Taipei Times (TT): The global economy is faltering and weighing on Taiwan’s GDP. What can the government do to ease the pain?
Jaspal Bindra: The world is going through a contraction in trade, largely driven by the impact of the slowdown in the Americas and Europe. That is unlikely to change in the near term.
It is important export-oriented countries understand the new trade routes. The new trade routes are Asia with Africa, Asia with the Middle East and Asia with Latin America.
It is important for Taiwan to diversify into new markets and the government is taking serious steps toward that by signing free-trade agreements or negotiating them at this stage with Singapore, India and many other markets.
Taiwanese firms have made some very good investments in Vietnam and Indonesia. That shows Taiwan is moving in the right direction. However, it has been historically dependent on two large markets (namely, the US and China). As the US is going to be slow in the medium term, Taiwanese firms should develop more sustained and resilient trade potential by diversifying.
TT: Which markets would you recommend?
Bindra: Standard Chartered can provide some help as we operate in 70 markets worldwide and 20 of them are growing by double digits in income. The medium to long-term potential for India is very bright. It could make a very good compliment to Taiwan. The single largest import item growing at the fastest pace in India is consumer electronics and Taiwan is home to that industry. For that industry alone, we see a fantastic opportunity for Taiwan to capture a very large market share in India. It is true that the country has supply side challenges in both infrastructure and education.
TT: What are your views on the Chinese yuan and how can Taiwan benefit from currency-related business?
Bindra: Taiwan has a fantastic opportunity in capitalizing on the new global currency, which is Chinese yuan. Today, the yuan is the third-largest traded currency after the US dollar and euro. It has the potential to grow multiple times from there as trading settlement process opportunities increase.
Today it has very limited functionality due to its convertibility restrictions, but over time we could see the currency growing in very big multiples. Taiwan is extremely well-placed to capture a fair share given its large trade partnership with China.
TT: How about Standard Chartered Bank’s first-half performance?
Bindra: We obtained our 10th record first-half profits with very clean results. We saw 9 percent growth in both revenue and profits which hit US$9.51 billion and US$3.95 billion respectively. Meanwhile, costs grew only 6 percent, suggesting they have been well controlled. The overall portfolio is looking robust in spite of the environment.
More importantly, our capital is sufficient and liquidity is high, with a low advance-to-deposit ratio of 77 percent. We have a liquid asset ratio of 27.9 percent.
TT: Loan impairment at Standard Chartered rose 42 percent during the January-to-June period from a year earlier. Will the trend be sustained into the second half and beyond?
Bindra: The increase came from very low bases and growth in the Middle East and India. Loan impairment stood at 49 basis points for consumer banking and 36 basis points for wholesale banking, relatively low compared with 2009 and 2007. We do not think it will go up, but will remain watchful given the challenging macro-economic environment. We have limited refinancing requirements over the next few years.