Singapore launches mandatory climate reporting consultation | FinanceAsia

Earlier this month, Singapore’s Accounting and Corporate Authority (Acra), together with Singapore Exchange Regulation (SGX RegCo), instigated a public consultation on a proposed set of mandatory climate-related disclosures (CRDs). The two bodies partnered in June 2022 to form Singapore’s Sustainability Reporting Advisory Committee (Srac).

The public consultation runs from July 6 until September 30, during which the public can access related documents through a portal on Acra and RegCo’s websites and submit feedback via a designated form. The two bodies (Acra and SGX RegCo) plan to consider public feedback and finalise the recommendations by 2024.

If further amendments are proposed to listing rules around sustainability reporting, a separate consultation will launch before the end of the year, SGX RegCo added in a press release.

The mandatory CRDs will require issuers listed on the Singapore Exchange (SGX) to report their climate impact in line with the standards set by the International Sustainability Standards Board (ISSB), starting from financial year 2025 (FY2025). 

Similar requirements for large non-listed companies with annual revenue of over $1 billion will be mandatory starting from FY2027, according to the recommendations. In doing so, Singapore becomes among one of the first markets in Asia to consult on CRDs that are set to affect large, non-listed companies. 

“To transition to a net zero economy, we need the critical mass to move the needle. With more companies adopting climate related disclosures, we are better able to drive actions and impact to meet our climate targets and make Singapore a better and more sustainable place for our future generations,” Esther An, chair of Srac told FinanceAsia.

New requirements

The new recommendations advance the city-state’s current reporting requirements, which were initially introduced in a phased manner in late 2021 to elevate Singapore’s role in Asia’s ESG arena and to uphold its position as a global business hub.

The market’s current CRDs require listed companies active in five prioritised carbon-intensive industries (finance; energy; transportation; materials and buildings; agriculture, food and forest products) to submit data related to their corporate climate impact.

However, the proposed amendments expand these requirements to all issuers listed on the SGX.

All SGX-listed corporates will be required to report their scope 1 and 2 emissions – those direct emissions that result directly from their activity or their production processes. 

Corporates will also be required to submit data around scope 3 emissions – the indirect pollutants that result from the full breadth of a company’s supply chain. However, because these involve more complex calculation, Srac is offering companies one to two years to prepare for these reporting requirements before having to submit exact data, the press release explained.

“Scope 3 emissions are typically the largest component of many companies’ greenhouse gas emissions,” An elaborated to FA.

“To facilitate companies in making the disclosure, the ISSB standards have provided relief. For example, the standards allow the use of estimates to prepare this disclosure when the information cannot be obtained without undue costs and efforts,” she explained.

External assurance on scope 1 and 2 emissions provided by Acra-registered audit firms will be expected from all listed firms starting FY2027, and from large non-listed companies starting FY2029, according to the recommendations. 


Commenting on the new disclosure requirements, Helge Muenkel, chief sustainability officer at DBS Bank told FA, “By starting with economically significant non-listed companies in Singapore, the goal is to eventually create a domino effect with better quality ESG data across the value chain, especially in relation to scope 3 emissions.”

As a Singapore-headquartered lender, DBS has been an active participant in Singapore’s sustainability effort. The bank announced in early July that it had upskilled over 1,600 institutional banking relationship managers and 170 credit risk managers to deepen their knowledge of sustainable financing practices, in order to better help corporate clients navigate the sustainability landscape.

Last September, market regulator, the Monetary Authority of Singapore (MAS) and SGX collaborated to launch a platform, ESGenome, aimed at enhancing companies’ ESG reporting processes, FA reported.  The assistance provided by the capability includes processes for sustainable procurement across supply chains.

To further facilitate large non-listed companies that are new to climate reporting, Srac suggests that scope 3 emissions need only be disclosed in the third year of mandatory reporting, An added.

The Srac team confirmed that mandatory CRDs for large non-listed companies with revenue over $100 million is set to commence from FY2030, but this timeline will be further reviewed in 2027, depending on the outcome from implementation of the current recommendations. 

“With more countries pledging for net zero and the rising carbon cost globally, climate strategy and reporting can help companies, listed or non-listed, to mitigate and adapt to risks in the transition to a low carbon economy,” An said. 

Whether the requirements will expand to include other aspects of ESG-related reporting remains undecided. The recommendations begin with CRDs as a starting point, An said, emphasising the urgency to combat climate change.

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Ayala’s path to an ESG driven business | FinanceAsia

With several ESG-backed initiatives in recent years, the Philippines-based conglomerate Ayala has solidified its commitment to sustainability. Operating across verticals including energy, finance, infrastructure, and real estate, Ayala has committed to net zero greenhouse emissions by 2050. The conglomerate’s energy wing ACEN recently created the world’s first energy transition mechanism (ETM) in November 2022, backed by BPI and RCBC.

On the social front, Ayala’s GCash app and BPI’s BanKo have  played pivotal roles in financial inclusion for unbanked Filipinos and small to medium size enterprises. BPI and Globe are currently reviewing their framework to consciously focus on these areas.

When it comes to governance, Ayala’s boards are working towards an appropriate level of diversity and independence. This involves maintaining high standards when it comes to transparency and disclosure.

