Following 8.4% growth in 2004, the Singapore economy grew by a robust 6.4%
in 2005 and 6.8% (SAAR) in the first quarter of 2006. Strong external
demand, especially in the IT and financial sectors, supported this performance.
The global economy expanded at a strong pace in 2005, with growth broadening
to all major economic regions around the world. In particular, the US
economy proved resilient against a backdrop of rising interest rates
and oil prices, as well as events like hurricane Katrina. Business confidence
rose in Europe, boosted by increased private investments. Japan’s
economy continued its resurgence, with growth reaching a record high
in the fourth quarter of 2005.
Looking ahead, the Singapore economy is expected
to grow by 5-7% in 2006. Leading economic indicators
suggest that the global economy is likely to
maintain its resilience. Coupled with continued
strength of the global IT sector, Singapore’s
economic momentum should be sustainable for
the rest of 2006. Against this backdrop, MAS
reaffirmed its monetary policy stance of a
modest and gradual appreciation of the Singapore
dollar in April 2006.
Global financial markets were resilient in
the face of potentially destabilising events
in 2005, including hurricane disasters in the
US and the terrorist bombings in London. The
transition to more flexible exchange rate regimes
in China and Malaysia last year and the more
recent exit from quantitative targeting regime
by the Bank of Japan also went smoothly.
The outlook for Singapore’s financial
services industry is promising. It expanded
at a robust rate of 6.5%. Corporate debt issuance
has been active, with total outstanding debt
registering a significant increase of 11.5%
in 2005. We have also done well in asset management
with assets under management reaching S$720
billion at the end of 2005, a 26% increase
from 2004. Given the increasing wealth in Asia
and the attractiveness of Asian markets, there
is further growth potential in this area. We
also expect good growth in the alternative
investments sector, such as in hedge funds,
real estate and infrastructure investments
and commodity derivatives.
To strengthen Singapore’s status as
an international financial centre through its
ability to offer a wide and complete range
of financial services, MAS stepped up its efforts
on the development of Islamic financial services.
We have so far seen encouraging results. MAS
has also stepped up our involvement in the
standard-setting work of the Islamic Financial
Services Board as part of our commitment to
contribute to the development of Islamic finance.
On the supervisory front, we continued the
implementation of a risk-focused and comprehensive
supervisory framework that began with the introduction
of a harmonised risk assessment framework in
2004. To enhance the quality and consistency
of our supervisory assessments, we initiated
a quality assurance framework for risk-based
supervision of financial institutions.
MAS continued to enhance corporate governance
requirements for locally-incorporated banks,
financial holding companies, significant direct
life insurers, and the Singapore Exchange.
This reflects MAS’ ongoing commitment
to promote in Singapore’s financial sector
sound corporate governance standards aligned
with global best practices.
A deposit insurance scheme was introduced
to protect the core savings of Singapore depositors
and strengthen protection for small depositors.
Deposit insurance will set out explicitly the
scope of protection given to depositors in
the event of a bank failure, and dispel any
misperception that there is an implicit government
guarantee of deposits.
As part of ongoing efforts to ensure high
market conduct standards among financial institutions,
MAS embarked on a pilot mystery shopping survey.
Financial advisers from the banking, insurance,
and securities sectors were assessed on their
compliance with regulatory requirements and
also on the adequacy of their financial advisory
To ensure high standards of professionalism
and business conduct in the trust services
industry, trust companies have been brought
under MAS’ regulatory framework. This
is to facilitate the unified regulatory oversight
of trust services, private banking, and wealth
management activities, which are often complementary.
A sound and comprehensive framework for the
regulation of the trust services industry can
also facilitate the establishment of Singapore
as a preferred location for trust business.
On the international front, Singapore will
host the 2006 Annual Meetings of the Boards
of Governors of the International Monetary
Fund and the World Bank Group in September.
MAS has been preparing for this major international
financial event for many months now. At this
coming Annual Meetings, we hope to see consensus
among policy makers and the international financial
community on measures to sustain economic growth,
reduce poverty, and enhance the global financial
architecture. We also hope that global investors
will get to see first hand the tremendous potential
in Southeast Asia, amidst robust growth in
this dynamic region.
Looking ahead, MAS will strive to reinforce
Singapore’s position as a leading financial
centre and as an attractive hub for financial
sector activities. We will also maintain our
high standards of regulation and supervision,
while ensuring that we remain responsive to
I wish to take
this opportunity to express my sincere thanks
to Dr Philip Pillai and Mr Chan Seng Onn for
their contributions to MAS and to the financial
sector. Dr Pillai and Mr Chan stepped down
from the MAS Board in December last year. I
would like to welcome Mr Lim Hng Kiang, Mr
Chao Hick Tin and
Mr Lucien Wong to the Board.
Goh Chok Tong