HSBC's customised trade finance for S'pore firms
Bank may soon offer option for S'pore-India trade
By MALMINDERJIT SINGH
(SINGAPORE) Singapore companies looking to do business in India may soon look towards customised trade financing options available there, according to Puneet Chaddha, Hongkong and Shanghai Banking Corporation (HSBC)'s managing director and head of commercial banking, India.
Speaking to The Business Times, he explained that while HSBC's standard products are good to a point, custom-made options are necessary and thus the bank is putting together the proposition of developing country-specific financing products.
Quoting examples of the India-Bangladesh and the India-UAE customised trade financing packages currently available in India, Mr Chaddha added that we are likely to see the same appearing for India-Singapore trade.
Such a development is likely to improve documentation and processes standardisation between banks in Singapore and India. Mr Chaddha said this would allow Singapore companies doing business in India to gain better access to financing than before and they would save through lower financial costs and turnaround time.
The global economic recession has altered the trend of financing choices for businesses in India. According to Mr Chaddha, the involvement of banks was kept low in the pre-crisis environment as buyers and sellers trusted each other more with credit options. However, as commercial trust becomes more fragile with the onslaught of the recession, more companies have turned to banks and their instruments, such as letters of credit, as credit enhancers.
Currently, Mr Chaddha explained, both small and medium-sized enterprises (SMEs) and large multinational corporations (MNCs) can draw from a host of financing structures and trade products that the banks in India provide. He pointed out that MNCs may also raise financing domestically or off-shore, depending on which is the cheaper market to borrow from.
Singapore is India's 14th largest import market and fourth largest export destination, as well as being the second largest provider of foreign direct investment into India. While Singapore's exports to India have largely been concentrated in mineral oils, electrical and medical equipment and organic chemicals, recent announcements by the Indian government to liberalise certain sectors of the economy, particularly financial services, higher education and defence, could signal more opportunities for businesses in Singapore.
'I see a greater sense of comfort among Singapore companies in doing business in India now,' Mr Chaddha said. 'As a result of the recent announcements by the Indian Finance Minister (on offering more banking licences), we will see more Singapore companies setting up operations in India, and particularly in the financial services industry,' he added.
HSBC, according to Mr Chaddha, will be following this segment of leading international business very closely as it looks to focus on facilitating cross-border trade. As such, he said the bank is clear that it will look towards penetrating the market that the India-Singapore trade flows creates.
At the same time, he explains that HSBC will create a proposition that it would like to bring to its customers in this segment, so as to highlight the benefits they may enjoy in doing business with the bank. This, he says, represents a more scientific approach to bilateral trade that HSBC is looking to adopt as opposed to simply targeting a certain percentage share of the market and he is confident that this will be a successful strategy.
Mr Chaddha was in Singapore to speak at a session of the International Enterprise Singapore's advisory seminar series on 'Doing Business in India' yesterday.
Saturday, April 3, 2010
Expect a Bold Budget
Expect a Bold Budget
By Malminderjit Singh
In the run up to the Budget, to be unveiled by Finance Minister Tharman Shanmugaratnam this afternoon, the rumour mills have been working overtime on what might be in store. While analysts have expressed mixed views on the likely contents of the Budget, many would agree that expectations in this year of economic recovery are higher than usual.
There are signs to indicate that Budget 2010 will be bold, and will target some broad objectives, as well as some very specific ones. But the economic backdrop to the Budget, while better than last year, is by no means rosy. Although the government has raised its growth forecast to 4.5-6.5 per cent for this year, in reality there are still obstacles to steering the economy to a full recovery. As long as US unemployment figures remain grim and the debt crises afflicting Europe, as well as Dubai, continues to fester, any talk of full recovery is premature.
Clouding the picture even more are the growing asset bubbles in parts of Asia, coupled with high inflation levels in China and India - which could lead to policy tightening in this region and add to the slack in global demand. Given such uncertainties, yet another bold Budget may be necessary to help stimulate the domestic economy.
