Crisis will bring new opportunities in Asia

The medium-term prospects for growth in Asia remain strong despite the global financial crisis, according to Heng Swee Keat, managing director of the Monetary Authority of Singapore.

"The secular trend in the growth of Asian enterprises and corporations, growing intra-regional trade, and the demands for infrastructure financing will generate new opportunities for corporate and institutional businesses," says Heng, who gave the keynote address at the International Institute of Finance Asia Regional Economic Forum in Singapore. "Wealth creation and the rise of the Asian middle class, coupled with the low penetration of financial services will drive the growth of personal financial services."

Heng went on to say that when the dust settles, global financial institutions which rebuild their resilience and stay engaged in the Asia region will increase the value of their franchises. 

"Asia will continue to provide strong growth opportunities and geographical diversification benefits," he says. "Some Asian financial institutions will also develop strong operations, brand names and a regional footprint. They will play their role in driving Asia's continued growth."

Singapore, he notes, is working to cushion the impact of the crisis while at the same time building capabilities in the economy and the financial sector for the upturn.

Like everywhere else, Singapore has experienced tightening credit conditions and it has taken action to address both the interbank money markets as well as the flow of credit from banks to corporations.

In the interbank money markets, the MAS remains focused on ensuring that both the Singapore dollar and the US dollar markets continue to function smoothly, Heng says. For the Singapore dollar market, the MAS will continue to ensure sufficient liquidity through its monetary operations and standing facility. For the US dollar market, it established a $30 billion swap line with the US Federal Reserve. This line is alongside other swap lines that the Fed has with 13 other central banks, including several in Europe and Asia. 

"As a major funding centre, we took precautionary measures to ensure that global financial institutions operating here continue to have access to US dollar liquidity," Heng says.

The MAS has not needed to use the swap line, "nor do we see any impending need", Heng says, while adding that the precautionary measure has served it well. 

With regards to the flow of credit from banks to corporations, Singapore believes this is best facilitated through government schemes to co-share some of the risks with banks. In February, the government announced the Special Risk-Sharing Initiative (SRI). Under this initiative, the government will absorb 75% of the risk for insurance covering working capital and trade-financing loan facilities. The government will also absorb 80% of the risk for bridging loans which go towards meeting firms' working-capital needs. It also has schemes for SMEs and micro-loans.