Credit Management March 2018

INTERNATIONAL
TRADE
Monthly round-up of the latest stories
in global trade by Andrea Kirkby.
JAPANESE JUMP
JAPAN'S firm economic expansion
is continuing, and consumption
is picking up – and in the funny
world we live in now, a pick-up
in inflation is considered good
news (albeit only from zero to 0.3
percent a year). Of course, the country is
best known as an exporter, but is it a good
import market for British goods?
The answer seems to be yes. The UK's
biggest single export to Japan is financial
services, and Japan is also the UK's
second largest market for royalty income
and a good market for media sales
(apparently Doctor Who has a particularly
fervent following). Machinery, power
generation, chemicals and pharma also
do well, but we should be doing much
more in new technologies (particularly lowcarbon)
and in high end consumer brands.
The demand is there – and for companies
at the bleeding edge, they may find
interesting projects, for instance in hybrid
transport. Consumer goods manufacturers
should look at the huge Japanese
e-commerce sector, including giant
Rakuten, as a way into the market. Building
relationships is important anywhere, but
it's the key to getting into the Japanese
market. Finding a good distributor, or a
good collaboration, may take time but will
pay off in the long term. But you'll want to
check out their financial standing as well
as their business cards!
TRADE INSURANCE
NIGHT OF THE
LONG KNIVES?
Trade insurers are currently putting
the boot into the UK retail sector,
discontinuing cover for Maplins,
New Look, and Poundland. You might
remember that the last time we saw this
kind of headline news was in 2008-9 when
the economy was in the doldrums after
the credit crunch, and Woolworths went
bust shortly after it lost its cover.
Now, as an exporter, you might not care
about half the British high street going
bust. But the likelihood is that insurers
who are taking the pain are going to look
to make up their losses elsewhere, and
that means higher premiums on all kinds
of trade insurance. Rycroft Associates
expects a 'substantial' increase in trade
credit insurance premiums in 2018, after
two decades during which the cost of
insurance effectively halved.
I have a nasty feeling that even if the
problems are mainly UK-based (with
insolvencies including Palmer & Harvey
last year, and now Carillion), increased
pain together with an upwards move in
interest rates will eventually start pushing
up prices for exporters, too. Make sure
you're on top of what you're paying, and
have alternative sourcing in place if your
insurers get a bit too ambitious.
ANGOLAN ALARM BELLS
It’s all change in Angola, with new president
Joao Lourenço moving more quickly
than expected to reform the economy.
He's abandoned the dollar peg which had
devoured the country’s foreign exchange
reserves as low oil prices hit the economy,
as well as replacing management at many
state-owned enterprises. The bond markets
love him – Angolan debt was the best
performing emerging market paper in the
last quarter of 2017.
The upshot has been a 12 percent
depreciation of the kwanza – and there’s
likely to be further derating. That will put
pressure on the country’s foreign exchange
reserves and on government debt.
However, Angola still looks like a good
bet for exporters. It has high economic
growth, with a young population, and the
UK is already a large investor in the country.
British firms do well in capital goods such
as industrial machinery and chemicals,
and there are great opportunities in the
infrastructure and agriculture sectors - but
education could be the real goldmine, as
there are plans to make English compulsory
in schools, and that should prime the
pumps for private and advanced language
training. Just make sure you’re not getting
paid in kwanza - or get properly hedged.
The Recognised Standard / www.cicm.com / March 2018 / PAGE 54