Why companies should consider Singapore for their corporate treasury centre

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    • Why Singapore ranks highly as a corporate treasury centreWhy Singapore ranks highly as a corporate treasury centre
    11 August 2020


    By Sam Cheong

    Key takeaways

    • More companies are setting up centralised treasury centres to improve efficiency and governance.
    • Within ASEAN, Singapore is a preferred regional treasury centre due to its open and robust financial ecosystem, ease of doing business and wide talent pool.
    • Singapore's booming financial technology (FinTech) industry also presents opportunities for companies to digitalise their treasury and cash management functions further.

    Cash is king, especially in times of business uncertainty. The corporate treasury function, and its role in managing a company's cash, have become even more important as Asian businesses face increased payment risks amid the COVID-19 pandemic.

    Over the past two decades, companies have increasingly recognised the role played by corporate treasurers in managing market volatility and coping with shifting regulations. As such, companies have moved away from having decentralised treasury functions that oversee domestic cash operations in favour of a centralised regional treasury centre. This is because a centralised treasury unit enables the company to reap benefits such as increasing cash management efficiency, improving governance and achieving economies of scale.

    Benefits of a centralised treasury centre

    A key benefit of setting up a regional treasury centre is that businesses will be able to adopt a uniform approach to managing its finances in various markets. For example, many multinational corporations and companies have invested into ASEAN to capture growth opportunities given its economic potential. However, as the region is made up of several countries with different currencies, one of the things that companies will have to deal with includes foreign exchange risks.

    Having a centralised treasury centre is one way to reduce such risks. By doing so, the corporate treasurer has an holistic view of the company's financial position across markets and enables them to manage foreign exchange and interest risks through effective hedging.

    Consolidating the corporate treasury function also reduces the number of stakeholders in the function. This in turn helps to streamline procedures and the documentation process – improving productivity and efficiency.

    UOB's extensive network in ASEAN, deep market insights and local market connections enable us to support our clients in their cross-border activities.

    Why set up a regional treasury centre in Singapore

    Singapore, with its robust, well-regulated and open financial system, has become a natural choice for multinational corporations looking to set up their regional headquarters and corporate treasury function. Here are four reasons why:

    1. Global service and financial hub

    In a survey conducted among treasurers and strategic stakeholders of regional and global treasuries by accounting firm EY last year, Singapore topped the list as the preferred regional treasury location in Asia. German-based luxury carmaker BMW Group and entertainment conglomerate Disney have set up their regional treasury centres in Singapore, joining the ranks of other multinationals such as Samsung, DHL and Johnson & Johnson.

    As a regional financial hub, Singapore's robust foreign exchange infrastructure provides easy access to international markets and liquidity, supporting treasurers in their cross-border trades. Singapore is also home to the foreign exchange pricing and matching engines of key financial institutions such as Euronext. With a strong foreign-exchange infrastructure in place, treasurers can reduce the lag time when trading currencies as they do not need to route orders through traditional trading centres in Tokyo, London and New York.

    As a result of the country's foreign exchange capabilities, Singapore is ranked as the third largest foreign exchange trading hub globally, behind the United Kingdom and United States of America. The country registered US$633 billion in average daily trading in 2019, according to the Bank for International Settlements.

    Singapore has also strengthened its position as a regional financial hub by providing instant cross-border payment platforms to facilitate regional trade. In July 2019, SWIFT gpi Instant, a global cross-border payment transfer platform, completed a trial to integrate its service with Singapore's domestic instant payment service, Fast and Secure Transfers (FAST). The trial saw the settlement of payments between banks in Australia, China, Canada, Luxembourg, The Netherlands, Singapore and Thailand settle within 25 seconds. The fastest payment – from Australia to Singapore – was completed in only 13 seconds.  

    2. Attractive tax rates for treasury management activities

    The Singapore government has introduced business incentives for companies conducting treasury management activities in the country. Companies that are approved under the Economic Development Board's Finance and Treasury Centre (FTC) incentive enjoy a tax rate of eight per cent on income from finance and treasury services. These services include international treasury and fund management activities, corporate finance and advisory services, economic and investment research and analysis, credit control and administration.

    3. Availability of highly skilled talent

    Singapore's highly educated and diverse workforce is another reason for businesses to set up their regional treasury centre in the city-state. More than 30 per cent of the workforce in Singapore hold a university degree; most speak English and at least one other language, specifically Mandarin, Bahasa Melayu or Tamil, which is also spoken in other ASEAN markets. Given the unique cultures, customs and languages in ASEAN countries, working with a team that understands the local practices and business environment is important.

    With its safe environment and high education standards, Singapore also appeals to global top talent in professions such as banking and technology who bring their skills to the country. This is evidenced by IMD's World Digital Competitiveness 2019 ranking which saw Singapore retain its second spot out of 63 economies, after the United States.

    4. Supported by strong technology ecosystem

    Singapore's booming FinTech community and continual investments into technology and digitalisation make it an ideal place for companies looking to transform their treasury functions digitally.

    According to a whitepaper last year by UOB, PwC and the Singapore FinTech Association, Singapore continued to attract the lion's share (51 per cent) of FinTech funding within ASEAN. It is also home to 45 per cent of FinTech firms in the region, an indication of the wide range of technology solutions available in the market.

    Singapore attracted 51 per cent of FinTech funding in ASEAN in 2019, and was home to 45 per cent of FinTech firms in the region.

    In addition, the issuances of five digital bank licenses – two for digital full banks and three for digital wholesale banks – is expected to contribute to a more robust financial ecosystem in Singapore.

    Recognising the importance of seamless digital international payments, UOB completed ASEAN's first cross-border peer-to-peer funds transfer proof-of-concept (POC) at the 2018 Singapore FinTech Festival. The POC demonstrated the ability for UOB customers in Singapore to make real-time payments to UOB Thailand customers through the account-holders' mobile phone numbers.

    UOB is committed to helping companies establish their regional treasury centre in Singapore. Through our Foreign Direct Investment Advisory team and comprehensive range of liquidity management and payment and collections solutions, we are able to help firms set up in Singapore and to seize business opportunities in ASEAN.

     

    About the author
    Sam Cheong is the Head of Group Foreign Direct Investment Advisory and Network Partnerships, UOB. Follow him on LinkedIn

     

    This article shall not be copied, or relied upon by any person for whatever purpose. This article is given on a general basis without obligation and is strictly for information only. The information contained in this article is based on certain assumptions, information and conditions available as at the date of the article and may be subject to change at any time without notice. You should consult your own professional advisers about the issues discussed in this article. Nothing in this article constitutes accounting, legal, regulatory, tax or other advice. This article is not intended as an offer, recommendation, solicitation, or advice to purchase or sell any investment product, securities or instruments. Although reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this article, UOB and its employees make no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability for any error, inaccuracy, omission or any consequence or any loss or damage howsoever suffered by any person arising from any reliance on the views expressed and the information in this article.

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