Apr 16, 2016, 7:24 pm SGT
There is a need to plug gaps in the global financial safety net and encourage investments in infrastructure projects around the world, said Finance Minister Heng Swee Keat.
He was speaking at several sessions at the G20 Finance Ministers and Central Bank Governors Meetings in Washington, DC, on April 15.
At the session on the global financial safety net, he talked about the importance of instilling confidence where a strong and credible global financial safety net would be an important part of this confidence.
However, gaps exist. Mr Heng suggested that these could be plugged in several ways. For example, this could be achieved by "announcing the availability of a standing facility geared towards groups of countries that may be affected by specific shocks".
"Second, where needed, proactive pushing out of liquidity through gatekeeper economies. This is not unlike central banks disbursing liquidity through primary dealers."
He also talked of promoting closer cooperation between the IMF and regional financing arrangements.
Specifically, he said bilateral foreign exchange swaps are an effective tool to provide access to financing.
"But with the rollback of key US dollar bilateral swaps, it is all the more important to work out how the various other layers need to be integrated, in order to maintain the strength of the global financial safety net," said Mr Heng, who cited the upcoming test run between the Chiang Mai Initiative and the IMF later this year as an example.
At a separate session about investment and infrastructure, Mr Heng said that although global foreign direct investment (FDI) had risen, it was mainly driven by corporate restructuring such as mergers and acquisitions in the developed countries of Europe and the United States.
"Investment in greenfield projects and productive assets remain limited, so productive capacity may not have expanded significantly," he noted.
Greenfield projects refer to those that involve setting up new plants for instances, as opposed to brownfield projects, where investors invest in existing facilities. These are some strategies of FDI.
He said brownfield investments give better risk-return ratios, and added that "if we are to promote productive greenfield investments, we need to reduce risks and improve returns for such projects".
Some ways to reduce risks, he suggested, include having structured project documentation and standardised contracts to reduce uncertainty.
Host countries can also offer a mix of tax policies and financial incentives "to nudge investments into productive assets," said Mr Heng.
For instance, he noted Britain had announced tax support of ·1 billion pounds for the oil and gas industry in its latest Budget.
"On this note, the G20 Tax Symposium in July is a good platform for us to discuss how tax policy can promote strong growth."
Mr Heng also pointed out measures to better long-term returns for greenfield investments.
One is to get better information on return rates across greenfield projects, and to promote connectivity of infrastructure projects, especially those that are cross-border.
He urged countries to "encourage green infrastructure even for emerging economies, and tap on green financing", as being sustainable will lead to lower costs and raise long-term returns.
Mr Heng added Singapore will be hosting the Global Infrastructure Connectivity Forum later this month, and "Singapore will do our part in furthering this connectivity agenda".