Dispatch (Asia edition)
| by Peta Tomlinson, Nazatul Izma Abdullah, Sonia Kolesnikov-Jessop 06 Mar 2008 Topic: News |
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What defines an international financial centre (IFC)? Such coveted status should not be measured in terms of size only, a new report from Hong Kong argues. When comparing only the concentration of financial market activities, the city appears to rate well behind the dominant centres of New York and London, but other measures show the true picture and highlight Hong Kong's importance, says a research paper by the Hong Kong Monetary Authority (HKMA). The report notes that the key criterion of an international financial centre includes a high concentration of banks - which Hong Kong has, with 76 of the world's largest 100 banks. Raising the bar from being an effective financial hub to a true IFC also requires an economy to attract international financial activities, and it is in this area that Hong Kong excels, the report asserts. The vast majority of world financial activities are presently concentrated in the UK and US, with a substantial gap between them and the rest of the economies studied. Hong Kong ranked sixth in terms of overall market activity, boosted by strong initial public offering (IPO) deals, trailing Japan, Germany and France. In reality, says the HKMA report, the figures can be blurred by the size of a domestic economy, especially in the US, where local activity accounts for a significant part of market turnover. Further, it says the degree of an IFC's success also includes its ability to attract capital flows and international demand for its wealth management services. Hong Kong's financial services exports increased by 88% from 2004 to 2006, surpassing Japan. Of the 23 largest financial institutions in the world, 19 have their Asia Pacific (excluding Japan) headquarters located in Hong Kong, compared with five in Singapore and one in Australia. Hong Kong is also the favourite base for international enterprises conducting business in the region. The report concludes that after adjusting for GDP, Hong Kong outperforms most major financial centres to become the leading location for international direct investment in the financial sector after Switzerland. Looking ahead, it says the rise of Mainland China will increase demand for financial services exports from Hong Kong, and further elevate the city's status as an IFC. The Malaysian Government launched yet another ambitious regional development corridor to catalyse long-term growth, create jobs and raise socio-economic standards in the run-up to the general elections in early March. The Sarawak Corridor of Renewable Energy (SCORE) is the fifth and largest to be launched following the Iskandar Development Region in the south of Peninsular Malaysia, the Northern Corridor Economic Region, the East Coast Economic Region and the Sabah Development Corridor. SCORE has identified certain high-priority sectors for development, including petroleum, aluminium, aquaculture and marine engineering. A prime attraction for investment is SCORE's ample energy resources, including 20,000 megawatts of hydropower, 1.46 billion metric tonnes of coal deposits and 40.9 trillion cubic feet of natural gas deposits. To date, SCORE has reportedly drawn about RM110bn (£17.42bn) in proposed investments, one-third of the Government's target of RM334bn (£52.9bn) required for full development by 2030, including five major deals to produce electricity via hydro-dams and coal-powered generation plants. Unsurprisingly, a project of this scale has also earned flak from environmentalists, since the hinterland in question is a treasure trove of biodiversity and may be considered tribal ancestral land. SCORE will develop about 70,700 sq km, or 57% of Sarawak, affecting more than 600,000 people. However, the Prime Minister has ordered a 'green development framework' study to ensure that SCORE's development is environmentally friendly and that energy resources will be developed sustainably. In the long run, will the potential economic payoff compensate for any negative environmental impact? The Government is optimistic that the full implementation of the SCORE master plan by 2030 will raise Sarawak's GDP from the current RM23bn (£3.64bn) to RM118bn (£18.68bn), spur annual GDP growth to 7% from the present 5% and spin off 1.6 million high-value jobs, while eradicating poverty in this resource-rich, yet underperforming, region. Singapore unveiled a Budget that left the top rate of personal income tax unchanged at 20%, but offered a one-off tax rebate of 20%, capped at S$2,000, for all resident taxpayers for year of assessment 2008. It also saw the abolition of estate duty. Tharman Shanmugaratnam, Minister for Finance, announced several tax incentives for research and development. The tax break for expenditure incurred on research and development carried out in Singapore will be raised from 100% to 150% (available from 2009 to 2013); a new incentive granting companies a Research and Development Tax Allowance, amounting to 50% of the first S$300,000 of chargeable income for each year, will be introduced for 2009 to 2013; and start-ups that have yet to make taxable profits within their first three years will be allowed to convert up to S$225,000 of the company's losses that arise from tax deductions for R&D, undertaken in Singapore, into cash grants of up to S$20,250 from the Government. Tax incentives to enhance business competitiveness included an allowance for writing down cost of fixtures and fittings over a period of three years up to a maximum of S$150,000 for SMEs; an extension of the unilateral tax credit claim for foreign income taxes incurred to all types of foreign-sourced income earned in countries with which Singapore has yet to conclude an Avoidance of Double Taxation Agreement; a five-year extension to the Further Tax Deduction for Overseas Talent Recruitment Scheme, which grants double tax deduction for recruitment and relocation costs of hiring top global talent. To promote the city as a centre for wealth management and Islamic finance, Shanmugaratnam announced the introduction of a new incentive that grants tax exemption on locally-sourced investment income and foreign-sourced income received by qualifying family-owned investment holding companies. The Financial Sector Incentive Scheme will be renewed for five years until 2013, and further enhanced, giving, for example, a 5% concessionary tax