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     FrontPage Edition: Sun 24 September 2006

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How Singapore can contribute to Asia's infrastructure financing activities

Source: www.mas.gov.sg

Speech by Mr Lee Chuan Teck, Executive Director, Monetary Authority of Singapore, at the Public Lender & Insurer Infrastructure Finance Summit 2006 on 21 Sep 2006

An Excerpt

But let me share with you how I believe Singapore can contribute to Asia's infrastructure financing activities.
Firstly, there is a sizeable pool of experience and expertise in Singapore, which can be shared with governments, developers and investors in Asia.
In terms of domestic projects, the Singapore government has handled several large scale projects that involved substantial private sector participation. As I mentioned earlier, we embarked on PPP in 2004. We have since awarded a number of projects: A desalination plant, a water-recycling plant, an incinerator and a software project for Singapore customs.
We are exploring PPP in a number of other projects. Along the way we picked up some valuable lessons on which projects are more suited for private investment, how to structure a deal taking into commercial concerns and public needs, how we organize a tender in a fair and transparent manner and so on.
On the other side of the fence, a number of Singapore-based companies are active infrastructure developers in Asia and elsewhere.
We have also developed or are developing industrial parks and Special Economic Zones in a number of countries - Indonesia, Vietnam, China, India and Russia. This wealth of knowledge and expertise, from both the public and private perspective, makes Singapore an ideal location where public officials, supra-nationals and private investors can gather in conferences like this and exchange ideas and views on infrastructure development.
Second, as a dispute mediation centre. In any multi-party ventures, disputes will occasionally emerged. Rather than going through litigation, which can be expensive and time-consuming, it may be better to go through an arbitration or mediation process.
I'm no legal expert but I was told that the difference between arbitration and mediation is that in an arbitration process a third party decides on the outcome while in a mediation process, the disputing parties mutually agree on the outcome.
It seems to me then that the ability to mediate successfully depends on there being a broad set of behavioral norms and values that disputing parties subscribed to, and which can then guide the mediation process.
Singapore has a trusted, world class legal system, with a strong blend of Asian values. Both are natural advantages for mediating Asian infrastructure disputes.
Third, as a financing centre. Through the Asian Dollar Market, Singapore based banks have been actively financing Asian projects throughout Asia since the 80's. We can broaden this to the capital markets.
The REITs market is a useful illustration on how this can be done. We started developing the REITs market in 2002, by giving certain tax advantages to REIT structures. At first, the underlying assets were mainly retail malls in Singapore, placed in a REIT structure for tax advantages. Then, it was expanded to warehouses and hotels.
Over time, as investors and developers became more comfortable with the asset class, it was expanded to overseas assets, including properties in China, Indonesia and so on. Investors who want an exposure to a diverse range of Asian commercial properties invest in the Singapore REIT market.
On the other hand, Asian property developers who need to raise funds efficiently issue a REIT in Singapore because there is a ready pool of investors there. In this way, Singapore became the conduit for funneling global investments to Asian property developments.
The same can be done for infrastructure. Singapore is a leading project finance hub in Asia. Leading banks such as Standard Chartered, Bank of Tokyo-Mitsubishi, Sumitomo Mitsui, Mizuho and BNP Paribas having sizeable on-shore project finance teams to access regional opportunities.
To complement this, last Saturday, we announced a set of tax incentives to promote the use of Singapore's capital markets to finance infrastructure projects in Asia through targeting the investors, issuers and intermediaries.
To build investor familiarity, interest income derived from qualifying infrastructure project bonds will be fully tax exempt.
In addition, we are seeking to facilitate more asset securitizations via the listed markets. Currently, an exemption already exists for qualifying foreign sourced dividends.
We have expanded this exemption to interest received from overseas by infrastructure funds listed on the SGX.
Finally, income from providing project advisory services will be taxed at a concessionary rate. Details of the tax scheme will be released in a month's time.
To conclude, I believe Asia is in an exciting phase of growth. To maximize our potential, much needs to be done to relieve infrastructure bottlenecks. Public lenders and insurers have a major role to play. And Singapore is happy to contribute to this process...

Full Text of Speech

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