Cash Repatriation

Treasury, FX & Banking in Vietnam

Report date: 
10 Jul 2023

Commentary

There are some things in life which are always a fixed time in the future: the big joke about nuclear fusion is that it is 30 years away – and it was 30 years away back in 1970. Similar comments have been made about Vietnam’s economic potential: despite being hailed by many as the next China for economic growth, with its population of nearly 100 million people, and high levels of education and entrepreneurship, it has remained one of the more difficult places to do business and manage cash.

  • This call showed that the economy has made progress. Participants generally have businesses which are profitable and generating cash, and obtaining and remitting hard currency is not the major challenge it used to be. However, there is a lot of bureaucracy to be complied with, and it is not plain sailing.
  • Cash repatriation and trapped cash are issues. The only truly viable way of extracting cash from the country is via dividends – this means cash accumulates until the financial year has been closed, audited, and tax paid.
  • One participant has been involved in a situation where cash was repatriated via a prepayment of intercompany royalties – this required approval from the central bank.
  • Intercompany loans out of the country are
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Topics covered in this report: 
Hedging FX, Bank Relationships, Intercompany loans, Cash Repatriation, Trapped cash
Service providers discussed in this report: 
JP Morgan, Standard Chartered, HSBC, DBS, Citi, ANZ

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Treasury, FX & Banking in Egypt

Report date: 
3 Jul 2023

Commentary

Egypt has been through a tumultuous period recently, with significant economic and political turmoil, severe foreign currency shortages, and a generally difficult operating environment. In this situation, it is a relief that the country is making the headlines a lot less, so it was time to see where things stand.

Overall, the message which emerged is that the country is indeed stable, but that the recovery is taking longer than hoped. The main issue appears to be an IMF package which was agreed at the end of 2022, but whose implementation seems to be bogged down by disagreements over the timetable. Two key elements of the agreement are the liberalisation of the FX market, and the sale of some 32 companies which are currently owned by the government. Unsurprisingly, the government is seeking a longer time to execute the company sales, while foreign investors are waiting for the inevitable currency devaluation before making any significant asset purchases. It was not clear how the country would get out of this impasse.

This leaves our participants to manage through the current situation. Many are in industries which receive preferential treatment for FX, such as pharmaceutical or food related industries. However, even they frequently struggle to get FX allocations. Also, they run a variety of business models, with offshore sales in hard currency and imports for onshore sales in EGP both being common.

The picture which emerged was interesting:

  • The allocation of FX is not decided by the central bank. It is the decision of each bank. However, when a bank runs out of foreign currency, it can no longer process foreign remittances.
  • The main source of the country’s foreign currency is Egyptians working abroad, especially in Saudi Arabia and other Gulf countries. 
  • This means it is better to work with banks who have

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Topics covered in this report: 
Hedging FX, FX, Cash Repatriation, Imports
Service providers discussed in this report: 
Citi, HSBC, Credit Agricole, National Bank of Egypt, Commercial International Bank Egypt, Abu Dhabi Islamic Bank, Mashreq Bank, First Abu Dhabi Bank, AHLI United Bank

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Treasury FX & Banking in Nigeria

Report date: 
12 Jun 2023

Commentary

If a country ever deserved the term “Complex Country”, it has to be Nigeria. The country itself has a complex composition: it is made up of many varied ethnic groups who have a long history of strife between each other, including a very bloody civil war in the twentieth century. It has immense mineral wealth, especially oil, and some very crowded cities, which are often home to massive traffic jams. Despite the oil riches, the country has huge economic issues and a long history of exchange controls and significant devaluations – the naira has gone from parity with the US dollar in the 1970s to between 450 and 600 to the dollar today – depending on whether you use the official or the black market rate.

This brings us to one of the key challenges facing international companies operating in the country. The many regulations are applied in ways which are not always transparent, and there are many local players who show astounding creativity in finding ways round them. So the MNC’s dilemma: how do I make sure these solutions are truly legal before I use them?

In short, welcome to Africa.

Whatever the regulatory situation, Nigeria has a population of 80 million people, oil wealth, and a large diaspora. So it is an important market that is difficult to ignore. Participants all face the same issues:

  • Difficulty accessing foreign currency
  • Assessing various proposals, including brokers, private FX sales, buying offshore bonds
  • Trapped cash, and how to invest it
  • Which banks to deal with? Local banks are needed for collections in remote areas, and they usually
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Topics covered in this report: 
Hedging FX, Cash - deposits, Cash Repatriation, Trapped cash, Investments
Service providers discussed in this report: 
Citi, Crown Agents Bank, Standard Chartered, Stanbic Asset Management, United Capital, Zenith Bank, Guaranty Trust

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Treasury & FX in India

Report date: 
20 Feb 2023

Commentary

This Treasury Peer Call took place a few days after the announcement that India had officially overtaken China as the most populous country in the world. Given the increasing speculation that India might also replace China as the world’s fastest growing major economy, it seemed opportune to get a view on how things are developing.

