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INFRASTRUCTURE investments in Asia is set to grow by leaps and bounds in the coming years and Singapore aims to be at the forefront of financing those projects.
And this is just one of five strategies to develop the financial sector which Senior Minister Goh Chok Tong unveiled at the annual dinner of the Association of Banks (ABS) last night.
"Asia needs to spend about US$8 trillion on transport, power and communications infrastructure over the next ten years for Asia to emerge as a viably connected, integrated and competitive region. Such infrastructure investment will spur the region's growth, and will potentially add US$1.6 trillion or 10 per cent to developing Asia's GDP by 2020," he said.
To tap on that, the government is now working with multilateral agencies to attract more private sector investments into viable infrastructure projects, while encouraging ABS members to undertake more Asian infrastructure financing out of Singapore. Last year, the government launched the Asia Infrastructure Project Development to assist municipal governments in sourcing for funds, from commercial banks and private investors, for commercially viable public private partnership infrastructure projects.
Secondly, Singapore will seek to tap on the growing wealth in Asia as investors now pay more attention to wealth protection besides growth.
"We have a reputation for a sound regulatory regime and a trusted legal and governance framework. We should build on this foundation to facilitate the growth of a trusted ecosystem for the asset management industry, encompassing high standards of risk management, transparency and industry competencies."
He noted that the asset management industry here had grown by an average of 20 per cent per annum over the seven years before the present crisis, thus illustrating the growth potential of the fund management sector. Also, the landscape has become more diverse, and "most of the fund management firms here are from countries in Japan, Europe and the US and, reflecting the international character of our asset management industry".
Thirdly, he said that Singapore needs to maintain a sound and progressive regulatory regime to restore confidence in the sector. The government is also open to raising the regulatory bar further, in keeping with changes in global regulatory standards.
For this reason, the Monetary Authority of Singapore (MAS) recently carried out a consultation on proposed changes to the regulatory framework on the sales and marketing of structured products to retail investors. Also, it found that financial institutions need fundamental changes in both business models and mindsets to win back the trust and confidence of consumers.
Therefore, the central bank will fine-tune its approach to supervision of market conduct of financial institutions, including greater probing of the boards and senior management of the steps they are taking to embed fair dealing outcomes in all their processes, from product approval to staff incentive structures.
In his speech, Mr Goh disclosed that the three banks and one finance company have offered settlements of $105 million on a "no-admission-of-liability" basis to over 3,600 investors, who were mis-sold the Lehman-linked structured products.
Fourthly, the government will try to enhance the risk management capabilities and market infrastructure here through initiatives to mitigate counterparty risks.
Another initiative which will strengthen Singapore's market infrastructure is the ongoing industry effort to enhance the framework for the fixing of the Singapore interbank offer rate (Sibor) and the Swap offer rate (SOR).
"In Singapore, the ABS has conducted a review of Sibor and SOR fixings and found the methodologies and processes to be sound. Nevertheless, governance of the fixings can be strengthened by expanding the resources and scope of the oversight committee. These proposals will be circulated to members for comments shortly."
Finally, Mr Goh emphasised the importance of building a talent pool and intellectual capacity during the downturn, which is why the government has agreed to cofund up to 90 per cent for training schemes supported by the Financial Sector Development Fund.
Meanwhile, United Overseas Bank head Wee Ee Cheong has taken over from OCBC chief executive David Conner as the new chairman of ABS.
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