Commentary: For Singapore’s sake, we need a contest in the presidential election

According to Education Minister and Minister-in-charge of the Public Service Chan Chun Sing, responding to a question in Parliament on May 10, there are more than 1,200 companies here that meet the shareholders’ equity requirement.

It takes a courageous man or woman with a deep sense of public duty to step in the ring and face national scrutiny over his fitness to attain the highest office of the land. I know of at least one person prepared to do so and I hope there are more likewise.

Why is it important?

The elected president plays a unique role in Singapore which sets it apart from the government. Though he (or she) does not have executive powers, he can be an effective check in the two important areas he has powers over, in safeguarding the reserves and in key appointments.

There is a reason why the Constitution states that he should not be a member of any political party, to preserve his independence and autonomy.

All past presidents had links to the ruling party. All have served Singapore well but their political association have politicised the office, even if they have acted with the utmost integrity and ability.

It might not have been a problem in the past when the PAP was unchallenged electorally and able to count close to 70 per cent of the popular votes in general elections (GEs).

But there is much more contestation today and support for the ruling party has fallen to the low 60s.

In the last GE in 2020, the opposition Workers’ Party garnered more votes than the PAP in the wards contested by both parties.         

When there is such a divide, a president with close association to a political party will find it difficult to win the support of a significant segment of the population.

The problem is compounded when there is no contest and Singaporeans are deprived of their legitimate right to vote their choice.

This was most evident in the last election in 2017 which was reserved for Malay candidates, a new requirement introduced by the government to ensure minority representation at the highest level. 

The reserved presidency was already a controversial move. A no-contest because Madam Halimah was the only candidate to qualify made it even more contentious.

There were two other Malay candidates from the private sector who were interested and had applied to the Presidential Elections Committee to be qualified to take part. Alas, they failed to meet the criteria.

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Singapore pulling all stops to avert a housing collapse

Singapore’s housing market is going through some big changes. It has a dual market structure consisting of a public and a private market. The public housing market is divided into a primary and a secondary (resale) market.

The Housing & Development Board is responsible for building and selling public housing flats at concessionary prices in the primary market to Singaporeans.

The primary public housing market is regulated and only open to Singaporean families, subject to a monthly household income cap of 14,000 Singapore dollars (US$10,400). After meeting the minimum occupation period of five years, owners can sell their flats in the secondary public housing market to Singaporean citizens and permanent residents who do not own private houses.

The private housing market is a laissez-faire market that supplies non-landed houses, such as apartments and condominiums, as well as landed houses, such as terrace, semi-detached and detached houses. Foreigners are prohibited from owning public housing flats. While they can buy and sell non-landed apartments and condominiums, they can only buy landed houses on Sentosa Island.

Despite Covid-19-related disruptions to supply chains and economic activities, the benchmark private residential property price index experienced 12 consecutive quarters of growth of 25% total after exiting the “circuit breaker” in June 2020. The resale public housing price grew by 28% over the same period.

The government introduced three rounds of cooling measures to pre-empt housing prices from diverging from economic fundamentals. On December 16, 2021, the government raised the Additional Buyer’s Stamp Duty (ABSD) — a form of transaction tax when buying private residential Singaporean properties — for foreigners from 20-30%.

The ABSD was also raised to 17% and 25% for Singaporean citizens and permanent residents respectively when buying second properties and 25% and 30% respectively when buying third and subsequent properties. Property developers also pay the ABSD of 40% — but 35% is remittable if developed units are sold within five years of the land acquisition date.

Another intervention occurred on September 29, 2022, when government agencies raised the medium-term interest rate floor — which is used to calculate the loan quantum granted by private financial institutions for property purchases — from 3.5-4%. The government also imposed a 15-month wait-out period for private owners to insulate first-time home buyers against intense competition in the public resale market.

The government is concerned about high housing prices weakening its social compact. Although foreign investments only constituted 7% of private property sales in 2023, they significantly drove up private housing prices, especially in the luxury housing segment. The latest ABSD rate hikes were intended to check the flows of oversea “hot money”, which have inflationary effects on the private housing markets.

On April 26, 2023, the government increased the ABSD from 30-60% for foreigners when buying private residential properties in Singapore. Singaporean citizens and permanent residents will now have to pay ABSD of 20% and 30% respectively — an increase of 3% and 5% — when purchasing second private properties for investment purposes.

