Sydney eyes financial hub role in region

Aug 2, 2008
Sydney eyes financial hub role in region
Australia plans big push to challenge Asian leaders Singapore and HK
By Roger Maynard, Australia Correspondent

SYDNEY - ANOTHER competitor is upping its game in the region's
financial services arena.

Australia's Assistant Treasurer Chris Bowen has pledged to lead
an 'Olympics-style push' to transform Sydney into a regional
financial services hub to rival Singapore and Hong Kong.

The government aims to do so by promoting financial services to Asia
through deregulation, education and a competitive tax region, he told
a conference of top businessmen and political leaders.

Sydney, already Australia's financial capital, hosts 53 of the 55
authorised deposit-taking banks. It is also home to all of the 10
foreign subsidiary banks and all of the 31 branches of foreign banks
in the country.

Keen to maintain the momentum, the government is to establish a
special Treasury unit to oversee the plan. It hopes to have an agenda
for action by the end of the year.

Prime Minister Kevin Rudd has personally endorsed the new strategy.
He will lead senior industry leaders to key Asian economies to
showcase Australia's financial services sector.

'We want to work to ensure that the financial services sector is an
important part of Australia's global branding,' he said.

Australian banks quickly welcomed the move.

But while many support the government's initiative, putting it into
practice may pose a bigger challenge than the Rudd administration is
prepared to acknowledge.

Sydney is still a relative minnow among the big fish when it comes to
financial hubs. A federal government ranking puts it 10th worldwide
and fourth in Asia, after Tokyo, Hong Kong and Singapore.

Mr Greg Canavan, of leading independent stock market research house
Fat Prophets, said that trying to turn Sydney into a financial
services hub was a 'big ask'.

'It sounds like government rhetoric that may or may not eventuate
down the track,' he said.

'Given that Hong Kong and Singapore are very embedded in the
financial industry in Asia, I think it would take a lot of work by
Sydney to get anywhere near rivalling them.'

Mr Canavan said uncompetitive Australian tax rates could work against
Sydney.

'Obviously the government would need to come to the party in terms of
tax to attract the big multinationals to set up shop here rather than
in Singapore,' he said.

As part of the government's initiative, Mr Rudd has already cut
withholding tax on real estate investment trusts and pledged further
deregulation on credit products.

But the finance community has made it clear that the government must
go well beyond its A$630 million (S$800 million) cut to withholding
tax if Australia is to become a major financial services hub.

Financial sector executives in Singapore pointed out that, even then,
there remain challenges for Australia's ambitions that cannot be
addressed simply by government policy.

Aberdeen Asset Management managing director Hugh Young said
Australia's location works against it.

'Australia may be part of the Asia-Pacific, but it's on the
outskirts.'

With a population of some 20 million, compared to Singapore's four-
plus million, Australia's economy and financial services also have a
large domestic focus.

CIMB-GK economist Song Seng Wun said the region is already well
served by Singapore, Hong Kong and Tokyo. Australia has 'probably
left it a little bit late', he said.

Mr Song said that Shanghai would have a better chance of making its
mark in the region's financial arena.