The 190-year-old company’s social and sustainability initiatives have a long history. Albert de Larrazabal, CFO at Ayala Corporation said, “We have always aligned ourselves to national interest and had very high standards of governance and stewardship. As we must be mindful of the ecosystems we operate under, ESG in various forms has always been part of our value proposition.”

Ayala’s approach to ESG

Today, ESG-based financing is a priority for Ayala. Apart from ACEN’s implementation of the world’s first ETM, Ayala has issued a social bond with the IFC in support of its cancer hospital. Larrazabal said, “We are looking to do KPI-linked social and ESG financing, which incorporates targets into the commercial terms and conditions of the loan.”

Even during the M&A process, the conglomerate is mindful of integrating new acquisitions into its ESG framework. Ayala has also taken steps to ensure that ESG is a priority that is ingrained at the highest levels of the organisation, leveraging its membership with the World Business Council for Sustainable Development (WBCSD). The conglomerate’s board has received training which ensures they can play an active role in tracking and monitoring developments in the ESG space.

Corporates making public commitments to sustainability draw a lot of attention, not all of it positive. Asked how Ayala approaches concerns about greenwashing, Larrazabal said, “Sometimes it happens inadvertently because of incorrect measurements. That’s why we brought in South Pole. We have taken steps to ensure we are on the right track by committing to independent verification, to give people a degree of reassurance.”

Building a model for the APAC region

While the need for sustainable leaders is strongly felt across APAC, many countries in the region have a minimal contribution to emissions — the Philippines emits half the global average on a per capita basis. Larrazabal said, “Between 80% to 88% of our emissions — depending on individual businesses — are scope 3.” These emissions are defined as the result of activities from assets not owned or controlled by a reporting organisation, but which are a part of its value chain. Larrazabal said, “Our scope 3 is somebody else’s scope 1 and scope 2. We need an environment that enables, incentivises, and if that fails, penalises those who disregard scope 1 and 2.”

Many emerging markets grapple with issues similar to those facing the Philippines — adopting renewable energy, while meeting the demands of a growing population and economy. As a result, ETM-like arrangements may be embraced to a greater extent. Asked for his advice on managing such a transaction, Eric Francia, president and CEO at ACEN said, “It is important for investors to reconsider their position on coal, so long as the principles are well understood. One may be investing in a coal plant, but for a good purpose, which is enabling its early retirement.”

Offering a financial perspective on the ETM, TG Limcaoco, president and CEO Bank of Philippine Islands added, “We provided lending and brought in other institutions. We took reduced rates of returns for equity and debt exposure, which allowed us to shorten the life of the plant by 10 to 15 years. It is a big win for everyone involved.”

For more on Ayala’s adoption of ESG and a deeper insight into the world’s first ever ETM, please watch the accompanying video.



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SUSTAINABLE FINANCE POLL 2023: Asian debt markets sharpen ESG focus | FinanceAsia

It’s looking increasingly like the time for sustainable finance to shine. After a fall in the year-on-year volume of green, social and sustainability (GSS) instruments globally during 2022, a rebound is forecast this year – to around US$1 trillion in issuance, forecasts S&P Global.

Asia Pacific (APAC) is well-placed to capitalise on this upswing. S&P Global’s projections, for example, are that GSS issuance volume in the region will jump by as much as 20%, to reach US$240 billion, roughly a quarter of the global landscape.

The longer-term story looks promising, too, especially amid ambitious climate goals. Even in South-east Asia alone, about US$180 billion needs to be invested in clean energy projects every year until 2030 to keep the transition journey on track, based on the International Energy Agency’s Sustainable Development Scenario. Putting this in context, from 2016 to 2020, investment in clean energy was $30 billion per year, on average.

Adapting to climate change is certainly a key driver. But according to more than 100 investors and borrowers in APAC who took part in the 6th annual poll by ANZ and FinanceAsia in April and May 2023, multiple dynamics indicate an ever-bigger role for GSS instruments.

Among the key factors is a mix of policy and regulatory initiatives to foster greater transparency. This should, in turn, boost investor demand and issuer appetite. At the same time, as this segment of the region’s capital market continues to mature, active GSS bond investors and issuers can expect greater potential for newer formats of issuance to help bridge social and environmental priorities such as biodiversity and gender equality.

10 top takeaways from the survey

  1. 92% of all respondents have integrated GSS factors within their strategy, with 77% confirming that the market volatility over the past 12-18 months either hasn’t changed or has increased their focus on GSS.
  2. Nearly half (49%) of investors now have their own in-house ESG research and analysis capability, a notable increase from the 42% poll finding 12 months ago.
  3. 70% of investors have some type of experience with sustainable finance, with bonds much more popular than loans.
  4. While just under one-third of investors have exposure to transition finance instruments, another 45% are interested in investing in them, either in the next year or over the medium to long term.
  5. Although 92% of investors haven’t yet invested in Orange (gender equality) bonds, half of them say they would do so if they were more widely available.
  6. 88% of investors and 90% of borrowers believe further regulation of sustainability and sustainable finance would have a positive impact on the market overall.
  7. 49% of investors and 41% of issuers say a ‘greenium’ of at least 4 bps is typically priced-in to new GSS bond issues.
  8. Alignment with sustainability objectives, better access to capital and investor diversification are the top three drivers for issuers of GSS instruments.
  9. Time, availability of targets and set-up cost are the biggest hurdles to issuing GSS instruments.
  10. Only 19% of borrowers have never issued a GSS instrument – compared with 64% in last year’s poll.

