Speech by Second Minister for Law, Finance & Education, Indranee Rajah, at the Legal & Accounting Connect Conference 2018

29 Jun 2018 Posted in Speeches

Mr Gregory Vijayendran, President of The Law Society of Singapore

Mr James Lee, Chairman, ACCA Singapore

Mr Reuter Chua, Head of ACCA, Singapore

My Chaly Mah, Chairman of SAC

Distinguished guests, ladies and gentlemen

1. Introduction

1. I am delighted to be here today because this really is a culmination of what we had recommended in the Committee for Future Economy report, which was basically different professional services should collaborate together and form part of Team Singapore, be part of Singapore Inc., in terms of going out and getting the opportunities which are there.

2. So why should we do this? What is the benefit? Well, the Singapore legal and accounting sectors have grown significantly over the last 10 years:
   1. The legal sector’s nominal value added (VA) grew by 40% from S$1.5 billion in 2008 to an estimated S$2.1 billion in 2017. Over the same period, the value of legal services exported from Singapore increased by nearly 140%, from S$363 million in 2008 to S$867 million in 2017.
   2. The accounting sector’s nominal VA grew by 45% from S$1.1 billion in 2009 to S$1.6 billion in 2016. Operating receipts have grown too, by more than 60% from S$1.3 billion to an estimated S$2.1 billion over the same period.

3. While the two sectors have done well separately, they can achieve even more together. That is the reason why in 2016, we set up a working group under the Committee on the Future Economy (CFE) to look into the growth of the two sectors together and a year later, as part of the CFE recommendations, we set up the Professional Services Programme Office (PSPO) to jointly develop and promote legal and accounting services.

4. I am glad to see that these efforts have helped bring the two professions closer together and today, LawSoc and ACCA are co-organising a conference and signing an MOU to further collaboration in thought leadership and professional development. The most important thing here is that you identify areas in which to work together and you start setting thought leadership for the region. Not just for Singapore, but for the region, because our professional services are advanced, the quality done by our professionals here is good, and it is something that the rest of the region looks towards.

5. The MOU is the first step. Lawyers and accountants are more alike than they would admit. Both professions serve the same clients, face the same issues, have similar structures, and work together on the same deals.

6. Collaboration is becoming more essential for Singapore to remain the go-to place for professional services in Asia. In fact, the vision behind the CFE recommendations is that Singapore should be a global exchange. A global exchange for international commercial transactions. And when you are an exchange for international transactions, you will inevitably need professional services. And we must be that place, the first place that people in the region think of when they need professional services. Professionals have an opportunity to work together to provide a complete suite of services to clients in Singapore and abroad.
   1. This is especially so in the high growth practice areas identified by the Committee on the Future Economy. Of the nine high growth areas identified, five, or more than half, straddle legal, accounting and/or financial services. Take restructuring for example. Accountants act as financial advisors and help develop the restructuring plan. Lawyers provide the legal advice and make the necessary court applications, while financiers provide new money to meet operational needs and recapitalise the company.
   2. Your clients are also globalising and are diversifying their offerings. They are confronting multi- faceted problems that transcend geographies and disciplinary silos. They need cross-cutting services. It is by working together with other professionals that you can provide seamless and quality service.

7. A successful collaboration is one where the outcome is greater than the sum of its parts. Collaboration is not merely piecing together independent works. It requires professionals to work together, understand each other and what their clients want, to deliver the best outcome for the client.

8. In my speech, I will focus on three areas which lawyers and accountants can collaborate –
   1. capturing opportunities in high growth areas;
   2. internationalisation; and
   3. business development & marketing.

2. Capturing Opportunities in High Growth Areas

9. The CFE Working Group on Legal and Accounting Services envisioned Singapore to be a trusted global exchange for financing, brokering, structuring and dispute resolution for international commercial transactions.

10. One key strategy to achieve the vision was to strengthen Singapore’s global market position. This strategy is twofold – the first is to grab the demand and pull it into Singapore, and the second is for Singapore to be a base to export services to Asia.

11. We have been working hard to position Singapore to capture the demand in the five high growth areas that cut across the legal and accounting sectors identified by the Working Group. In my speech, I will give some examples of what the Government has done to capture work in some of these areas. Later this morning, lawyers and accountants will jointly present case studies in three of the areas – projects & infrastructure, restructuring, and risk management.

