Singaporean sweeteners help financial services investment hold up

Singaporean sweeteners help financial services investment hold up

19 Feb    Finance News

Foreign direct investment (FDI) in financial services and fintech held up well in Singapore last year, despite the economic fallout from the Covid-19 pandemic.

The city state attracted 53 financial services and fintech projects in 2020, a slight drop from the 59 projects it attracted in 2019. Meanwhile, capital investment in Singapore increased from $1.18bn to $1.2bn in 2020, according to greenfield data monitor fDi Markets.

In comparison, other countries in southeast Asia saw sizeable declines in financial services and fintech FDI projects last year. Vietnam, for example, saw a 63% drop in financial services projects (from 11 to four) and a 57% drop in capital investment (from $382.6m to $163.9m).

The Singaporean government does a lot. In a year where Covid-19 has forced people to look around more before investing, it has made Singapore more attractive.

Tania Gold, Fitch Ratings

Meanwhile, the number of projects in Malaysia fell from 12 in 2019 to 10 last year. Financial services capital investment in Malaysia fell 28% from $160.3m to $114.2m.

Foreign financial services and fintech investment created 1,980 jobs in Singapore last year, almost the same number (1,988) as 2019. This compares with a precipitous drop in fintech jobs created in the Philippines (306 jobs last year compared with 1,286 in 2019) and a 75% slump in financial services and fintech jobs (from 306 to 75 jobs) in Thailand, according to the latest data.

Singapore’s well-organised response to the Covid-19 pandemic – including widespread test and trace measures and strict quarantines leading to the lowest case fatality rate in the world – is one factor, along with its position as a developed English-speaking regional hub. But another factor behind the steady FDI figures may be a series of ambitious government programmes that seek to attract the financial services and fintech investment.

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Digital licences and co-investment

Singapore, for example, has tried hard to attract family offices – private wealth management advisory firms that serve ultra-high-net-worth investors – and its global investor programme offers permanent residence to wealthy people and businesses viewed as able to drive growth in key areas such as technology.

Other incentives seek to assist tech companies with resources to grow or scale a business in Singapore. Singapore’s Economic Development Board, for example, will co-invest in tech companies that want to develop a presence in the city state.

“The Singaporean government does a lot,” said Tania Gold, head of banks ratings south and southeast Asia, Fitch Ratings. “In a year where Covid-19 has forced people to look around more before investing, it has made Singapore more attractive.”

The Monetary Authority of Singapore, meanwhile, recently awarded several digital banking licences that seek to enable non-bank players to offer financial services.

Two full digital retail banking licences were awarded to a Grab-Singtel consortium and tech giant Sea; and digital wholesale bank licences went to Ant Group and a coalition comprising Greenland Financial Holdings, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management.

“Digital penetration is high in Singapore but credit penetration is lower in terms of credit cards and loans. So there’s clearly a market for digital banks here,” Ms Gold added. “Other markets in southeast Asia are more underbanked than Singapore, such as the Philippines or Indonesia, with more pent-up demand but the infrastructure isn’t there.

“The Singaporean regulator is not too onerous. It seeks to ensure a good balance between financial stability and providing room for digital players to grow.”

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