Keynote Speech by Ms Indranee Rajah, Senior Minister of State for Law and Finance, At Project Finance International (PFI) Best Asia Infrastructure Projects Dinner, Marina Bay Sands26 Sep 2017
Mr Rod Morrison, Editor, Project Finance International
Mr Seah Moon Ming, Chairman, International Enterprise Singapore
Ladies and gentlemen,
1. I am pleased to join you at tonight’s Project Finance International Best Asia Infrastructure Projects Dinner. I would like to thank PFI and IE for putting together this dinner, which recognises infrastructure projects in Asia that have been successfully structured and executed in the past year. To our overseas guests, a very warm welcome and I hope that you will enjoy your stay here.
2. As Moon Ming pointed out earlier, the demand for infrastructure is tremendous. Asia will contribute to much of the growth of this demand, as the world’s economic centre of gravity shifts here. Asia is also expected to account for about 60% of the annual growth in global trade until 2020. This growth will require new roads, railways, ports, airports and energy infrastructure to support them.
The Infrastructure Bankability Gap
3. Despite the demand however, Asia’s infrastructure needs remain largely unmet as many projects are not bankable, a result of poor project structuring and preparation resulting in risk allocation that is unacceptable to lenders and investors.
4. The need for more well-structured projects is critical to getting more projects off the ground and bringing in more private funding into infrastructure. The Asia Pacific Risk Centre of Oliver Wyman analysed a database of deals from the past decade, and concluded that 60% of these projects are not bankable without government or multilateral bank involvement.
5. A larger proportion of infrastructure projects can be made bankable if they are well-structured by experienced financial, legal and technical advisors. Governments and multilateral development banks can complement this through project prioritization and investing in early-stage project preparation. These will improve the pipeline of bankable projects in the region.
Singapore as Asia’s ‘Smart’ Infrastructure Hub
6. To make projects bankable, we also need an ecosystem that closely integrates the players across the infrastructure value chain. These include multilateral development banks, private financiers, lawyers, accountants and other professional services. Singapore has built an ecosystem which is able to provide the expertise, financing and regulatory framework for the development of infrastructure projects in the region.
7. This year’s PFI awards’ focus on ‘Smart Financing’ is an especially timely one. Singapore is working on a transformation to be a ‘Smart Nation’. This will require innovative financing of infrastructure that incorporates technology, in order to aid the optimal delivery of infrastructure services.
8. Governments have a key role to play in this transformation. These include creating institutional frameworks to handle complex issues such as privacy and interoperability. Governments can also provide test-beds for technological innovation. One example is Singapore’s One-North district, which has been set aside as Singapore’s first test site for self-driving vehicle technologies and mobility concepts.
9. The increasing pace of technological innovation presents both opportunities and challenges for infrastructure planning. For example, ‘smart sensors’ would allow asset owners to more effectively monitor and improve asset performance in real time. Yet, technology can also be a disruptive force in infrastructure planning. For example, the rise of car-sharing services would impact traffic and demand projections for transport infrastructure. We need to ensure that infrastructure remains relevant over the entire life-cycle. Thus, we need the best professional service providers to help us.
Singapore’s Professional & Engineering Services
10. Singapore’s continuous investment in infrastructure projects has led to the private sector developing strong technical expertise. Consultants such as Surbana Jurong, Meinhardt and Arup have worked on complex technical projects and are well-equipped to advise on and ascertain the viability of projects.
11. The Singapore member firms of the big 4 accounting networks – PriceWaterhouse, EY, KPMG and Deloitte – provide project advisory services to the region. These financial advisory services help organisations develop compelling business cases, structure bankable packages and drive capital efficiency for their projects.
12. Just as importantly, having good legal support is critical, especially given the complexity of infrastructure projects. Our top five Singapore law firms, Allen & Gledhill, Rajah & Tann, WongPartnership, Drew & Napier, Dentons Rodyk & Davidson, are the largest in Southeast Asia with strong regional practices. We are also home to over 40 of the top 100 international law firms, including Latham & Watkins and Allen & Overy.
