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20 banks likely to join frenemy trade pact between Hong Kong and Singapore
SOME 20 global banks are expected to join the landmark partnership between Singapore and Hong Kong to build a blockchain-powered trade network - the first in the world and one that could cement the two trade hubs' position as global players - said two top central bankers from Singapore and Hong Kong.
Speaking at the Singapore Fintech Festival on a panel on Thursday, they said the latest global trade connectivity network (GTCN) could set new global standards for the trillion-dollar industry as the two competitors partner for the first time in a long while.
The Monetary Authority of Singapore (MAS) said this week that the GTCN will be rolled out by early 2019. This platform aims to bring about the seamless transfer of digital documents and data. The aim is to cover global trade flows coming through the two main trade hubs in Singapore and Hong Kong. Singapore, which is taking the Asean chairmanship next year, is expected to target Asean, while Hong Kong will take on China.
"Hong Kong has a hinterland called China. Singapore has a hinterland called Asean," said Bernard Wee, head of MAS's financial markets development department and payments and technology solutions.
Both the Singapore and Hong Kong central banks were engaged in a three-hour meeting with bankers in Singapore on Thursday, said Li Shu-Pui, executive director (financial infrastructure) of the Hong Kong Monetary Authority. Much work lies ahead in realising the GTCN. The bankers have flagged concerns such as data privacy, fretting that transaction secrecy cannot be preserved, said Mr Li. He added that the regulators will have to think about the regulations backing the use of distributed ledger technology, which remains a new form of innovation in "mission-critical" trade finance.
Blockchain technology uses a distributed ledger - shared among financial institutions and regulators - to digitise trade-finance documents and bring about significant savings for the industry and corporates.
Mr Li also acknowledged that it's not adequate just to have Singapore and Hong Kong involved in GTCN. But he thinks that if they made progress with it, others, especially the Europeans, will be drawn to it.
Current documentation supporting business remains beset with problems of inefficiency due to its paper-based nature. As an example, a shipment from Singapore to Jakarta takes about a day. But to send a document related to that very trade takes about a week, said Tan Kah Chye, founder of Tin Hill Capital and the former vice-chairman of Barclays corporate banking.
"Coming from the private sector, most of us want the government to be hands-off. But creating standards is something that we want the government to be hands-on," said Mr Tan, who was speaking on the panel.
Mr Li also remarked on the fact that Singapore and Hong Kong are sitting together on a panel, noting the traditional competition between the two open economies in Asia.
But this new form of "coopetition" is emerging as fintech is helping to tear barriers down.
As MAS's Mr Wee summed it up: "The message is that when you work with one of us, you work with both of us."