Speech by Prime Minister Goh Chok Tong at the Monetary Authority of Singapore's (MAS) 30th Anniversary Dinner
Date: 20 Jul 2001
Five years ago, MAS celebrated its 25th Anniversary. A year later, the Asian financial crisis hit us. While Singapore did not escape the contagion effects, we were spared the massive disruptions that affected other economies in the region.
2 The resilience of the Singapore economy during the crisis was attributable in large measure to our sound economic management. In this regard, MAS has played a key role. Over the years, you have built up a solid international reputation as a credible and competent central bank and financial regulator. You have put in place policies which helped achieve macroeconomic stability and growth in Singapore.
3 You have built this reputation over 30 years. It is a valuable asset which we must preserve.
4 Here, let us look back and pay tribute to the people who built the institution into what it is today. The first Chairman was the late Mr Hon Sui Sen. Together with Mr Michael Wong Pakshong, the first Managing Director, he built up MAS from scratch and guided it through its formative years. Dr Goh Keng Swee, who had been instrumental in the founding of MAS in 1971, took over as Chairman in 1980. Dr Goh undertook a major restructuring of MAS' key functions - monetary policy, reserve management, and supervision and development of the financial sector. He worked closely with the MAS staff, especially Mr Koh Beng Seng, who helped to establish MAS as a highly respected regulator reputed for its sound and professional oversight of the financial sector. These and other pioneers, many of whom are present today, laid the foundations of our financial sector.
The New Economic Landscape
5 As a result of MAS' efforts, we have built up considerable credibility in our monetary policy, and a progressive financial sector that can count itself among the premier financial centres. But we must not be lulled by our success. The environment in which we operate is in a state of flux. In the last five years especially, globalisation and rapid technological advances have transformed the economic and financial landscape. We must constantly ask ourselves if our current policies are robust enough to meet these new challenges. As the operating environment shifts, policies and the mindset of policy makers will have to shift as well.
MAS - At the Forefront of Change
6 I am pleased that MAS has not locked itself in its past success and old ways of thinking. Instead, MAS has been at the forefront of change in Singapore in the last few years. It is not easy discarding established mindsets and operating parameters, especially when they have worked well and still seem sound.
7 Four years ago, in 1997, MAS launched a fundamental review of the financial sector. We had witnessed intensifying competition and the consolidation of financial activities in a few key centres. We realised that to secure Singapore's position as a major financial centre, we needed to adopt a fresh approach to regulate and develop our financial sector. The Cabinet discussed the problem. It gave the go-ahead to shift our regulatory approach and to liberalise our financial sector. This set off the whole flurry of changes that have since taken place.
Benefits and Transitional Challenges
8 These changes bring clear long-term benefits. As the financial sector is increasingly liberalised, consumers will gain from more choices and better services. Competition will produce stronger and more efficient financial intermediaries - banks, brokerages, fund managers, and insurance companies. Among the local players, the stronger ones will survive and thrive in the new landscape. A more open and competitive financial market will also stimulate innovation and attract more players, spurring the development of our financial centre.
9 However, the gains from the liberalisation of the financial sector will not come without some adjustments among the various participants, and some transitional costs.
10 First, the ongoing mergers of local banks will mean the dilution of the control of major shareholders, including that of the founding families. They have built up the banks into sound and reputable institutions. But the mergers are inevitable to avoid their banks being marginalised in the intensifying global competition. In the long run, it is in the interest of all shareholders, including major shareholders, and in the interest of Singapore that our local banks attain adequate size and capability, remain viable, and earn competitive returns.
11 Secondly, some bank employees are concerned about possible job losses. When banks merge, they have to rationalise their operations. Likewise, when MAS liberalised securities trading, although consumers were happy because brokers' commissions came down, it meant lower incomes for the stockbroking industry and job losses for remisiers and brokers.
12 Layoffs are never welcome, but they are part and parcel of the restructuring process. Should layoffs become necessary, I am sure that the banks will be fair to the affected workers, and the unions and the Ministry of Manpower will do what they can to retrain the workers and help them to find new jobs.
13 Thirdly, managers and professionals in the financial sector may feel insecure about the influx of foreign talent. However, no company that wants to be globally competitive can afford not to seek out the best talent, whether Singaporean or foreign. Having a larger pool of talented individuals working together and competing with each other, and in the process rubbing their skills off one another, will strengthen our financial centre. This, in turn, will help create more jobs for Singaporeans.
14 Fourthly, small depositors are worried that with bank mergers, they will no longer have access to affordable banking services. These are legitimate concerns. The Government will ensure that low-income Singaporeans continue to have access to banking services at affordable prices.
15 However, the Government cannot require banks to service customers free of charge. In a liberalised and competitive environment, banks will no longer be able to subsidise services that they used to provide for free in a protected market. Banks are commercial institutions. They have to recover their costs and break even. But they have every incentive to minimise costs, and retain and attract more customers.
Need to Press on with Liberalisation
16 We are aware of these transitional challenges. Both the private sector and the Government will have to manage these issues. But we have to press on with the liberalisation and rationalisation of the financial sector. As we do so, the local financial institutions will have to continue to upgrade themselves and strengthen their capabilities in order to remain competitive. Failure to do so will lead to more severe losses and adjustments in the long term.
17 In conclusion, the economic and external landscape is evolving rapidly. For Singapore to succeed in the new environment, the Government, the businesses and the people have to understand the forces shaping this new landscape. And we have to adapt to the new landscape, developing new capabilities and changing practices that are no longer advantageous. In particular, the public sector must be open to new ideas and be ready to review and innovate policies, even as it adheres firmly to fundamental values and principles.
18 As one of the key institutions in Singapore, MAS has been exemplary in evolving itself to meet the new challenges. In the last few years, MAS has been busy revamping its policy framework, recruiting talent, and building up its capabilities. These changes have greatly enhanced Singapore's prospects to become the premier financial centre in Asia.
19 But I hope you will not rest on your laurels. After having gone through a tremendous exercise of change, the human inclination is to step back, take a breather and enjoy the fruits of its labour. Unfortunately, we cannot afford such luxury. Even as we speak, more changes are taking place around us. As a small and open economy, we have much less room than others for mistakes. We have to keep abreast of changes, take calculated risks and adapt as we go along. To stay put is the surest way of being left behind.
20 MAS' accomplishments in the last 30 years have been one of the key drivers of Singapore's success. I congratulate you on 30 years of excellence in central banking. I look forward to more years of excellence from you.