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Finance

How Singapore sees itself complementing China's Belt and Road

The city state wants to be make itself a REIT and arbitration hub

SINGAPORE -- This city-state wants to capitalize on the big bang in Asian infrastructure that China's Belt and Road Initiative has set off.

The island's government has begun looking into forming and floating listed investment trusts to raise funds to finance the projects that China wants to put together to form modern day Silk Road trade routes.

It is also considering how it can offer legal support for settling disputes and other issues.

Capitalizing on its position as a financial and legal hub, Singapore is looking to underpin its economic growth by involving itself in the huge China-led projects.

Some real estate investment trusts backed by properties outside of Singapore are listed on the Singapore Exchange. Utilizing REIT-related know-how, the government of the city-state will consider formulating a mechanism that could help investors feel safe in their Belt and Road investments paying off.

An employee works at the front desk of the Singapore Exchange head office on April 22, 2015.

REITs could provide an alternative to loans from banks and make it possible for governments and companies to raise enormous amounts of funds for road, railway and other infrastructure projects.

The mechanism could also offer an asset management option for insurance companies, pension funds and other long-term investors.

Singapore also serves as an arbitration hub, handling a large number of international disputes. Gigantic infrastructure projects involving complicated contracts can sometimes leave parties feeling disputatious.

"With the rapid development of outbound investment under the 'One Belt, One Road' initiative, the number of investment arbitration cases will continue to grow," Chen Luming, a partner at JunHe LLP, said at a seminar that the Singapore International Arbitration Centre and the Shanghai International Arbitration Center hosted in May.

Singapore plans to work as a "receptacle" for businesses that get involved in the Chinese initiative. Chinese companies in 2016 were awarded $126 billion in overseas Belt and Road projects, according to the Chinese Ministry of Commerce.

China is Singapore's biggest export market. If the relationship is further strengthened through the Belt and Road program, Singapore can expect its financial and legal services market to become more active and offer more job opportunities.

But if other countries become similar receptacles, they could threaten Singapore's position as a trade and financial hub.

"As a small country, we should be able to benefit from all of the economic growth in Asia," said K. Shanmugam, who concurrently serves as Singapore's minister for home affairs and minister of law. "And 'One Belt, One Road' in itself offers tremendous economic opportunities."

Minister of Finance Heng Swee Keat is similarly confident. "It is possible for us to have an infrastructure trust of some kind," he said, "where the infrastructure can be put out either on the stock exchange, or bonds can be issued."

Stressing the importance of arbitration in promoting the Belt and Road Initiative, Heng said, "I am optimistic that we can play a role to complement China in its growth."

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