Singapore beats Hong Kong as Asia's top treasury location

More multinationals still prefer the Lion City with 4,200 regional headquarters based in Singapore, the largest in APAC.

Singapore zoomed past close regional competitor Hong Kong to rank as the preferred regional location for multinational corporate treasurers, according to a survey conducted by accounting firm EY. 

The survey reached out to treasurers and strategic stakeholders of regional and global treasuries of commodities, consumer goods, technology and shipping firms based out of Singapore with over 45% having a global turnover of more than US$20b.

The finance and treasury centre (FTC) incentive tax rate in Singapore, which stands at 8%, is a key component of the city’s regional competitiveness although the playing field has since leveled out after Hong Kong introduced a similar incentive in 2015-2016.

“Whilst the presence of the FTC tax incentive is an attractive factor in Singapore, most of the interviewees emphasised that the location of the regional business headquarters and a well-developed financial ecosystem were more important criteria in influencing the decision on location selections,” EY said in the report.

Proximity to the regional management is an important factor for treasuries to carry out funding and investment requirements, balance intercompany lending and borrowing and allow for shorter response time on critical funding decisions and day-to-day activities such as liquidity and cash management.

This aspect is something that Singapore fulfils easily, attested by the 4,200 regional headquarters based in Singapore, the largest in Asia-Pacific. The figure is triple the 1,389 regional headquarters based in Hong Kong and towers above 531 in Tokyo and 470 in Shanghai, according to the EY report. Moreover, there are 132 commercial banks, 26 merchant lenders and 758 capital markets services license holders in the city state.

“The other important factor is access to a well-developed, well-regulated and open financial ecosystem. It is critical for the regional treasuries to have access to appropriate advisory and solutions on funding, hedging exposures and managing investments and cross-border flows,” EY noted.

Respondents also preferred Singapore over Hong Kong for its legal and regulatory system, political stability, diverse workforce and talent and livability.

Room to grow
Despite ranking as the preferred treasury location in Asia, Singapore still trails behind London and US which still rank highly for debt issuance and certain foreign exchange activities due to better depth in capital markets that allow for better pricing on exotic currencies, financial instruments and better investor appetite.

“[W]hilst Singapore has the infrastructural means, the appetite of investors may be a limiting factor in the raising of funds. To better drive investors interests, there could be more forums and industry talks organised by the authorities and the industry to raise the overall awareness of the debt capital market,” EY proposed.

Moreover, respondents cited ‘overly stringent’ track-and-trace requirements to qualify for the FTC incentive given the need to spend significant time and attention to ensure compliance with tax regulations and set up different banking and financial accounts for different cash pools to track various funds and its flows. “Treasuries are therefore limited in how they can truly optimise their processes given the need to create the necessary mechanism to track the compliance with these requirements,” concluded EY.