CHALLENGES FACING SINGAPORE AS A FINANCIAL CENTRE

Abstract

Singapore has developed as a financial centre and this is largely attributed to the efforts of Singapore Government. After three decades of development, the Singapore financial centre has not only attained regional, but international recognition. In particular, her offshore market (Asian Currency Units), her foreign exchange market and her futures market have gained significance on the world's financial map. However, Singapore's ambition is more than just being a financial centre. Her target is to be the premier financial centre in the region. Hence in her quest for this goal, she faces multitudes of challenges. However, for the purpose of this academic exercise, three challenges are being examined. The three are : deregulation, competition and advancement in technology. Deregulation is a crucial factor for the growth of financial markets today. Globalization has also hastened the process of deregulation. However, for prudential reasons, the process of deregulation is usually accompanied by the formulation of new regulations. The issue of balance between regulation and deregulation has also become more prominent over the years as countries begin to see the effects of deregulation on wooing international institutions and investors. For Singapore, whose financial centre is segmented into the liberal offshore market and the highly regulated domestic market, deregulation of her regulated domestic market seems is what is left to be done. The second challenge, competition, comes from all direction. Though competition in the financial marketplace improves efficiency, it also brings out the winners and the losers. Since no one likes to be a loser, financial centres around the world are rapidly improving themselves. Singapore, being a more experienced financial centre compared to the neighbouring countries, has the competitive edge to be a winner at the moment. However, to stay as a winner for longer term, she needs to keep watch of the bottomline and continually improve her own industry.

Advancement in technology is the third challenge. The implication of technological improvement is in boosting the financial centre's competitive advantage via minimising time loss, cutting costs and increasing productivity. In other words, the improvement in technological infrastructure of a financial centre plays an important role in ensuring the centre's competitive advantage. Hence, Singapore has to keep up with such improvement to boost her financial industry. Besides, more attention should also be given to keep cost competitive and raise productivity of the industry. All in all, Singapore needs to upgrade in order to meet these challenges. Being small and open, she needs to change and adapt quickly. She has done well in the past, but whether she will continue to do well in the future, depends on how fast and how well she can upgrade and keep ahead of her competitors in the region. In conclusion, we hope that the recommendations and policy implications can help Singapore overcome the challenges she faces and remain as the premier financial centre in the region.