for us", Mr Lutty
says. The manager admits that there are huge
differences between each Asian country when
it comes to business: "In Singapore and Hong
Kong, it is very easy to do business, because
they are straight forward and clear in their
expectations. The Philippines and Indonesia,
however, are more bureaucratic. India remains
interesting, but it is very difficult to get a
project there because of bureaucratic hurdles.
The market is rather protective". As another
upcoming market, Myanmar is on the group’s
map. "We have just finished two small projects
there. They have big plans to modernise their
ports. The same applies to Vietnam. Australia
is one of the most important markets because
of the natural resources that are exported from
the continent into the Chinese region".
As protective market, China remains on Jan
De Nul’s wish list. "We only work in China
when the local companies do not have enough
capacity and ask for one of our big vessels
to come in and work for them". At the same
time, Chinese companies will develop to
become serious competitors in the field. "The
technologies are still at different levels. Ours
are at a higher level and are more productive.
For instance, we have the biggest vessel in the
world, which can dredge and store on board
46,000 cubic meters of sand. Also, our safety
standards are much better. But we are careful
to not underestimate China, as they can adapt
rapidly", Mr Lutty says.
Clearly, dredging is a tough business. That’s
why the group invests heavily in training
facilities for the vessel’s captains in the Luxembourg premises. At the end of the day, the
country that offers the whole package will win
the game. EA
The multilingual, multi-skilled executives in Luxembourg’s
finance sector are ready to greet you. Over 75% of finance
workers are foreign residents or cross-border commuters,
so new arrivals quickly feel at home. Both stable and
dynamic, Luxembourg is open for business.
www.luxembourgforfinance.lu
Agency for the Development of the Financial Centre
12 Rue Erasme, P.O. Box 904, L-2019 Luxembourg
Tel: (+352) 27 20 21 1 Fax (+352) 27 20 21 399 Email lff@lff.lu

Chinese banks - Luxembourg for Finance

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