The island state of Singapore punches above its weight as an Asian financial centre. but far from rivalling Jersey and Guernsey, its continued development offers plenty of opportunities for Channel Islands businesses and investors
Perched at the foot of Malaysia and a short distance from Indonesia across the Malacca Straits, Singapore’s primary strength has always been its geographical position. A journey by ship between East Asia – China, Japan, South Korea, the Philippines and Vietnam – and places west, such as India, the Middle East and beyond, will inevitability pass through or near to Singapore.
For a long time, it was considered that its growth as a major sea port, trading centre and financial services hub would be enhanced if it fostered the right communications infrastructure and
high-grade skills and education.
And that’s what it did, particularly under the leadership of its first Prime Minister and visionary leader Lee Kuan Yew following independence in 1965.
The state and business are closely entwined in Singapore – and nowhere is this more in evidence than in the financial services sector, where the Monetary Authority of Singapore (MAS), the country’s central bank and financial services regulator, plays a leading development role.
First and foremost, the authority’s careful and respected regulatory regime supports the integrity of the jurisdiction. This has been vital in attracting business and investment.
At the same time, it has identified key aspects of the economy, and particularly financial services, that it wants to encourage. This includes implementing the financial sector’s Industry Transformation Map (ITM), which is one of 23 ITM sector initiatives introduced by the government in its 2016 budget.
Strategic approach
As part of this, Singapore’s strategy for financial services is for it to be:
• A leading international wealth management centre
• An Asian hub for fund management and an investment fund domicile
• The leading foreign exchange centre in the Asian time zones.
In order to achieve these objectives, MAS is working with the financial services industry in a number of ways:
• Building platforms that enable Asian companies to reach a wider network of international investors
• Developing Singapore’s financial ecosystem to facilitate the financing of Asian infrastructure projects
• Growing its bond markets for the benefit of Asian businesses to raise debt
• Promoting Singapore as the Asian centre for insurance and risk transfer.
Part and parcel of these measures is harnessing and developing the most up-to-date technologies, creating shared utilities – such as digital payments – and client identification.
Growing its fintech sector is also a priority, as is committing to an education and skills programme to make sure the jurisdiction’s financial services businesses have the skills to meet the ITM aims.
There is clearly common ground between some of Singapore’s chosen areas of financial services development and those where the Channel Islands have deep and longstanding expertise.
In particular, wealth management and the use of trusts is an area where the islands have been playing a leading role for some time. In fund management, and specifically fund domicile, Jersey and Guernsey again have a significant presence of their own.
Infrastructure funds is another segment of the market where Channel Islands expertise has played a role in connecting with infrastructure projects from all over the world.
It’s perhaps not surprising, then, that a number of Channel Islands businesses have strong ties with partners or sister operations in the Singapore jurisdiction.
One of these is Butterfield Group, the Bermuda-based offshore bank and trust company with operations in both Jersey and Guernsey.
Paul Hodgson, its Deputy Group Head of Trust based in Guernsey, explains that in 2018 Butterfield acquired Deutsche Bank’s Global Trust Solutions business – which included its Singapore trust company. This fitted well with Butterfield’s global wealth structuring operation.
“We provide high-end fiduciary solutions to high-net-worth individuals and families from the whole of the Asian region – North and South Asia, not limited to people with connections to Singapore,” he says.
“Their shared characteristic would generally be their level of overall wealth and the need for sophisticated wealth structuring solutions, such as trusts and company service provider arrangements.”
Wealth management
Hodgson explains that Singapore is increasingly becoming the wealth management centre of South-East Asia, South Asia and North Asia, including Japan, Taiwan and mainland China.
“We have a number of structures that utilise the services of the Guernsey trust company as the trust service provider, but the relationship management lies with our Singapore team,” he explains.
“While Singapore has moved into the trust space over the past 10 to 20 years, the courts in Singapore are not particularly familiar with trusts, and especially with trusts in dispute.
“I would say that a lot of trust companies in both Guernsey and Jersey have books of business where the family is living, working and making its money in Asia but it has a Guernsey or Jersey trust as a wealth planning tool.”
The key is the level of expertise resident in the Channel Islands and the way in which this can be added to Singapore’s geographical and business strengths for mutual benefit.
And it is a growing market – because an increasing proportion of the world’s personal wealth is being developed in Asia. This is good for Singapore, but it is also healthy for Channel Islands service providers.
Infrastructure financing
The development of all forms of infrastructure is a necessity across Asia, including the major populations of China, India and Indonesia. Infrastructure can mean roads, railways, airports, ports, bridges, power generation and distribution, water treatment and delivery.
Again, while Singapore is establishing itself as the go-to financing hub, the Channel Islands’ skills are complementary and valuable.
Infrastructure projects involving private sector funding often employ limited partner structures. If domiciled in the Channel Islands, these can be tax-neutral.
This appeals to investors who, while paying tax on their income in their home jurisdictions, are not taxed again at the fund structure level, which might be the case were the fund domiciled in an onshore jurisdiction.
A further advantage the islands provide to infrastructure projects is debt-raising through The International Stock Exchange (TISE) in Guernsey. Fund sponsors will typically list their debt in the form of bonds or loan notes, and Jersey and Guernsey’s twin well-regulated and transparent environments are cost-effective and administratively efficient places to do so.
Moreover, the islands’ expertise in infrastructure funds is global – expertise gathered in Europe or North and South America, for example, can be harnessed for the benefit of Asian projects financed through Singapore.
Unsurprisingly, both Guernsey Finance and Jersey Finance have led delegations to Singapore and taken part in exhibitions and trade shows in the region to promote the islands’ services and capabilities.
In addition, many firms, such as Butterfield, have established, acquired or expanded operations in Singapore in recent years. These include trust provider Hawksford, law firms Carey Olsen and Collas Crill, and corporate services provider Equiom, among others.
Perhaps the last word should rest with Butterfield’s Paul Hodgson, who believes the Channel Islands can learn from Singapore’s development.
“We have the opportunity for the Channel Islands to be the Singapore of Europe. We have historically invested in the people and the skill sets, just as Singapore is doing. We have the appropriate legal and accounting talent here, which is very, very important as part of the ecosystem that a trust industry relies on. So we have all the ingredients here.”
Jersey and Guernsey, it seems, have much to gain as Singapore moves to the next stage in its development as the epicentre of Asian financial services.