‘Asia is our fu­ture’, for­mer bank CEO says of Aus­tralia

China Daily (Canada) - - EXPATS - By KARL WIL­SON in Syd­ney

karl­wil­son@chi­nadai­lya­pac. com

In the course of a bank­ing ca­reer span­ning three decades, Mike Smith has never been one to mince his words. Thus he makes no apolo­gies for his views on Aus­tralia and its place in Asia.

“Asia is our fu­ture. It’s that sim­ple,” the for­mer CEO of Aus­tralia and New Zealand Bank­ing Group (ANZ) said.

Smith, 60, stepped down as CEO in late 2015 — af­ter eight years of po­si­tion­ing the bank to cap­i­tal­ize on Asia’s enor­mous growth. He is now se­nior ad­viser with pro­fes­sional ser­vices group PwC’s Asia prac­tice as he helps ex­pand its role in the re­gion.

Smith is cred­ited with giv­ing ANZ a pres­ence in Asia when other banks were pulling back. When­ever his de­ci­sions were crit­i­cized, he coun­tered: “We are look­ing at the long term — not the short term.”

Growth in Asia may be slow­ing but it will con­tinue to grow, he said.

One of the world’s most re­spected bankers, Smith spent much of his ca­reer with the HSBC Group, which took him all over the world. He has a strong affin­ity with Asia and es­pe­cially Hong Kong, where he was head of com­mer­cial bank­ing for HSBC.

“Asia’s very spe­cial,” he said from his of­fice in Mel­bourne, the city that is now his home.

“Fly­ing into Hong Kong is like an adren­a­line shot in the arm. The place is ef­fi­cient and it works. It still has that ‘can do’ at­ti­tude rather than the cyn­i­cal at­ti­tude we have in the po­lit­i­cal and me­dia cy­cle here (in Aus­tralia).”

Born in Der­byshire, in the East Mid­lands of Eng­land, Smith spent his for­ma­tive years board­ing at the coun­try’s pres­ti­gious Chel­tenham Col­lege.

“My fa­ther was a com­puter guy with IBM. So they were con­stantly mov­ing around, liv­ing an ex­pat life­style, and kids like me went to board­ing school.”

De­spite the life­style, Smith did not see him­self fol­low­ing in his fa­ther’s foot­steps at a tech­nol­ogy firm.

“As for bank­ing,” Smith said, “it didn’t en­ter my mind. I saw my­self in the Royal Navy. I liked the idea of that swash­buck­ling life­style when grow­ing up.”

Smith’s in­tro­duc­tion to the bank­ing world came while vis­it­ing his par­ents, who were then based in Nairobi, Kenya.

“My par­ents took me to cock­tail par­ties and din­ners, the sort of thing you did as an ex­pat. I soon re­al­ized that the best houses were oc­cu­pied by bankers. I thought to my­self this can’t be too bad a job.”

Smith also wanted to get out of Eng­land, so he ap­plied to as many ma­jor in­ter­na­tional banks as he could.

“Most of them were Amer­i­can, but the first let­ter I got back of­fer­ing me some­thing was from HSBC.”

Smith ex­celled at the bank, climb­ing the cor­po­rate lad­der quickly and even “took a bul­let” when he was head of HSBC in Ar­gentina from 1997 to 2003.

“The bank we took over at the time had some prob­lems and we un­cov­ered quite a bit of cor­rup­tion,” he said.

Smith said he must have up­set a few peo­ple as some­one tried to have him kid­napped and, in the con­fu­sion, he was shot.

That ex­pe­ri­ence, how­ever, did not de­ter Smith. He stayed on for an­other three years be­fore mov­ing to Hong Kong in 2004 to be­come pres­i­dent and CEO at HSBC.

“The eco­nomic col­lapse of Ar­gentina (2001-02) was a re­mark­able ex­pe­ri­ence to live through,” he said.

In Oc­to­ber 2007, he was lured to ANZ — one of Aus­tralia’s “big four” banks and among the top 15 global fi­nan­cial in­sti­tu­tions.

Smith was re­luc­tant at first to leave HSBC, but he knew when “the time was right”, he noted.

