Challenge for GIFT as Singapore use subsidies to attract bond listing on SGX

PALAK SHAH Mumbai | Updated on February 23, 2021

MAS ‘subsidy’ defeats popular perception of Singapore attracting companies only due to better infrastructure

How does Singapore, Asia’s largest tax haven, hold a competitive edge over India’s off-shore jurisdictions like the Gujarat International Finance-Tec City (GIFT)? The Monetary Authority of Singapore (MAS), which is equivalent to Indian financial market regulators like the RBI or SEBI, attracts companies by providing them ‘subsidy’ for listing on the Singapore Stock Exchange (SGX).

The MAS runs two schemes – Asian Bond Grant Scheme and the Sustainable Bond Grant scheme – under which it reimburses a large portion of fund raising and listing expenses incurred by companies if they list on the SGX. MAS website says it subsidises expenses including that of issue arranger, audit, credit rating, legal, listing agent and listing fee. The subsidy virtually means that fund raising can be done for lowest cost in Singapore compared to any other off-shore jurisdiction. The expenses could come to around ₹2-5 crore for bond issuances between ₹700 and ₹3,500 crore. More than half of revenues from issue arranging have to be spent on Singapore companies to avail subsidy.

High level of secrecy

Experts say, MAS ‘subsidy’ defeats the popular perception of Singapore being able to attract companies for fund raising only due to its better infrastructure. The ‘grants’ show there is more secret behind Singapore’s success story, an investment baker said.

“You need an echo-system for financial markets and that comes only when more companies prefer to raise money in your jurisdiction. So to attract companies, Singapore gives subsidies and for financiers and fund managers, it has doled out tax incentives. Also, SGX has other attractions like India’s largest traded equity index Nifty and it allows omnibus fund structures, which makes tracing of the ultimate beneficiary of money flow difficult. Traders on SGX enjoy a high level of secrecy,” the Singapore based investment banker told Business Line.

SGX claims thousands of bond listings on its platform, which also includes major Indian companies like the SBI, NHAI, Indiabulls Housing Finance, Indian Renewable Energy Development Agency among others.

The Singapore authorities have set-up an office in Mumbai’s Bandra-Kurla Complex, which reaches out to several companies, fund managers and high net worth individuals explaining them the incentives.

Singapore is classified as a tax haven because it offers tax advantages to offshore non-resident companies and the last two decades has seen a dramatic rise in the country as Asia’s banking and investment markets. Singapore has many Free Trade Agreements and Double Taxation Treaties. India has been making a persistent attempt to bring back the share of financial markets that it has lost to tax havens like Singapore, Dubai and Mauritius. In the recent budget the government announced exemption of tax for funds to shift their assets to jurisdictions like GIFT City.

FPIs hold assets worth more than ₹25 lakh crore and more than a third of this come from lax tax havens.

Published on February 23, 2021

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