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India’s Icegate system snarls up supply chains – Industry roundup: 6 April

Technical glitches hamper Indian supply chains

Indian importers and logistics firms are encountering supply chain problems and delays in securing customs clearance, following major glitches in a new national electronic data interchange platform known as Icegate (Indian Customs Electronic Gateway).

In recent days import containers have been piling up at port locations across the country, according to industry sources.

Stakeholders are concerned over the inability to make customs duty payments through the electronic gateway, which became apparent when the authorities rolled-out the new system on 1 April.

India’s industry groups, including the Brihanmumbai Customs Brokers Association (BCBA) of clearing agents in Mumbai, quickly drew attention to the problem and lobbied government policymakers for intervention and a swift resolution.

The Central Board of Indirect Taxes and Customs (CBIC) said it was making every effort to rectify the problem and stated: “Our technical teams are working overtime to fix some teething issues and the problems being temporarily noticed will be resolved at the earliest.”

One Mumbai-based ocean freight forwarder reported that clearing agents were not coming forward to pick up delivery orders for vessels arriving in recent days. Containers overstaying on docks typically run the risk of demurrage fees and other penalties, with disputes often ending up in protracted legal action.

Air freight inbound shipments are also facing similar customs hiccups, a source said.

India’s freight industry has undergone a series of technological changes and updates to facilitate  doing-business in recent years as the country bids to keep pace with evolving global supply chain dynamics.

New Delhi recently launched a broader digital platform – dubbed the national logistics portal (NLP) – offering a “one-stop shop logistics experience” for users, with visibility and transparency being the key focus.

The government said the platform “aimed at connecting all the stakeholders of the logistics community using IT to improve efficiency and transparency by reducing costs and time delays and achieving easier, faster, and more competitive offerings of services, to promote the growth of the logistics sector and thereby improve trade”.

In addition, an initiative is underway for a new electronic customs programme to tighten export/import cargo traffic, named the Sea Cargo Manifest and Transhipment [SCMT] Regulations. It is broadly similar in concept to the 24-hour advanced manifest rule for US cargo.

But the current import clearance snags coincide with Indian export flows facing bottlenecks resulting from significant berth capacity cutbacks at Nhava Sheva port (JNPT), with perishable goods movements bearing the brunt of the congestion.


EU Chips Act “to get green light on April 18”

The European Union’s (EU) €43 billion (US$47 billion) plan to boost its semiconductor industry and catch up with the United States and Asia is likely to get the green light from EU countries and lawmakers on April 18, people with direct knowledge of the matter have told Reuters.

The European Commission (EC) wants Europe to double its share of global semiconductors production from the current 10% to 20% by 2030 and the new Act aims to provide public and private investment to accomplish that increase in capacity.

While the EC had originally proposed funding only cutting-edge chip plants, reports suggest that EU governments and lawmakers have since expanded the scope to cover the whole value chain, including older chips and research and design facilities.

As the European Parliament (EP) website notes: “Since late 2020, there has been an unprecedented shortage of semiconductors around the globe. The semiconductor supply chain is very complex and vulnerable to events such as the Covid-19 outbreak. The industry is finding it difficult to recover from the shock caused by the pandemic. The EU is taking action to secure its supply.

“The European Chips Act aims to increase the production of semiconductors in Europe. The European Parliament has approved its position on the proposed legislation and is ready for negotiations with EU governments.

“In February 2023, MEPs also adopted the Chips Joint Undertaking – an investment tool whose objective is to support the growth of the sector and promote EU leadership in this field in the mid to long term.”


UAE’s digital currency takes a step forward

The United Arab Emirates (UAE) has kicked off the first phase of its project to launch a digital currency, with the UAE Central Bank (CBUAE) launching its implementation strategy, which forms one of the key initiatives in its programme to digitise the country’s finance sector.

