What Makes Singapore an Asian Financial Hub?

Nora Setiawan

July 15, 2020

Singapore has been well known in many fields at the top of the world, whether it is entertainment, governance and tourism. Singapore is also commonly known as a financial hub not only within the region, but across the world as well.

Over the past 50 years, Singapore has established itself as a reputable financial center that offers to both the local economy and the Asia Pacific region. It’s no wonder to us that Singapore is considered as one of the most attractive markets to go among investors and financiers around the world. This makes Singapore a financial hub in Southeast Asia.

Overview of Singapore as an Asian Financial Hub

As an international financial hub, the country is home to over 1.200 financial institutions which offer a lineup of products and services across multiple asset classes.

According to the Singapore Department of Statistics (DOS), the financial and insurance services sector claimed the first spot in terms of FDI volume S$927.890 million in 2018. It accounted for 53.45% of the total FDI value. 

The sector indeed has continuously grown since 2014. Moreover, the value of FDI flows into this sector rose by 22% compared to 2017 and 30% compared to 2016. In 2019, the sector has ranked fourth as it accounted for 13.9% of the total GDP. This was equivalent to S$70.56 billion.

The banking sector in Singapore is also growing. The country had a total asset size of approximately S$2 trillion in 2014. More than 200 banks are currently operating there, and more foreign banks choose Singapore to be their regional headquarters, as the country starts to be a global platform for banking services.

Meanwhile, the 3 dominant local banks such as DBS Bank Ltd, Overseas-Chinese Banking Corporation Ltd (OCBC) and United Overseas Bank Ltd (UOB), are ranked highly in Bloomberg’s list of the world’s strongest banks.

According to the 2016 Bank for International Settlements Triennial Central Bank Survey, Singapore’s Foreign Exchange Market was ranked the 3rd largest in the world by turnover, behind the United Kingdom (1st) and the United States (2nd). The average daily volume of Foreign Exchange Turnover and Foreign Exchange Derivatives Turnover reached US$419.2 billion and US$87.3 billion respectively in April 2016.

To add more reasons, why Singapore is known as the Asian financial hub. Singapore’s asset management industry registered a relatively good expansion of 5.4% to S$3.4 trillion, or US$2.5 trillion in 2018. Then, Singapore continues to serve as the Global-Asia gateway for asset managers and investors to tap the region’s worth opportunities, with 75% of assets under management (AUM) sourced from outside of the country in 2018.

According to Singapore Business Review’s annual survey of the Insurance sector, total assets of the 50 largest providers in the city reached S$232 billion in 2018, an increase of 13.73% from the previous year which was S$204 billion.

Not only in the conventional financial sector, Singapore is also putting time and effort to establish itself as a leading global fintech hub. In 2019, it was home to more than 50 innovation labs. The financial technology (fintech) sector received a record high of S$1 billion in 2019

On September 30, 2019, Singapore claimed the 1st spot ASEAN in both funding value and the number of deals, accounting for more than half (51%) of each category. The country then continues to be the preferred base of fintech firms. The total fintech firms in Singapore as of September 30, 2019 were 1157 firms.

Reasons Why Singapore Is an Asian Financial Hub

Reasons why Singapore is an Asian financial hub

In 2020, Singapore has improved on the “dealing with construction permits” criterion. It made dealing with construction permits easier by enhancing its risk-based approach to inspections, improving public information, and the process to obtain a construction permit. It’s the ease of doing business there.

Other than that, we will give you detailed information below in getting to know more about Singapore as an Asian Financial Hub!

1. Conducive Pro-Business Environment

The Monetary Authority of Singapore (MAS), established as a legal board in 1971, is responsible for the supervision and development of the Singapore financial service sector. The MAS also functions as Singapore’s central bank, formulation and implementing the policy.

The regulation and rigorous supervision have earned investor confidence in the Singapore financial system. It has resulted in financial stability, even amidst turmoil such as the 2007-2008 global financial crisis.

In addition, the support from the government is endless. The Singaporean government has introduced several incentives to attract more players to the financial sector and encourage the development of this sector.

For example, in 2017, the government removed the currency, counterparty and investment instruments restrictions in the existing Financial Sector Incentive (FSI).

In helping to the adverse effect from the Covid-19 on the financial and insurance services sector, MAS has announced a $125 million support package for firms in this sector to deal with the challenges from Covid-19 and to recover for the future growth.

2. Skilled Workforce

The key reason for financial institutions to operate in Singapore is, to have a large pool of finance professionals in the financial services industry.

In order to ensure the continued availability of skilled labour, the Institute of Banking and Finance Singapore (IBF) and Workforce Singapore (WSG) introduced a program, including a structured training and attachment schemes to equip professionals with essential skill sets that would help them thrive in the financial industry.

3. The Competitive Cost and Business Infrastructure

The cost of doing business such as wages and rental has steadily risen. However, office rental in Singapore remained significantly lower than the leading rival financial centers, such as London, New York, Hong Kong, and Tokyo.

Speaking about infrastructure, Singapore has a well-established set of an efficient public transport system and advanced ICT infrastructure. It ranked 1st in the world for the transport infrastructure, it has also a world-renowned aviation hub, and a busy global port hub.

Moreover, Singapore has ranked 1st in Asia in terms of digital infrastructure in the world, regarding technological readiness. It has the fastest broadband speeds in the world with a 159% mobile penetration rate.

These factors definitely make a strong idea for foreign investors to set up a businesses, as Singapore is always ready to embrace new and more contemporary markets. So, if you want to have a business in Singapore, you will not regret it as it has a great business environment, skilled workforce, and great financial sectors, and you would get the benefit in the future! If you need any help for setting up a company in South East Asia, Viettonkin Consulting able to help you!

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