The Taiwanese Solution
Those of you who import from Taiwan are familiar with being asked for `L/C Sight' or `L/C 90 day'.
In the past Taiwanese trading companies were undercapitalised and limited in access to working and development capital. Their solution was to look only to markets which had spare capital and to raise finance for exports on the back of their customers balance sheets as opposed to their own.
Taiwan is now the 13th largest trading nation in the world and still finances 60% of exports by Letters of Credit issued by foreign buyers. Banks in Taiwan are active in providing pre-shipment and post shipment finance in connection with L/C transactions.
It is only fair to point out that the Taiwanese trading companies have a discrepancy rate of less than 1% in documentation - compared to perhaps 60% in on first presentation in Ireland.
This mechanism provided the Taiwanese exporters with off balance sheet finance, finance in hard currency, finance at extremely competitive rates and with currency exchange risk eliminated into the bargain.
Given our market development and position the Taiwanese system would not work for Irish exporters as a standard request when negotiating new contracts. But as risks increase and we extend our export reach we should be able to benefit by learning from their experience.
This material has been provided courtesy
of Obrico Ltd Global Trade & Finance.
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