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Delano: Today most Luxembourg exports go to European markets. In five to ten years, will that shift in favour of the BRIC countries?
Jeannot Krecké: 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 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 diversif,' their customer base, also geographically. When the euro zone-our biggest client-doesn't do well-, we need to have fall-back solutions.
Delano: Do you think there is a risk of over-focusing on these major players?
Jeannot Krecké: 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.
Delano: 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?
Jeannot Krecké: 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.
Delano: What opportunities does Luxembourg have with the BRICs outside of financial services?
Jeannot Krecké: I am firmly convinced that sophisticated products and services are our key asset in our future economic relationship with the BRICs. Luxembourg can offer some world-class know-how. I am actually even more convinced that non-financial service companies will have a brighter future with emerging market clients, advising them during their development. Green technology, logistics, infrastructure engineering and planning are all sectors where we pos sess specific skills that are in high demand outside Europe.
Delano: German companies, for example, often quickly gain acceptance from international clients in the BRICs because of Germany's reputation for manufacturing and green energy. How can a smaller country compete with giants in sectors like ecological technology?
Jeannot Krecké: We do not compete with giants. We cooperate with them or position ourselves in our own little niches. Luxembourg has a reputation for quality. I think that has to do with the myth about being the richest country in the world. Well, we all know that it's not true, but a lot of people actually think that "if those guys are even richer than the Germans, they must also be better than them!" Often we are, say in steel production or engineering in the steel sector.
Delano: Is Luxembourg prepared, linguistically, to work with the BRICs and emerging economies, where English is the second language and French and German are not used?
Jeannot Krecké: Being the home of an important population with Portuguese roots, Luxembourg is certainly well positioned to explore the Brazilian market. "We do encourage companies to train their sales force in foreign languages, with grants of up to 50 percent of cost being available via the Office du Ducroire. Russian and Chinese are becoming more and more important and I applaud parents who try to give their children some exposure to these languages. Spanish has long been taught in Luxembourg's secondary schools. And we're OK for India. Most Indians speak with just as much accent in their English as we do.
Delano: Does Luxembourg welcome inward investment from the BRICs, or do you have any concerns about xenophobic measures being taken?
Jeannot Krecké: I have to admit that I worry a bit when I read or hear some of the comments my fellow Luxembourgers make when a foreign investor enters into the share capital of what we perceive as a "Luxembourgish" company. They do not understand our economic history. Luxembourg without foreign entrepreneurs and foreign investors would still be the famine-ridden backwater that drove its sons and daughters to mass-emigration in the 19th century! Look back: our steel industry was created with mostly Belgian and German capital, often German know-how, Polish, Italian and French labour force to supplement us Luxembourgers and the products finally sold onto the German market. RTL, our media giant, always catered to international audiences, as did SES. The money managed by our banks and investment funds generally doesn't belong to Luxembourg clients. The interaction with the outside world and our openness to international investors is the secret to our success. Denying this and calling for protectionism is pure foolishness. But it is also true that we need to encourage more Luxembourgers to opt for careers in the private sector, to work their way up to management positions in order to influence all those companies that form Luxembourg's corporate family.
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