Private residential property prices are already at historically high levels, with average launch prices ranging from S$2,000-S$2,900 (US$1,485–$2,153) per square foot. The current median housing price is 14 times that of medium-income — such high prices will make the private housing market unaffordable and inaccessible for medium-income families.

Using a recent project launched after the new ABSD rule, Blossoms by the Park, a local buyer purchasing a 3-room unit at S$2.28 million (US$1.7 million) will make a down payment of S$570,000 (US$423,000), based on a loan-to-value ratio of 75%.

Because of the 4% interest rate floor, their monthly mortgage payment will be S$10,360 (US$7,693). Based on the total debt servicing ratio of 55%, their monthly income must be at least S$18,840 (US$13,990) to obtain a mortgage loan from a local bank. This means that only the top 10% of Singaporean households by income could afford the unit in the Blossoms by the Park.

Interest rate hikes and geopolitical tension add significant risks to investing in private real estate markets. If macro-risks trigger negative economic outcomes — such as recession and unemployment — private housing market prices could spiral, leading to more socioeconomic consequences.

While the potential effects of the new ABSD of 60% are unclear, the costs of inaction could be more detrimental regardless of the direction private housing prices go.

A market failure could have a widespread impact on every stakeholder In the market. Developers may not recover the costs of investments and local buyers will face a negative equity situation when their housing value drops. Foreigners will lose money by selling their properties below the original costs. 

The housing market crash would destabilize Singapore’s financial system when borrowers default on their mortgage loans. But the economic costs of inaction would be higher than an intervention that curbs short-term foreign investment flows into the property market.

Tien Foo Sing is the Provost’s Chair Professor at the Department of Real Estate, Business School, National University of Singapore. The views expressed here are the author’s and do not represent the views of their companies and affiliates.

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

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Indonesia’s economic reform deeper than recognized

The Covid-19 pandemic posed a tremendous economic challenge, especially for emerging economies such as Indonesia. But it also marked a watershed moment for the country’s economic reform efforts. The crisis enabled Indonesia to reduce its reliance on volatile foreign capital inflows and rethink its growth pathway.

During the pandemic, Indonesia was temporarily set free from its reliance on foreign capital as global investors fled emerging markets bonds and equity. At the same time, slumping domestic demand, which suppressed imports, and relatively large national savings ameliorated Indonesia’s current account deficit problem.

Russia’s war in Ukraine led to a commodity price boom that further boosted the domestic economy while it was still recovering from the pandemic.

Indonesia’s current account deficit problem stems from insufficient foreign direct investment (FDI). In 2021, Indonesia’s FDI inflow was only 1.8% of GDP, compared to Vietnam’s 4.3% and Malaysia’s 5%.

Instead, the economy has depended on volatile commodity-related exports and volatile foreign inflows in bonds and equity markets. The shallow and inadequate domestic financial market has not been able to sufficiently mobilize savings to finance the country’s investment needs.

In previous cycles of global volatility, subsequent outflows of foreign capital have significantly depreciated the Indonesian rupiah and caused liquidity crunches in the financial system.

This negatively impacted the domestic economy by increasing the government and corporate sector’s debt burden, creating inflationary pressure and raising funding costs and non-performing loans in the banking system.

Reform efforts to handle the problem by shrinking the account deficit have faced challenges. In previous years, reducing the current account deficit usually meant slowing down domestic consumption and imports, which inhibits economic growth. Efforts to boost manufacturing exports also have hit a brick wall.

The Indonesia rupiah is near a 20-year low. Photo: AFP / Bay Ismoyo
Stacks of Indonesian rupiah. Photo: AFP / Bay Ismoyo

As Indonesian wages are relatively higher, other Asian exporters — notably Vietnam and Bangladesh — have become more competitive.

Numerous financial scandals have undermined efforts to effectively mobilize savings and deepen financial markets. Despite these setbacks, institutional reforms are making some headway. The Ministry of Finance and Bank Indonesia are increasingly seen as credible institutions that adopt evidence-based policies, defend Western-style central bank independence and are led by respected figures.

Implementing measures to prevent excessive capital flows has proved complicated. Even a hint of capital controls or other regulations that would restrain the country’s relatively free and open capital markets have been met with resistance due to the experience of the Asian financial crisis. Relatively loose global monetary policy and prudent fiscal policies have also led to Indonesia’s rising popularity for foreign portfolio investment.

