Structured finance: prospects for enhanced trade competitiveness

Hew, David (2005) Structured finance: prospects for enhanced trade competitiveness. [Proceedings Paper]

The Palm Oil Industry, like many industries today faced two major characteristics: (a) The realities today where slim profit margins are the norm. One can lower operating costs only to some extent. To lower these any further will result in inefficiency. Addressing operating costs alone inefficiently may be partaking in a download spiral which may ultimately push one out of business; and (b) Going forward, bank borrowings will be forced to abide by the recommendations of the Basie Committee on Banking Supervision meeting in the Bank for International Settlements (known widely as Basie II for short). Basie II will be recommending replacing the one-size fit all and broad-brush structure with a risk sensitive framework for bank regulators to adopt. One word describes the cost of capital rising from the need to price risks after Basie JI. Judging from the risks already inherent in the Asian environment. Painful. Kudos to those who are already risk-centric in their operations for they will streak further ahead in the widening divide so characteristic of globalisation between the able and the less able. There is however a form of financing typically appropriate to the palm oil industry. It is known as structured finance. Structured finance is a technique where certain assets with cash flows can be isolated from the originator in order to deal with the risks specific to these assets, the objective being to secure or improve credit. It is a technique which addresses the Basie II requirement to come as well as seek to achieve to lower one's costs of financing allowing one to stay in business. The talk will address what is and the different forms of structured finance pertinent to players in the palm oil industry. Unfortunately to the best of the presenter's knowledge, no known structured finance models are available by way of case studies in the palm oil industry. However there are actual examples of how structured finance has applied to other industries relating to commodites. The presentation will deal by way of case study with - a structured project finance example involving the financing of the construction of a fertilizer plant in an Asian country and - structured trade finance involving the financing of coffee plantation. Both these case studies will permit the audience to extrapolate and conclude on how structured finance can be applied by way of project and trade finance to the palm oil industry and thereby enhance the trade competitiveness of the Palm Oil Industry of Malaysia.

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Abstract

The Palm Oil Industry, like many industries today faced two major characteristics: (a) The realities today where slim profit margins are the norm. One can lower operating costs only to some extent. To lower these any further will result in inefficiency. Addressing operating costs alone inefficiently may be partaking in a download spiral which may ultimately push one out of business; and (b) Going forward, bank borrowings will be forced to abide by the recommendations of the Basie Committee on Banking Supervision meeting in the Bank for International Settlements (known widely as Basie II for short). Basie II will be recommending replacing the one-size fit all and broad-brush structure with a risk sensitive framework for bank regulators to adopt. One word describes the cost of capital rising from the need to price risks after Basie JI. Judging from the risks already inherent in the Asian environment. Painful. Kudos to those who are already risk-centric in their operations for they will streak further ahead in the widening divide so characteristic of globalisation between the able and the less able. There is however a form of financing typically appropriate to the palm oil industry. It is known as structured finance. Structured finance is a technique where certain assets with cash flows can be isolated from the originator in order to deal with the risks specific to these assets, the objective being to secure or improve credit. It is a technique which addresses the Basie II requirement to come as well as seek to achieve to lower one's costs of financing allowing one to stay in business. The talk will address what is and the different forms of structured finance pertinent to players in the palm oil industry. Unfortunately to the best of the presenter's knowledge, no known structured finance models are available by way of case studies in the palm oil industry. However there are actual examples of how structured finance has applied to other industries relating to commodites. The presentation will deal by way of case study with - a structured project finance example involving the financing of the construction of a fertilizer plant in an Asian country and - structured trade finance involving the financing of coffee plantation. Both these case studies will permit the audience to extrapolate and conclude on how structured finance can be applied by way of project and trade finance to the palm oil industry and thereby enhance the trade competitiveness of the Palm Oil Industry of Malaysia.

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Item Type:	Proceedings Paper
Additional Information:	Available at Perpustakaan Sultan Abdul Samad, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia. TP684 P3I61 2005 Call Number
AGROVOC Term:	international trade
AGROVOC Term:	markets
AGROVOC Term:	finance
AGROVOC Term:	economic analysis
AGROVOC Term:	investment
AGROVOC Term:	government agencies
AGROVOC Term:	private sector
AGROVOC Term:	economic growth
AGROVOC Term:	sustainability
Geographical Term:	Singapore
Depositing User:	Nor Hasnita Abdul Samat
Date Deposited:	04 Sep 2025 03:31
Last Modified:	04 Sep 2025 03:31
URI:	http://webagris.upm.edu.my/id/eprint/1069

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