Citi’s Asean chief still bullish on region
While economic conditions going into 2016 continue to look difficult, medium-term prospects for Asean remain strong, according to Michael Zink, head of Asean for Citi.
Mr Zink, also Citi’s country officer for Singapore, said the Asian economies over the past six months had clearly slowed due to sluggish growth in China, the end of the commodities “supercycle” and the strength of the US dollar.
“It’s been somewhat predictable. When oil goes from $110 to $40, it’s hard to miss. [The slowdown] has been predictable and we’re adapting to it,” he told the Bangkok Post.
“When our clients’ business slows, our business slows. But we understand it. It’s a cyclical environment.”
Mr Zink noted that technology and networks were transforming economies and opening new opportunities across the board.
The rise of mobile devices, the declining cost of computing, storage and networks, and changes in consumer behaviour are megatrends presenting both threats and opportunities for all industries.
“The iPhone was introduced in 2007,” Mr Zink said. “Today, there are what, some 12 billion devices connected to the internet? And almost everyone we want to do business with has one, two or five [devices].”
Within Asean, Filipinos on average spend 3.5 hours per day on social media, with Indonesians and Thais not far behind, he noted.
“We are very comfortable today getting on to Whatsapp and handing over all of our personal information, because that connects us to a network, and the cost of access to that network is zero,” Mr Zink said. “The cost of signing up to Facebook, LinkedIn or Twitter is zero.
“These trends are unlocking potential to do things that we couldn’t do before. So while we’re worried about how we adjust to an economy that’s been in place for a long time — the movement of physical goods across supply chains, the drop in commodity prices, etc — we’ve also unlocked all this potential to interact at a price point that was previously inconceivable.”
For Citi, the networked economy poses both an opportunity and a challenge.
Mr Zink said China’s popular WeChat application boasts 550 million users who can open mobile wallets through Webank to purchase movie or air tickets, transfer funds or pay for a restaurant bill.
Eventually such virtual institutions will have to become part of the financial regulatory framework, he said.
“The reason we have regulations is to protect people’s wealth. So deposit insurance or capital standards, it’s about protecting citizens,” Mr Zink said.
“Another point is that bad guys also want to use the banking system, whether it’s to launder money or avoid taxes. And so I think eventually we will see convergence [between virtual and traditional financial institutions].”
For Citi, the challenge is to create applications that link already-networked customers with the bank.
“We need to meet clients where they live, work and play,” he said. “And they don’t live, work and play at the bank branch. They live, work and play with their phone in their hand.”
But the traditional brick-and-mortar branch will always be needed, if only to manage more complex transactions such as mortgages, estate planning or wealth management that require a personal presence.
“There is still a need for physical distribution, although the need has changed a lot,” Mr Zink said. “The number of transactions being done physically at a branch has dropped dramatically for every bank in the world. But the answer is not zero branches.”
Before the global financial crisis, Citi ranked as the world’s biggest bank by assets and the world’s largest company. But while the bank has now fallen behind top Chinese banks such as ICBC and China Construction Bank, Citi still boasts a global presence unmatched by its peers.
Mr Zink said maintaining the bank’s global scope was central to its strategy during the financial crisis, under the idea that the network is key not only to the bank’s multinational clients, but also its emerging-market clients.
“If we think about the world in the late 20th century, the largest multinationals like Sony or GE were from the G7,” he said. “Today we have moved from a G7 world to a G20 world, where companies from China, India, Korea and Brazil want to follow a similar growth path.
“Having people on the ground in 100 countries, who understand the environment, the regulations, who know the regulators, who can help people navigate the landscape is important. When someone comes to Thailand, we’ve been here 48 years. And someone shows up and they’ve been here an hour. We’ve got some insight on what to do to be successful.”
Mr Zink said he was optimistic about medium-term growth prospects for the Asean region and played down criticism that policy changes move at a glacial pace.
The opening of Myanmar’s economy, infrastructure investment in Indonesia, Vietnam and Thailand, and closer regional ties through the Asean Economic Community all bode well for the future.
Asean, Mr Zink said, was born from the hope of bringing “peace and prosperity” to the region “at a pace that everyone can move together”.
“Some people say it’s too slow. And I just disagree. What part is it that you don’t like? Is it the peace or the prosperity that you have a problem with?” Mr Zink asked rhetorically.
“Maybe it can go faster. But what I think people from outside Asean miss is that if you try to go faster, and don’t have a solid consensus, you might end up in a worse place.”