The government was quick to implement policy reforms that have partly borne fruit. The first of them is reform in the real economy. The government pushed through the Omnibus law in November 2020, which aims to improve Indonesia’s competitiveness and encourage labor-intensive industries’ growth. But its implementation is yet to be seen due to pushback by special interest groups.

The global energy crisis also inspired the government to enact a series of controversial policies, including “downstreaming” and the prohibition of raw material exports. These policies have partly contributed to increasing exports of nickel derivatives between 2011–2022 and stimulated economic growth in regional provinces.

The second policy group included financial sector reforms. The government passed a new financial omnibus bill to improve the credibility of the financial system, widen and deepen the domestic financial market, support new technologies growth and clarify crisis responses. Plans were also put in place to restructure the entire non-bank financial system after the collapse of a major state-owned insurance company in 2020.

The local bond market has grown substantially since the pandemic. Local banks are inclined to hold a large number of government bonds due to slumping credit demand, significantly boosting local ownership. The Ministry of Finance’s successful campaign to push savvy domestic investors to buy retail government bonds further mobilizes consumer savings and improves market discovery.

Indonesia’s central bank — Bank Indonesia — has also pulled its act in the domestic foreign exchange market. New derivative instruments have succeeded in driving market expectations of local currency movements and relieving pressure on the current exchange rate. The launch of a new time deposit facility for exporters also boosted foreign exchange supply.

A fishing boat is seen near a container terminal in Tanjung Priok , north Jakarta Indonesia November 16, 2016. Photo: Reuters/Darren Whiteside/File Photo
A fishing boat is seen near a container terminal in Tanjung Priok , north Jakarta Indonesia November 16, 2016. Photo: Agencies

In anticipating the sudden global dollar liquidity crunch, the central bank has intensified efforts to proliferate local currency settlements (LCS) — a program that encourages using local currencies to settle bilateral transactions — with Indonesia’s main trade partners.

Its efforts have significantly increased its monthly LCS usage. The central bank has also sought to reduce Indonesia’s reliance on foreign service providers by launching a new national credit card gateway.

Bank Indonesia has also embraced digitalization. The Indonesian QR standard has become widely available, logging over 24 million merchants and daily transactions of more than US$800 million.

It has enabled millions of informal sector vendors to interact with the mainstream financial system via Indonesia’s growing digital banking industry. This could be a potential goldmine for the government to increase fiscal policy effectiveness.

Indonesia has taken advantage of the Covid-19 pandemic and undergone fundamental reforms to address its previous flaws. Its job now is to finish implementing those “structural reforms” by enhancing the ease of doing business, reducing investment barriers and improving labor productivity and financial inclusion.

Suryaputra Wijaksana is an economist at Bank Rakyat Indonesia. The views expressed in this article are the author’s own.

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

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With Micron ban, China says no to ‘de-risking’

US chip maker Micron Technology has become the first Western firm sanctioned by China after G7 countries vowed to de-risk from the world’s manufacturing hub.

China’s key national infrastructure operators are now forbidden to purchase products from Micron because the company poses network security risk, said the Cybersecurity Review Office, a unit of the Cyberspace Administration of China.
 
Mao Ning, a spokesperson of the Chinese Foreign Ministry, said Monday that the investigation of Micron’s products is necessary as it is aimed at preventing China’s telecom infrastructure from facing cybersecurity risks.
 
The US Commerce Department said China’s accusations against Micron have no basis in fact. It said it will engage directly with China to resolve restrictions on Micron chip deliveries.

“We also will engage with key allies and partners to ensure we are closely coordinated to address distortions of the memory chip market caused by China’s actions,” the department said. “This action, along with recent raids and targeting of other American firms, is inconsistent with the People’s Republic of China (PRC)’s assertions that it is opening its markets and is committed to a transparent regulatory framework.”

The US had asked South Korea to urge its chipmakers not to fill any market gap in China if Micron products were banned in the Chinese markets, according to a Financial Times report published April 24.

Jang Young-jin, South Korea’s vice minister of trade, said Monday that Samsung and SK Hynix will make a judgment on whether they should do as the US requested.

Micron said it is evaluating the conclusion made by the Cyberspace Administration and assessing its next steps.

Re-invest or leave

An article titled “Micron has done all the bad things! Now it is finally sanctioned” was widely circulated on the Internet in China on Monday, explaining the logic behind Beijing’s curbs. 

“In January 2022, when the US government pushed forward its plan to de-couple from China, Micron said it would stop cooperating with China, sack its staff and close its Shanghai-based DRAM design center,” the writer says. “It also provided skilled worker visas to more than 40 senior technicians and migrated its businesses from China to India and the US.”