Read more survey findings and analysis here


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FinanceAsia Volume Two 2023 | FinanceAsia

By now, most of our subscribers will have received print editions of the latest FinanceAsia Magazine: Volume Two 2023. 

Over the course of the summer, we look forward to sharing online our in-depth magazine features, including the detailed rationale behind our jury’s selection of winners across our recent flagship FA Awards process.

You can access the full online edition here.

To whet your appetite, read on for our editor’s note.

Positive predictions

As a snake (according to the Chinese zodiac), I have so far fulfilled my Year of the Rabbit prophecy in securing opportunity for career growth within the Haymarket Asia business. A successor will soon have the good fortune to step up as editor in my place, as I become content and business director and oversee the editorial strategy of our finance publications: FinanceAsia, CorporateTreasurer and AsianInvestor.

It is said that those born in 2023 will be blessed with vigilance and quick-mindedness. Very useful personality traits, I would think, as artificial intelligence (AI) advances globally, at pace. We are witnessing great development in this field in Hong Kong – and across the wider Asian economy, as emerging tech becomes the next positive disruptor and the capital markets work to respond through evolving regulation and new listing regimes.

In this summer issue, Christopher Chu delves into the value disruption put forward by generative AI, with consultants estimating its worth to breach $16 trillion by 2030. He explores its sophistication and how its potential is interwoven with political factors, while questions are posed around data ownership.

Also intertwined within the realm of transformative technology, is this edition’s flagship interview with BNP Paribas’ CEO for Asia Pacific, Paul Yang. He shares his journey navigating a career path that has taken him from IT coding in Paris, to leadership of the bank’s Asia Pacific business. He offers insights around his accomplishments to date and details plans to progress the bank’s 2025 Growth, Technology and Sustainability (GTS) strategy.

Reviewing activity across Southeast Asia, Liza Tan inspects the market’s prominent position in the ongoing start-up story, through assessment of the current venture capital (VC) fundraising landscape. Her discussion with experts asserts that fintech is inherently fused with human approach and that quality conversations and connections are key to future success.

Indeed, as FinanceAsia’s recent in-person awards celebration underlined, we have much to look forward to in the second half of the year and it is the human elements involved in dealmaking that have capacity to shape the road ahead. I think we all agree that recognising and nurturing talent is vital and so I hope you enjoy reading our evaluation of market resourcefulness, ingenuity and skill that informed the jury’s selection of award winners, amongst truly outstanding competition.

Finally, Sara Velezmoro and I explore the outlook for Asia’s debt capital markets – investigating what opportunity is on offer alongside the changing environment; and whether the momentum surrounding Japanese equities can be sustained, if the government were to reverse yield curve control.

Amid uncertainty we must focus on potential, so please join me in acknowledging the positive strides being taken by Asia’s market movers.

Ella Arwyn Jones

(Please feel free to send feedback or suggestions to [email protected])


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SocGen announces new Asian leadership roles | FinanceAsia

Paris-headquartered Société Générale has announced via media note two newly created leadership appointments within its global banking and advisory businesses.

In addition to her role as head of Corporate Coverage for Southeast Asia, Singapore-based Eliza Ng becomes head of Global Banking and Advisory for the Southeast Asian region; meanwhile, Kanta Murata takes on responsibility for Japan as market leader of Global Banking and Advisory, alongside his current capacity as Japan head of Corporate Client Coverage and deputy branch manager of the bank’s Tokyo office.

Effective from the end of June, the appointments mark the bank’s continued commitment to strengthen its local capabilities to support clients in local markets, the release detailed.

In their new roles, the pair will supervise all global banking and advisory endeavours, excluding business related to the bank’s institutional and debt capital markets (DCM) efforts. They both report regionally to Stephanie Clement de Givry, head of Global Banking and Advisory for Asia Pacific; and to Olivier Vercaemer, her deputy.

Ng and Murata shared with FinanceAsia their priorities as they settle into their new functions.

“My priorities revolve around three main areas: customer-oriented approach; regulatory compliance and credit risk management; and growth, especially across ESG-related aspects,” said Murata.

He emphasised his work to enhance client experience through expertly structured finance arrangements to meet evolving market needs, while prioritising robust risk management practices to ensure the security and stability of the bank’s operations.

The ESG arena is another area where he targets expansion. “To stay competitive and relevant in a rapidly evolving ESG landscape, it is essential to embrace innovative approaches,” he explained.
Ng agreed that ESG is embedded in the bank’s business and is a focus for the regional teams.

“My immediate priority is to leverage the expertise and capabilities that our expanded franchise can offer our clients in the Southeast Asia region,” she said, adding that she looks forward to continuing to accompany clients on their energy transition aims.

This effort, she explained would complement and further support development across the region’s emerging economies.

Ng added that such regional sustainability efforts are bringing with them new business opportunities across several segments, “including the transportation value chain and new technologies in the renewable energy sector.” 

Murata also observes a trend towards decarbonisation across Japanese activity.

“According to the latest preliminary figures as of 1Q23, the Bank of Japan’s “Flow of Funds” [demonstrate that] the loan balance of private non-financial corporations has been steadily growing during past quarters; partly driven by economic recovery, capital expenditure, and ESG-related investment opportunities.”

