When the hinterland is in difficulty, the financial centre will be adversely affected, but it still plays an important role in facilitating the process of recovery. As confidence recovers and investor interest returns, the financial centre will be an important conduit for the funds required for rehabilitation and growth. Thus as Asian economies make progress in putting themselves in order, they will need access to global capital for corporate restructuring and new investments. Singapore's financial centre will be ready to play that role, whether the capital is to be raised through loan syndication, debt securitisation, private equity, or bond issuance. Financial centres in Asia Looking ahead, the trend towards concentration of financial institutions and activities in fewer major centres is likely to persist. However, it is not easy to predict which specific cities will emerge as leading centres. This will depend not only on the static comparative advantage of the different cities, but also on the dynamic competitive advantages created by their policies and strategies. Incumbents will always have an advantage, but no lead is totally unassailable, as London found to its dismay in 1998 when within a few months Frankfurt snatched away the trading of German bund futures. London and New York will continue to be key global players. In Asia, while Tokyo will always be big and significant, the role of the other centres is still unclear. Hong Kong, Singapore, Sydney, and in the longer term Shanghai are in play.

So the premium on sound regulation and good living conditions has gone up. Location However, the trend towards concentration is unlikely to end in the extreme of only one or two global financial hubs. Location still matters even in the globalised financial landscape of the New Economy. Physical proximity to potential clients will remain important, especially in capital market origination, the M&A business or private banking, where personal services and physical interactions with clients are essential. Indeed, the growing customisation of finance to suit local conditions and meet individual client needs will mean that regional financial centres will continue to play a complementary role. Competition among financial centres will not be a zero-sum game of winner takes all. Smaller centres can coexist with the mega centres, focusing on different niches and serving different regions. There are thus collective gains to be shared through co-operation. Linkages between key financial centres, both across and within time zones, can help the centres to reap the benefits of integration while at the same time preserving close access to local communities. Similarly, there is an important role for closer regulatory co-operation and, where appropriate, harmonisation of standards, particularly in cross-border listing requirements, ongoing supervision, and accounting and disclosure. For the regions they serve, international financial centres make good economic sense. They provide easy access to funding and hedging opportunities, links to other key centres, and markets with liquidity and reach, especially for emerging economies. Financial centres tend to prosper when their hinterlands are buoyant.