Singapore the most preferred treasury location: EY Report
Singapore tops the list of desirable locations for treasury in Asia, beating the likes of Hong Kong.
Singapore tops the list of desirable locations for treasury in Asia, beating the likes of Hong Kong.
A survey of treasurers and strategic stakeholders has revealed that Singapore is the preferred regional treasury location in Asia.
The EY report Singapore: a strategic regional treasury location examined the reasons behind Singapore’s position as Asia’s top treasury location. The survey reached out to treasurers and strategic stakeholders of regional and global treasuries of commodities, consumer goods, technology and shipping firms based out of Singapore with over 45% having a global turnover of more than US$20b.
The study sought to gain the views of corporate treasuries with diverse profiles across multiple parameters, which include the industry it is in; participation in the FTC tax incentive scheme; duration of the treasury operations in Singapore; and global corporate turnover.
Other preferred treasury center locations reported across the globe were San Fancisco, New York, London, Amsterdam and Hong Kong.
According to the survey, one of the primary factors in selecting Singapore as the regional corporate treasury location are regional business headquarters in Singapore and the depth and breadth of financial ecosystem.
Proximity to the regional headquarters where the regional management resides allows for better engagement with the leaders as the corporate treasuries plan the funding and investment requirements over a long-term horizon, balance the intercompany lending and borrowing across different entities and markets and manage the central and in-country banking relationships in the most efficient manner.
Singapore has 132 commercial banks, 26 merchant banks and 758 capital markets service holders. With 4,200 regional headquarters based in the city-state, Singapore is home to the largest number of regional headquarters in Asia-Pacific.
One of the respondents, a treasurer in a multinational firm in the commodity industry said: “Being in the same location as the regional business management allows me to understand long-term strategic investments and short-term tactical working capital needs of business better.”
The other important factor is access to a well-developed, well-regulated and open financial ecosystem.
It is critical for the regional treasuries to have access to appropriate advisory and solutions on funding, hedging exposures and managing investments and cross-border flows. The Global Financial Centres Index 2018 ranked Singapore as the fourth most competitive financial center globally, which positions the city-state as a strong contender as a regional treasury location.
Additionally, Singapore is ranked the largest foreign exchange (FX) center in Asia-Pacific, the third-largest market for over-the-counter (OTC) FX transactions globally, and the second-largest OTC interest rate derivatives center in Asia-Pacific by trading volume in the 2016 Triennial Survey by Bank for International Settlements.
Having said this, although Singapore is seen to have a well developed financial ecosystem, some interviewees, primarily those from European, US and Japanese companies, believe that its capital market has scope for improvement.
They prefer tapping on US and London for debt financing due to the lack of awareness of their companies and businesses among investors in Singapore and the region, as well as the relative lack of depth in Singapore’s capital markets.
One of the treasurer in a US-based multinational company in the electronics industry added: “We find it difficult to access short- term debt capital markets in Singapore as not many investors know who we are.”
Singapore is second in the world for ease of doing business, third most competitive economy in the world, fourth globally for political stability, first in Asia for talent competitiveness and ranked 13th globally and sixth in the world for innovation.
In addition to the two primary factors, the interviewees shared that there are other key criteria that play an important role in their treasury location decision.
These include:
Beyond the criteria and considerations that drive the treasury location decisions, the interviewees shared the challenges they face and what can be done to address them.