All participants are bullish about their businesses in the country. Several already have significant operations, and most see major opportunities. The good news is that several participants are generating meaningful profits and cash – the bad news is that this creates issues in terms of cash investment and repatriation. And, of course, India is India – there are always plenty of regulations to navigate.

Main points and concerns:

  • For those companies who are generating cash, it is a challenge to invest it. Most retain a conservative approach, which means safe investments – these typically return a rate which is below inflation.
  • Cash repatriation is not without issues. The main vehicle is dividends: these attract withholding tax (the rate varies according to the jurisdictions), and are subject to complex tax rules. Cross border pooling is not allowed, and intercompany loans are subject to central bank approval.
  • Within India, cash pooling is
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Topics covered in this report: 
Investments, Hedging FX, Cash Pooling - domestic, Supply Chain Finance, Intercompany loans, HR, Payments-digital, Funding, Cash Repatriation
Service providers discussed in this report: 
Barclays, JP Morgan, Bank of America, Citi, Standard Chartered, HSBC, Deutsche Bank, BNP Paribas, MUFG, ICICI, HDFC, Kotak Mahindra Bank

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Treasury & FX in Bangladesh, Pakistan & Sri Lanka

Report date: 
20 Jan 2023

Commentary

Pakistan, Bangladesh, Sri Lanka – three countries with sizeable populations and even bigger economic and social problems. They are difficult places to do business at the best of times – but they have become even more problematic with recent world events, limiting tourism receipts in Sri Lanka and restricting the apparel export business in Bangladesh.

The themes across the three countries were remarkably consistent, though there are variations in the detail:

  • For all our participants, these are important markets, so they are staying there, even though it is very difficult to get currency out. However, one participant is in the process of divesting their entity in Pakistan.
  • FX has always been an issue in these countries, but it has got worse recently. However, the prospect of an IMF package has led to some improvement in Sri Lanka.
  • Officially, none of the countries has strict exchange control regulations, but in practice, they are restricting the outflows of hard currency by a series of administrative measures. Goods imports tend to be prioritised over services, royalties and dividends.
  • In Pakistan, central bank approval is required for all
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Topics covered in this report: 
Hedging FX, Cash Repatriation, Dividends, Royalties, Funding, Intercompany invoices, Letters of Credit (LC), Bank Relationships, Investing, Imports, intercompany netting
Service providers discussed in this report: 
HSBC, Standard Chartered, Deutsche Bank, Citi, Sampath Bank, Habib Bank, Commercial Bank (Sri Lanka)

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FX & Treasury in Egypt

Report date: 
1 Nov 2022

Commentary

Egypt is a challenging environment – but one which seems to work overall. The country went through a bad period in 2015/2017, when foreign currency was auctioned, and in very scarce supply. The situation then improved, but has recently deteriorated again. This is hardly surprising, given the role tourism plays in the economy, and the combined impacts of COVID and the Ukraine war.

The situation reported by all participants is that there are no formal exchange controls, but banks are rationing hard currency according to a priority system, under which essential goods, such as food and pharmaceutical goods, get paid first, and items such as services, royalties and intercompany debt are satisfied last – if there is any currency left. The way in which this is implemented varies from bank to bank, so it is vitally important to maintain good relationships with your banks. The common themes were:

  • Most participants sell hardware offshore in hard currency, and provide services onshore billed in Egyptian pounds. This has worked well, but the distributors are finding it increasingly difficult to get access to the hard currency.
  • Some are requiring LCs, on the grounds these improve the chances of getting hard currency when payment is due. However, banks are reluctant to issue them, and they can be very expensive.
  • Egypt is in advanced negotiations with the IMF over an aid package, which should ease the payment issues. This is expected to be accompanied by a devaluation: this is further complicating the FX
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Topics covered in this report: 
FX, Hedging FX, Letters of Credit (LC), Funding, Cash Repatriation
Service providers discussed in this report: 
Citi, HSBC

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Treasury & FX in Brazil

Report date: 
30 Jan 2019
  • Receivables are moving from paper to electronic, but Boletos continue to be challenging to achieve automated straight through reconciliation.
  • Capital Injections & Hedging, continues to be challenging and requires extensive planning and work to make sure there are no delays.
  • Cash Repatriation & Hedging, seems to be easier as long as documentation is correctly in place.
  • Cautious optimism for the economy in the year ahead. 
Topics covered in this report: 
Receivables, Boletos, Funding, Hedging FX, Cash Repatriation
Service providers discussed in this report: 
Bank of America

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