Published Date: 26 September 2003

Speech by Lee Hsien Loong, Deputy Prime Minister and Chairman, Monetary Authority of Singapore, at the Singapore Investment Forum, 26 Sept 2003, 11.45am, Ritz-Carlton Millennia


1   I am happy to join you today at the Singapore Investment Forum, which also marks the launch of the Wealth Management Institute (WMI).

2   This symposium takes place at an opportune time. Economic prospects for East Asia are appreciably brighter than six months ago. Asia now faces a more favourable external environment with the end of the Iraq war, the abatement of SARS, and budding recovery in the G3 economies, particularly the US and Japan. Domestically, East Asian economies are enjoying a consumption boom, and governments continue to run accommodative policies. Benign weather has boosted agricultural output. Most East Asian economies are expecting better growth this and next year. Singapore was affected by SARS this year, but we expect growth to be firmer from the last quarter of 2003 onwards.

3   Global investors and financial intermediaries are paying attention to the region again. Asian stock markets have risen by more than 30 percent from their lows earlier this year. Following the Asian Crisis, excesses have been trimmed and company operations streamlined, making valuations more attractive. The IPO markets are also active, particularly in China, Hong Kong, Taiwan and Singapore. These four countries have raised almost US$14 billion from IPOs for the first eight months of 2003, as compared with less than US$10 billion for the whole of 2002.

4   In the longer term, economic growth, high savings rates and a youthful population throughout large parts of Asia offer attractive prospects. Despite its problems, Asia is the world's fastest growing region, and the fastest growing wealth management market.

5   Against this regional backdrop, what is Singapore's role? I believe that we have the potential to be one of the key financial nodes of a rising Asia - a window to global and regional financial markets, useful both to Asians investing worldwide, and to global investors participating in Asia's growth. We can be a global centre for wealth management activities.


6   Even before the Asian Crisis, Singapore saw that the world was already changing, and that we needed to change our model of doing business. The key change is globalization, which affects us in multiple ways.

7   First, we are totally connected to the global financial system. Information is transmitted worldwide instantaneously, through satellite TV and the Internet. Whatever happens in Wall Street during our night hours is felt immediately the next day in Singapore when our markets open.

8   Second, capital flows across borders and continents with great ease. Funds can gush in, and can also stampede out.

9   Third, competition has become more intense. Global financial institutions are consolidating through merger and acquisitions, in order to better exploit economies of scale. They are also rearranging their global operations, consolidating key activities into fewer centres to rationalise operations and reduce costs. They are aggressively pursuing consumers, who are more sophisticated and better informed.

10   Fourth, with product and technological innovation, boundaries between products are blurring. The transfer of insurance risk through capital markets is one example. Traditional investment instruments are also being married with derivatives to create alternative solutions.

11   All these mean a more rapidly changing, unpredictable world and a tougher operating environment. If we are not competitive, we will find ourselves out of business very quickly. But even if we stay in business, global players will come for our domestic market share. There is no more comfort zone. If we rest on our laurels thinking that we are a big fish in a small pond, when the ocean tide comes in, bigger fish will come along and swallow us up.

12   That is why we have been preparing ourselves for life in the open sea. Globalization is not new to Singapore. Since day one of our independence, we knew that a small country like Singapore depends on the world to survive. Asia's rise presents many opportunities for us. But we must adapt ourselves to this new environment, and manoeuvre around the new hazards and obstacles. We may no longer be competitive in activities which used to be our forte. But new activities and businesses will come in, if we can spot the opportunities and lure them here.


13   This is a challenge we face throughout the economy. In every sector, we need to remake and restructure ourselves - to move away from activities which are becoming non viable, give up practices which are no longer relevant, and to rebuild our economy into something fitter, more productive and more relevant to the world. This was what the Economic Review Committee (ERC) sought to do.

14   The Government accepted the ERC's recommendations. It is a holistic set of strategies, including strengthening our external linkages, making ourselves more competitive and flexible, encouraging entrepreneurship, promoting manufacturing and services as our twin engines of growth, and developing our human capital. With these strategies, we are pursuing the remaking and renewal of the Singapore economy.

15   The financial services industry has undergone more than its fair share of remaking. We are shifting our regulatory approach to risk-focused supervision, which is more conducive to dynamism and innovation. We have liberalised financial services substantially, including retail banking, insurance and stock-broking activities. We are broadening and deepening the debt market and promoting asset management activities. As a result, the financial industry has been restructured. Local banks have consolidated and upgraded themselves, as has the stock broking industry. A few thousand jobs were lost in the restructuring, but we have gained a much leaner and stronger industry, better able to hold its own against foreign competition as our markets open up. At the same time because we made these changes we have attracted new activities, which are creating new jobs in the financial sector.