He said that this growth opportunity is further supported by the Japanese government’s push for carbon neutrality by 2050, which will require more than JPY150 trillion ($1 trillion) in investment from public and private sectors over the next ten years.

In terms of landmark deals, both Ng and Murata have been involved in a number of the bank’s key transactions.

Murata pointed to his involvement in an accelerated bookbuild for a Japanese client that saw the bank organise a block trade so it could divest European stocks; meanwhile, Ng highlighted the bank’s role across Temasek Financial’s EUR 1.5 billion ($1.65 billion) four and ten-year dual tranche senior unsecured bonds, earlier this year. 

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Who should pay developing world’s climate change bill?

Here are three inconvenient truths. First, the world cannot fight climate change without developing countries. Second, developing countries will need massive amounts of investment for climate financing — and much of these required savings will need to be imported. 

Third, the governments of developing countries won’t allow the import of foreign savings if they worry that a backlash from international financial markets might cause financial instability.

The combination of these three truths has produced a predicament that the world has not yet grappled with – that action on climate change is inextricably linked to the financial stability of developing countries, both perceived and actual.

This is a big problem. Estimates of how much investment will be required by developing countries to fight climate change over the coming decades are in the tens of trillions of dollars. 

But developing countries, particularly those in East Asia, lack sufficient domestic savings given the massive amounts of investment already needed to reduce poverty and develop their economies, meaning they typically run current account deficits — where a country imports savings from overseas.

These current account deficits can often be a source of financial volatility. When an international shock occurs, countries with a current account deficit greater than 3% of GDP tend to be punished by the market with capital outflows, hurting the financial sector and the exchange rate.

The last few years have been a case in point. As US interest rates have risen, capital has been sharply withdrawn from developing countries and shifted to the United States to enjoy higher returns. 

This has caused a sudden tightening of financial conditions in developing countries and pushed down their exchange rates against the US dollar, making their foreign-denominated debts larger and, in some instances like Bangladesh, requiring IMF assistance. The same turbulence was experienced during the taper tantrum in 2013 and the global financial crisis in 2008.

Money dealers count Pakistani rupees and US dollars at an exchange in Islamabad. Photo: AFP/ Aamir Qureshi
Money dealers count Pakistani rupees and US dollars at an exchange in Islamabad. Photo: Asia Times Files / AFP/ Aamir Qureshi

Recent estimates suggest that if developing countries were to import the necessary foreign savings to fight climate change, their current account deficits could increase substantially. This is a terrifying thought for developing country finance ministers who have become hypersensitive to growing current account deficits. 

The result is that policymakers limit financial inflows using monetary policy and macroprudential tools to keep the current account deficit in check, constraining economic growth — and in the process, constraining the sustainable investment needed to fight climate change.

To be sure, recent international turbulence has revealed that developing countries, particularly in Asia, have come a long way in bolstering the resilience of their financial systems. 

Decades of reform have strengthened risk monitoring frameworks, hedged risks, liberalized exchange rates, deepened financial systems, strengthened supervisory mechanisms and improved resolution processes for troubled banks and financial institutions.

Not all developing countries face the same challenges, and not all developing countries have the same contribution to climate risks. And there is only so much developing countries can do. While recent crises have revealed how far developing countries have come, they’ve also shown their continued susceptibility to global shocks. 

If developing countries are to import the foreign savings needed to fight climate change, the rich world and the institutions it controls will need to work with them to reduce financial instability.

Luckily, there are practical things that can be done. At the global level, efforts to reform the lending conditions of the International Monetary Fund need to be continued, to reduce the stigma which stops developing countries from seeking assistance. 

Development banks, like the Asian Development Bank at the regional level and the World Bank at the global level, can provide finance directly through concessional lending and grants to ease the financing burdens of developing countries.

An emerging deal between China and the World Bank will likely see China agree to reschedule some of its loans to developing countries where, in return, the World Bank will increase its lending to developing countries, including for climate action. 

The COP27 agreement to loan Indonesia US$20 billion will also help. But given that the size of the green investment required dwarfs the resources of these institutions, development banks will need to be more innovative and use their balance sheets to help backstop the liquidity of developing country governments as they undertake sustainable investments.

Development banks don’t have enough capital to finance the developing world’s green investment needs. Image: Facebook

Bilaterally, rich world central banks need to use currency swap lines and standby loans to plug the gaps in the safety net and ensure that all developing countries have access to foreign exchange in times of need.

And international institutions need to support developing countries by implementing the tools and mechanisms that the countries need domestically to manage risks from capital inflows. 

These tools and mechanisms can also help them to price carbon domestically as part of a global approach and implement domestic regulatory reforms to fight climate change, including the elimination of fossil fuel subsidies.

In a nutshell, climate change is a global challenge that will be won or lost in developing countries. All countries have a shared incentive to ensure the necessary investments are undertaken in developing countries — and that means all countries have a shared incentive to bolster the financial stability of developing countries. 

If the last two years have shown us anything, it’s that we have a long way to go.

M Chatib Basri teaches in the Economics Department at the University of Indonesia and was formerly Indonesia’s Minister of Finance.