“You could see the storm clouds of the global fi­nan­cial cri­sis gath­er­ing and it looked like a good time to move on.”

ANZ an­nounced in Novem­ber 2016 that full-year profit had dropped 24 per­cent to A$5.7 bil­lion ($4.2 bil­lion), hit by nearly A$1.1 bil­lion in write-downs. Still, it is among the most prof­itable banks in the world with a pres­ence in 33 coun­tries and staff of 47,000.

Although he of­fi­cially stepped down as the head of ANZ, Smith still holds an ad­vi­sory role at the bank’s Mel­bourne head­quar­ters.

He now has more time for him­self, fam­ily and great loves: wine and clas­sic Bri­tish cars.

He also has time to re­flect on the things he is pas­sion­ate about — Aus­tralia, its role in Asia and its re­la­tion­ship with China.

He feels the re­cent United States pres­i­den­tial polls have thrown up an added di­men­sion with the elec­tion of Don­ald Trump. “It’s go­ing to be a fas­ci­nat­ing four years,” he said.

“How it is go­ing to work out is any­one’s guess, but if we look at what peo­ple in his new ad­min­is­tra­tion have said, what the man him­self has said, they have not joined the dots.

“I mean it’s pol­icy on the fly,” Smith said.

“The push for in­fra­struc­ture is a good ex­am­ple and a com­mend­able one. But, it is go­ing to need a great deal of in­vest­ment and the money is go­ing to have to come from some­where … prob­a­bly the public sec­tor ini­tially.

“How does the govern­ment raise money? It has to bor­row. And who is the big­gest pur­chaser of US govern­ment se­cu­ri­ties? China. And the US can­not af­ford to get China off­side by im­pos­ing tar­iff on im­ported goods from China, can it?”

Trump’s pro­posal to scrap the Trans-Pa­cific Part­ner­ship trade agree­ment is an­other ex­am­ple of the pres­i­den­t­elect “play­ing to his do­mes­tic au­di­ence”, Smith said.

“A lot of jobs have gone from the US. But at the same time 1 bil­lion peo­ple in Asia, Africa and South Amer­ica have been lifted out of poverty,” he added.

“Walk into Wal-Mart in the US and the cost of prod­ucts has been re­duced sig­nif­i­cantly in real terms. I can’t see the av­er­age Amer­i­can who pays a dol­lar for a pair of socks in Wal-Mart, which are made in Viet­nam, pay­ing $14 for a pair made in the US.

“It’s just not go­ing to hap­pen and the irony of all this is that the TPP fa­vored the US mar­ket.”

The can­cel­la­tion of the TPP deal is “an op­por­tu­nity for China to fill the void”, he said. “In fact, it is a great op­por­tu­nity for Asia and Aus­tralia.”

Even though Aus­tralia is now his home, Smith is not afraid to speak his mind, es­pe­cially when it con­cerns Aus­tralia and its fu­ture.

“Aus­tralia missed the fi­nan­cial cri­sis,” he said, but it has been slow in en­gag­ing Asia.

“You only have to look at our in­vest­ment in China — it is tiny.” Many Aus­tralian busi­nesses lacked the ap­petite for risk with re­gard to in­vest­ing in China and the re­gion, he said.

“It is a short-term view, but trade and in­vest­ment re­la­tion­ships in Asia just don’t hap­pen overnight, they take time.”

Smith blames “com­pla­cency” and the fact that any­one un­der the age of 40 has not seen a re­ces­sion.

“They have not seen what it is like in bad times,” he said.

“Aus­tralia is still very de­pen­dent on in­ward cap­i­tal flow. With a mas­sive land­mass like Aus­tralia and a small pop­u­la­tion, the cost of main­tain­ing a bal­anced econ­omy is very high.”

To off­set this, Smith ob­served: “Aus­tralia must pur­sue as many trade op­por­tu­ni­ties as it can, es­pe­cially in Asia, to re­duce those costs.”

for­mer CEO of Aus­tralia and New Zealand Bank­ing Group


Mike Smith thinks Aus­tralia has been slow in en­gag­ing Asia. Mike Smith,

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