16   One promising area for Singapore is wealth management. In this field, Singapore possesses several advantages that give us international appeal and a competitive edge.

17   First, we have strong fundamentals. We are a sovereign state with socio-political stability, a sound economy, a robust and efficient legal and judicial framework, a well-regulated international financial sector, and fiscal prudence. Singapore is therefore a safe and secure place to conduct wealth management activities.

18   Second, we already have a critical mass to build on. Most of the top private banks and fund management institutions have operations in Singapore. Several locate their regional headquarters here. There is potentially a significant domestic market for fund management services, because Singapore still has one of the highest saving rates in the world.

19   Third, we have been proactively developing the sector. For example, to develop the onshore market, we are exempting from tax interest income as well as many types of foreign-sourced income. We are in the process of modernising our trust law and working out a framework to regulate trust companies. MAS will spare no effort to ensure that a wide range of wealth management products and services are available in Singapore.

20   Fourth, we are developing a pool of talent in wealth and fund management. This is probably the most critical success factor, because ultimately, industries grow where talent congregates. We experienced this in manufacturing too. Years ago, when we began industrialising our economy, we aligned our education policy with the needs of the industry. We emphasised science and mathematics in schools, to inculcate in pupils the aptitudes and instincts for analysis and logical thinking. We oriented our whole education system towards engineering and technical education, and so produced a pipeline of engineers, scientists and technicians that allowed our industries, especially manufacturing, to grow.

21   The same approach will help us to grow the wealth management industry. We will train our people to pick up the specific skills, and top up our pool of expertise with foreign talent.


22   MAS has therefore been working with the industry to identify and fill in skill gaps in the financial sector.

Stock broking

23   Stock broking is one industry that needs training support. Market liberalisation has led to a sharp drop in commissions, and stock broking professionals must now adapt and learn to provide other value-added services.

24   We are cultivating a stronger research-oriented environment in the stock broking industry. The global economic slowdown has led to stock broking firms cutting costs in many areas, including equity research. We need to rebuild this area of expertise, because in the long run, a dearth of equity research activities can adversely affect market liquidity.

25   The Singapore Exchange will be launching the SGX-MAS Research Incentive Scheme. The Scheme provides grants for stock broking houses and research firms to provide research analysis for a broader range of SGX-listed stocks, to facilitate more interest in the market. SGX will announce the details shortly.


26   Other financial institutions too have responded to MAS' drive to develop talent. Some implemented total training plans for their employees. Others have set up regional corporate training centres in Singapore, to support the expansion of activities throughout the region.

27   The Government Investment Corporation (GIC) and Temasek Holdings have also responded. They have brought together academic institutions, leading wealth management institutions and industry associations to set up the Wealth Management Institute. WMI will be Asias first centre of excellence for wealth management education and research. Its purpose is to expand the talent pool and develop expertise for the wealth management industry, which has great potential for growth in Singapore and Asia.

28   WMI targets to run its first Master of Science in Wealth Management degree programme in January next year. It will promote the master's programme across Asia, to attract students from as many countries as possible. Over time, an alumni with strong linkages across the region will be created. Combining an Asian focus with global perspectives, the WMI will offer an academically-rigorous education with a strong practical-orientation.

29   I would like to commend the wealth management industry for supporting this initiative. Private banks, asset managers and the Investment Management Association of Singapore, have participated in the formation of the WMI, and will be closely involved in curriculum-planning, programme development, and providing on-the-ground training to WMI students. It signals the private sector's strong commitment to develop our wealth management talent pool, and a firm belief in Singapore's potential in this field. WMI will be an important building block from which Singapore can develop into a hub for wealth management in Asia.


30   The recent SARS outbreak reminded Singaporeans how vulnerable our small and open country is to external events beyond our control. But it also showed that we can overcome the challenges by being adaptable, nimble, taking practical and bold actions. Indeed that is how from a poor island with no natural resources, we have created a hub of economic activities, an international node for manufacturing, commerce and transport.

31   Singapore's journey of development will continue, as we muster our resources and our resourcefulness to adapt to a new world, embark on new enterprises in the public and private sectors, nurture existing business, and at the same time develop new areas of growth. We are determined to make a living for ourselves, both in manufacturing and services. We will grow our financial services, including wealth management. And the WMI will help us to grow this sector.

32   Thank you.