‘Kill the chicken to scare the monkeys’ is an old Chinese saying. Micron has been selected for the chicken role in this phase of the chips war. Image: screenshot

The writer continues, “In the China-US chip war, Micron has always been actively playing the role of a vanguard of the US. The company makes money in the Chinese market while replying to the United States’ power to suppress Chinese chip firms. It has done all the bad things!”

He concludes, “What do we only sanction Micron but not Samsung and SK Hynix? They all make money in China but Micron does not increase its investment in the country while Samsung and SK Hynix keep re-investing.”

Media reports said last month that US President Joe Biden was set to sign an executive order that would restrict US companies and private equity and venture capital funds from investing in China’s microchips, artificial intelligence, quantum computing, biotechnology and clean energy projects and firms.

Biden had planned to announce these investment curbs before the G7 Summit, which was held in Hiroshima between last Friday and Sunday, but he has not unveiled them so far.

De-risking from China

G7 leaders said in a joint statement on Saturday that they have a common interest in preventing a narrow set of technological advances from being used by some countries to enhance their military and intelligence capabilities to undermine international peace and security. 

“A growing China that plays by international rules would be of global interest. We are not decoupling or turning inward,” they said. “At the same time, we recognize that economic resilience requires de-risking and diversifying.”

“We will continue to ensure that the clearly defined, narrow set of sensitive technologies that are crucial for national security or could threaten international peace and security are appropriately controlled, without unduly impacting broader trade in technology,” said G7 leaders. “We will enhance resilient supply chains through partnerships around the world, especially for critical goods such as critical minerals, semiconductors and batteries.”

This statement also set off the Chinese punditocracy. “G7 has become an important tool for the US to contain and suppress China,” a Hebei-based writer says in an article. Washington “is now promoting deglobalization by using subsidies and coercion to attract semiconductor firms to set up factories in the US.”

He adds, “Now the US gets what it wants as China is saying ‘no’ to US memory chip makers. Micron tried to expand in China and benefit from the US sanctions against Chinese chip firms. But it has shot itself in the foot.”

Supply shock?

Last year, Micron’s revenue from China amounted to $3.3 billion, about 11% of the company’s total revenue. The figure more than tripled from $5.3 billion in 2016 to $17.4 billion in 2018 but it started to decline after Micron had legal disputes with Chinese firms.

As early as March 31, the Cyberspace Admnistration had said it was looking into Micron’s products sold in China but it was not until Sunday evening that it announced the Micron ban.

An unnamed analyst was quoted by the National Business Daily as having said on Monday that Chinese memory chip makers, including GigaDevice, Yangtze Memory Technologies Corp (YMTC), ChangXin Memory Technologies (CXMT), Dongxin Co. Ltd and Ingenue Semiconductor, will benefit as they can grab Micron’s market share in China. 

A YMTC worker examines a semiconductor wafer. Photo: YMTC

He said that during the transition, China will not face a memory chip shortage as there is enough inventory in the markets.

YMTC, the main Chinese competitor to Micron, is developing its own supply chain by using Chinese-only equipment, the South China Morning Post reported on April 23. The company has placed orders with domestic tool suppliers, including Beijing-based Naura Technology, after receiving new funding from its state-backed investors.

However, Liu Pei-chen, a researcher at the Taiwan Institute of Economic Research, warned that China may face a memory chip shortage if suppliers in South Korea, Japan and Taiwan limit their exports to the country upon the US’s request.

Liu said China still relies heavily on the import of foreign memory chips as YMTC and CXMT have limited production capacities. She said the US may have a say in whether suppliers in South Korea, Japan and Taiwan should take up Micron’s market share in China. 

Read: Micron probe by China seen as chip war retaliation

Follow Jeff Pao on Twitter at @jeffpao3

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The long patient queues that triggered Dr Kev Lim’s startup journey to profitability with Qmed Asia

Family health challenge opened eyes to painful part of patient experience
Building a successful startup requires deep understanding of pain points

As a teenager growing up in Tangkak, Johor, Kev Lim took an interest in computing thanks to his older brother who was pursuing a degree in computer science. Helping himself to…Continue Reading

Beijing cools Taiwan issues ahead of G7 Summit

The Chinese Communist Party (CCP) has softened its stance on Taiwan matters and highlighted peaceful reunification in advance of the 49th G7 Summit, which will be held in Japan’s Hiroshima May 19-21.