Adam Triggs is Partner at Mandala and Non-Resident Fellow at the Brookings Institution and the Crawford School of Public Policy, The Australian National University.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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ADDX appoints former SGX leader to board | FinanceAsia

Singapore-based digital securities exchange, ADDX, has appointed former Singapore Exchange (SGX) senior managing director, Sutat Chew, as chair.

Chew brings to the firm over 25 years of experience across financial services, including 14 years spent at the Singaporean bourse, where he led the global sales origination team and helped the business expand across 10 international locations. In terms of other prior experience, he has held senior roles at Standard Chartered, OCBC Securities and DBS.

The leadership appointment offers ADDX strategic direction as it looks to expand overseas. Specifically, Chew will be responsible for driving growth and innovation, the company release stated.

Speaking to FinanceAsia, Chew said that his priorities in coming on board involve cultivating strategic collaborations and partnerships so that ADDX is “poised to advance” its mission to democratise investment for wealth creation.

“We hope to meet the needs of customers in North Asia and the Middle East in the second half of this year through appropriate partnerships and joint ventures (JVs),” he said.

Operating on a private, permissioned blockchain that is regulated by the Monetary Authority of Singapore (MAS), ADDX offers issuers access to a larger pool of capital than is available through traditional fundraising means.

The platform’s employment of sophisticated digital processing technology enables it to manage the issuance, custody and distribution of private market products at a lower administrative cost compared to traditional markets and thus, the firm is able to reduce the fundraising entry threshold, inviting a wider community of investors to participate in capital exchange.

Regulation and innovation

Reflecting on progress and innovation across Asia’s capital markets, Chew said that it is the development of new forms of market infrastructure to support the advancement of digital assets, that excites him the most.

“Initiatives such as Project Ubin, Project Orchid and Project Guardian aim to explore the potential of blockchain and distributed ledger technology (DLT) in areas such as payments, settlements, digital identity, and cross-border transactions – which should enhance efficiency, transparency, and security in the financial sector,” he told FA.

He commended the efforts of Singapore’s market regulators in supporting the city-state’s development as a “world-class global financial hub with a highly competitive and diverse financial ecosystem.”

“Regulators here have been at the forefront of technology and innovation in the financial sector, balancing it with appropriate consideration for education and investor protection,” he explained.

“The progressive stance taken by the MAS in recognising that tokenised securities should be regulated in the same way as traditional securities, gives companies like ADDX clarity to invest and innovate for global clients who can trust the regime.”

Market uncertainty

However, Chew acknowledged that the uncertain market economic climate threatens the capital market advancement.

“One of the challenges to market innovation is reduced investor confidence and risk aversion as part of the uncertain market environment. As investors become more cautious and conservative, that may result in more gradual adoption of new ideas, technologies, and investment opportunities.”

“What we have done is adapt to evolving investor sentiment and risk appetite, communicate transparently, as well as actively educate and engage investors to address their concerns, provide reassurance and offer a suite of products that meet their needs.”

As an example, he shared that the platform had helped four issuers raise more than S$650 million via commercial papers to meet near-term investment needs.

“I believe that regulators and responsible startups or fintech players can continue to work together to keep pace with emerging technologies and financial innovation, whilst striking a balance with appropriate regulatory safeguards,” he added. 

In addition to Chew, ADDX’s board comprises Oi-Yee Choo, who serves as CEO; and Inmoo Hwang, the firm’s COO.

Chew also serves as chair of ADDX’s listing committee, a position he has held since 2019; and he has been a board member of ICHX Tech – ADDX’s holding company – since 2018. MAS approved the operational transfer of ADDX from ICHX Tech in May 2022, and the platform began is regulated activities from September the same year.

ADDX’s shareholders include SGX, the Stock Exchange of Thailand, Temasek subsidiary, Heliconia Capital, the Development Bank of Japan, UOB and Hamilton Lane, among others. In April last year, it partnered with UOB to execute the largest foreign currency digital bond in Singapore to date; a sustainability-linked bond, issued by Singtel. 

Read also: Temasek-backed venture debt fund tokenises on ADDX

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Proposed special economic zone could strengthen special Singapore - Malaysia ties

It takes five minutes for Emily Ma to leave the country. 

Perched on a long bench in Singapore’s Woodlands Station, the slight elegant retiree doesn’t seem in a rush. The close links between her home country and neighbouring Malaysia allows her to build a base across both sides of the border. 

A shuttle train leaves 13 times a day from Singapore’s Woodlands station and arrives in the Malaysian city of Johor Bahru just five minutes later. A bus takes one hour, and non-residents are currently allowed to stay in each country for up to 30 days without a visa.

“I go for a holiday, to see friends, or just to relax,” Ma said. “These links are important because [Singapore and Malaysia] used to be one family. In a way, we still are one family.”

Once part of the same country, these neighbours remain close trading partners with increasingly intertwined economies. As ASEAN states deepen their connections through schemes like the bloc’s Single Window customs programme and cross-border QR payments arranged through central bank collaborations, Malaysia and Singapore may soon draw even closer together with a transnational special economic zone between the city-state and the state of Johor 

The combined GDP of their two intertwined economies is already predicted to exceed $1 trillion within the next five years, more than a quarter of the total ASEAN bloc. The special zone is still in tentative stages, first proposed unofficially by Malaysia’s Economic Minister Rafizi Ramli in May, but could mark a significant step in the countries’ integration. 

