The rapid development of the financial sector, including long-term lending and project finance in Singapore, has contributed to the successful implementation of multi-million dollar projects in industry, energy, infrastructure, transport, trade, real estate, healthcare and other areas.

Singapore, a small state in Southeast Asia, has undergone major economic changes since the end of World War II.

As a result of these transformations, this former British colony is now one of the most economically developed countries in the world, significantly influencing the geopolitical situation in the region.

Today, innovative financial instruments play an important role in the development of big business and international cooperation between Singaporean companies and foreign partners.

Brief overview of economy of Singapore

Southeast Asia is the most politically, culturally and economically diverse region on the planet.

Here, the highly developed countries and the poorest countries in the world coexist side by side. Singapore is of exceptional interest among the most investment-attractive countries that have achieved a high level of development.

A small island state, devoid of valuable minerals, is surrounded by much stronger neighbors, both in territory and in economic power. It is important that the region is torn apart by political, ethnic and religious contradictions. The Lion City, as Singapore is sometimes called, has managed to create an efficient political and economic system that has allowed not only to survive on the world stage, but also to effectively use the available local resources for the prosperity of business and society.

Singapore is a city-state with an open economy based primarily on the international trade.

It is the leading financial, shipping and trade center in the Asia-Pacific region and a gateway for expanding trade and investment in the rest of Asia.

Singapore’s policy is aimed at developing friendly relations with all neighboring countries, supporting activities within the ASEAN framework, liberalizing international trade, and establishing close trade and economic ties with all interested partners.

Singapore’s Gross Domestic Product reached US$397 billion in 2021, which is impressive given its population of just 5.45 million. Economic growth at the level of 3.8-4.5% per year contributes to the further development of this promising market by foreign companies and the attraction of additional investments in all key sectors. This is also facilitated by the balanced policy of local authorities.

The Singapore government pursues a business-oriented economic policy, creating an attractive investment climate in almost all areas.

Singapore’s economy is dominated by services, the most important of which are trade, banking and financial services, and infrastructure and transportation.

Industrial production is also important, especially high-tech industries with high added value. A favorable investment climate and stability facilitate the implementation of capital-intensive projects based on project finance (PF) and other advanced financing schemes.

Singapore is considered to be a well organized country in terms of legal, tax, regulatory and political issues.

It is highly trusted by large foreign investors due to its economic and social stability, a well-developed financial sector operating in accordance with the best international standards, as well as a large number of high-qualified specialists in the local labor market.

Singapore has been pursuing a successful pro-export policy in recent decades. The electronic industry, shipbuilding, mining machinery and petrochemical industries are at a high level, attracting the attention of investors from all over the world. Singapore is also one of the world leaders in biotechnology, medicine and many other science-intensive fields.

The prosperity of Singapore is largely based on its favorable location, as the city plays the role of a world trade center.

The weaknesses of the Singaporean economy are the lack of raw materials, which makes local investment projects highly dependent on the import of minerals, raw materials, semi-finished products and energy.

But this fact did not prevent Singapore from becoming the third oil refining center in the world after Rotterdam and Houston. Agriculture plays a minor role in the local economy, so almost all necessary food is imported.

Some features of project finance and lending in Singapore

Project financing is a method of attracting long-term debt financing for large investment projects, in which the source of debt servicing is the cash flows that the project generates or will generate in the future.

This method came to Southeast Asia later than to the European market, where it showed itself in the financing of large oil and gas projects. Despite the high cost of organizing PF schemes, this method allows companies to attract huge financial resources on an off-balance sheet basis, using special formally independent companies (SPV, SPC).

Lending and project finance in Singapore is traditionally well developed and has a long history of commercial success.

This market is replete with large-scale public-private projects (PPP) designed to develop infrastructure, energy, manufacturing and trade.

This concept has been widely used by Singaporean companies for the construction of water treatment facilities, marine infrastructure, waste processing plants and other facilities. Since the mid-2000s, official guidelines have recommended increased use of project finance to modernize and expand high-value facilities worth over S$50 million (about US$35 million).

Major projects in Singapore are financed by dozens of financial institutions, among which we should mention such reputable institutions as Standard Chartered Bank, United Overseas Bank, BNP Paribas, Bank of America and a number of others.

Singapore banks play a huge role in project finance schemes throughout the region. According to some reports, more than half of all project finance loans issued to companies in Southeast Asia are issued by financial institutions in Singapore. In 2018, the Infrastructure Asia was created, which is designed to help Asian businesses in the development of large infrastructure projects.

An important feature of the implementation of investment projects in Singapore is the smaller scale and, accordingly, the lower cost of projects compared to countries such as India, China, Japan or Saudi Arabia.

