UOB sees more FDI flows from Europe into Asean

Singapore

UNITED Overseas Bank (UOB) is expecting more foreign direct investment (FDI) flows from Europe into South-east Asia, as the bank deepens its advisory relationship with clients, a senior banker told The Business Times on Tuesday.

The bank - which has the widest branch network in South-east Asia among the Singapore lenders - said its FDI advisory unit has registered a doubling of clients in the last year.

Through the FDI advisory unit, UOB has to date advised more than 500 companies expanding into South-east Asia, and plans to grow the base by another 30 per cent by the end of 2015.

European companies - working in an uncertain environment back home - are eager to tap into the average GDP growth of about 5 per cent in this region, said Sam Cheong, head of UOB's FDI advisory unit.

"And the 5 per cent is just the tip of the iceberg," Mr Cheong added, pointing to the optimism over the Asean Economic Community (AEC) to be launched by the end of this year.

One common nuance that the bank still has to explain is that Asean is not as homogenous as Europe, and that MNCs - whether from the West, or within Asean - must send staff who are "culturally agnostic" to manage situations on the ground, he said.

UOB's FDI clients from Europe almost doubled in the last year, including companies in the consumer, agriculture, and automotive industries.

Mr Cheong noted that the AEC alone is not the reason for companies to turn their attention to this region.

Instead, companies have been drawn to more fundamental prospects that include demographic changes, as well as lower labour costs here. Notably, the bulk of UOB's FDI clients - or about 40 per cent - is still from China, as corporates there are keen to expand beyond its domestic market.

Most companies also continue to use Singapore as a base to expand into the region, said Mr Cheong. It is the top FDI destination in South-east Asia for UOB, as it captures half of the total FDI that would flow into the region. UOB expects total Asean trade to hit US$6.6 trillion by 2030.

UOB's FDI advisory model is such that the bank would offer free advice to prospective clients looking to expand into the nine countries where the bank offers such a service.

Many clients turn to the FDI offices when they face hurdles in getting investment approvals, said Mr Cheong.

The bank also boasts multiple ties with government agencies that promote foreign trade. These include Vietnam's Foreign Investment Agency, and the China Council for the Promotion of International Trade.

This month, the bank's Thai subsidiary also signed a memorandum of understanding with Amata Corporation, Thailand's largest listed conglomerate in the industrial estate sector, to provide access to business referrals through each other's network.

An official set-up by a bank for corporate matchmaking is a rare sighting. Most competing banks - whether as corporate lenders or as investment bankers - would say they likewise offer advice to corporates and rich entrepreneurs, but this is often to existing borrowers, or informally.

Since 2011, UOB has set up FDI advisory offices across Asia in China, Hong Kong, India, Indonesia, Malaysia, Myanmar, Singapore, Thailand and Vietnam.

The bank ties its growth in cross-border loans to the use of FDI advisory, particularly as companies navigate through the diverse marketplace that is Asean, he added.

Last February, UOB said it had doubled its cross-border business lending in about four years - cross-border loans make up about 15 per cent of all corporate loans at the bank today.