Moreover, with the General Elections possibly on the horizon later this year, the government may be unwilling to risk any decline in economic growth. This is another reason for it to lean towards an expansionary budget to boost job creation and output. We already have a foretaste of what is to come in the recommendations of the Economic Strategies Committee on Feb 1. It could be argued that the ESC recommendations did not produce as much excitement as expected. After all, the push for productivity and enterprise development, which the committee emphasised, has reappeared many a time over the decades and then fallen off the radar screen. However, the ESC's role was not to generate hype or excitement, but to come up with ways to achieve more sustainable and inclusive growth.
The excitement could be delivered through other means, including the Budget. If the ESC's framework was skeletal, then the Budget will look to add flesh and muscle. It could make the recommendations more concrete and help improve their mass acceptance. An expansionary Budget would be most conducive to measures aimed at restructuring the economy.
Expect Budget 2010 to also address social issues, albeit subtly. This is as good a time as any for the government to use the fiscal tools at its disposal to tackle rising socio-economic concerns. For instance, by incentivising companies to focus on worker productivity, the government would be able to begin the process of reducing Singapore's dependence on low-cost labour from overseas. It is no secret that the influx of foreign labour has been on the minds of many Singaporeans, and this is likely to be addressed in the Budget. There have also been calls for a minimum wage to help tackle the issues of depressed wages and rising income inequality.
If the government does introduce a minimum wage, or a derivative in some part, then it could help improve the standards of living of a significant proportion of Singaporeans. Thus, while previous Budgets have been geared mainly towards economic concerns, do not be surprised if the measures in Budget 2010 are also focused on social policies.
Of course, we should not expect this year's budget to dig as deep into the coffers as did last year's $20.5 billion Resilience Package. After all, the Resilience Package was an urgent solution to help the economy avert the worst effects of the recession - which it did successfully. This time around, the Budget is likely to be less extraordinarily generous. But it could contain measures that have a profound long term impact in terms of guiding the direction of Singapore's future economic development
By Malminderjit Singh
In the run up to the Budget, to be unveiled by Finance Minister Tharman Shanmugaratnam this afternoon, the rumour mills have been working overtime on what might be in store. While analysts have expressed mixed views on the likely contents of the Budget, many would agree that expectations in this year of economic recovery are higher than usual.
There are signs to indicate that Budget 2010 will be bold, and will target some broad objectives, as well as some very specific ones. But the economic backdrop to the Budget, while better than last year, is by no means rosy. Although the government has raised its growth forecast to 4.5-6.5 per cent for this year, in reality there are still obstacles to steering the economy to a full recovery. As long as US unemployment figures remain grim and the debt crises afflicting Europe, as well as Dubai, continues to fester, any talk of full recovery is premature.
Clouding the picture even more are the growing asset bubbles in parts of Asia, coupled with high inflation levels in China and India - which could lead to policy tightening in this region and add to the slack in global demand. Given such uncertainties, yet another bold Budget may be necessary to help stimulate the domestic economy.
Moreover, with the General Elections possibly on the horizon later this year, the government may be unwilling to risk any decline in economic growth. This is another reason for it to lean towards an expansionary budget to boost job creation and output. We already have a foretaste of what is to come in the recommendations of the Economic Strategies Committee on Feb 1. It could be argued that the ESC recommendations did not produce as much excitement as expected. After all, the push for productivity and enterprise development, which the committee emphasised, has reappeared many a time over the decades and then fallen off the radar screen. However, the ESC's role was not to generate hype or excitement, but to come up with ways to achieve more sustainable and inclusive growth.
The excitement could be delivered through other means, including the Budget. If the ESC's framework was skeletal, then the Budget will look to add flesh and muscle. It could make the recommendations more concrete and help improve their mass acceptance. An expansionary Budget would be most conducive to measures aimed at restructuring the economy.
