1   Good morning ladies and gentlemen. To all our foreign guests, a very warm welcome to Singapore. I trust that you found yesterday's discussions both intriguing and fruitful. This morning, I've been asked to talk about general trends in the evolution of corporate treasuries and in particular, how these have affected where they choose to locate their regional treasury centres and what they choose to do in these treasury centres. As many of you are aware, over 3600 companies have chosen Singapore as their regional base in Asia. This is an important segment of our financial industry, generating good business for our financial institutions. Thus, we monitor these trends closely; constantly reviewing our policies and refining our tax regime, to maintain our status as the location of choice for regional corporate treasuries. 

2   The responsibilities of the corporate treasurer have certainly grown in scope as markets expand and transactions become increasingly global. Once considered as just a transactional operator, the increasingly complex nature of international business and proliferation of treasury management systems has transformed the corporate treasurer into a strategic advisor and a financial supply chain manager. This metamorphosis produces 2 opposing arguments as to how the treasurer should structure his operations. 

3   On the one hand, there are forces which argue for a centralization of treasury operations to a single point. Let me just highlight 2 of these: Technology and cost. Technology has produced several applications that not only facilitate, but simplify the life of the regional treasurer. Those of you who are in the midst of implementing an ERP solution at your company would beg to differ, I'm sure. However, treasury management solutions and the automation of processes they offer have enabled treasuries to execute a host of intricate tasks while retaining managerial oversight and compliance with financial reporting requirements. Access to real-time financial and accounting information of affiliate companies around the globe from a single platform can streamline the cash management process and facilitate transparency.  Armed with these tools of technology, the corporate treasurer can truly begin to drive real business value, seamlessly manage the financial risks of the business and close problematic "time and effort gaps". 

4   Advances in technology makes centralized management of cash and the operation of an in-house bank a reality for every corporate.  In principle, an in-house bank provides all of the banking services that its subsidiaries require. As only the in-house bank will be able to transact with external banks, it will necessarily cause the group to aggregate its requirements internally, and derive more economies of scale in outside transactions. With less emphasis on earning spreads, the in-house bank is able to service its subsidiaries more economically.

5   Cost and organizational efficiencies are also key drivers behind the centralization of treasury functions.    A centralized treasury operation can minimize processing times, simplify the flow of funds and avoid unnecessary duplication. Moreover, a centralized model pools people, skills and knowledge into a single center that allows management to monitor, direct, and grow treasury operations swiftly and efficiently.  From a cost perspective, a centralized model lowers costs through higher trade volumes and fewer transactions and counterparties. 

6   Opposing this argument to centralize is the belief that as corporates extend their operations, especially into countries with less developed financial infrastructures, there is a need to be closer to the ground.  Operating from a single global treasury centre is not ideal. There are 2 sub-arguments to this. First, time zones.  Companies with global operations will find it extremely tedious to manage cash flows across time zones from headquarters.  Second, market risks. Experience in the past decade suggest that a country's financial markets and currency tends to be more closely correlated with other markets and currencies in the same region, than with those in other regions.  Thus, funding an operation in Taiwan, out of borrowings from say, the S$ market, may carry less risks than borrowing in US$.

7   The net result of these 2 arguments, one towards centralization and another towards decentralization is the emergence of the regional treasury centre. Thus, instead of having a single global centre or a multitude of local centres, we have a few key regional centres.  Now, if that is the motivation for setting up regional treasury centres, what makes a location ideal for setting up such a centre? Allow me to suggest a few factors.

8   First, the basic pre-requisites: A safe and stable operating environment, a strong legal system, a skilled labour force, connectivity and good telecommunication infrastructure so that the regional centre can connect with other centres seamlessly. These are obvious and do not need further elaboration.

9   Second, costs.  A 2006 KPMG study concluded that Singapore is the most cost-competitive business location among nine industrialized countries with costs 22% lower than the US benchmark. A key component of cost is taxes. We aim to continue to attract foreign companies to locate their central or regional treasury management activities in Singapore, through our Finance and Treasury Centre incentive, or FTC. Upon receiving FTC status, a company will enjoy a concessionary tax rate on its treasury activities, as well as a withholding tax exemption.  By awarding the incentive over a period of five to ten years, companies achieve a degree of tax certainty which allows them to make further operational commitments with confidence. Singapore's robust line of over 40 double taxation agreements is also a key regulatory advantage over other locations in the region.

10   Third, a developed financial sector with a deep pool of financial institutions to service the treasuries, and a broad range of financial tools to help them manage their risks. Of course, both are abundantly available here. All of you are aware that Singapore is the main centre for the Asian dollar market and the fourth largest FX centre in the world. This has been our bread-and-butter business. However, over the last few years, we have also expanded now into newer markets including credit derivatives, energy and some soft commodities, equity derivatives and regional interest rate products.  

11   Fourth, and this is a more recent factor for countries in Asia, the presence of a deep capital market where corporate treasuries can raise funds or invest surplus cash. The Singapore stock market is well-developed. In addition, since 1998, we have actively developed the Singapore bond market. The size of the bond market is now close S$200 billion. In addition, the types of securities issued have also become more sophisticated. In 2004, about half of S$ private issuance were in the form of structured notes: including asset-backed securities and credit-linked notes. Several of the regional treasuries are regular issuers in the Singapore bond market.  For those of you who have not done so I would encourage you to consider this.

12   In Singapore, there is a unique confluence of all these factors, which makes it a very compelling location for a regional treasury centre. As one of the government minister noted in the recent election, we are like a Swiss watch, where all the parts are precisely in placed.  This does not mean that we can afford to be complacent.  On the contrary, we are constantly reviewing our position : from costs, to infrastructure to manpower to markets, to continue to present an even more compelling case for all of you to continue to your treasury operations out of Singapore.

13   With that, I thank you and wish you fruitful discussions for the rest of the day.