13. A reality of commercial endeavours, including those in the infrastructure sector, is that disputes are bound to arise. Singapore has a strong reputation for rule of law and good governance, as well as a neutral and stable legal system. All these make us a natural venue for international parties to settle their disputes. We also constantly update our legislation, grow our dispute resolution institutions, and develop world-class infrastructure at Maxwell Chambers, which is the 2nd most preferred hearing facility in the world.
14. Singapore law is widely accepted and used in commercial contracts.
a. First, it draws on the strengths of common law, and provides clear rules for transacting, while remaining aligned with international commercial practices.
b. Second, our courts interpret contracts governed by Singapore law objectively, providing a high level of commercial certainty.
c. It is regarded as a neutral law, supported by strong jurisprudence.
15. Many dispute resolution institutions are located in Singapore.
a. Singapore is one of the top 5 most preferred arbitration seats in the world, and the Singapore International Arbitration Centre is among the top 4 arbitration institutions globally.
b. ICSID arbitrations are conducted here using the Maxwell Chambers facilities.
c. In June 2017, the Ministry of Law signed an MOU with the ICC, under which ICC will set up a case management office here.
d. In July one month later, the Ministry of Law signed a Host Country Agreement with the Permanent Court of Arbitration (PCA) to establish a physical office in Singapore for administration of hearings conducted in Singapore and the region.
e. The establishment of the Singapore International Court (SICC) means that we are now well placed to hear cross-border infrastructure litigation cases. Experienced international judges from other jurisdictions including UK, US, Australia and Japan sit alongside Singapore Judges on the SICC bench. Foreign counsel can also appear in the SICC.
Singapore court judgments are enforceable internationally through registration in the scheduled countries under the Reciprocal Enforcement of Commonwealth Judgments Act. The enforceability of Singapore court judgments has also been further enhanced by Singapore’s recent ratification of The Hague Convention on Choice of Court Agreements. Other parties to this Convention include the EU and Mexico. The US is a signatory but has not yet ratified the Convention. Most recently, China has also signed the Convention.
Singapore’s Infrastructure Structuring & Financing Capabilities
16. Infrastructure financing is critical to turning projects into reality. As a financial hub, Singapore is well positioned to facilitate infrastructure financing for the region.
17. Multilateral development banks are a critical source of infrastructure finance and project structuring expertise. The World Bank Group has expanded its office in Singapore to establish its first Infrastructure and Urban Development Hub. The International Finance Corporation (IFC) also has a significant presence here, including its Asia Treasury Hub.
18. Singapore is also home to well-established financial institutions providing both equity and debt financing. These include infrastructure fund managers such as Armstrong Asset Management and the Equis Funds Group. Singapore-based banks such as DBS, OCBC and UOB have a good regional network in Asia and a deep understanding of their infrastructure needs. Clifford Capital, a home-grown provider of structured finance solutions, has also achieved a strong record in its first 5 years of operation. The ecosystem is complemented by international banks that have made Singapore their hub for Asian project financing, including Sumitomo Mitsui Banking Corporation (SMBC), China Construction Bank (CCB), and Standard Chartered Bank.
Building supply of talent in the infra sector
19. The Singapore Government is helping to build the supply of talent in this crucial sector. Existing initiatives include the Asia Leaders Programme in Infrastructure Excellence (ALPINE) and the Infrastructure Development Internship (IDI) programme.
20. Earlier today, we launched the Global Ready Infrastructure Talent (GRIT), a joint programme between International Enterprise Singapore and Workforce Singapore. This scheme aims to develop a core pool of Singaporeans with deep skills in project origination and structuring, financing or management. This pool could include mid-career professionals and PMETs transitioning into the infrastructure sector. In recognition of the efforts that companies make to on-board and train these professionals, the government will help support the salaries of these professionals during the training phase of the project. The scheme currently has 12 participating companies. So I would encourage interested parties to reach out to IE Singapore.
21. As you can see, Singapore is developing an ecosystem that integrates the different functions of infrastructure development. By bringing everyone together, we are building a procurement network to serve Asia’s infrastructure needs.
22. And we hope that all of you here will partner us in this endeavour to make Singapore Asia’s Infrastructure exchange.
23. Thank you very much.