Chinese media also stress that China will face a huge crisis if it has to divide its army to fight against the US, Japan, South Korea and Australia at the same time in a war in the Taiwan Strait.

Wang Huning, one of the seven standing committee members of the politburo of the CCP’s Central Committee, explained the party’s new strategy on Taiwan in an internal meeting on May 10. He stressed that the mainland will deepen its economic cooperation with Taiwan and increase, step by step, cross-strait exchanges.
 
Beijing’s softened tone is a big contrast to the People’s Liberation Army’s actions of deploying warplanes, naval vessels and military drones to the Taiwan Strait early this month when 25 US defense contractors attended the Taiwan-US Defense Industry Forum in Taipei on May 3.

Wang Huning is head of the party’s Central Policy Research Office and Xi Jinping's close aide. Photo: Communist Party of China
Wang Huning is head of the party’s Central Policy Research Office and Xi Jinping’s close aide. Photo: Communist Party of China

“It is necessary to fully, accurately and comprehensively implement the party’s overall strategy for resolving the Taiwan issue in the new era, and firmly grasp the dominance and initiative in cross-strait relations,” Wang said in the annual Taiwan Work Conference on May 9 and 10.

“We must adhere to the one-China principle and the ‘1992 Consensus’ to promote the peaceful development of cross-strait relations,” he said. “We must uphold the concept of ‘one family on both sides of the strait,’ respect, care for and benefit Taiwan compatriots, strengthen the systems and policies that improve the wellbeing of Taiwanese people and continue to deepen cross-strait integration and development.”

Punditocracy’s warnings

Significantly, over the past weekend, several articles remarkable for their frankness have circulated freely on the normally strictly censored Internet in China, promoting the drawbacks of having a Taiwan Strait war.

On Sunday a Jiangsu-based writer published an article titled, “I don’t support reunification by force! A war will only exhaust the people and waste money and not benefit the general public.”  

“Military reunification will not only cause casualties but also bring irreparable losses to Taiwan’s economy and society,” he says. “Taiwan is our brother province, not our enemy. The peaceful resolution of cross-strait relations is in the fundamental interests of the people on both sides of the strait, and it is also one of the necessary conditions for realizing the great rejuvenation of the Chinese nation.”

The writer adds: “Against the backdrop of intensified disputes in the South China Sea, we need to focus more on striving for a peaceful solution to the issue, rather than falling into the vortex of military confrontation. More importantly, the Taiwan issue is the Chinese people’s own issue, and we should not leave the problem to external forces to solve it.”

He says military reunification will only bring more hardships and losses to China’s relatives, friends and compatriots in Taiwan. He says China should adopt a more ingenious approach, through cooperation and negotiation, to let the people of the Taiwan region accept its love and kindness, and let them become friends and partners of the mainland.

Multi-front combat

“Once we start to unify Taiwan by force, we need to prepare for the worst – facing multi-front combat,” a Zhejiang-based columnist writes in an article published Sunday. “In case the US, Japan, South Korea and Australia take actions together, we will have to fight on all four sides from the waters near the Okinawa Island and in the Bohai Sea, the Taiwan Strait and the South China Sea.

“Our main concern is the US has already deployed forces to many military bases around the Taiwan Strait and keeps delivering weapons there,” he says. “The US troops in Okinawa are among the biggest threats to us.”

He says it is likely that the US will dispatch its aircraft carrier strike force and nuclear submarines to the Taiwan Strait one day and pose a great threat to China.

“Due to the unstable situation on the Korean Peninsula, South Korea may not send a large number of troops to the Taiwan Strait but it can still send some there and then start a military action on the peninsula,” he says. “If Australia and the US join hands, it will be a huge crisis for us in the South China Sea region.”

He concludes that although China has the ability to fight on all four sides, it needs to further boost its military strength.

It is not common that articles such as this are permitted to be published on the heavily-censored Chinese internet. As of Monday, they have remained accessible. 

Blinken’s China visit

After the spy balloon incident broke out in late January, US Secretary of State Antony Blinken canceled a Beijing trip he had scheduled for early February. After US House Speaker Kevin McCarthy met Taiwanese President Tsai Ing-wen in California on April 5, Blinken proposed to visit China in April but was rejected by Beijing.