Expect Budget 2010 to also address social issues, albeit subtly. This is as good a time as any for the government to use the fiscal tools at its disposal to tackle rising socio-economic concerns. For instance, by incentivising companies to focus on worker productivity, the government would be able to begin the process of reducing Singapore's dependence on low-cost labour from overseas. It is no secret that the influx of foreign labour has been on the minds of many Singaporeans, and this is likely to be addressed in the Budget. There have also been calls for a minimum wage to help tackle the issues of depressed wages and rising income inequality.
If the government does introduce a minimum wage, or a derivative in some part, then it could help improve the standards of living of a significant proportion of Singaporeans. Thus, while previous Budgets have been geared mainly towards economic concerns, do not be surprised if the measures in Budget 2010 are also focused on social policies.
Of course, we should not expect this year's budget to dig as deep into the coffers as did last year's $20.5 billion Resilience Package. After all, the Resilience Package was an urgent solution to help the economy avert the worst effects of the recession - which it did successfully. This time around, the Budget is likely to be less extraordinarily generous. But it could contain measures that have a profound long term impact in terms of guiding the direction of Singapore's future economic development
Saturday, February 27, 2010
Buoyed by growth, India to cut deficit - February 27, 2010
Buoyed by growth, India to cut deficit - February 27, 2010
My article in the Business Times on the Indian Budget 2010.
My article in the Business Times on the Indian Budget 2010.
Thursday, February 18, 2010
Watch List for 2010
We are well into 2010 so it is timely to anticipate the events that Singaporeans will need to look out for as these are most likely to have the greatest impact on the country collectively. In no particular order, here are the 10 events most likely to shape public debate:
1. Budget 2010
The Economic Strategies Committee (ESC) has already announced its recommendations, which are a prelude to Budget 2010 announced by the Minister of Finance on 22nd Feb. It remains to be seen how bullish the government will be in rolling out incentives this year. Analysts have predicted that we are unlikely to see figures close to the $20.5 billion rolled out last year. According to reports by a local financial institution, as the 2009 tax revenue was healthier than initially budgeted, the budget deficit is likely to be smaller than the estimated $8.67 billion, which would have been equivalent to 3.5% of GDP. The report estimates the budget deficit to be around $6.8 billion or 2.8% of GDP. This may spur the government to be bolder than most analysts expect as they look to finance some of the ESC recommendations and pave the way for economic recovery. If last year's budget focused on saving businesses and jobs, this year's is likely to emphasize on strengthening the labour force and enterprises.
2. Economic Recovery
It is natural that, as we exit from one of the largest and widespread recessions of recent times, there are nervous glances to this end. We have to give the government and its schemes, like the Jobs Credit and SRI, credit for preventing this recession from being as severe as initially expected. Nevertheless as the debt crisis unfolds in Europe, unemployment continues to be high in the US and Asian governments tighten monetary policy to curb asset and consumer inflation, we may expect to revisit this topic several times during the year. Even thought economists have predicted the economy to grow between 3-5%, it may not be as smooth a recovery as we would like.
3. Youth Olympic Games
All eyes will be on Singapore as we host the YOG. As we draw closer to the event proper, there will be widespread buzz and excitement among Singaporeans. Like always though, there will be some who stand to gain less than others so expect to see less complementary letters in the Forum pages scattered among the bouquets. More importantly though, after the success of hosting APEC in 2009, this will be another to chance for us to prove that Singapore can deliver on varied platforms. This will be crucial if we are looking to host even bigger events in the future.
4. World Cup 2010
With the greatest sporting event in the world (you can tell I am biased here) less than 4 months away, there is still no clear indication if Singaporeans are going to be able to watch it from the comfort of our homes. Going against all norms of micro-economics, this is perhaps one of those few examples when competition has actually compromised consumer welfare instead of enhancing it. If either of the parties involved fails to deliver, there will be scores of angry football fans here, lots of finger pointing and plenty of filled up hotels in JB and Bintan. It will be interesting to see who takes advantage of this desperate situation and steps in to resolve it. Instant heroic status beckons.