This is reflected in a peculiar approach to contractual relations, financing terms and capital structure. In particular, financing without recourse to the borrower is used less frequently.

Non-recourse financing gives the lender the right to repay the debt only from the profit generated by the project. From the borrower’s point of view, the risk is limited to the funds that he has invested in the project. Thus, most of the risk lies with the providers of capital.

To finance expensive projects, partners use innovative mechanisms to ensure the safety of capital, increase the creditworthiness of companies and collateral. This includes mezzanine financing, the collateralization of a loan with highly liquid assets, the issuance of bonds, and more.

For example, a bank may issue a large long-term loan for the construction of a new facility.

Large investors provide liquidity by issuing asset-backed securities.

The borrower provides this liquidity to lending banks in exchange for long-term loans, which are converted into securities and contribute to a credit rating upgrade.

Singapore law does not restrict foreign participation in special purpose vehicles that are registered in the country. Exceptions are such sectors as banking, media, as well as some projects in licensed industries. Restrictions usually relate to the ownership of a controlling stake in a company, which is important to consider when designing a project finance structure in Singapore.

In general, the local system is quite liberal and does not require special permissions to organize project finance schemes. Additional costs associated with obtaining permits and licensing may be required only for the registration of land, the operation of communal infrastructure, as well as some issues related to energy, telecommunications, access to water and waste management.

When planning investment projects in Singapore, investor should also take into account laws that allow the authorities to forcefully buy land from private companies for public purposes.

These rules are rarely enforced and are all clearly defined in local legislation.

Project finance services in Singapore: Our core business service

Contact our consultants and learn more about CP Finance UK Finance opportunities in international project finance.

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Investment consulting as a specialized type of consulting in various areas of investment activity contains the potential to increase the efficiency and competitiveness of capital-intensive projects.

Successful investment activities of companies in a highly competitive business environment require competent specialists and modern technologies.

CP Finance UK Finance investment consulting and advisory services include, but are not limited to:

• Analysis of investment projects.
• Development of a detailed business plan.
• Financial modeling and forecasting.
• Providing long-term business financing on flexible terms.
• Consulting and project support at all stages.

If necessary, together with international partners, we carry out engineering design, construction, purchase and installation of equipment on the terms of an EPC contract (turnkey).

Thus, our team is ready to offer clients a full cycle of professional Investment consulting service, from a business idea to a finished object.

We actively cooperate with large companies in dozens of countries around the world, including Spain, France, Germany, Brazil, Mexico, Saudi Arabia, South Africa and others.

Reasons to use investment consulting services

The work of an investment consultant is related to the process of assessing risks and investing resources in such instruments that can bring the greatest return.

They are hired by banks, brokerage firms, investment funds, large multinational corporations, SMEs and private investors.

Close cooperation between the investor and the investment advisor, including the mutual exchange of information and ideas, can help analyze the financial situation and indicate the best paths for a successful investment.

Let us repeat that the investor makes the final investment decision by agreeing to a certain risk and based on the expert’s recommendations.

Investment consulting services are highly individualized, so the portfolio of assets that an investor builds with the support of a consultant will always be unique.

The main responsibilities of an investment advisor include the following:

• Advising private clients on various instruments.
• Investment portfolio management using optimal financial instruments.
• Advising companies on mergers, acquisitions and changes in the capital structure.

An investment consultant primarily performs tasks related to the conclusion of contracts for the provision of his services through the intermediary of an investment company or to ensure the execution of such contracts.

The consultant also receives and transmits orders to buy or sell securities or rights to participate in collective investment institutions on behalf of its clients.

There are many very important issues for clients to consider when preparing for an investment, and it can be costly for an investor to skip any of the pieces of this puzzle. For this reason, it is very important to consult with experts, because this area is very wide and complicated.

The services of investment advisers can be used by companies and individuals who do not have experience or knowledge in the field of investment and have free financial resources that they would like to invest with an acceptable return.

Naturally, investment consulting services come with additional costs, but from the point of view of possible potential benefits or avoidance of large losses, this is certainly a well-invested money.

When looking for an investment consulting firm, experts are recommend to choose one with reputation and solid experience in the given field.

A good investment advisor is able to intelligently manage the capital entrusted to him by a client unfamiliar with the financial markets. In addition, the consultant has some responsibilities under local investment laws. If the investment advice does not meet the standards, the advisor can be held liable for losses incurred by the investor based on his incorrect advice.

Investment consulting services for potential investors

In a broad sense, investment consulting is professional services related to the selection of suitable financial instruments and investment objects for clients in various fields of activity, from financing the real sector of the economy to financial assets.