US Ambassador to China Nicholas Burns said on May 2 during a webinar organized by The Stimson Center, a Washington-based think tank, that the US wants to resume more communication channels with China and hopes that the Taiwan Strait will remain peaceful going forward.

Chinese Foreign Minister Qin Gang (left) and US Ambassador to China Nicholas Burns Photo: Twitter, China’s Foreign Ministry

On May 9, Chinese Foreign Minister Qin Gang told Burns in a Beijing meeting that China will only talk to the US if the latter stops pressing Taiwan issues, avoids overreacting in cases such as the recent balloon incidents and quits imposing new sanctions on the Chinese technology sector. 

The Qin-Burns meeting was followed by Wang’s speech on May 9-10 and a ten-hour meeting between National security adviser Jake Sullivan and top Chinese diplomat Wang Yi in Vienna on May 11. 

After the Wang-Sullivan meeting, the White House said the two sides had engaged in candid, substantive and constructive discussions on key issues regarding US-China relations, global and regional security issues, Russia’s war against Ukraine and the cross-Strait dispute, among other topics. Xinhua reported that Wang reiterated China’s stance on Taiwan issues during the meeting. 

Wu Xinbo, a professor and dean at the Institute of International Studies and director at the Center for American Studies, Fudan University, said in an interview on May 12 that whether Blinken will be invited to visit Beijing will be determined by Washington’s stance in the G7 Summit. 

“Since the balloon incident, the Sino-US relations have been deteriorating due to the US’s various measures, including Taiwan and trade matters,” Wu said. “China is now asking the US what it will do to stop the further deterioration of the two countries’ relationship.”

“A series of actions recently taken by the US and its allies created a negative impact on the security situation surrounding China and in the Asia Pacific region and affected our core interests and Taiwan matters,” he said.

He said he had told Burns, who visited Fudan University in late April, that if the US uses the G7 Summit to criticize China, it should not hope that Sino-US relations will improve this year.  

On May 12, German Finance Minister Christian Lindner said that G7 finance leaders had discussed whether developed countries should diversify their supply chains and reduce their over-reliance on China. He said emerging and low-income countries could come into play.

Prior to this, the media reported last month that US President Joe Biden was set to sign an executive order that would restrict American companies and private equity and venture capital funds from investing in China’s microchips, artificial intelligence, quantum computing, biotechnology and clean energy projects and firms. Biden was planning then to announce these investment curbs before the G7 Summit and ask US allies for support.

Read: China ‘will talk,’ but only if US changes its tune

Follow Jeff Pao on Twitter at @jeffpao3

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Singapore digital banks behind the regulatory times

The digital banking ecosystem among Southeast Asia’s approximately 687 million inhabitants is diverse.

Some ASEAN members, including the more developed ASEAN-5 economies and Brunei, have well-consolidated financial services sectors, while others — especially in their rural areas — have large unbanked populations. Traditional banks and fintech start-ups have increasingly turned to digital banking to solve this problem but various issues demand greater regulatory oversight.

Digital banks have proliferated across Southeast Asia and financial authorities in Singapore, Malaysia and the Philippines are seeking to incentivize financial innovation by supporting fintech growth without compromising financial stability. Some of these initiatives include rules for digital wallets, peer-to-peer lending, application programming interfaces, licensing frameworks for digital banks and regulatory sandboxes.

Digital banking adoption is influenced by numerous factors including unmet customer needs, technology adoption, talent and national identification tech systems. The World Bank estimated that the region’s connectivity rate of 133% contrasts with only 27% of the population having a bank account. It is estimated that 80% of Indonesia, the Philippines and Vietnam, and 30% of Malaysia and Thailand are unbanked.

Traditional banks such as the United Overseas Bank and Commerce International Merchant Banks have increasingly leveraged technology to compete with online-only banks and fintech start–ups. But with increasing mobile connectivity, monetary authorities — including the Monetary Authority in Singapore — have leaned towards licensing digital-only banks and nurturing fintech start-ups to compete with traditional banks.

The number of fintechs in Southeast Asia increased from 34 to 1,254 between 2000-2022. Southeast Asian fintechs have a cumulative total of US$4.8 billion of equity funding — the largest share of these start-ups located in Singapore.

Singapore’s position as a financial hub and the region’s leading digital economy for tech-driven innovation makes it an ideal choice to observe the motivations and challenges for technological transformation in financial services.

In December 2020, the Singaporean Monetary Authority awarded digital full bank licenses to GXS Bank and Sea Limited’s Mari Bank and gave significantly rooted foreign bank privileges to Trust Bank to create competition for traditional incumbents and encourage financial innovation and digital banking.