In February, when it announced its Financial Infrastructure Transformation (FIT) programme, the CBUAE said a digital currency was one of nine initiatives, which also include the country’s first card payment platform, an instant payments system. The central bank named financial services blockchain specialist R3 and UAE-headquartered cloud supplier G42 Cloud as infrastructure technology providers, with Clifford Chance providing legal services.

The CBUAE said a central bank digital currency (CBDC) will eventually be applied across a range of domestic and cross-border use-cases in the Middle East region. The first phase is expected to be introduced over the next 12 to 15 months. According to the Bank, this will see the initiation of real-value cross-border CBDC transactions for international trade settlement, proof-of-concept work for bilateral CBDC bridges with India, and proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage.

“As part of the CBUAE’s digital transformation programme, the implementation of the CBDC strategy will aim to address the pain points of cross-border payments, enhance financial inclusion and further strengthen the UAE's payment infrastructure,” said the Bank.

“The technological support of R3 will enable CBUAE to ensure the readiness of the UAE for the potential future tokenisation of financial and non-financial activities, in addition to the digitisation of other financial services.”

Payments made annually using CBDCs will balloon from US$100 million this year to US$200 billion in 2030, according to projections by Juniper Research. The firm notes that the CBDC sector is in its early stages of development with mainly pilot projects but expects government projects to boost financial inclusion and stimulate adoption. This will particularly be the case in emerging economies “where mobile penetration is significantly higher than banking penetration”.

David Rutter, CEO at R3, said the UAE’s plan is another landmark moment in bringing CBDCs even closer to production and issuance. “CBDCs can strengthen our financial market infrastructure in several ways, including more efficient cross-border payments, faster settlement time periods and the streamlining of multi-party processes. The CBUAE has made a significant step forward in realising these benefits.”

Talal Al Kaissi, CEO at G42 Cloud, said the collaboration represents an important milestone in the digitisation of the UAE’s monetary and payments framework. “As a company founded in the UAE, we have seen first-hand the country’s rapidly advancing status as a global fintech hub and are excited to be working with the CBUAE in leading its digital transformation.”

Jack Hardman, Middle East head of fintech at Clifford Chance added: “As CBDC development moves from research to real-life building, it is vital that central banks are aware of the legal implications of any chosen design feature or strategy, in addition to how this emerging technology interacts with existing regulations.”


Alibaba’s restructure plan divides opinion

Alibaba Group Holding’s recent announcement of a proposed radical restructure that would see it split into six separate businesses has sparked differing responses, with reports suggesting it has been well received by many foreign investors who are returning to China’s bourses.

Exchange data shows net foreign buying of mainland-listed stocks daily since Alibaba shared its plans to split up and float its business units last week, Reuters reports. The group’s stock has recouped losses from 2022, when it fell by more than 16%.

The inflow may reflect a shift in sentiment. Overseas investors have been notably absent in recent months although while China’s markets and economy have performed strongly since Beijing abruptly lifted its stringent zero-Covid policy last December.

Derrick Irwin, a portfolio manager at US. asset manager Allspring Global Investments, commented that the Alibaba breakup and its founder Jack Ma’s return to China reflect the government’s effort to extend an olive branch to entrepreneurs. “This may reignite investment in the private sector,” he said. Since late 2020 China had been, until recently, imposing a crackdown on a broad range of industries, castigating tech companies for monopolistic behaviour, among other issues, and levying hefty fines.

Rob Brewis, a portfolio manager at UK-based asset manager Aubrey Capital Management, said that his firm has moved back into Chinese equities this year, mainly based on economic recovery hopes and cheap valuations. Premier Li Qiang has also  assured foreign investors about China’s expanding market access and optimising the business environment.

Meanwhile the South China Morning Post reports that Alibaba’s decision to split its US$257 billion business empire into six independently run units has been largely welcomed by investors, but internally, some employees are worried about the future of less profitable departments and job security.

The Hangzhou-based tech giant envisages six new entities that include cloud computing, Chinese commerce, smart logistics, local services, global business, and media and entertainment, each reporting to their own CEOs and responsible for their own funding.”