5. Integrated Resorts
Well, if Singaporeans don't have the World Cup, they can take heart that there are alternative forms of entertainment. While the casino at Resorts World has just opened, there is still lots more to be launched across both IRs during the year. There will be plenty of attention on how the economic gains are balanced against the moral implications as we progress and how successful it is in increasing visitor arrivals into Singapore.
6. Social Cohesion
We spent a huge chunk of 2009 discussing various social issues and 2010 has started on the same note. Whether it is racial tolerance and respect, integration of foreigners or civil-society relations, these issues have gained in prominence over the course of the past year. While some may celebrate this as a sign of maturity of Singaporeans in addressing such issues, I am certain that many segments of the community is less enthusiastic that these topics have emerged. Recent incidences of teenage boys posting insensitive remarks online or of religious leaders displaying signs of racial intolerance, coupled with continued tension across the Causeway, is a sign that we may not have seen the last of racial intolerance bear its ugly head. It is affirmative action that senior political leaders have come out to address the situation but there will need to be more concrete steps taken to prevent the problem from exarcebating. Strangely enough, the racial prejudice cases have actually over shadowed the foreigner integration issue recently. However, the government has also helped to alleviate concern by acknowledging the problem exists, by introducing recent changes in healthcare, education and housing policies in favour of citizens and by understanding that the flow of foreigners needs to be calibrated.
7. Formula One
Many argue that the novelty of the F1 races will wear off by this year and so it may not be as profitable and popular. However, if last year was a reflection of what is to come, then I would say that Singapore will only be more ready this year to welcome back the Night Race into town. Fringe events, such as the F1 Rocks concert, were successful this year and so expect many more this time around. This was one of the reasons the F1 was brought in; to create an ecosystem of supporting businesses that will leverage on the F1's existence here. Expect another festive time but yet more complains on disrupted businesses and traffic congestion.
8. General Elections
Whether or not it will happen this year is anyone's guess really. The excitement has already set-in since last year with the rumour mills working overtime on several accounts. Even before the elections are announced, there is already plenty to look out for.
Firstly, with the recent cooling-off period introduced, there may be greater focus on online campaign strategies this time around; an area where the incumbent has to develop greater expertise in. Then, there is the Electoral Reform Bill to be passed, which may see smaller GRCs and more SMCs. Lastly, it remains to be seen on who the parties involved will be roping in to contest their electoral battles with the opposition parties recently generating some hype on this topic. Also, look out for the announcement of the electoral boundary review committee who will decide on the constituency lines and size.
9. Tourism 2010
Recent reports have shown that tourism figures declined for 2009 so it will be interesting to note the steps STB takes to improve on this trend, especially since tourism contributes to more than 5 percent of GDP. STB has already taken steps in the right direction by implementing a public ideas portal, the Tourism Compass 2020, to better its blueprint targets, to achieve $30 billion in tourism receipts and 17 million visitor arrivals to Singapore, by 2015. The new plans may unveil some exciting new attractions to enhance our growing tourism landscape.
10. Productivity
The P word comes back to our dictionary after being inconspiciously absent for some years. Productivity will be key to long-term competitiveness but expect some displacement if efficiency makes a larger headcount redundant. However, this may not be significant because by the time productivity efforts begin to show results, a calibrated foreign worker intake, along with economic expansion, will free more jobs in the economy. The ESC has already identified this as a major are of concern and with PM setting 2-3 percent increases as a benchmark, the Tripartite will now be responsible for driving this forward.
1. Budget 2010
The Economic Strategies Committee (ESC) has already announced its recommendations, which are a prelude to Budget 2010 announced by the Minister of Finance on 22nd Feb. It remains to be seen how bullish the government will be in rolling out incentives this year. Analysts have predicted that we are unlikely to see figures close to the $20.5 billion rolled out last year. According to reports by a local financial institution, as the 2009 tax revenue was healthier than initially budgeted, the budget deficit is likely to be smaller than the estimated $8.67 billion, which would have been equivalent to 3.5% of GDP. The report estimates the budget deficit to be around $6.8 billion or 2.8% of GDP. This may spur the government to be bolder than most analysts expect as they look to finance some of the ESC recommendations and pave the way for economic recovery. If last year's budget focused on saving businesses and jobs, this year's is likely to emphasize on strengthening the labour force and enterprises.