12. First – projects and infrastructure. Asia is expected to drive demand for infrastructure.
    1. The UN projects that by 2030, 24 of the world’s 41 megacities will be in Asia. These cities will need infrastructure and urban solutions.
    2. The Asian Development Bank projects that US$26 trillion may be spent over the next 15 years on infrastructure projects in Asia.
    3. Despite all the demand, a number of projects are not taking off due to the lack of bankability, usually occasioned by the lack of proper project preparation, project structuring, and technical issues.

13. Singapore is uniquely placed to address these problems. We have done fairly well thus far in capturing infrastructure work, but we can do better.

14. We have the players.
    1. We have the lenders. Singapore-based banks have provided loans or financial advisory services for an estimated 60% of infrastructure projects in ASEAN.
    2. Commercial banks with project finance teams and project structuring expertise are also located in Singapore.
    3. Multilateral development banks such as the World Bank and its sister agencies, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) also have a significant presence here.

15. We have the professional services firms.
    1. the accounting firms with project advisory teams;
    2. the local and international law firms with project financing and infrastructure dispute resolution expertise; and
    3. other professional services companies such as engineering consultancies and architecture firms.

16. The presence of these players although valuable, is not enough. To take this one step further, we have set up Infrastructure Asia, an office by Enterprise Singapore and the Monetary Authority of Singapore. It is intended to be a platform to connect infrastructure stakeholders, enable information exchange on infrastructure opportunities in Asia, facilitate infrastructure investments and financing, and help infrastructure players including law and accounting firms access these opportunities.

17. To ensure that Singapore has the capabilities to support the needs of infrastructure players, we have developed courses to help professionals build or deepen their expertise in infrastructure.
    1. If you are a lawyer thinking of moving into the infrastructure space, NUS Law will be introducing a new course – the Project Finance Academy. The course is a practical “hands-on” workshop that will take you through the main legal considerations in structuring project finance transactions. The first run will take place in November this year.
    2. If you already have some infrastructure knowledge but would like to deepen your expertise and mingle with other players in the space, you can consider signing up for the Asia Leaders Programme in Infrastructure Excellence or ALPINE. This course is organised by SMU and is open to all players in the infrastructure space. It brings together leaders to share and gain an understanding of one another’s perspectives and objectives.

18. Second – restructuring. This is never an easy topic for businesses. But against the backdrop of rising interest rates, insolvency and debt restructuring are a reality. Global corporate defaults have increased since the global financial crisis in 2008 and regional law firms have reported a sizable increase in insolvency and debt restructuring work.

19. Restructuring generates sizeable work for our lawyers and accountants. The total amount of debt that may require debt restructuring across key Asia-Pacific markets is estimated at US$250 billion. Out of this, a substantial sum is accessible to Singapore-based service providers based on a study by Oliver Wyman.

20. To enhance Singapore’s position as an international debt restructuring centre for Asia and to assist businesses and creditors in achieving better outcomes in a restructuring, we amended the Companies Act in May 2017. It has been slightly over a year since the new legislation came into effect, and in that time more than 15 restructuring cases have been filed under the new framework with the Singapore courts. This is a good start.

21. While enhancing our legal regime is a key first step, this alone is not sufficient. The work will not come to Singapore if our professionals are not up to scratch. Businesses today have international operations and their assets are scattered across the globe. To provide your clients with holistic legal and accounting advice, lawyers and accountants need to be equipped with multi-disciplinary skillsets and expertise on the different markets and regulations.

22. To find out what are the skillsets required and identify gaps in the ecosystem, the Singapore Accountancy Commission (SAC) convened a task force to study the restructuring landscape. SAC has already interviewed practitioners from the legal, accounting and finance sectors to garner preliminary views. A survey has also been developed by SAC to target legal, accounting and banking firms to uncover more insights. I would like to encourage you to participate in this survey and share what you know. Because the more data that we collate, the more information we have, the better we will be able to understand the landscape and the better we will be able to develop key strategies that ultimately we can use to benefit all of you. This will guide us in crafting relevant policies and initiatives.

