SPECIALISED FINANCIAL INSTITUTION FOR CROSS-BORDER SME FINANCING

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SPECIALISED FINANCIAL INSTITUTION FOR CROSS-BORDER SME FINANCING: 5.

Mr Teo Siong Seng asked the Minister for Finance whether he will provide an update on the study of a specialised financial institution to handle cross-border financing for local SMEs as proposed by the Economic Strategies Committee.

The Second Minister for Finance (Mrs Lim Hwee Hua) (for the Minister for Finance): Sir, the study that the Member has asked about is still underway. The Government is evaluating how best we can realise the development of a market-based institution to support and catalyse cross-border financing for Singapore-based companies.

The study includes an assessment of the various possible business models for such an institution. It involves discussions with both companies and banks, as well as with Export-Import (EXIM) banks and Export Credit Agencies (ECAs) of other countries who can give us a detailed understanding of how they operate in the marketplace.

We would like to find an approach that is commercially sustainable, and which also stays relevant through business cycles, not only at times of crises. Sir, we should also not rush into duplicating models elsewhere but instead explore solutions that meet the needs of our companies and address the gaps in our financial market.

In the meantime, IE Singapore continues to support cross-border financing through

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existing schemes like the Loan Insurance Scheme (LIS) and LIS Plus, the Export Coverage Scheme (ECS) and the Internationalisation Finance Scheme (IFS).

Mr Teo Siong Seng (Nominated Member): Thank you, Minister for the explanation. While we see world trade picking up with the economic recovery, the SMEs do not want to miss out on the opportunity. So I have three questions. One is that though it is under study, when can we expect such a scheme to start, ie, the time frame? What amount can the SMEs expect? Lastly, will the Government consider taking in any partners, whether local or foreign, into this scheme?

Mrs Lim Hwee Hua: Sir, I would like to assure the Member that even as the study is underway, the existing schemes will continue to be there to support the cross-border financing as well as internationalisation activities. So the SMEs will not have to worry about there being a reduction in lending or financing support. I will highlight some of the areas being considered in the study. There are two main areas of considerations.

The first is the scale of operations for such a market-based institution, and this will include questions like, whether it will cover trade finance, internationalisation and project finance; in what forms should these be undertaken, whether they be guarantees or they be direct lending. There is also the question on which markets to cover, so as to better support the SMEs and Singapore-based companies seeking to expand abroad.

Finally, there is the question which the Member has raised, which is the size of the institution, as well as the type of capital funding that such an institution will need in terms of equity and debt. These are all very complex issues that we would have to look through very carefully.

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The second major area of consideration is the nature of Government's participation. Here, there is a whole range. It could be a Government-owned and Government-run organisation or institution, to one that is in partnership with private institutions, to the other extreme where Government outsources the entire operation. Again, there are various implications for each of these models. So until the Government is convinced that the resulting institution is best able to meet the different needs, it will not rush into forming one that may eventually prove to be ill-equipped. Because of the complexity of the issues and the need for us to continue consulting other players who have already been operating in that space, as well as consulting the business community in greater detail, the study would take the better part of this year.