Speech by Prime Minister Lee Hsien Loong at The Great Eastern Centennial Gala Dinner, 26 August 08 at Raffles City Convention Centre
1 Good evening. I am very happy to join you tonight for Great Eastern’s centennial celebrations.
Great Eastern – Reaching 100 Years of Age
2 Reaching 100 years of age is a significant achievement. In 1908, when Great Eastern opened its first office at Winchester House in Collyer Quay, it had only 15 staff and $70,000 worth of assets. Since then, you have grown in tandem with Singapore, and are now the largest insurance group here and in Malaysia, with assets of over $45 billion.
3 Over the century, Great Eastern has weathered a succession of turbulent periods. It has endured through the Great Depression, the Second World War, and the 1997 Asian financial crisis. The company could not have survived if not for the farsightedness, resourcefulness and determination of its staff and leaders. For instance, during World War II, managers continued to believe in the company and took steps to protect its value and relationships through the occupation years. Loyal employees preserved vital records: when Japan bombed Singapore in 1941, Great Eastern’s staff photographed the company’s policy and share registers, and sent copies to Sydney and Calcutta for safekeeping. As a result, after the war Great Eastern was able to service clients who returned to revive lapsed policies. By 1946, Great Eastern’s financial position had stabilised.
4 Your record of rebounding from difficult periods is an inspiration to other companies in Singapore. Companies who now face global economic uncertainty will need the same resilience and grit that Great Eastern displayed through trying times in its history.
A Challenging Period
5 Financial markets are now going through a volatile period. The problems originated in the US sub-prime housing market, but quickly snowballed into a crisis affecting financial institutions worldwide. Several banks in the US and Europe ran aground and required capital infusions. This resulted in a general tightening of lending requirements, which precipitated a credit squeeze. Actions by financial authorities and central banks have provided some respite, but markets are still shaky. Current troubles at Fannie Mae and Freddie Mac, and continuing uncertainty over the financial strength of some major banks, show that the dust from the crisis has yet to settle.
6 Stresses in financial markets are exerting a drag on economic activity, particularly in industrialised countries. This is compounded by high inflation as a result of rising energy and commodity prices. We now face twin challenges of inflation and slowing growth. Global growth is expected to moderate from 3.8% in 2007 to 2.9% this year.
7 Growth in Asia has so far held up relatively well. Asia has not felt the full impact of the financial turbulence. One reason is that the region is less “advanced” in using complex credit instruments, and continues to rely on traditional bank financing. Another is that the growth momentum in China and India has benefited the rest of Asia. Nonetheless, in a globalised world, Asia cannot be completely de-coupled from other major economies. Ongoing problems in the US will curtail Asia’s growth, while several regional economies are beset by double-digit inflation.
Strong Opportunities in Asia; Good Prospects in Singapore
8 All is not doom and gloom. First of all, Asian countries will tackle these challenges from stronger positions than in the Asian Financial Crisis a decade ago. Many of them are now more resilient, having accumulated comfortable foreign reserves, reined in government debt and established more flexible exchange rates. Moreover, longer term prospects in Asia remain bright as underlying economic fundamentals are sound.
9 Secondly, there is scope for increasing capital flows between Asian economies. Robust growth over the past few years has spurred wealth creation and accumulation. On one side, countries such as Japan, South Korea and China have amassed large stocks of wealth. On the other side, less advanced but rapidly developing economies urgently need investments in infrastructure and education. Asian and other investors are now allocating more funds to public and private markets within the region. Areas such as infrastructure finance and mergers & acquisitions should continue to experience strong growth. This creates significant opportunities for financial intermediation.
10 Singapore is well-placed to support these activities. We will continue to build on our sound and progressive regulatory environment to become a vibrant financial centre. We will also develop deeper and more liquid capital markets to facilitate financing. As transactions become increasingly complex and cross-border, we will need to enhance our expertise in financial and ancillary services. For example, Singapore is in the process of liberalising our legal services; Parliament has just passed the amendment to the Legal Profession Act today.
11 Thirdly, while ageing populations are a major economic and social challenge, they do offer opportunities for the financial industry to cater to the growing needs of older clientele. Longer life-spans, rising healthcare costs and the need to provide for retirement present market opportunities for insurance and fund management firms. They can offer products and advisory services that enable consumers to prepare for their retirement and healthcare needs. In addition, individuals who have accumulated significant wealth will need financial services to manage this wealth and transfer it to the next generation, as well as to support their philanthropic activities. This is the silver lining of the “silver” population.
12 Finally, there are still many opportunities in the traditional business of life insurance, despite Great Eastern’s diligent efforts all these years. Insurance coverage amongst Singaporeans is still low. Life insurers can raise consumer awareness and tailor their products to meet this protection gap. Of course, insurance intermediaries have a duty to recommend products that truly meet the needs of consumers, as well as to educate consumers on the risks and benefits of individual products. They must uphold the highest standards of integrity and professionalism, and give advice to customers that is fair, objective and in the customers’ best interest.
Emerging Stronger Through Overcoming Challenges
13 Despite modern macro-economic theory and the sophisticated econometric models of governments and central banks, we must still expect ups and downs in the economy, both in individual countries and sweeping the whole world. Business cycles have not disappeared, nor the propensity for exuberance and despair to take hold of the mood and carry things to excess. It is easy for companies to do well when the economy is booming and a rising tide raises all ships. But it is when the going gets tough that truly outstanding companies show their mettle. Companies that are built to last will withstand the buffeting, and prepare themselves to capture first-mover advantage when the economic situation changes, as it always eventually does.
14 As a country, Singapore must do likewise. We should use this period of uncertainty to strengthen and build up our financial sector further. New international regulatory and risk management standards are being introduced. We must stay abreast of the latest thinking and practice, discuss them with our financial institutions, and update our standards and practices. But we should also be mindful to avoid a disproportionate response, swinging from over confidence to excessive caution, as that would impede innovation and growth.
15 In the current uncertainties, we need to stay vigilant, whilst preparing ourselves to capture opportunities in the horizon. Singapore needs to manage the impact of the ongoing turbulence, but we are well-placed to overcome these challenges and continue to grow.
16 Our financial sector has made good progress. We are a premier asset management location, and an international trading hub for a wide range of instruments, including foreign exchange, fixed income, derivatives and commodities. In addition, our insurance sector is well-diversified, and we are a leading reinsurance centre in Asia. We must continue to enhance the diversity and vibrancy of our financial sector, while maintaining high standards of integrity and sound financial management.
17 Great Eastern itself has made steady progress for a hundred years. Your longevity attests to your resilience; I am confident you too will emerge stronger from this period of uncertainly. I congratulate Great Eastern on your 100th Anniversary, and wish you continued success in the years to come.