Rafizi Ramli, Malaysia’s economic minister, has spoken about the potential of an economic zone between the two countries. Photo: Saeed Khan/AFP

While details of what such a collaboration would entail remain scarce there are plans to raise it at an upcoming Malaysian Cabinet meeting before bringing it to the annual meeting of a Malaysia-Singapore joint committee for economic cooperation, expected to be held in mid-July.

“Malaysia and Singapore enjoy strong ties in terms of trade and investment flows, tourism and labour movement,” said M. Niaz Asadullah, a professor of development economics at Monash University Malaysia. “But there is untapped potential for mutual economic gains if Singapore can leverage its close proximity to natural resources rich Malaysia.”

Thousands of Singaporeans cross into Malaysia every day by the 1,056-kilometre rail and motorway causeway that has linked the two over the Johor Strait since 1924. Bus fare for the crossing starts from about $1.48 (SGD 2).

The convenience of travel has created a longstanding symbiotic exchange of labour, trade and people between the two regions. As of 2014, it was estimated that about 5,000 Singaporeans live and work in Johor Bahru. The ringgit’s recent depreciation against the comparatively stable Singaporean dollar has made the cost of living in the Malaysian region comfortable compared to the expensive city-state. 

But while more casual travel is a breeze, the closeness for commercial purposes is still marred by long queues, traffic bottlenecks and customs checks. Recent complaints reveal some Singaporean bus passengers spent up to seven hours waiting at the Johor-Bahru customs checkpoint, a delay a special economic zone could ease.  

Motorists coming from Malaysia’s state of Johor form a queue as they approach the immigration checkpoint to enter in Singapore on 31 March, 2023. Photo: Roslan Rahman/AFP

Strengthening inter-ASEAN ties

The announcement of the proposed region comes as part of a concerted push by Malaysian Prime Minister Anwar Ibrahim to strengthen his country’s inter-ASEAN ties and reduce reliance on Western economies. 

As its closest neighbour, the city-state is a regional economic hub and a natural trading target for Malaysia. 

The two countries have deep historical connections – Singapore was originally part of the Federation of Malaya after the two countries achieved independence from the U.K. but split in 1965. A January meeting with Singaporean leaders secured $4 billion in foreign direct investment from the Lion City. 

“[Anwar’s] latest effort to renew bilateral ties with Singapore could be motivated by … a ‘look 

East’ philosophy,” said Asadullah. “By strengthening economic ties with Singapore, this can help Malaysia accelerate its transition to a high income nation status by 2028.”

For its part, Singapore benefits from the resources and labour available in the Malaysian state, with many Singaporean companies already choosing to locate their assembly and production lines in Johor.

People board a bus in Singapore on 29 November, 2021, under the vaccinated travel lane (VTL) for border-crossing passengers to Malaysia’s southern state of Johor. Photo: Roslan Rahman/AFP

Johor: a cornerstone of trade

Johor’s role as a cornerstone in the regional trade between Singapore and Malaysia has been a longstanding part of both countries’ economic history. In 1988, the border state announced a policy ‘twinning’ with Singapore that led to a 200% increase in investment from its neighbour that same year. 

Since then, the relationship between the two has only deepened – especially amidst broader economic recovery efforts after two years of pandemic-related border issues. 

“The two-year Singapore lockdown really had an impact on Johor,” said James Chin, professor of Asian studies at the University of Tasmania. “Now people are really looking for new impetus to push this Johor-Singapore growth triangle.”

Another motivating factor of this deepening network of economic relations would be renewable energy, as announced by minister Ramli.

This follows a May announcement to lift a Malaysian ban on renewable energy exports, part of the government’s ambitious aims to double renewable energy capacity by 2050. But the country’s renewable energy sector is still nascent, with coal and natural gas currently meeting 75% of Malaysia’s power demands. 

Over the border, Singapore is also trying to boost its renewables with limited success. Experts believe a symbiotic partnership between the neighbours could unlock new potential for both.

“The limited land area is a big challenge for Singapore to develop large-scale renewable energy projects,” explained Kim Jeong Won, research fellow at Energy Studies Institute of National University of Singapore. “Importing renewable electricity through regional power grids can help Singapore’s energy transition and the deployment of low-carbon solutions in the region.”

Professor Asadullah also hopes the new proposed economic region will help meet growing regional demand for energy while encouraging a mutually beneficial trade between Malaysia and Singapore.

“Land and natural resource-poor Singapore is particularly keen to develop a sustainable pan-ASEAN power grid,” she said. “This will not only pave the way for greater bilateral trade in clean energy, it’ll also encourage FDI from Singapore into Malaysia’s renewable energy sector … and overall development of green infrastructure.”

Smoother trade and transactions

The practicalities of how the two countries’ different economies, currencies and markets would interact could raise hurdles to seamless trade within the region. For Asadullah, the success of the economic region would rely on lowering cross-border transaction costs and harmonising labour and environmental standards. 

Singapore and Malaysia’s central banks have linked their countries’ smartphone QR systems to facilitate cross-border financial transactions.

“The key challenge is to coordinate the necessary institutional reforms,” said Natalya Ischenko, CEO of Robocash Group, an international financial lending platform, adding that the effects of the QR developments should be “significantly manifested” in the coming year. 

She estimated that cross-border QR payment systems could facilitate trade between the two countries of at least 0.5% and e-commerce in Singapore by at least 2% a month.

