Singapore remains committed to supporting the growth of Islamic financing despite the the expiry of tax incentives introduced for the sector in Budget 2008.
Speaking at the Islamic Finance News Singapore Roadshow early this month, Ng Nam Sin, Assistant Managing Director, Monetary Authority of Singapore, explained that like all tax breaks, the incentives for Islamic finance had a fixed tenure, in this case, of five years.
"It is useful to note that Islamic Finance activities will continue to be incentivized alongside conventional finance activities under our other existing schemes," says Ng. "The lapsing of the two incentives is thus no reflection of MAS’ continuing commitment to develop Islamic financial services in Singapore."
Ng emphasised that Singapore’s proposition for Islamic finance must be broader than just tax advantage. He explained that the nation's success as an international financial sector stems from its high standards of regulation; deep and liquid capital market, the presence of international buy side players, and a critical mass of financial intermediaries with expertise to address a wide range of financing needs.
"It is these strengths that allow Singapore to support the growth of Islamic finance," says Ng.
Ng says that the government will maintain its fundamental approach of providing a level playing field between Islamic and conventional finance.
"The growth potential for Islamic finance in Singapore is strong," says Ng. "As such MAS remains committed to further grow this important sector of our financial services industry."
The global Islamic finance industry has grown to reach some US$1.3 trillion in total asset size. Sukuk issuance reached a record level in 2012. The demand for these Islamic financial products came not only from the Muslim community, but also non-Muslim investors. Thus, Islamic finance now features prominently alongside other conventional financial services.
With a view on this trend, Singapore started to promote Islamic finance in 2004. The government's aim is to leverage the country's strengths in wholesale banking, asset management and capital markets to allow Islamic financial services to flourish, alongside other conventional financial services.