An investment advisor selects assets for his clients that are worth investing in, based on an analysis of the client’s financial situation and goals.

First of all, this specialist provides detailed recommendations for informing the investor and describing the mechanisms of operation of a certain investment product, including determining the level of risk, time horizon or determining the planned rate of return and initial payment.

In addition, it provides professional services for managing the financial flows of investment projects and offers other services for large businesses:

• Investment project management.
• Preparation of investment memorandum for partners.
• Development and expert assessment of investment projects.
• Analysis and monitoring of investment projects.
• Development of detailed business plans for projects.
• Financial risk management.
• Project support from A to Z.
• Fundraising, etc.

Despite the broad capabilities of investment advisory service providers, the final investment decisions remain with the client, and the advisory service does not create any obligation.

Investment consulting belongs to the category of brokerage services. Activities in this area are strictly regulated and limited by the national legislation of a particular country, and in different countries investment consulting may have unique features and limitations.

In particular, the provision of such services may require a special license. Thus, the provision of any paid or free advice and recommendations in relation to stocks or bonds or units of investment funds can only be carried out by licensed organizations (companies).

Fundraising: attracting investments for large business

Fundraising, or raising funds for investment projects, is considered a popular investment consulting service today.

Arranging financing for a business project is a long, complicated and expensive process, which nevertheless does not give a 100% guarantee of success for each proposed project.

Fundraising in business consulting means a set of consistent activities to find and attract investors. Therefore, some consulting companies define this service as investment financing.

A good investment advisor comprehensively justifies the use of various instruments and methods of financing and develops an optimal financial scheme.

This is influenced by the following factors:

• Terms of implementation of the investment project.
• Project type and current industry specifics.
• Specific stage of the project cycle.
• Taxation system in the host country.
• The structure of the company’s assets.
• Capital market, etc.

In all cases, the purpose of this activity within the framework of investment consulting services is to raise capital on favorable terms for the customer using such instruments as long-term loans, issue of shares, leasing instruments, etc. Often these tasks are solved by project financing instruments (PF).

Financing an investment project should provide the following effects:

• Attraction of sufficient funds for the project as a whole and for each stage of the investment cycle in accordance with the schedule of their implementation.

• Minimization of risks and costs of project participants, each of whom strives to obtain the greatest benefit and has its own requirements for the results.

The greatest interest in attracting investors arises at the stages of launching a company (project) or its rapid growth. Consulting companies have huge databases of potential investors, understand their profile and strategy. Potential investors also use these contacts.

Types of investors and strategies for raising funds

The investor’s goals are always formulated through the development of a clear investment strategy or investment plan, following which in the long term should lead to the achievement of goals. The investor achieves these goals by acquiring various assets for a certain period.

The investment process includes the following stages:

1. Search and purchase of a profitable asset.
2. Receiving income for the period of ownership of the asset.
3. Search for a new buyer of the asset.
4. Sale of an asset.

Income for the investment period consists of regular income for the period of ownership of the asset and the final income as a result of changes in the market value of the asset:

• Passive investment strategy: the investor’s activity ends with the acquisition of an asset, after which he receives dividends or profits (the so-called “buy and hold” strategy).

• Active investment strategy: the investor is interested in the growth of income and capitalization of the asset (increase in value over time). In this case, the investor seeks to get more money from the growth in the value of his asset, tracking changes in value and being ready to sell it at any time.

Different types of investors have different motivations and goals for participating in the project, they are attracted at different stages of the project cycle.

Thus, depending on the type of project of the life cycle stage, the goals of the investment rounds differ.

It is important to take these stages into account when developing strategies for attracting funds for large business, since these strategies must fully fit into the investor’s understanding of their financial interests at each stage and its duration.

It is important not to limit the activity to the search for an investor of the appropriate profile.

In the case of financing large projects, we are talking about a comprehensive service, including the search for investors or lenders for the project, the development of an attractive proposal, the organization of effective communications, the development of a financial model, etc.

Finding a provider of capital in investment consulting is only the first step to the success of a project. The second step depends on the appropriate preparation of the project and the team for attracting investments (presentation and communication). The main task of a consultant when organizing an investment round is to create balanced mechanisms to protect the interests of the parties in the long term.

From the point of view of real sector companies, investment consulting is focused on finding and attracting financing for investment projects. From the point of view of a potential investor, these services represent a professional search, formation and management of an investment portfolio that best suits the profile of a particular investor.

In this section, we consider investment consulting from the point of view of a large business that needs to attract financing and manage financial flows in the framework of investment projects.

If you are interested in financing your project in the EU or abroad, contact the experts of CP Finance UK Finance for more information.