The banking and finance services have boosted the Singapore’s economic growth in these 30 years. Singapore also becomes the prosperous financial center in Asia Pacific region. There are over 700 financial institution operate in Singapore. Banking services are all about business activities of accepting and ensuring the currency belong to other people and entities. When people want to earn a profit, they can lend out this money. Finance services are the products and services include banks credit unions, credit card companies, insurance firms, accountancy firms, consumer finance companies, stock brokerages, investment funds, real estate funds, and some government sponsored enterprises provided by 700 financial institutions in Singapore.
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Due to Singapore budget proposed financial support, banking and finance services sector have encouraged firms to innovate and enterprise abroad. Moreover, internationalizing companies are introduced concessionary tax rates, and young and fast-growing companies are piloted a new risk-sharing scheme with alternative financing options by Budget 2015.
- Wealth management insurance & reinsurance
Wealth management is a professional service that provide appropriate financial products and services to build wealth to the clients. Singapore is recognized as a premier asset management location in Asia with sum assets under administrative of around S$1.4 trillion.
This is because Singapore is located at the crossroads between the East and West. It is a strategic geographical location, which offers worldwide speculators incomparable entry to the Asia Pacific markets. (MAS) Other than that, there are many international insurance firms and reinsurances are situated in Singapore, there are not only the local people playing in this industry. Hence this sector contribution to Singapore’s economic by attracting many foreign company and foreigner invest in Singapore.
- Foreign direct investment (FDI)
A country possesses an open trade regime, stable political and legal environment, and prudent macroeconomic policies, competitive tax rates a transparent regulatory environment and efficient judicial framework are easily attracting Multinational Corporation (MNC) to set up their business in this area which is FDI.
Singapore provide the above strength, therefore there are many MNCs do business in various sectors, for instance Financial and insurance services sector, Hotel and restaurant. FDI provide employment and higher salaries for Singaporeans and bring in new technology and expertise to sustain Singapore’s competitiveness.
- Financing SME
Small and medium enterprises (SME) are important to the Singapore’s economic. There is 70 per cent of the work force work in SMEs, and also SMEs contribute around 50 per cent of the national GDP. Singapore’s government should strongly promote SME financing. In order to aid stimulate growth and facilitate economic restructuring.
Besides that, there are two options to SMEs financing, there are mix of internal financing and external are financing. Internal financing includes the business owner’s capital and retained earnings while external financing is primarily bank financing.
- Shortage of skilled talent
Singaporeans are facing shortage of skilled talent. Therefore, there are many financial institutions hiring more foreigners because of their new practices and ideas. Singaporeans have learnt their skill and knowledge, but foreigners have become the leader of the department said by Mr Wong Keng Fye, head of group human capital at Maybank Singapore (YEAR). Generally, foreigner’s salaries is quite high, this will impact the cost of the company increase.
Nowadays, people use internet as their entertainment. As such, there is an increase of cyber-crime appear in Singapore. There is a report stated that direct financial loss in Singapore due to cybercrime grew from US$944 million in 2012 to US$1 billion in 2013 (Norton, 2013). Cyber-crime can be categorized in hacking, fraud, and intellectual property theft. New cybercrime attack vectors and more points of entry are being introduced, allowing criminals to easily take personal information for fraudulent activities, or worse, they could simply aim at one device to damage the entire systems said by Singapore’s Second Minister for Home Affairs and Trade and Industry S. Iswaran.
Once they hack into one system, they will claim ransom. Cyber risk can take numerous structures. An enormous data breach can welcome litigation, cause regulatory fines, and instigate law enforcement investigations. Moreover, a distributed denial of service (DDoS) assault can stop an organization’s operation or make technology or software go off, thus having a direct impact on its revenue and reputation. When cybercrime happen in banking and finance services sector, the companies in this sector will face the risk of losing business trade secret or competitive information as well as money.
- Money laundering & Terrorism financing
There are many countries facing a serious problem, which are money laundering (ML) and terrorism financing (TF). ML can be defined as a crime, criminal earn the money from drug trafficking or other serious crime and try to convert the money to legitimate sources. TF is closely related to ML. The fund of TF might originate from legitimate or criminal sources. But the method used to disguise the sources and uses of the terrorists’ funds are similar to ML (the Commercial Affairs Department, 2014).
