Business
Trade and investment
“ We need to have fall-back solutions”
Economy and foreign trade minister since 2004, Jeannot Krecké talks to Delano about increasing the Grand Duchy’s ties with the “BRIC” countries-Brazil, Russia, India and China--and inward investment from emerging markets.
Interview: Aaron Grunwald — Photo: David Laurent/Wide (archives)
AG: Today most Luxembourg exports go to European markets. In five to ten years, will that shift in favour of the BRIC countries? JK: It is no secret that we witness higher growth today in emerging countries like the BRICs than in our ‘mature’ economies. Consumption in India, China, Russia or Brazil is on the rise due to the emergence of a middle class with more purchasing power. Given the large populations in these countries even a small growth in percentage results in very high absolute figures which means that there should be an almost mechanical effect on some exports. It is nevertheless true that more and more products --even sophisticated ones--are manufactured locally, so the growth in demand and our exports to the BRICs will not be in total harmony. Our companies will have to struggle for market share and stay at the vanguard of innovation. Luxembourg produces only a small amount of consumer goods, which is in this case good because, in order to produce locally, BRIC manufacturers often
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need Luxembourg products such as sophisticated machinery. Generally speaking, one of the mantras that I kept repeating over the last seven years has been that our companies need to diversify their customer base, also geographically. When the euro zone--our biggest client--doesn’t do well, we need to have fall-back solutions. AG: Do you think there is a risk of over-focusing on these major players? JK: It really depends on the business you’re in. I guess that nowadays the BRICs, with all their difficulties in terms of market access, are often still easier to do business with than quite a few African countries. But when your product or service is geared towards the African market, then you will certainly focus on this, rather than on Russia, for example. Right now, over 85 percent of Luxembourg exports go to the EU and a good chunk of the remainder to the US. With the little that is left, it would be hard to argue that there is ‘over-focusing’ on anything.
AG: Do you think Luxembourg’s reputation as a UCITS centre is a ‘door opener’ that can help attract more emerging market clients to the financial centre? JK: Frankly speaking, I think the world of UCITS is one where some sophistication is necessary. Most people don’t even know the term. To the general public and even to business leaders outside Europe, Luxembourg is known as a financial centre. Very often there is little distinction made between our know-how in terms of investment funds, private banking, financial engineering, etc. The big disappointment that I often see in the faces of emerging market clients has to do with the fact that they often don’t know that Luxembourg is, simplifying a lot, a place for people with money and not a financial centre for people who need money. Projects are presented to us, often very interesting ones, with the hope that ‘the dynamic Luxembourg financial centre’ will organise the financing. Then I almost always have to say ‘sorry, we’re not in that game.’