“[If so], the foreign trade between Singapore and Malaysia will be between $136.9 billion and $147.3 billion by the end of 2024,” she said. 

For Chin, the latest proposed economic tie is a continuation of a history of two countries linked by politics, geography and ambitious economic goals. 

“Of course this is good for the region. It is a win-win situation,” he said. “[But] the way to understand the economic relations between Johor and Singapore is that they are tied to each other. Whether they like each other or not, it really doesn’t matter, they have to work together for prosperity.”

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"Hong Kong to emerge as stock exchange of choice” – Dealmaking experts | FinanceAsia

Former Securities and Futures Commission (SFC) senior director, Roger Cheng, is set to join UK-headquartered law firm, Linklaters, at its Hong Kong base from August.

The move follows his nearly five years of experience at the special administrative region’s (SAR) financial regulator, where Cheng oversaw the operations of the Takeovers Team. The law firm’s announcement pointed to the instrumental role that he played during this time, developing Hong Kong’s takeovers and mergers policy, as well as driving forward other listing-related progress.

Prior to his tenure with the SFC, Cheng spent 13 years at Slaughter and May.

Offering some thoughts around trends affecting dealmaking in Hong Kong and China, Betty Yap, Linklaters partner and global co-head of the firm’s Financial Sponsor Group shared that there had been a noticeable rebound of M&A activity in the region post-pandemic, though activity has not yet returned to pre-pandemic levels.

“Inbound investment into mainland China is still somewhat marred by geo-politics and recent regulatory changes,” she told FinanceAsia, adding that her team is optimistic around sectors less affected by national security concerns, such as the consumer segment.

“Interest from Middle Eastern investors in M&A opportunities in China has increased as relations between [both] continue to strengthen.  We are also seeing a number of sales by private equity (PE) sponsors in the market, as investments made in prior years mature,” she continued.

Her colleague, Hong Kong-based partner, Xiaoxi Lin, noted that recent financial stress in the Chinese real estate market has presented interesting M&A opportunity in Hong Kong, through the sale of prime commercial and residential properties to generate cashflow and service restructuring debts.

“A cocktail of factors including the distress in the PRC real estate sector, rising interest rates, and regulatory restrictions have meant that commercial banks are reducing their exposure to the real estate sector, including loans secured by residential and commercial properties,” Yap said.

“Credit funds – who are not subject to the same regulatory restrictions – are stepping into this funding gap,” she added, highlighting that while the current elevated interest rate environment means that borrowing costs are higher, credit funds are able to provide financing on the back of higher loan-to-value (LTV) ratios and can offer swift deal execution.

IPO dynamics

In terms of the IPO landscape ahead, Lin told FA, “Market participants are cautiously expecting a stronger HK IPO market this year with more companies listed than in 2022”.

Corporate partner, Donnelly Chan, added that Hong Kong’s recent introduction of the Chapter 18C regime – which reduces the listing requirements threshold for firms operating in new economy industries – together with recent China Securities Regulatory Commission (CSRC) reforms, is likely to support the market’s advancement.

“The track record and proven success of the pre-revenue Biotech listing regime and the weighted voting rights (WVR) listing regime since their introduction in 2018, coupled with the concession route for Greater China companies to secondary list on the main board has demonstrated the Hong Kong market’s flexible approach and readiness to evolve and explore opportunities,” he told FA.

Chan added that, as a result, it is hoped Hong Kong’s bourse will become “the stock exchange of choice” compared to other regional fundraising hubs.

Opportunity elsewhere

However, Yap is bullish on opportunity across the full breadth of Asian markets.

“For the remainder of 2023, we believe there will be continued interest in M&A opportunities in Asia,” she told FA.

“As inbound investment interest in China remains mixed given geo-politics, other single jurisdiction markets in Asia that can provide scale will be of interest to financial sponsor investors looking for efficiency in the deployment of capital.”

She pointed to markets such as India and Japan as benefitting from investor appetite – with the latter offering attractive costs “because of the lower yen”.

Yap added that Southeast Asia will continue to draw capital: “in particular Indonesia, with its relatively young demographics and the consumption power of its growing middle class.”

In terms of sectors, she noted that energy transition will remain of utmost importance “with interest in targets from renewables to electric vehicles to batteries to de-carbonising assets,” while digital infrastructure and data centre investment will continue to support the rise of e-commerce.

In the Linklaters release, head of Corporate, Sophie Mathur shared, “We are delighted to welcome Roger to our corporate practice. We are confident that his insights into takeovers and mergers regulations and policy matters will be of immense value-add to our clients when navigating take-privates and other public market transactions.”

Unlike the typical structure of a corporation, Linklaters employs a limited liability partnership which enables the firm’s partner leadership-base to make long-term strategic decisions for the business together.

Cheng’s appointment follows other key hires in Asia in recent months, including the appointment of Yoshiyuki Asaoka as corporate partner in Japan. In June 2021, William Liu was appointed as regional managing partner for Asia Pacific.


¬ Haymarket Media Limited. All rights reserved.

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Sequoia split anticipates new China sanctions

Sequoia Capital, one of Silicon Valley’s oldest and most successful venture capital funds, is dividing itself into three independent regional businesses to simplify management and reduce political risk.