23. Third – risk management & corporate governance. There is increasing demand by companies to manage risks better due to tightening regulations across sectors. An example is the finance sector where anti-money laundering is a key concern. Banks are increasing the size of their in-house compliance teams, in response to more scrutiny and heavier penalties imposed by the regulators. Some Singapore law practices have responded by setting up specialised regulatory compliance teams.

24. As businesses operate in a more digitised world, cyber-attacks and data frauds have been flagged as the top risks [1] companies need to navigate. Accounting and advisory professionals can support firms on this journey. A survey jointly conducted by SAC and ACCA indicated high demand by businesses for risk advisory and technology risk advisory services in the region. For instance, risk advisory is listed as the second most demanded non-regulated professional services. However, there is a lack of skilled talent in niche areas such as digital and technology risk advisory.

25. To address this gap, SAC, together with other government agencies, will promote Singapore as the thought leader in the region, and increase capability development opportunities for both firms and individuals.

26. SAC, together with Workforce Singapore and ISCA recently launched the Professional Conversion Programme (PCP) for Financial Forensic Professionals.
    1. The PCP offers mid-career PMETs the opportunity to enter into a high growth area where there is strong demand for financial forensic professionals.
    2. Accounting entities stand to benefit as the PCP offers you an opportunity to widen your talent pool by accepting PMETs from different sectors and backgrounds. Accounting entities such as EY, KPMG, Helmi Talib and Nexia TS have pledged their support for the programme.

3. Internationalisation

27. There is only so much that we can do within Singapore. Law and accounting firms need to venture out and capture regional legal and accounting work.

28. Much has already been said about Asia’s growth. It is the world’s fastest growing economy. It is expected to grow at over 6.0% this year, more than double the expected growths of other regions in the world.

29. As Asia grows, international companies will come to Asia and Asian businesses will go global. Companies’ legal and accounting needs will become more complex and require co-ordination across borders. It will be increasingly difficult for you to serve your clients if your presence is only in Singapore. You need to grow with your clients to serve their needs.

30. Earlier this year, MinLaw, LawSoc and Enterprise Singapore (formerly IE Singapore and SPRING) launched “Lawyers Go Global” to support the internationalisation efforts of law firms. The first mission trip under “Lawyers Go Global” took place in April, to Guangzhou, China. I heard that the lawyers found the mission trip useful. It was a good opportunity for the lawyers to better understand the Guangzhou market and meet with Chinese law firms and businesses. I will be making a trip to China and I will be inviting the lawyers who participated in the Guangzhou mission trip as well as other Singapore lawyers to join me.

31. On the accounting side, ISCA has been actively organising business missions to help small and medium-sized accounting practices develop regional partnerships in ASEAN. Earlier this year, ISCA brought together five Singapore accounting firms to form the OneSMP network, which has seen the addition of more than eight accounting firms around ASEAN since its formation. The network aims to help foreign investors establish businesses in Asia. Through such a collaboration, the group is able to offer an array of accounting and advisory services across the different ASEAN countries.

32. Besides internationalising alone, law and accounting firms can work together, leverage your branding as Singapore–based firms and hunt in a pack together. The government agencies and associations on both the legal and accounting side have been working to explore what can be done to facilitate more interactions and collaborations between the lawyers and accountants.

4. Business Development and Marketing

33. This leads me to my last point – business development and marketing. A Law Society study of small and medium-sized practices found that 53% of interviewees had no deliberate business development plans. Similarly, according to a national census conducted by SAC, 40% of Accounting Entities do not have any form of digital presence in terms of website and social media platforms.

34. Business development should not be left to chance. You need to sit down with your partners and strategize. Determine your strengths, identify your target clients, industries and markets. Articulate what makes your firm distinctive to your clients and potential clients. Develop an implementation plan to execute your identified strategies. A successful business development plan and marketing campaign will help you attract clients instead of chasing them.

5. Conclusion

35. It may not be easy for an individual lawyer, accountant or firm to navigate the different practice areas or figure out how best to capture growth. But you can come together, learn from each other, and learn from other sectors.

36. We have worked hard to position Singapore’s legal and accounting sectors to capture the growth in Asia. We hope that you will work with us and with each other to seize the opportunities presented.

37. Thank you.

^[1] Source: World Economic Forum, The Global Risks Report 2018; Allianz Risk Barometer 2018: SME Business Risk

Last updated on 29 Jun 2018