These initiatives prompted the three biggest traditional banks in Singapore — namely the Development Bank of Singapore (DBS), Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) — to accelerate their transformation processes. With high overheads, traditional banks must transform to compete with fintechs in terms of costs, products and services.

DBS approached this challenge in its journey toward being a tech-minded company by collaborating with cloud computing provider Amazon Web Services to retrain its staff in digital tools, artificial intelligence (AI), and machine learning. Over 3,000 DBS employees — including senior executives — were trained in innovative technologies.

DBS differentiated itself by developing 85% of its technology in-house — rather than outsourcing — during its cloud-based tech infrastructure transition. Data is used for personalized intelligence and analytics to enable a greater understanding of customers’ desires and expectations. DBS is industrializing the use of AI and machine learning to power differentiated customer experiences.

Fundamentally, DBS had to operate as a start-up and embed an appropriate organizational start-up culture — a particular challenge for incumbent banks transitioning into the tech space. Adopting a hybrid multi-cloud infrastructure, DBS aims to reduce infrastructure costs by adapting its architecture to the cloud and reimagining its processes to be customer-centric.

In this context, Singapore’s Smart Nation Initiative “Singpass”, a digital identification framework, could play a key role in enrolment and verification. DBS has become a technology company, enabling flexibility to experiment and implement changes faster, and integrate with customer systems.

For example, DBS and GovTech are teaming up to pilot Singpass face verification technology for faster digital banking sign-ups among seniors aged 62 and above.

During Singapore’s economic post-Covid-19 transition, DBS created the DBS Digital Exchange to manage its integrated digital ecosystem. Self-directed trading is possible via its digibank app. DBS and JPMorgan also co-created “Partior” as a blockchain-based cross-border clearing and settlement provider that harnesses smart contracts to transform the future of payments.

Before experimenting with intelligent banking, DBS built its proprietary AI machinery using an integrated approach. This combines predictive analytics, AI and machine learning, and customer-centric design to convert data into hyper-personalized nudges to help customers make informed decisions.

Because DBS provides “insights” and “nudges” for customers on its digibank app, the technology must be consistent and dependable. Yet despite spending billions on tech, training, contracting reputable vendors and using proven technology, DBS still encountered technical problems in its digitalization journey.

On May 5, 2023, DBS’ online banking and payment services were disrupted for the second time in two months. Previously, on March 29, 2023, DBS lost electrical power, disrupting its digital services for 10 hours. These two disruptions come 16 months after an outage in November 2021 which lasted for two days, causing access problems to the bank’s control servers.

The DBS Digital Exchange is 10% owned by Singapore’s SGX stock exchange. Image: Twitter

For the 2021 outage, the Monetary Authority required DBS to apply a multiplier of 1.5 times to its risk-weighted assets for operational risk, amounting to US$700 million of regulatory capital to ensure sufficient liquidity.

As traditional banks like DBS digitalize and embrace technology, they must have robust business recovery and continuity capacity built into their digital frameworks. Regulatory authorities like the Monetary Authority have driven digital transformation and highlighted the need for banks to continually review their digital banking infrastructure.

But regulators also need to increase monitoring and supervision of banks’ digital processes and transformation models.

Dr Faizal Bin Yahya is Senior Research Fellow in the Governance and Economy Department of the Institute of Policy Studies, National University of Singapore.

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

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Winners: FinanceAsia Awards 2022-2023 Southeast Asia | awards, financeasia awards, southeast asia, sustainability, impact, esg, flagship awards, annual winners, 27th iteration | FinanceAsia

Still reeling from the effects of last year’s supply chain woes, energy disruptions and geopolitical tensions, financial markets are now also contending with the impact of consecutive interest rate hikes and uncertainty following recent banking turmoil.

While 2023 may not deliver the capital markets rebound we were all hoping for, it is worth pausing to recognise leading financial institutions that have forged through and made waves in these volatile times.

Marked progress and innovation across deals continues to demonstrate regeneration and resilience. After all, the goal posts have not changed: each of Asia’s markets is bound by net zero commitments; and digital transformation continues to drive regulatory discourse and development around emerging sectors and virtual assets. As a result, sustainability and digitisation continue to be underlying themes shaping a new paradigm for deal-making in the region. 

