Chairman's Statement
  2004 was a good year for Singapore.

The external geopolitical landscape was generally benign. The situation in Iraq has improved after its elections. The integration of ten new member states into the European Union proceeded smoothly. In Asia, political transitions were relatively smooth. The cross-strait situation has stabilized. Nonetheless, the bombings in Madrid and Jakarta were a grim reminder that the war on terrorism is far from over and countries must remain vigilant.

The global economy strengthened in 2004, despite the increase in oil prices. The Singapore economy expanded by a robust 8.4%, the highest growth recorded since 2000.
Although our GDP growth moderated in the first quarter of 2005, this largely reflected fluctuations in the biomedical sector. Overall, the outlook remains positive. The underlying growth support for our economy remains intact, and barring unforeseen shocks, we should see a pick up in activity in the second half of the year. The Singapore economy is forecast to grow between 2.5% and 4.5% in 2005. Given the high base in 2004, this can be considered a good performance.

Inflationary pressures remain a concern over the medium term, with the economy close to its potential output level and the upside risks to external inflation. Our present monetary policy stance remains that of a modest and gradual appreciation of the Singapore Dollar Nominal Effective Exchange Rate policy band, a stance that was first adopted in April 2004.

The financial services industry was one of the strongest performers last year, expanding by 6%, compared with 4.3% in 2003. Singapore maintained its ranking as the fourth largest forex centre in the world, according to the 2004 Bank for International Settlements Triennial Central Bank Survey of Foreign Exchange and Derivatives Activity.

The industry outlook is promising. Corporate financing activity should strengthen further as our corporate bond market grows in sophistication and as the Singapore Exchange attracts more foreign listings. We anticipate growth in wealth management to be sustained by a growing Asian investor base and renewed investor interest in the region. We also expect continued growth in alternative investments, including hedge funds.

To encourage the industry to train and channel manpower resources quickly to fast growing areas, we launched the Financial Sector Manpower Conversion Scheme with programmes in private banking and settlement operations. We are pleased with the good progress made by the Financial Industry Competency Standards Committee in establishing a competency standards and certification framework for Singapore’s financial industry that is aligned with international standards.

As part of our risk focused supervision, we are responding to the convergence in financial products by harmonizing our regulatory requirements and supervisory practices where possible, across the different sectors, to minimise arbitrage. To enhance the transparency of our operations, we are also publishing information on our inspections and supervisory reviews in this annual report.

To encourage greater understanding and exchange of views on issues affecting Singapore's financial system, we published our second semi-annual Financial Stability Review in June this year. The Review assesses the stability of our financial system in the context of developments in the macroeconomic environment and financial markets.

On the consumer education front, MAS published an Investor Alert List while MoneySENSE embarked on a national financial literacy survey. To enhance the efficiency of dispute resolution mechanisms for retail consumers, we facilitated the set-up of the Financial Industry Disputes Resolution Centre (FIDReC). FIDReC brings together existing dispute resolution schemes under the banking and insurance sectors, with extended coverage to include the capital markets sector.

We were active in the international arena. For example, we worked with the Executives’ Meeting of East Asia-Pacific Central Banks to successfully launch the Asian Bond Fund 2, which comprises a Singapore-domiciled Pan-Asian Bond Index Fund and eight country sub-funds. MAS also became a member of the Islamic Financial Services Board, a standard setting body for Islamic financial services.

Going forward, MAS will continue to strengthen Singapore’s position as a leading financial centre in Asia. We will strive to maintain our strong economic performance, robust and vibrant financial system and high standards of regulation and supervision.

I wish to take this opportunity to express my sincere appreciation to Mr Lee Hsien Loong, Mr Lim Hng Kiang and Mr Koh Yong Guan for their many significant contributions to MAS and the financial sector. Mr Lee, who served as MAS Chairman from January 1998, and Mr Lim, who served as Deputy Chairman from January 2001, stepped down from the MAS Board on 20 August 2004. Mr Koh was MAS Managing Director from January 1998 to March 2001, and from October 2001 to May 2005. He remains a board member. I welcome Mr Heng Swee Keat to MAS.

Goh Chok Tong
Monetary Authority of Singapore