What were RBC’s ultimate goals in opening a representative office in Thailand?

What were RBC’s ultimate goals in opening a representative office in Thailand?

Its ultimate goal was to meet a whole branch license to work in Thailand since the country’s economy had potential, and it was growing fast. RBC’s office in Bangkok by then was only a representative of restricted operations. This office was only operating as a marketing liaison, and it didn’t solicit business in that jurisdiction. The office, as a representative, allowed the Royal Bank of Canada to create connections, refer and offer advice. The bank saw several excellent chances in foreign trade, servicing multinationals, and though trading activities would produce substantial returns.

How large is the initial staff for the office, and what is the estimated pretax profit?

The bank wanted to start with a staff of five individuals. There would be one general manager, an experienced banker from the network. It would then hire locals (remaining four staffs) as members of the staff. It intended to train the local staff, who would be Thailand University graduates. They would be trained in Canada before going back to their country to operate in the office. These four staffs were expected to have analysis, credit, and account management skills with experience and familiarity with the marketplace. The bank expected them to be familiar with the Thai market and be knowledgeable since it would be vital to the bank to enrich their opportunities to get customers and create a customer base.

What are RBC’s four major business lines in its Asia Pacific network?

The four major business lines include world private banking, treasury services, multinational lending, and financial banking. RCB’s Asia Pacific network had ten offices traversing seven jurisdictions. It has been marketing in this country for more than thirty years. As such, the bank was given allowed lending facilities in the 1980s for term loans to government entities like Thai Airlines, Electrical Generating AUTHORITY TO Thailand and the Kingdom of Thailand. The Royal Bank of Canada had a connection with Thailand Banks like Siam Commercial Bank, Thai Farmers Bank, and Bangkok Bank. It offered facilities to many locally incorporated groups as well as above 15 corporations in Thailand and overseas.

What are the limitations of BIBF licenses?

Since the Royal Bank of Canada failed to weather the storm in the 1980s with their first office, it wasn’t invited for a BIBF on the initial round in 190s during the liberalization of the financial service. It was invited and offered a BIBF in 1996. The bank had to address particular adversities due to the restrictions of the Bangkok International Bank Facilities license. BIBF allowed entry into a strictly governed marketplace. It was to operate as an entry place to onshore lending in the future. The organization working under that kind of license would be restricted to giving out loans within the country and overseas but applying funds from overbroad that was provided from outside country. External banks were limited to one office, and they were not allowed to deal in the Baht, Thailand currency. Moreover, BIBF could accept only a particular transaction that didn’t involve some types of trade business dealing with goods from Thailand or clients such as issuing letters of credit.

What are the advantages of the possible upgrading of RBC’s operations in Thailand to a branch status?

The advantages include the idea that the bank could allow a wide array of businesses. This involves the capability of doing onshore lending in the Thai currency.  The bank would provide or sell a much larger variety of goods and services. The capability of securing collateral and the local presence offered a chance to create connections with a much broader perspective customer base than could be met from overseas. Other advantages include;

Technology expertise was transferable to Thai customers and workers

The bank’s appetite for exposure which was available to help trade in more than 120 nations in the world, was available to help Thai exports

The bank upgraded the skills of local personals including those who worked for RBC as well as personnel working with customers

It would also provide sophisticated products reflecting the bank’s experience in specialized lending

Organizations would get funding at an attractive price

What are Thailand’s most famous exports?

The essential exports include; Agriculture: most Thai population, around 70 percent, focus on agriculture. The country export sugar, cassava, rubber, and rice, accounting for around 11 percent of total agricultural export. And Manufacturing played a substantial role in the country. Manufactured products account for almost 81 percent of the country’s exports. These include jewelry, furniture, electronic components, and parts and clothing.

What is the “current” (1997) situation in Thailand?

The economy had crashed, making the country t enter into the volatile phase. Its exports were not booming anymore, external investors were worried about the current-account deficit, and big loans that were provided to property developers had inflated a dangerous financial state. The stock market plummeted to a place the country hasn’t seen for almost eight years. There was economic stress since bad debt had accumulated. The banking industry was deregulated since while the real estate market had become entirely reckless. As such, its currency had devalued by 20 percent. The crisis in the economy was a result of semi-fixed rates system, large current account deficit, heavy borrowing, and high debt.

What are the highlights of the IMF’s bailout of Thailand?

The country arrived at an agreement with the IMF on a tough economic program and financial reforms to get $16.7 billion in bailout funds. Through the program, it could resume to a more rapid growth state f economy, and the country could now implement two reforms that it wanted for an extended period. These reforms included restoring the budgetary control and restructuring Thailand’s rickety and corrupt financial system. It would also close 16 financial firms besides the 42 firms closed earlier the same year. The closed firms were supposed to merge with other banks and organizations; otherwise, they had to submit rehabilitation strategies. The country hiked taxes, suspended cuts, accelerated privatization, and likely the phasing out of the public utility subsidies. The bailout outcomes were the government would be accountable to the International Monetary Fund, and they had to meet some requirements like reporting its reserves after every two weeks and the central bank to keep foreign reserves beyond $24 billion, which would enough to pay imports for four months. Still, the amount would rise to $25 billion.

As RBC’s representative in Thailand, you need to prepare a detailed recommendation for senior management to either:

Stay in the country and “weather the storm,” which perhaps means to take losses for an extended period

Thailand’s need for restructuring the financial system offers a significant chance to get the upgrade to the whole branch status; it has waited for long. RBC has a comparative benefit to local banks because of its considerable reputation as a section of the banking system in Canada, its international network, its substantial size, and technological superiority. Thai government can appreciate it since it is looking for the resurgence of its economy, and the bank offers it with a top participant in developing a robust financial system.

As a representative, the suggestion to RBC would allow for the top management to remain in Thailand and weather the storm. It could mean taking losses for an extended time, but it is likely to progress and grow. It needs persistence and patience since it is an emerging market. It was essential to be aware and overcome the challenges like barriers to entry, poor performance quality, political instability, and volatility in economic development. The economic distress can encourage the government to decrease the limits of offering the entire branch license. Hence, the bank can apply its experience, specialization, and expertise to reap the whole advantage of getting and meeting their ultimate goal. It will be showing a commitment to the Thai government as well as the regulators if RBC stays in  Thailand to “weather the storm” and enrich their connection and drastically lower the political risk of the bank. It may be denied access to the financial market again if it fails to show commitment to the Thai government.

What Have I Learned From This Case?

The case has educated me about the international market where there are protective controls like Thailand. There can be many difficulties, although there are benefits when the business is conducted correctly. Thailand is an emerging market, but the banking system in the country is not serving it properly since they don’t have experience and technology presenting great opportunities for foreign banks. These banks get a comparative benefit over the local banks since they are less developed. The case indicates that local fragile banking systems finally require to be restructured, although measures in Thailand take too long to be taken, leading to setbacks. One can learn that every economy has its time for distress, and there are several possibilities a company can reap if it remains in a country that can offer a chance for first-mover advantage.