Sixteen local and international financial institutions will be given special tax concessions for helping develop Singapore's debt capital markets. The list includes HSBC, whose treasurer Mervyn Fong said this latest batch of enticing tax exemptions would stiffen bond market competition with Hong Kong and Tokyo. 'This is important because the tax incentives now make Singapore much more attractive,' Mr Fong said. Singapore is still a toddler in the sophisticated world of bond markets compared to Japan, Hong Kong, Europe and the United States. However, it is proving to be a fast learner. The approved bond intermediary (ABI) tax incentive scheme announced by Finance Minister Richard Hu Tsu Tau in his March budget is the latest in the string of recent government initiatives taken to liberalise, deepen and broaden the city state's fledgling debt securities market. An initial package of tax incentives was introduced last year aimed at debt issuers and financial intermediaries, as well as investors. The government has also taken measures to boost the government securities market, persuade statutory boards to issue debt papers and encourage foreign issuers of good credit standing to tap its Singapore dollar market for the first time. 'These efforts have helped to significantly boost the level of debt market activity here,' Second Finance Minister Lim Hng Kiang said. Singapore dollar issuance by foreign entities and statutory boards has ballooned from practically zero to about S$4 billion (HK$18.5 billion) over the past year after restrictive barriers were lifted. For the first half of this year, corporate debt issuance amounted to about $9 billion, already the same amount as for the whole of last year. Just yesterday, Westpac Banking Corp launched a debut Singapore dollar-denominated bond issue in the republic. The $150 million five-year issue was lead managed by JP Morgan Securities. Only one international debt security has been issued out of Singapore this year and that came just this week, when the Development Bank of Singapore issued a US$750 million 10-year bond. Financial institutions qualifying for ABI status will be exempt from tax on fee income earned from arranging, underwriting and distributing qualifying debt securities. They will also enjoy a 10 per cent concessionary tax rate on interest income earned from holding such securities. In addition, interest paid on qualifying debt securities to non-residents will be exempt from withholding tax. To qualify for ABI status, financial institutions must prove they have assembled a substantial debt team in the republic, outline their future development plans and meet a set of qualitative criteria including expertise and track record. The incentives offered have, not surprisingly, been widely hailed by industry. Most of those receiving ABI status yesterday said they would be committing more resources to the republic. 'We are pleased to be conferred the ABI status,' JP Morgan's managing director Bart Broadman said. Mr Broadman heads the United States merchant bank's Asia-Pacific markets operations. 'It will support our drive and commitment to being a trusted player in the development of a viable and vital Singapore debt capital market,' Mr Broadman said. Foreign players would still like to see some remaining inhibiting regulations governing Singapore's swap, repo and interest rate derivative markets relaxed. They would also like to see deeper liquidity. ABN Amro's Asia-Pacific fixed-income and treasury head Piero Overmars said: 'Liquidity attracts liquidity. That takes a bit of time. 'But this is one step in the right direction.' Mr Overmars' bank shifted its Asian fixed-income headquarters from Hong Kong to Singapore two years ago. To meet these and other concerns, Mr Lim yesterday also announced plans for a new debt market committee to be headed by Monetary Authority of Singapore (MAS) managing director Koh Yong Guan. Mr Lim said: 'The committee will look at how public and private sector bond raising could be further encouraged, as well as continue to work closely with industry to review and develop a regulatory and infrastructural environment that is conducive to the growth of a vibrant debt market.' Members of the first batch of 16 banks to be accorded ABI status are ABN Amro, Citicorp Investment Bank, Credit Agricole Indosuez, Deutsche Bank, Development Bank of Singapore, HSBC, JP Morgan Securities, Merrill Lynch, Morgan Stanley Dean Witter, Oversea-Chinese Banking Corp, Overseas Union Bank, Schroder International Merchant Bankers, Standard Chartered Bank, Tokyo-Mitsubishi International, UBS and United Overseas Bank. MAS executive director Teo Swee Lian said additional applications had been received and further banks would be included in the ABI scheme. Deutsche Bank Asian derivatives markets managing director Loh Boon Chye said: 'Hong Kong started earlier and Singapore is catching up strongly.'