The company’s operations in the US and Europe will continue to use the name Sequoia Capital. Operations in India and Southeast Asia have been combined and rebranded as Peak XV Partners. Peak XV was the original designation given by British surveyors to Mount Everest. Operations in China will be called HongShan, which means Sequoia.

On June 6, Sequoia announced that “It has become increasingly complex to run a decentralized global investment business… This has made using centralized back-office functions more of a hindrance than an advantage… We will move to completely independent partnerships and become distinct firms with separate brands no later than March 31, 2024.”

The company’s statement, which also mentioned “market confusion due to the shared Sequoia brand” and “portfolio conflicts,” was signed by Roelof Botha, managing partner of Sequoia Capital; Shailendra Singh, managing director of Peak XV Partners; and Neil Shen, founding and managing partner of Sequoia China.

Not mentioned in the statement, but almost certainly a factor in the division decision, are widespread expectations that the Biden administration will soon issue new, tighter restrictions on US investment in China. This is a concern for both US and Chinese investors and Sequoia has reportedly hired consultants to advise it on the issue.

What types of investment might be restricted is not yet known but media reports line up the usual suspects: semiconductors, quantum computing and artificial intelligence (AI).

US Treasury Secretary Janet Yellen has said that any new restrictions would be “narrowly scoped and targeted at technologies where there are clear national security implications.” But what Treasury considers “narrowly scoped” could affect a wide swath of high-tech venture capital investments.

Photo: Reuters/Joshua Roberts
US Treasury Secretary Janet Yellen eyes new restrictions on investing in China. Photo: Agencies

In a report issued at the beginning of May, the Peterson Institute for International Economics wrote that:

“The US government must finally decide whether its primary concern is with the effects of capital or knowhow/technology transfer. If it is capital, the impact on China will be small. China’s venture capital sector was managing around $280 billion at the end of 2019, compared to $403 billion in the US. A recent report from the Center for Security and Emerging Technology found that only 37% of fundraising rounds by value for Chinese AI companies included any US investor. Clearly, Chinese AI firms and presumably also tech startups in other sectors do not rely on US capital.”

The Peterson Institute is not alone in thinking that new investment restrictions might be ineffective. On May 25, Patrick McHenry, chairman of the US House of Representatives Committee on Financial Services, sent Secretary Yellen a highly critical letter requesting detailed evidence that Treasury would achieve its purported goals. In part, it reads:

Dear Secretary Yellen,

I am writing in regard to the Administration’s proposed Executive Order on outbound investment, the imminent release of which has been rumored since last year.

According to briefings provided by the Administration, the Department of the Treasury (Treasury) may transform CFIUS into a committee on foreign investment in the United States and China, prohibiting deals in certain Chinese technology sectors and mandating investor notifications in others. As we prepare for your testimony before the Committee, I would request your feedback on the following matters.

Last year, China recorded a current account surplus of $417.5 billion, the highest level since 2008. The last time an Administration tried to restrict financing against a large current account surplus country [Russia], in 2014, it failed. Do Treasury and the Administration really believe that investment restrictions will be effective this time – particularly against a surplus country that holds $3 trillion in reserves?

Given Treasury’s longstanding principle that coercive measures must achieve clear objectives, it is unclear why the Administration now wants to repeat the same policies in China but expects different results.

The Administration further claims that U.S. investments in early-stage Chinese companies may require the declaration of a national emergency. However, U.S. venture capital deals in China have fallen by 87 percent since 2018.1 At their height, these investments were concentrated in later-stage companies. Moreover, U.S. venture capital firms typically acquire control, substantive decision-making rights, board seats, or material nonpublic technical information when they invest.

As your colleagues in the Office of Investment Security know, these represent potential national security risks to the target country – in this case, China. It is inexplicable that the Administration hopes to rescue China from these risks before Beijing can. At a time when the Chinese Communist Party is already cracking down on Western firms and business intelligence services, the Administration should reject an E.O. that advances Beijing’s goals.

And that’s not all. The Peterson Institute report ends with this comment: “Whatever Washington decides, its rules could remake the US government’s relationship with its firms, investors and the world.” That, of course, is already happening.

Sequoia Capital was founded in 1972 by Don Valentine, “the grandfather of Silicon Valley venture capital.” It was an early investor in Apple Computer, Atari, LSI Logic, Oracle, Cisco, Electronic Arts, Google and Nvidia. Having started as a $3 million fund, it reportedly had approximately $85 billion under management in 2022.

Sequoia entered China in 2005 and India in 2006. In China, where its investments have included Alibaba, ByteDance, Meituan and, assets under management have risen to as much as $56 billion. It is the largest venture capital company in India with assets valued at about $9 billion.

Sequoia had a financial hand in Alibaba’s success. Image: Agencies

This was achieved with what is regarded as unusually decentralized decision making:

“Our founder-focused, local-first approach has been key to our success in each region… Sequoia China has made substantial investments in healthcare and traditional consumer sectors alongside technology investments… Sequoia India has been instrumental in cultivating the startup ecosystem in India and SEA [Southeast Asia… Each entity is now a market leader.”

Once back-office functions, infrastructure and profit-sharing have been completely separated, there will be three venture capital firms instead of one, two of them domiciled outside the US. An example has been set. Sequoia will probably not be the only investment firm to take this route around US sanctions.

Follow this writer on Twitter: @ScottFo83517667

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