Heng Swee Keat: International reform agenda – Singapore’s challenges Opening keynote address by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore (MAS), at the Asian Banker Summit, Singapore, 19 April 2010. *  *  *  Introduction 1. Good morning. It gives me great pleasure to join you today at this 11th Asian Banker Summit. 2. The inaugural Asian Banker Summit was held in Singapore about 10 years ago. At that time, Asia was staging a strong recovery from the financial crisis which shook the region in 1997. Today, we find ourselves at a similar inflection point. Emerging from the crisis 3. The worst of the global financial crisis appears to be over. Global financial conditions have since improved markedly and prospects for the world economy have brightened. Asia ex-Japan is leading the recovery, with its GDP already surpassing the precrisis level by nearly 8%. For the whole of 2010, the region is expected to grow by 8% over the previous year. The Singapore economy has rebounded strongly and is expected to grow by 7–9% this year. 4. While the immediate outlook is positive, we need to remain vigilant. The structural headwinds to growth in advanced economies remain. The transition from government-led stimulus to sustained private-sector driven growth may be more difficult in those economies which face rising sovereign debt levels.
At the same time, more and more conventional investors are also looking to diversify their portfolios into sukuk as a new asset class. So, issuing sukuk would enable fund-raisers to enjoy a wider and more diverse investor base. 20. Second, you would be able to diversify your funding sources. With the additional option of sukuk in your arsenal, you can choose to issue either conventional bonds or sukuk, depending on the pricing and liquidity in the market at the time of issuance. This would provide more flexibility and a more stable source of funding to fund-raisers, particularly at a time when the funding cost of sukuk is more attractive than that of conventional bonds or when there is difficulty in obtaining liquidity in certain markets. 21. Having said that, sukuk remain a relatively new product type in Hong Kong’s financial market. Some of you may have questions about the mechanics of sukuk, such as what would be suitable underlying assets, how to ensure Shariahcompliance, etc. Malaysia’s experience has clearly shown that there are readily available solutions to address these issues. In particular, while sukuk are assetbased, a number of different sukuk structures are available. So, for companies that do not have much fixed assets, some asset-light sukuk structures may be utilised to  BIS central bankers’ speeches  3  overcome issues concerning availability of tangible assets. I am certain that the experts present here today will be able to provide more guidance and address such questions in detail in later sessions. Concluding remarks 22.