"When the kids are grown, they need to leave home to face the market by themselves," Alibaba CEO Daniel Zhang Yong told employees in a widely circulated video last week. "I hope there will be multiple listed companies emerging from the Alibaba system, and that they will continue to nurture their own sons and daughters and cultivate more listed companies."

However, one Alibaba staff member, who insisted on anonymity, said some colleagues are concerned about how potential clients and business partners would view the change. The group name has influence when the team is building business relationships in the industry, the person said, but that advantage could be lost when the team becomes independent.

Being spun off into a smaller organisation could also deprive employees of a sense of belonging to a bigger group, they added, although the restructuring might work out better for the domestic commerce unit, which contributed most of Alibaba's revenue.

Over two-thirds of Alibaba's recent revenue came from China-based e-commerce, while the other five units each generated 3% to 8% of the group's sales, according to Scott Kessler, global sector lead at business consultancy Third Bridge.

Another employee, based in a middle-office role at Alibaba who also requested anonymity, expressed concern about job losses, as CEO Zhang has said the company would “lighten” its middle and back-office functions.

Alibaba has already shed nearly 20,0000 jobs in 2022 as China's Big Tech companies worked to streamline businesses and rein in costs under a regulatory crackdown and slowing economy.

Separately, a report this week claims that both Alibaba and Huawei may be ready to satisfy local demand for generative artificial intelligence (AI) chatbots in coming weeks.

Since the release of Open Ai’s ChatGPT, Chinese users have been eager to access the technology. Beijing and other major cities have pledged to assist developers, while both academia and private industry have made progress.

Alibaba was reported by local media to be launching a large-scale model on April 11 during its 2023 Cloud Summit in Beijing. An industry application model is planned to follow a week later, although the group has declined to confirm those dates.


Mastercard wants banks to use recycled materials for cards

Mastercard said that it wants the plastic in consumers’ wallets to be less damaging to the environment.

The company announced that from 2028 it will require all banks issuing one of its payment cards to use sustainable materials as it seeks to remove first–use, PVC plastics from its network, according to a. Acceptable alternative include recycled or bio-sourced plastics and must be approved through a certification programme, in a first move for a payment network

Mastercard added that it will support its global issuing partners through the transition away from “virgin PVC”.

The company first launched its Sustainable Card Programme in 2018. Since then, over 330 issuers across 80 countries have signed up, working in partnership with major card manufacturers to transition more than 168 million cards across its network to recycled and bio-based materials. The latest announcement “further accelerates these efforts, while also complimenting the company’s work to deliver innovative, digital-first card programmes that fully eliminate the need for a physical card offering.”

The rule change will see all newly made cards certified by Mastercard to assess their composition and sustainability claims; this certification will then be validated by an independent third-party auditor. Once a card has been validated it can be imprinted with a Card Eco Certification mark. 

“At Mastercard we are leading and shaping our industry’s collective pursuit of a more sustainable, more environmentally conscious future,” said Ajay Bhalla, President of Cyber & Intelligence at Mastercard. “As our customers respond to increased consumer desire to make more eco-friendly choices, we are making a firm commitment to reducing our environmental footprint – for the benefit of people, planet and inclusive growth.” 

In 2018, through Mastercard’s Digital Security Lab, the company launched the Greener Payments Partnership with card manufacturers Gemalto, Giesecke+Devrient and IDEMIA to reduce the use of first-use PVC plastic in card manufacturing. Mastercard’s participant banks span more than 80 different countries worldwide. It launched the Mastercard Card Eco-Certification (CEC) scheme in 2021.


Chinese banks lend US$975 million for Peru port terminal

In the latest  example of China's growing financial influence in Latin America, a syndicate of lenders led by the Bank of China as joint mandated lead arranger and bookrunner, is providing a 15-year US$975 million loan to finance the development and construction of a new port terminal in Peru. The syndicate also includes Bank of Communications, China Minsheng Banking Corp, Shanghai Pilot Free Trade Zone Branch and Rural Commercial Bank.