2. Economic Recovery
It is natural that, as we exit from one of the largest and widespread recessions of recent times, there are nervous glances to this end. We have to give the government and its schemes, like the Jobs Credit and SRI, credit for preventing this recession from being as severe as initially expected. Nevertheless as the debt crisis unfolds in Europe, unemployment continues to be high in the US and Asian governments tighten monetary policy to curb asset and consumer inflation, we may expect to revisit this topic several times during the year. Even thought economists have predicted the economy to grow between 3-5%, it may not be as smooth a recovery as we would like.
3. Youth Olympic Games
All eyes will be on Singapore as we host the YOG. As we draw closer to the event proper, there will be widespread buzz and excitement among Singaporeans. Like always though, there will be some who stand to gain less than others so expect to see less complementary letters in the Forum pages scattered among the bouquets. More importantly though, after the success of hosting APEC in 2009, this will be another to chance for us to prove that Singapore can deliver on varied platforms. This will be crucial if we are looking to host even bigger events in the future.
4. World Cup 2010
With the greatest sporting event in the world (you can tell I am biased here) less than 4 months away, there is still no clear indication if Singaporeans are going to be able to watch it from the comfort of our homes. Going against all norms of micro-economics, this is perhaps one of those few examples when competition has actually compromised consumer welfare instead of enhancing it. If either of the parties involved fails to deliver, there will be scores of angry football fans here, lots of finger pointing and plenty of filled up hotels in JB and Bintan. It will be interesting to see who takes advantage of this desperate situation and steps in to resolve it. Instant heroic status beckons.
5. Integrated Resorts
Well, if Singaporeans don't have the World Cup, they can take heart that there are alternative forms of entertainment. While the casino at Resorts World has just opened, there is still lots more to be launched across both IRs during the year. There will be plenty of attention on how the economic gains are balanced against the moral implications as we progress and how successful it is in increasing visitor arrivals into Singapore.
6. Social Cohesion
We spent a huge chunk of 2009 discussing various social issues and 2010 has started on the same note. Whether it is racial tolerance and respect, integration of foreigners or civil-society relations, these issues have gained in prominence over the course of the past year. While some may celebrate this as a sign of maturity of Singaporeans in addressing such issues, I am certain that many segments of the community is less enthusiastic that these topics have emerged. Recent incidences of teenage boys posting insensitive remarks online or of religious leaders displaying signs of racial intolerance, coupled with continued tension across the Causeway, is a sign that we may not have seen the last of racial intolerance bear its ugly head. It is affirmative action that senior political leaders have come out to address the situation but there will need to be more concrete steps taken to prevent the problem from exarcebating. Strangely enough, the racial prejudice cases have actually over shadowed the foreigner integration issue recently. However, the government has also helped to alleviate concern by acknowledging the problem exists, by introducing recent changes in healthcare, education and housing policies in favour of citizens and by understanding that the flow of foreigners needs to be calibrated.
7. Formula One
Many argue that the novelty of the F1 races will wear off by this year and so it may not be as profitable and popular. However, if last year was a reflection of what is to come, then I would say that Singapore will only be more ready this year to welcome back the Night Race into town. Fringe events, such as the F1 Rocks concert, were successful this year and so expect many more this time around. This was one of the reasons the F1 was brought in; to create an ecosystem of supporting businesses that will leverage on the F1's existence here. Expect another festive time but yet more complains on disrupted businesses and traffic congestion.
8. General Elections
Whether or not it will happen this year is anyone's guess really. The excitement has already set-in since last year with the rumour mills working overtime on several accounts. Even before the elections are announced, there is already plenty to look out for.
