A conversation with Chris Corson, Global Head of Credit Suisse's Emerging Markets Financing Group, is like a whistle-stop trip round the world. In one breath, he mentions five continents, nods to myriad nations, and fires off a rapid round of international acronyms. The geographical breadth of his discourse is to be expected, though, since the bank has been a market leader in emerging markets economies since the early 1990s. "We have good relationships in most areas," he says. "We're strong in China, India and Russia. We're expanding our operations in North Africa and the Middle East and are looking to do so in the Andean regions down as far as Chile. Our overall Latin American coverage is excellent. We're covering most areas in most countries - but there's always room for improvement and that's what we're constantly striving to do.”
Chris's 60-strong team operates from three hubs in Asia, one in London, and one in New York, and evolved from a centralised lending business that was established after the Russian financial crisis of 1998, which saw the country default on its debts, and had a big impact on lenders the world over. In the years since then, Credit Suisse's business in this area has transformed from a buy and hold business to a client-focused distribution led one, that is, one committed to forging and investing in long-term relationships with borrowers rather than just setting up and selling on loans. Over the past decade, the business has also developed by building on its "plain vanilla” offering, that is, its provision of straightforward corporate loans, to also offer complex structured debt products. And the business has continued to expand into new markets, thanks to the lead of respected regional experts.
Nature and nurture
Credit Suisse's chief executive, Eric Varvel, spent his early years at the bank in Asia and, among other achievements, helped build up much of the bank's business in Indonesia, a nation with which Credit Suisse has been extensively involved for some years. While economic growth is slowing closer to home, the world's largest Muslim nation is developing rapidly. In 2010, its economy grew at its fastest rate for six years. GDP rose by 6.5 per cent in the three months to September, compared to a year earlier. Chris attributes the country's success to its abundant natural resources,and the relative stability and business-friendly approach of the government.
"Indonesia is a poster child for taking a country with resources and managing it well,” he says. "It's a long archipelago with large supplies of oil, gas, thermal coal and palm oil, among others. "After the 1997 Asian financial crisis, where a large portion of the currency's value was wiped out overnight, the government set about creating a stable, pro-business economy, with sensible interest rates and fiscal policy. They've created an environment in which world-class businesses can be nurtured. They have well-run banks and stock exchanges. The government is consistently trying to carve employment opportunities from the continual growth and in the very near future, it's likely to become an investment grade country (one regarded as a reliable borrower by the financial community). For a nation that, in my living memory, was considered to be a basket case, they've done an excellent job of building the economy up in a sensible fashion.”
The average Indonesian, though, still earns less than £2,000 per year, and almost 30 per cent of the population lives on less than £1 per day. Economic growth has struggled historically to keep up with population booms, but the birth rate is starting to plateau, with population growth in 2010 coming in at just over 1 per cent, compared with 2.6 per cent 30 years ago. This shift should mean an increase in household incomes, and a study by the Central Bureau of Statistics shows that recent economic growth has been largely due to rising domestic consumption. Chris agrees that the economic situation of many Indonesians is improving, but warns it may be some time before the poorest sections of the nation's population see any benefits. "If you visit Indonesia, you see motorways, toll roads and lots of construction, and the standard of living is gradually getting higher," says Chris. "But in such a large, diverse country it's difficult to bring wealth to everybody at the same time."
Chris is effusive about the entrepreneurial nature of the Indonesian business sector and singles out Bakrie & Brothers, with whom Credit Suisse has a longstanding relationship, for particular praise. The company was started in 1942, when the brothers' father Ahmad started in the palm oil business. During the early 1990s, the family purchased their first coal mine, Arutmin, from BHP, followed by Kaltim Prima Coal in 2003.
Now, spearheaded by the next generation, the company's growth has mirrored that of its homeland. "Their rise has been phenomenal," says Chris, "and is an example of Indonesia producing world class businesses. From those two mines, they became pan-Asian thermal coal distributers and commodities traders. They've expanded into media and, perhaps most impressively, telecoms. They devised a brilliant strategy when they entered the sector, working out that most Indonesians aren't interested in getting roaming to the United States, or 3G, or any other bells and whistles, so why give them an expensive quality phone? Why not use simpler technology and give them far cheaper handsets, while providing a robust and accessible service? The whole group has gone from strength to strength and despite going through troubled times in the past, they've come out on top."
Chris says it's essential that the country as a whole also continues to balance its books successfully. Looking on from the sidelines, Indonesia can see clearly in the eurozone crisis the pitfalls of fiscal mismanagement. Staying stable, says Chris, is the main challenge Indonesia and other emerging markets nations face. As the Indonesian economy continues to expand however, its future looks bright.