rate on income derived from performing specific Shariah-compliant activities. There was also a liberalisation of tax exemption for SMEs and certain sector-specific tax incentives. Full details of the tax changes can be found at www.singaporebudget.gov.sg/key_initiatives/benefits_for_business.html The stock exchange, Bursa Malaysia, recently announced key amendments to its listing requirements in order to raise governance and reassure investors in the wake of unsettling corporate scandals and the exposure of accounting irregularities. Among the recent controversies that were widely reported in the press were the alleged misappropriation of RM36.3m (£5.75m) in funds by a former managing director of Multi-Code Electronics Industries (M) Bhd, claims of fraud and fictitious transactions at Transmile Bhd and Megan Media Holdings Berhad, and alleged missing or destroyed accounting records at OCI Bhd by its previous management. Bursa Malaysia's amendments affect companies listed on the Main Board, Second Board and Malaysian Exchange of Securities Dealing and Automated Quotation (MESDAQ) market. Notably, the independence of the audit committee has been enhanced and the internal audit function mandated in order to improve internal checks and balances for Plcs. Executive directors are now prohibited from sitting on the audit committee. The internal audit function is also made compulsory to provide more effective support to the audit committee, and it is required to report directly to the audit committee. Other amendments include setting out the rights of the audit committee to convene meetings with either the external auditors or the internal auditors, or both, and excluding the attendance of other directors and employees at these meetings. The amendments will take effect from 28 January 2008, but listed companies will be given until 31 January 2009 to comply with the requirements on the revised composition of the audit committee, as well as the mandatory internal audit function. The number of accounting graduates finishing tertiary studies in Australia will not be enough to meet future demand, university data shows. Accountancy is projected to experience one of the highest job growth rates of any profession, yet enrolments do not reflect that trend. According to the Federal Department of Education, Science and Training, the total number of accounting graduates coming from Australian universities has stabilised or decreased in recent years, at around 5,200 each year. Charles Sturt University (CSU) accounting academic, Naomi Stuart, believes one of the reasons is that accounting has an image problem, especially among young people. Stuart visits regional high schools as part of the university's advisory committee, and finds a common negative perception of accountants, who are generally thought of as 'cardigan-wearing number crunchers'. Stuart, who was in public practice for eight years, tries to address that by promoting accountancy as a viable but also glamorous career option. 'I tell students that accountants don't always go into traditional jobs - maybe they'll go into human resources or general business management. Accounting today is more about helping people to grow their businesses. It can be a very exciting career.' With large international firms now recruiting accounting students in the second and third years of their degree, there is even more pressure on smaller firms to find and recruit graduates to maintain their business, especially in the inland regional areas of Australia. CSU is continuing its research on how to remedy this situation, with the findings due later this year. Already, it says one area firms may need to address is low starting salaries. 'Graduate Careers Australia has reported that starting salaries for accountants are over 9% lower than average earnings for the average graduate in their first year of work. A 2007 survey also found accounting firms outside of Sydney appear to offer even less to graduates commencing their careers,' Stuart said. This may further encourage graduates into higher paying corporate positions rather than moving into professional practices, she said. Long before Beijing won its bid to host the 2008 Olympic Games, the local division of PwC was helping China get to the starting block. As early as 2000, the firm was involved in the bidding process by projecting and putting together the Games' budget. By July 2001, PwC Beijing managing partner, Charles Feng, had travelled to Moscow to present the financial section of Beijing's bid to the International Olympic Committee, shortly before the voting. In April last year, the firm's Olympics run was sealed when PwC was named official accounting services supplier to the Games of the XXIX Olympiad. In addition to the main competition, this also requires provision of financial services to the international Paralympics, the Beijing Organising Committee of the Olympic Games (BOCOG), the Chinese Olympic Committee and China's delegation of athletes. In 2001, after Beijing won its bid, PwC turned its attention to providing advisory services during the tender for the major Olympic venues. These projects included the main stadium - the Games' architectural showpiece, also known as 'The Nest' - and the Olympic Village, which will house over 18,000 athletes and team officials. Hongbin Cong, PwC Advisory Services director, says momentum is building as the Games draw near. The firm has assigned two partners - one in Beijing, the other in Hong Kong - to oversee a team of, at times, more than 20 staff members working on the Olympics assignment. Their work will not end when the last medals are awarded. PwC expects its involvement will continue until around May 2009 when the Games' final report is officially presented. Cong believes that PwC was chosen because of its local knowledge and global exposure. The Big Four firm has 9,000 staff members in China, including the Mainland and Hong Kong. 'I believe we were given this opportunity not only because we understand the Chinese environment, but because the BOCOG set a goal to be completely transparent and in compliance with international standards. As China moves towards globalisation, the Olympics is the chance to showcase its financial best face to the world, to illustrate how quickly China is adopting international common practices.' in brief...
Boom town for bankers
Policing auditors
CEOs upbeat on growth
Singapore aims to entice NPOs
Plcs delay submission
Tax treaty a step closer | |