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Sydney knocked out of top 20 in finance hub ranking

By AB+F Journalist posted Sun, Mar 16, 2014 11:46 PM

Author: Vish Teckchandani

Sydney and Melbourne’s rankings as global financial centres have taken big hits as rivals Hong Kong and Singapore held fast their solid reputation as good places to do business while North American and emerging Asian cities continued their ascent, according to a new report.

London-based consultancy Z/Yen’s bi-annual Global Financial Centres Index (GFIC), released over the weekend, said that Sydney’s ranking fell by a whopping eight places after its rating was marked down two points to 690.

That led to the Harbour City dropping to 23rd spot, from 15th when the last survey was released in October 2013. Meanwhile, Melbourne’s ranking dropped four places to 37th spot in the survey, even though it’s rating actually improved by 18 points to 670.

The report also said that New York dethroned London to become the world’s top financial centre for the first time in seven years as the UK capital’s reputation was tarnished by scandal, among other things, in recent years.

Hong Kong held third spot as its rating improved by two points to 761 and Singapore maintained fourth with no change to its score of 751.

Sydney’s freefall as a preferred place to do business came even after the previous government established the Australian Financial Centre Forum — led by ex-Macquarie Bank deputy chairman Mark Johnson — in 2008 to promote Australia as a leading financial services centre.

As Sydney declined, other cities including from emerging Asia and North America made dramatic improvements in the eyes of the global business leaders who participated in the GFIC survey. Most notably:

• Seoul surged three spots to number seven (from 10th last time) after its rating was marked up by a substantial 17 points to 718
• Busan, another major South Korean city, made a “strong entry” on the list at rank 27
• San Francisco’s ranking climbed from 12th to 10th as the city’s rating increased by 14 points to 711
• Shenzhen vaulted past Sydney, up from 27th spot to 18th, as the major Chinese city’s rating was marked up by 37 points to 697
• Tel Aviv also surged past Sydney as its rank soared from 32nd to 21st after the Israeli city’s rating increased by 37 points to 692
• Solid improvements were made by other North American cities including Washington DC (its ranking improved by four places to 13), Montreal (up two places to rank 16) and Vancouver (up two places to rank 17)

‘Endless raft of legislation’

Commenting on survey’s findings, John Brogden, chief executive of the Financial Services Council, said: “It is unfortunate, but not surprising, that Australia’s standing has slipped over the last year. The industry has been forced to focus internally to cope with the enormous and expensive burden of FoFA (Future of Financial Advice) and Stronger Super.”

“Indeed, over the last three years we have been in the trenches battling the detail of and endless raft of legislation and regulation. We are only now beginning to lift our heads above the parapet,” he said.

His views were echoed by Ben Heap, managing director of Australasian Wealth Managements and former boss of UBS Global Asset Management Australasia. Heap added that the ranking of Australian cities were likely impacted by the fact they are far away from many of the other major financial centres.

But Heap said he expects Sydney’s ranking to improve going forward given most of the changes have been absorbed by companies and the industry’s focus moves more towards growth rather than meeting new regulatory requirements.

Johnson, now a senior advisor at investment and advisory boutique Gresham Partners, had warned in October 2012 (when Sydney was ranked 15th and Melbourne 18th) that Australia is losing ground against Asian competitors due to slow implementation of key policy initiatives which were recommended in the Australia as a Financial Centre report.

Those recommendations included tax changes to develop the Investment Manager Regime, regional funds passport, removing impediments to Islamic finance, simplifying retail debt issuance and increasing competition in exchange-traded markets.

Johnson wasn’t available to comment for the story.

Hong Kong, Singapore ‘becoming even stronger’

The survey said that a number of centres have changed profile since the previous study. On Sydney, it said:  “Sydney is now an established transnational centre having been a global leader, although it is on the borderline and may well regain global leadership status in the near future”.

An unnamed Sydney-based investment banker who participated in the survey commented that “Hong Kong and Singapore are still the clear leaders in Asia – as far as I am concerned they are becoming even stronger.”

The survey rated financial centres in three bands — stable, dynamic and unpredictable — depending on so-called instrumental factors that encompass five broad areas including business environment, financial sector development, infrastructure, human capital and reputational and general factors.

Sydney was rated ‘dynamic’ whereas the big four — New York, London, Hong Kong and Singapore — were regarded as ‘stable’, with the survey noting that the stable centres are fairly consistently towards the top of the GFCI ratings.

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