Greater partnership with Chongqing augurs well for Singapore

Singapore

IN DEEPENING ties with Chongqing, Singapore can look at ways to ramp up financing for infrastructure projects along the One Belt One Road route, in part by taking aim at the expected 800 billion yuan (S$166 billion) pipeline of public-private partnership projects in the strategically located Chinese city alone.

Speaking at the second Singapore-China (Chongqing) Financial Conference in Chongqing on Monday, managing director of the Monetary Authority of Singapore Ravi Menon said greater partnership with the Chinese city would allow Singapore to participate in an initiative that he described as "breathtaking in its strategic vision".

"The Belt and Road's potential scope for connectivity is perhaps unmatched in human history," said Mr Menon. "The Belt and Road Initiative is about bringing together the countries of Asia through greater connectivity - deeper links of transport and communications, stronger flows of trade and investment, greater movement of people and ideas."

Mr Menon said this comes as annual direct investment between Singapore and Chongqing has more than doubled in the last five years, from 7.4 billion yuan to 22.2 billion yuan. Singapore is the largest foreign direct investor in China.

Through the Chongqing Connectivity Initiative project - the third of government-to-government level projects between Singapore and China - Chongqing corporates have raised 22 billion yuan in offshore financing from Singapore-based financial institutions as at end-2016.

The average financing cost for these deals in 2016 was about 4.86 per cent, which meant some 70 basis points were shaved off when compared to the average interest rate for similar short-term loans in Chongqing. "Chongqing is a cornerstone of regional connectivity," said Mr Menon.

"It is a pivotal node on the One Belt, One Road, connecting the growing economies of South and Southeast Asia with the rest of China. It is also an important city along the Yangtze River Economic Belt and a key player in the overall development of the Western Region."

In unlocking private-sector financing for infrastructure projects, the Chinese banks with operations in Singapore have already committed more than 500 billion yuan in financing Singapore companies involved in Belt and Road projects, including the issuance of project bonds, said Mr Menon.

Singapore can also work to securitise infrastructure assets that are illiquid by nature, with some 800 billion yuan of projects owned and operated by both the state and companies in Chongqing expected between 2015 and 2020. By turning these hard assets into securities, Singapore can play a role in connecting project owners with long-term investors such as insurance companies and sovereign wealth funds.

There is an ongoing "demonstrative project" where Shanghai Pudong Development Bank is looking to securitise a portion of its client's assets as a real estate investment trust in Singapore, said Mr Menon.

Singapore can offer expertise on risk management to support investment in infrastructure projects, which are vulnerable to natural catastrophes. Mr Menon cited an example of a Singapore start-up, Asia Risk Transfer Solutions, which has developed a risk analytics platform for pricing and managing index based insurance products.

There is also ongoing cooperation in the area of training for topics such as insurance to forex risk management.

More than 400 financial sector professionals and corporate leaders from Singapore and Chongqing participated in the conference.

Three memoranda of understanding (MOUs) were also signed between the three Singapore banks - DBS, OCBC, and UOB - and corporates in Singapore and Chongqing.

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