The FinanceAsia team invited banks, brokers and ratings agencies to showcase their capabilities to support their clients as they navigated these uncertain economic times. Our awards process celebrates those institutions that showed determination to deliver desirable outcomes, through display of commercial and technical acumen.

This year marks the 27th iteration of our FinanceAsia awards and celebrates activity that has taken place within the past year (2022).

To reflect new trends, this year we introduced an award for Biggest ESG Impact (encompassing all three elements of ESG strategy) and updated our D&I award to include equity: Most Progressive DEI Strategy.

Read on for details of the winners for Southeast Asia. Full write-ups explaining the rationale behind winner selection will be published in the summer edition of the FinanceAsia magazine, with subsequent syndication online.

Congratulations to all of our winners!

 

*** SOUTHEAST ASIA ***

CLM (CAMBODIA, LAOS, MYANMAR)
Domestic
Best Bank: Cambodian Public Bank
***

INDONESIA
Domestic
Best Bank: PT Bank Central Asia
Best Broker: PT Mirae Asset Sekuritas
Best DCM House: PT Mandiri Sekuritas
Best ECM House: PT Mandiri Sekuritas
Best ESG Impact: PT Bank Mandiri
Best Investment Bank: PT Mandiri Sekuritas
Best Sustainable Bank: PT Bank Mandiri
Most Innovative Use of Technology: PT Bank Mandiri
Most Progressive DEI: PT Bank Rakyat Indonesia

International
Best Bank: BNP Paribas
Best Investment Bank: BNP Paribas
Best Sustainable Bank: MUFG
***

MALAYSIA
Domestic
Best Bank: Public Bank Berhad
Best DCM House:
Winner: CIMB Investment Bank
Finalist: Maybank Investment Bank
Best ECM House: Maybank Investment Bank
Best ESG Impact: Public Bank Berhad
Best Investment Bank:
Winner: Maybank Investment Bank
Finalist: CIMB Investment Bank
Best Sustainable Bank:
Winner: Public Bank Berhad
Finalist: Maybank Investment Bank
Most Progressive DEI: CIMB Bank

International
Best Bank: Citi
***

PHILIPPINES
Domestic
Best Bank: BDO Unibank
Best DCM House:
Winner: BPI Capital Corporation
Finalist: China Bank Capital
Best ECM House:
Winner: First Metro Investment
Finalist: China Bank Capital
Best ESG Impact: Bank of the Philippines Islands
Best Investment Bank:
Winner: First Metro Investment Corporation
Finalist: SB Capital Investment Corporation
Best Sustainable Bank: Bank of the Philippine Islands

International
Best Bank: HSBC
Most Progressive DEI: Citi
***

SINGAPORE
Domestic
Best Bank: DBS Bank
Best Broker: CGS-CIMB Securities
Best DCM House: United Overseas Bank
Best ESG Impact: DBS Bank
Best Investment Bank: DBS Bank
Best Sustainable Bank: DBS Bank
Most Innovative Use of Technology: DBS Bank

International
Best Bank: Citi
Best Investment Bank: Citi
Best Sustainable Bank: MUFG
Most Progressive DEI: Citi
***

THAILAND
Domestic
Best Broker: InnovestX Securities Co., Ltd.
Best ECM House: Kiatnakin Phatra Securities PCL
Best DCM House: Kasikornbank
Best Investment Bank: Kiatnakin Phatra Securities PCL
Best Sustainable Bank: Bangkok Bank PCL
Most Innovative Use of Technology: InnovestX Securities Co., Ltd

International
Best Bank: HSBC
Best Investment Bank: Citi
Best Sustainable Bank: MUFG
Most Progressive DEI: Citi
***

VIETNAM
Domestic
Best Bank: Techcombank
Best Broker: SSI Securities Corporation
Best Investment Bank:
Winner: Viet Capital Securities Corporation
Finalist: SSI Securities Corporation
Best DCM House: SSI Securities Corporation
Best ECM House:
Winner: Viet Capital Securities JSC
Finalist: SSI Securities Corporation
Best ESG Impact: Saigon-Hanoi Commercial Bank
Most Innovative Use of Technology: TechcomSecurities

International
Best Bank: HSBC
Best ESG Impact: HSBC
Best Investment Bank: HSBC
Best Sustainable Bank: Citi
Most Innovative Use of Technology: HSBC

***

For other winners:

Click here to see the winners across North Asia.

Click here to see the winners across South Asia.

¬ Haymarket Media Limited. All rights reserved.

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