Firstly, with the recent cooling-off period introduced, there may be greater focus on online campaign strategies this time around; an area where the incumbent has to develop greater expertise in. Then, there is the Electoral Reform Bill to be passed, which may see smaller GRCs and more SMCs. Lastly, it remains to be seen on who the parties involved will be roping in to contest their electoral battles with the opposition parties recently generating some hype on this topic. Also, look out for the announcement of the electoral boundary review committee who will decide on the constituency lines and size.
9. Tourism 2010
Recent reports have shown that tourism figures declined for 2009 so it will be interesting to note the steps STB takes to improve on this trend, especially since tourism contributes to more than 5 percent of GDP. STB has already taken steps in the right direction by implementing a public ideas portal, the Tourism Compass 2020, to better its blueprint targets, to achieve $30 billion in tourism receipts and 17 million visitor arrivals to Singapore, by 2015. The new plans may unveil some exciting new attractions to enhance our growing tourism landscape.
10. Productivity
The P word comes back to our dictionary after being inconspiciously absent for some years. Productivity will be key to long-term competitiveness but expect some displacement if efficiency makes a larger headcount redundant. However, this may not be significant because by the time productivity efforts begin to show results, a calibrated foreign worker intake, along with economic expansion, will free more jobs in the economy. The ESC has already identified this as a major are of concern and with PM setting 2-3 percent increases as a benchmark, the Tripartite will now be responsible for driving this forward.
Wednesday, February 10, 2010
Singapore's Most Influential News Story of 2009 - Poll Results
I ran this little poll here on Insights-Asia, just to get a sense of which of these news stories created the largest impact on readers in Singapore. In fact, when I was compiling the big news stories of 2009, the list was endless as there were many more that created waves. However, I wanted a good balance between economic, social and political stories and hence, my list.
There is little surprise that voters chose the Resilience Package, Economic Recession and Its Woes as the most influential news story of 2009, given that it was topic that was on most Singaporeans' minds. What is perhaps more surprising though is its margin of victory as the second placed news story lost by only 1 vote (2%)! It is the Integration of Foreign Expats which came close to topping it and few can deny that this was one of the most discussed issues in Singapore last year and is still being carried forward until now.
The ranking of the other stories, APEC Singapore, Multiracialism in Singapore and the Singapore Youth Olympic Games, did not score as highly as the other two and I guess this may give a slight indication of what influences Singaporeans most. Having said that, the sample size was a challenge and I hope to get more respondents in the future so that the voting results can be more reflective of the general population.
Saturday, January 9, 2010
Challenges Facing Singapore's Economy (Part 4) - Implications of Rising Costs on Businesses
In my previous post, I explained how Singapore has moved rapidly up the value chain based on international comparisons of the Manufacturing Value-Added (MVA) data. Many may look at this as less of a problem and more of a positive sign as having a higher MVA indicates progression in manufacturing activity. Critics may also argue that since we are being presented with these opportunities to upgrade, there is no reason to turn them away and should instead embrace them.
The point is that moving up the value-chain too quickly has forced business costs in Singapore to rise rapidly. This is reflected by higher unit business costs here as unit labour costs in Singapore increased by 22.8 percent in 2007 to 2008. This is enormous when compared to corresponding figures of 0.4 percent and 2.8 percent in Japan and US respectively, not to mention the drop in Korea’s unit labour costs by 0.3 percent.
Moreover, the rising labour costs in Singapore are not directly a result of higher productivity. Comparing the productivity growth rates released by the International Labour Organization, Singapore’s productivity increased by 3.7 percent from 1980 to 2002, thus showing that its productive efficiency is increasing at a slower rate than its MVA growth as well as its rising business costs. We can conclude from this that Singapore’s rapid rate of rise up the manufacturing value chain has contributed to higher unit labour costs here, and consequently higher business costs, which have not been compensated by a substantial increase in productivity. If we are to continue on this trend of moving up the value chain quickly, then we should at least ensure that productivity gets a greater push so that higher labour costs can be substantiated for our SMEs and MNCs.
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