Treasury Today Asia September/October 2019

Published: Sep 2019



Central reservation

When a business grows and reaches into a different region, setting up a regional treasury centre may be seen as a logical next step. After all, having somewhere closer to the action that can support business growth, cover the local footprint, and have treasury experts on tap, should be appealing. And what about the favourable tax regimes established by key locations; surely a major benefit?

Whilst the tax incentives are undeniably attractive (albeit usually with a time limit of around five years), when taking the regional treasury centre path it’s better to think more in terms of how such a structure can help the company achieve its objectives such as enhancing operational efficiency, centralisation of funding, liquidity and risks, and optimisation of capital.

However, any business considering this path will rapidly be made aware of the considerable need for local knowledge to achieve all this. The demands of the process for some may even put the brakes on any such plan, encompassing as it does swathes of regulation, in-depth knowledge of local business practice, payment systems, taxation, legal requirements and so on. Building a regional treasury centre is thus not something a business can take lightly, and reservations may abound.

Fortunately, Asia presents a number of realistic options for companies seeking treasury centre efficiencies.

There are two obvious candidates in the region. Singapore is easily the largest FX trading centre here, with a mature banking sector to match. It offers political stability, a strong technological infrastructure, and a deep talent pool for businesses to draw upon. Furthermore, it is currently ranked second among 190 economies by World Bank annual ratings on ease of doing business.

The other contender, Hong Kong, despite its current difficulties, is a convenient gateway to China, offers interesting tax incentives and a favourable environment in which to do business (it takes fourth place in World Bank annual ratings). What’s more, it offers a dynamic financial structure, and one of Asia’s largest stock exchanges.

Whilst these two financial colossi may be strong magnets for APAC treasury centres, they are not the only options for companies in the region. Other demonstrably suitable locations currently include China, Malaysia, Thailand, India, Australia and New Zealand (the latter taking the number one spot in the 2019 World Bank ease of doing rankings).

With the trend of relocating treasury centres having seemingly picked up speed in the last few years, these alternative locations may well be serious challengers to the dynamic duo. With more options, any reservations about taking the centralisation pathway begin to melt away.

In our main feature this edition, we explore in depth the options open to those seeking to establish a regional treasury centre, opening up the options beyond the obvious (but giving the obvious credit where it’s due).

Elsewhere, we look at opportunities for treasurers seeking to expand their short-term investment strategies, we cast a critical eye over the role treasury can play in M&As, and even explore the contentious notion of zero-based budgeting.

Whilst it sometimes pays to be circumspect, treasury options are opening up in many fields; being aware of what’s out there is essential if informed decisions are to be made.

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