|2006 was a significant year for Singapore and MAS.
Conditions in the global economy were generally favourable, supported by growth in the US economy and the pick-up in activity in Europe and Japan. The Asian economies, led by China and India, performed well. So too did Singapore, which has now seen five consecutive years of expansion. Real GDP grew by 7.9% in 2006. The broad based expansion in the non-electronics manufacturing and services industries more than offset the drag from the global-led slowdown in the domestic electronics sector. CPI inflation remained well-contained at 1% despite the strong growth and higher energy-related costs. The unemployment rate declined to 2.7% as a record 176,000 jobs were created, 62,700 more than in the preceding year.
In the financial sector, the asset management industry continued its strong growth. We witnessed record high trading in the equities and derivatives markets. Singapore continues to be the largest REITs market in Asia outside Japan. Eight new REITs were listed on the Singapore Exchange. In February 2007, we had the first infrastructure finance trust listed on the Singapore Exchange. This new asset class adds to the dynamism of the products we offer.
Given the supportive external economic environment, the Singapore economy is projected to grow between 5% and 7% in 2007. Inflationary pressures should be well-contained, notwithstanding the one-off adjustment in consumer prices associated with the GST increase on 1 July 2007. CPI Inflation should come in at 0.5% to 1.5% under MAS’ current monetary policy of a modest and gradual appreciation of the S$NEER policy band.
Despite the rosy prospects, we believe in “Being Prepared”, as the scouts would say. We continued to focus on risk management last year, especially crisis and business continuity management. We conducted several exercises to test MAS’ and financial institutions’ decision making, communication and coordination efforts during a crisis.
On the supervisory and regulatory front, MAS expanded its efforts in promoting transparency in the way we supervise the financial sector. We issued a monograph on our supervisory framework for financial institutions. MAS also introduced several new provisions in the Banking (Amendment) Act which expanded its role in bank resolution and strengthened the regulatory framework of foreign banks. We made further progress in the implementation of Basel II capital standards in Singapore, which banks here will adopt on 1 January 2008.
In the insurance sector, MAS is reviewing the Policy Owners’ Protection Fund. This is an industry-funded compensation scheme for policy owners which will reduce the financial impact on individuals in the event of an insurer default. The first phase of the review is completed and another public consultation will be conducted in the second phase.
We stepped up efforts to encourage fair market practices in financial advisory services. We released the findings of our first mystery shopping survey which covered 100 representatives from 30 financial advisers. The challenge remains for financial advisers to continually improve their processes. MAS will work closely with the industry on further improvements.
MAS values the opinions of its key stakeholders and the engagement of industry players on a range of issues. For example, the successful launch of MEPS+ would not have been possible without the strong support of the industry. Its support and that of other government agencies also contributed to the success of the first MoneySENSE Roadshow.
The highlight in the 2006 calendar of financial events must surely be the Annual Meetings of the Boards of Governors of the IMF and World Bank Group. With a record number of 20,000 participants
from 184 countries, Singapore 2006 had the largest turnout of delegates for the Annual Meetings held outside Washington D.C. From the many positive comments we have received, Singapore can be proud of its efforts in organising this monumental event.
The MAS International Advisory Panel held its sixth meeting in Singapore during Singapore 2006. Global financial leaders and industry experts shared their perspectives on Asia’s economic outlook and the challenges and prospects of the region. Their valuable insights will help MAS to strengthen Singapore as a strategic financial hub.
MAS is only as good as the collective strength of its staff. Hence, we emphasise continual staff development. The Financial Supervision Group Faculty of Peers was launched in 2006 to provide professional development opportunities for our staff and to deepen our supervisory expertise. An expertise repository was also set up to store institutional knowledge and share information among MAS staff.
Moving forward, we will continue to maintain financial stability, low inflation and the strong economic performance of Singapore. We will continue to facilitate the development of the financial industry while ensuring high standards of regulation and supervision. We aim to be a leading financial centre in Asia.
I would like to take this opportunity to express my sincere appreciation to Mr Lim Siong Guan for his significant contributions to MAS. Mr Lim stepped down from the MAS Board on 30 September 2006 after serving for two periods, from 1 April 1987 to 1 September 1994, and from 18 January 1999 to 30 September 2006. I would also like to welcome Mr Teo Ming Kian to the MAS Board.