The multi-purpose terminal is being developed in Chancay, 67km north of the capital Lima, by COSCO Shipping Ports Chancay Perú, a company 60% owned by COSCO Shipping Ports, a Hong Kong-listed company and 40% owned by Volcan Compañia Minera, a Peruvian-listed company. The funding represents one of Peru’s largest project finance transactions in a decade and is believed to be the largest port financing in the country’s history.

The Port of Chancay is a natural deep water port, which will allow the handling of containerised cargo, general cargo, non-mineral bulk cargo, liquid cargo and roll-on/roll-off cargo through an operational port area, a gateway complex and an underground viaduct tunnel. It will be the first private port for public use in Peru and is set to become the main regional port in the South Pacific.

The financing proved highly complex, with negotiations lasting more than three years between parties located in China, Hong Kong and Peru. The deal includes a highly tailored security package, covering shares in CSP Chancey, a pledge of all assets, a pledge of all accounts, a mortgage on the land and concession and direct agreements with the project contractors.


Coinbase to offer faster transactions on Derivatives Exchange

Cryptocurrency exchange platform Coinbase announced that it is teaming up with US-based infrastructure provider Transaction Network Services (TNS) to enable faster, more efficient transactions on its derivatives exchange, in a joint statement by the two companies.

Coinbase launched the Derivatives Exchange (CDE), which is regulated by the Commodity Futures Trading Commission (CFTC), last June to attract more retail traders. Futures contracts require less upfront investment than traditional bitcoin futures products.

The cloud-based financial trading infrastructure deployed by TNS for the exchange will enable institutional investors to increase storage capabilities and process large data sets with minimal delay.

“Crypto has witnessed both volatile and liquid markets, and with institutional adoption remaining strong, we believe the time is right for the offering that TNS brings to the table,” said CDE CEO Boris Ilyevsky. “Dedicated cloud infrastructure connectivity coupled with our derivatives exchange represents a mission-critical step toward supporting and maintaining a vibrant and reliable crypto derivatives market.”


Hedge funds profit from bank sector turmoil

Hedge funds made US$7 billion last month from betting against banks during the sector’s upheaval, which saw Credit Suisse acquired by rival UBS and the failure of US banks Silicon Valley and Signature according to a Financial Times report.

The paper says that the short sellers’ haul in March was the largest from the banking sector since the crisis of 2008.

As the value of Credit Suisse stocks and bonds plummeted in the early weeks of March, some investors viewed the sell-off as an opportunity to buy, correctly anticipating that regulators would step in and prevent Swiss bank from total collapse.

According to the New York Times the funds that correctly predicted the rescue deal were two that specialise in buying the bonds of companies on the brink of bankruptcy: Redwood Capital Management, which was a bondholder of the bankrupt Chinese real estate business Evergrande, and 140 Summer. Goldman Sachs, Jefferies and Morgan Stanley were among the banks facilitating the trades between investors, the NYT added.

Japanese banks provide US$5 billion loan for Indian steel plant

Luxembourg-headquartered multinational steel producer ArcelorMittal SA said that AMNS Luxembourg Holding SA, the parent company of the ArcelorMittal Nippon Steel India (AM/NS India) joint venture has entered into a US$5 billion loan deal with a consortium of Japanese lenders.

The proceeds will be used to fund the expansion of the AM/NS India’s annual steelmaking capacity at its Hazira plant in India to 15 million tonnes from nine million tonnes. The expansion would include the development of downstream rolling and finishing facilities for a string of sectors including defence, automotive and infrastructure, and add 60,000 jobs, the company said.

The JV, called AM/NS India, is owned by AMNS Luxembourg Holding SA, in which ArcelorMittal holds a 60% interest and Nippon Steel the remaining 40%.

The Japanese banks in the consortium include Japan Bank for International Cooperation, MUFG Bank, Sumitomo Mitsui Banking Corp, Sumitomo Mitsui Trust Bank, Mizuho Bank and Mizuho Bank Europe NV.

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