APCA 2003

APCA successfully convened APCA 2003, its 10th annual APCA conference in Kuala Lumpur, Malaysia from 6th to 8th October 2003 in collaboration with UNCTAD (the United Nations Conference on Trade and Development). 110 participants took part in this, the 10th annual conference in the APCA Conference series. Malaysia’s Ministry of Defense who was one of four Malaysian agencies who supported APCA 2003 had expressed satisfaction that APCA 2003 has helped it achieve some of its objectives and have consequently requested that APCA 2004, the 11th in the APCA conference series considers returning to Malaysia in 2004.

Keynote address
The event opened with cocktails in the evening of 6th October 2003. On the morning of 7th October 2003, and at the sound of the beating of drums, dancers in traditional costumes escorted the Right Honourable Minister of Defence for Malaysia, Y.B. Dato’ Sri Haji Mohd Najib bin Tun Haji Abdul Razak as he entered the conference hall to open APCA 2003 with his key note address.

His Excellency made it plain that Countertrade and Offset would be a requirement in all of Malaysia’s future defense procurement. He substantiated this with reasons and gave pointers for the way ahead. He says, “this is intended to contribute to industrial enhancement activities leading towards developing and strengthening the expertise, capacity and marketing potential of Malaysia’s industry, as well as maximizing the usage of local contents in the equipment purchased. At the same time, it is intended to contribute towards economic growth through expanding the export market, employment creation, foreign direct investments, spin-offs to other sectors of the economy, enhancing other potential areas as well as reducing the outflow of currency”.

Countertrade and Offset
The sessions on Countertrade and Offset started with a delivery by the Malaysian Industry-Government Group for High Technology, called MIGHT for short. MIGHT’s CEO unfortunate absence was ably made up by Lt-Kol Kammarulzaman who delivered Y.B. Datuk Dr. Ahmed Tasir Lope Pihie’s presentation. Lt.-Kol Kammarulzaman’s presentation entitled “Maxmising Globalisation through Countertrade: The Malaysian Experience” gave hints of the March 2000 study that MIGHT did on Offset in 2002. The audience were left in no doubt that Malaysia’s offset policies will be directed towards expanding and improving Market Penetration, embarking on High Technology intensive industries, improving Productivity through cost reduction and Indirect Offsets will be emphasized.

Following this delivery on the policy aspects, Mr. Jesbil Singh, the Under Secretary, Defence Industry Division, Ministry of Defence spoke on the implementation aspects in his presentation “Countertrade Management in Defense Purchases: The Malaysian Experience”. Mr. Singh took the opportunity to debunk remarks made that Malaysia’s palm oil counter purchase transactions lacked additionality and emphasized that that additionality is, has been and will be one of the criteria that is required to be fulfilled by obligors.

The international speakers started with Mr. Grant Rogan, Chairman and CEO of Summit Corporate Services Limited. Mr. Rogan delivered on the “the Changing Nature and Face of Countertrade and Offset”, offering Summit’s concept of economic enhancement, leveraging on a government’s buying power to enhance is economy.

Mr. Johan van Dyk, the General Manager of the Countertrade Department of Denel, shared his wealth of experience as a regulator and an obligor on how to make countertrade programs work in his delivery “A Practical Approach to Countertrade Programs”.

GIAT’s countertrade and offset manager, Mr. Claude Zurita took the place of Dr. Stephane Castelli and substituted Dr. Castelli’s presentation with a presentation on GIAT’s industrial cooperation proposals in support of the sale of their Caesar artillery to Malaysia.

The final speaker, Mr. Joseph W. Flaherty of the Boeing Company Malaysia offered a new perspective for offset program in his delivery “Raising the Value – An Offset Perspective for the 21st Century”. In Mr. Flaherty’s view that traditional programs with their stringent guidelines no longer meet the needs of countries that have initiatives to develop their future economic and human resource capabilities. A new more flexible approach is needed to raise the intrinsic value of an offset program.

The panel discussion which ended the countertrade and offset session saw discussions on whether multipliers, a tool of offset programs should continue to be used. The preponderance of opinion suggests that multipliers should be done away. The Chairman however urges the consideration of the use of multipliers to incentivise obligors in circumstances where the risks and level of difficulties in implementation associated with the proposed activity is high.

Structured Finance
The sessions on structured finance commenced with Mr. Lamon Rutten, UNCTAD’s Chief of Structured Finance and Energy providing an overview of trends in structured finance. The main focus of his paper dealt with the new Basel Capital Accord (Basel 2″). Mr. Rutten puts the impact of Basel 2 succinctly as follows, “except for banks that can demonstrate, through their track records, that they have designed relatively safe structured finance mechanisms, capital adequacy requirements for risk to emerging countries will increase strongly. This will mean that there is less lending for these countries, and what arrives will be costly and more pro-cyclical.”

Ms. Jill Li, Noble Finance then took over to address the issues “Traders Versus Banks – Who should Commodity Exporters and Importers turn to for their Finance”. Mr. Raseed Idrees of Denton Wilde Sapte then spoke on “Warehousing and Collateral Management Issues” followed by Mr. Rasjachmur Akbar, Operations Director, Sucofindo, Indonesia delivery on “Warehouse receipt finance in Indonesia”; Mr., Anton Timpers, Head, Trade and Commodity Finance, Rabobank, Singapore on the subject “How Risk Management can leverage Commodity Finance” and Lamon Rutten again on “Linking Structured Finance with Carbon Sequestration Finance under the Kyoto Protocol’s Clean Development Mechanism”.

The panel discussion, which ended, the structured finance session saw lively discussions on the impact of Basel 2 and the Clean Development Mechanism arising from the Kyoto Protocol. We are all grateful to UNCTAD for opening all our eyes to these developments, which for many in attendance was quite clearly the first time they were hearing about it, judging from the questions that flew during this discussion.

APCA 2003, the first collaboration between UNCTAD and APCA has brought new life to the APCA conference series and achieved UNCTAD’s aim of “the development-friendly integration of developing countries into the world economy”. It is a collaboration that augurs well for the future and we look forward to fulfilling the perennial theme of the APCA conference series of “providing solutions, and creating opportunities together” again in 2004.

No event can be successful without the supporting cast and participants. We therefore thank our Malaysian supporting agencies – the Ministry of Defence, MIGHT, MATRADE and Tourism Malaysia; our sponsors – Summit Corporate Services, Jawala Corporation Sdn Bhd, Denel Countertrade and GIAT Industries; our media partners – Countertrade and Offset and Euromoney’s Trade Finance; and our Official Airline – Malaysia Airlines. Above all, we thank you the participants of APCA 2003. See you all in APCA 2004.