Singapore is also facing this problem due to its open economy with efficient financial system and well-developed business infrastructure to result in the wrongdoers snatch at a chance to do these kinds of thing. Remittance agents and money-changers have higher ML/TF risks with its cash-intensive sub-sectors, owing to its huge amount of cash, high numbers of walk-in, one-off and overseas customer contribute to higher inherent ML/TF risks.
- Training and education
In order to facing this challenge, there are some strategies planning to deal with. Firstly, training and education must be well-advocated. Nowadays, most companies always seek for someone possesses at least degree bachelor holder, so that if the applicant have only diploma certificate, he will have less opportunities to get a job. For example, there are two candidates intend to apply banking executive position, both of them possess almost same requirement unless education background. One of them have degree bachelor, the other one have diploma certificate. In this circumstance, the firm will probably hire the one who possesses the degree bachelor holder. Moreover, there is a research stated that people who want to work in financial sector must have a knowledge of insurance, banking and credit unions said by Richard Brophy.
Secondly, the Monetary Authority of Singapore will launch leadership programs and provide scholarships for postgraduate study by the Ministry of Manpower. This can help Singapore possess more talent. Further, organization should provide training to enhance employee’s skill.
- Government tax policies
Every country has different taxes for business. Singapore’s government has adopted a tax, which is single-tier income tax system in 2003. This means that stakeholders don’t have to pay double taxation. Moreover, Singapore has decreased the corporate income tax rates repeatedly from 26 percent in 2006 to 17 percent in 2014 (T1). From this tax rate, Singapore can generate more local business and attract foreign direct investment because they don’t have to pay the high tax and also maintain Singapore competitive. In top of that, cutting the corporate tax rate will lead to higher wages and living standards and help the state compete globally as well. Therefore, local people and foreigners are willing to create their business in Singapore.
In addition, SMEs are an important part to Singapore’s economic, the Government has adopted a partial tax exemption scheme which lowers the taxable profits of these companies.
Singapore’s corporation tax in various years
- Anti-money laundering & Counter terrorism financing
Anti-money laundering (AML) and counter terrorism financing (CTF) are what Singapore always does. Singapore is a member of several international AML and CTF organizations. For example, the Financial Action Task Force (FATF), the Asia/Pacific Group on Money Laundering (APG) and the Egmont Group of Financial Intelligence Units (Egmont Group). All of them have one thing in common, which is AML and CTF. In top of that, Singapore has their own department to investigate the complex fraud, white-collar crime, ML and TF that is The Commercial Affairs Department (CAD). Other than that, there is a unit called The Suspicious Transaction Reporting Office (STRO), which is Singapore’s Financial Intelligence Unit (FIU). The functions of STRO are receiving, analyzing and disseminating Suspicious Transaction Reports (STRs). ML and TF are often involving with international organizations. In order to AML and CTF, exchange of information with foreign FIU is necessary. Therefore, STRO can share STRs filer with foreign FIU. It will help Singapore to do much better in AML and CTF. (the Commercial Affairs Department, 2014)
Monetary authority of Singapore (MAS) to aid Singapore creates a sound and progressive financial center and sustains non-inflationary economic growth. MAS is acting as the central bank of Singapore, its functions including the, the oversight of payment systems, conduct of monetary policy, issuance of currency, and serving as banker to and financial agent of the government. Moreover, MAS is supervising financial services and financial stability surveillance. In addition, MAS handle the official foreign reserves of Singapore. It also helps Singapore become an international financial center.
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The expectation of Singapore economy is continued to grow at a moderate pace over the next few quarters. Some segment within the external-oriented sectors should benefit in pace with the increase of the US economy, certain parts of activity will be subject to tardy demand in the Eurozone and China. Thus, the performance of the domestic-oriented sectors will also be uneven. (MAS, 2014)
The financial and insurance services are the most optimistic in the services sector. A net weighted balance of 34 percent of companies anticipates that income will increment for the first quarter of 2015. (Singapore statistic, 2015)
Another way to help Singapore’s economic growth is raising the personal income tax rates of the top income earners from Year of Assessment 2017. This fiscal resource is expected to raise $400 million of extra revenue a year (Kelly Tay, 2015).