Easy movement of cash is critical to any treasury. While not a problem in the US and Europe, it's a common issue in Asia where varying capital expatriation regimes complicate the lives of treasurers.
China, India and Vietnam are known to be particularly difficult. Kelvin Hayes, deputy group treasurer at SGS, said his firm uses a variety of methods to get trapped cash out of countries. For example, in Vietnam SGS faces a dearth of available liquid foreign currency locally so it sources funds from outside the country. Other companies employ strategies such as notional pooling, which involves a banking partner crediting a specified amount to the company's bank account outside the problem country while simultaneously deducting the amount from their account in the restricted market, to solve the problem of trapped cash.
Indonesia is not known to be the easiest of countries to locate a treasury. Exchange controls limit cash transfers abroad and to non-resident entities to only those supported by an underlying economic transaction; unfortunately, this does not include overnight sweeping into a central interest bearing account elsewhere in Asia. That's why it came as a surprise to learn that Actavis, Iceland-based manufacturer and wholesaler of generic pharmaceuticals, has based its Asia-Pacific treasury in Jakarta.
FinanceAsia sat down with Henryady Sudjana, regional finance director at Actavis Asia-Pacific, and asked why.
Please describe Actavis's treasury in Indonesia.
In Indonesia, the local treasury model is centralised. Above a certain level, the finance team is also involved in procurement processes to ensure a cost effective and better working capital management.
The Asia-Pacific regional management is based in Jakarta, led by Thomas Runkel as the vice president for the region. Thomas is supported by a regional finance team in Jakarta. This regional team is not only responsible for the region, but also for Indonesia as a legal entity.
How does Indonesia function within the regional and global treasury at Actavis?
Actavis in general depends on global cooperation to maximise the excellent work done by our employees -- in this case performed by Actavis Indonesia -- and shares that with colleagues around the world and vice versa.
What would you say are the strengths and weaknesses of Actavis's treasury in Indonesia? Regionally?
We have good information systems, supported by high-quality IT personnel, so we are able to accurately forecast our cashflows. We have a good relationship with our customers, local banks and global treasury. However, managing cashflows in some of the countries in the region can be a challenge.
What difficulties does Actavis face managing cash in Indonesia?
The biggest challenge I can think of probably came when Actavis acquired Alpharma in December 2005. We were Alpharma before the acquisition. But, we successfully overcame all challenges through various measures, including tight control in the spending process and more frequent cashflows forecasting process. Since then, any issues we've faced have been limited to unfavourable movements in the exchange rate.
Why place a regional treasury in Indonesia when other countries in Asia-Pacific are known to be easier to move cash in and out of?
Our regional office is based in Indonesia because Indonesia is the biggest market in the Asia-Pacific region, where Actavis has both sales and marketing, and manufacturing activities. Indonesia supplies products to our Asia-Pacific markets.
Looking ahead, what are your plans for Actavis's treasury in Indonesia?
At Actavis, we're continuously improving. Such is the nature of the generic pharmaceutical business, particularly at a company like ours, which sells some of its 858 different products within the group to more than 60 countries. Our immediate plans in this region involve making the regional finance team more focused on its regional activities. This means that my focus is shifting, away from Indonesia, towards a more regional role.
