Lim Hng Kiang
Singapore
“The company has made commitments to recycle the ash, and as for renewable energy, the gasification project is not an energy project, it is not a generation company (genco). It is to produce hydrogen and carbon monoxide or, essentially, carbon. Because as feedstock to the petrochemical sector, you need more C and more H2.”
“The Government will continue to recover the IIA awarded if the company fails any conditions or breaches the legislative amendments. I would like to highlight that there are no errant cases in the last five years for IIA and the current amendments are, therefore, not reactionary in nature, but are being made for legislative clarity.”
“In addition, the IIA scheme will be extended till 31 December 2022. Clauses 10 to 13 give legislative effect to this change. The remaining legislative changes arising from our periodic review of the income tax system are either administrative or technical in nature.”
“Data on household and individual savings rates by income groups are not available. However, data on the aggregate level of household financial assets can be obtained from the Household Sector balance sheet compiled by the Department of Statistics.”
“The aggregate level of financial assets owned by Singapore’s household sector6 in each of the past five years is provided in Table 1 below. Data on the amount of financial assets owned by households and individuals in the different income percentiles is not available.”
“The Second Review of the Comprehensive Economic Cooperation Agreement (Second CECA Review) is ongoing. The review is taking some time as both countries have our respective interests to work through, such as in the area of labour mobility. Our agencies regularly engage Indian counterparts to work through issues collaboratively.”
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“I am sure the communication process is a two-way process. The investors would ask and the FIs would respond accordingly. RETRENCHED AND UNEMPLOYED WORKERS 11. Mr Ong Ah Heng asked the Acting Minister for Manpower in light of the impending recession (a) what is the Ministry's projected number of retrenched workers and unemployment rate for 2009; (b) which sectors and industries are likely to contract and which will create jobs; and (c) what measures are being planned to help the retrenched and unemployed workers. 12. Ms Sylvia Lim asked the Acting Minister for Manpower (a) in the last 12 months, what is the percentage and number of Singapore citizens, permanent residents and foreigners who lost their jobs at all levels (unskilled to professional levels); (b) what measures has or will the Government put in place to induce employers to retain Singaporeans as opposed to foreigners in any downsizing exercise; and (c) whether the Government will reduce the number of work passes in the various categories issued to foreigners so as to increase the employment opportunities for Singaporeans. The Acting Minister for Manpower (Mr Gan Kim Yong) (for the Minister for Manpower): Mr Speaker, Sir, may I have your permission to take Question Nos. 11 and 12 together?”
“As I have mentioned in my response, there are some ideas of what to do and we are putting them up for feedback both to the FIs as well as to the general public. When we have assessed the feedback, then we would make a decision. I think this process serves us well. Mdm Cynthia Phua (Aljunied): Sir, I just want to ask the Minister whether the FIs are required by MAS to inform the investors of the reasons for rejection or partial settlement?”
“As I explained in my response, the process is actually very bottoms-up. The FIs and the IPs look at every case on its own merits. So even though we found it useful to have what we call "vulnerable groups" to make sure that this is given priority in the review, actually, on the ground, every case is looked at. Even those which are not vulnerable are assessed on its own merits and the numbers show that many of them are also given full compensation and partial compensation. It is not meaningful to categorise "non-vulnerable" because, as I have explained in my response, each specific criterion, like age, education or size of investment, does not, in itself determine the merits. It is the overall combination of, first, what is the risk assessment of products versus the risk profile of the person to make sure that there is matching and, therefore, there is no inappropriateness in the products sold to the person. Then, in assessing whether it is inappropriate or not, we have to look at the person's ability to make his investment decisions, his education, his track record and the way he has been investing his funds. So it is a holistic assessment of each case. As to Hong Kong's approach versus ours, I know we are similar. There are pros and cons in proceeding in different ways. In Singapore, we have decided that we should do this in a deliberate manner. The fact that we have resolved the 5,000 over cases in a very rigorous and fair manner shows that the process works, whereas, in Hong Kong, the resolution of such cases is still pending. On the second part of the regime itself and the processes, again, MAS believes in doing this in a deliberate manner with proper consultation.”
“I am sure they do. Just like in the courts and adjudication process, the facilities are always there.   Ms Sylvia Lim: I have two questions. First, I wonder whether the Minister could answer part (b) of my Question which is, "how many cases of investors who do not fit the age or education profile of "vulnerable investor" have had their claims upheld" which I had filed earlier. My second point is that the Minister is aware that the Hong Kong's Monetary Authority had already issued a list of recommendations for banks and financial institutions to implement to prevent such things from happening again in the interim. And the public is actually noticing that the MAS' review is still pending and seems to be slower than the Hong Kong's Monetary Authority in issuing guidelines. I wonder whether the Minister would like to comment on that.”
“Even if they go for the FIDReC process, as I mentioned, there is a cautionary note – they may or may not receive more or less than the offers. So investors should study the settlement offered to them carefully and make the right decision.”
“Mr Speaker, Sir, on the first question, obviously if those who opted for option 4, which is the no advice option, if we have excluded them I think the figures would have been much lower. So I think the figures included even those who opted for no advice option, but I do not have the figures right here with me. On the second question on aggregated numbers and the breakdown of each FI – what I have given is what is a useful breakdown in terms of the character of the review. There is a distinction between the FIs and the finance company versus the stock-broking companies. As I mentioned in my response, the stock-broking companies generally just execute the instructions given to them. They do not undertake a full financial advisory role so their responsibility is much less and therefore again this is reflected in the outcome. So if you look at the outcome for the Lehman Minibonds by the FIs, 75% received full or partial settlement, which I believe is a very fair outcome. Third, on the total amount, it is not possible for us to give the total amount-compensated right now because, as I said, the FIs are in the process of making the offers individually and some may turn down or not all will accept. So the final outcome of the compensation will really depend on who finally takes up the compensation that is offered to them. The FIDReC process does both a mediation process as well as an adjudication process, and I think if you go on to the website you will find that it is a very equitable process. Finally, on the findings of the investigation and whether investors should wait for the findings to be known before they accept the offer, I would urge investors to look at the offer given to them. Whether they accept or not, it is entirely up to them.”
“Sir, my second question relates to the information that has been disclosed which has been aggregated across all FIs divided into categories. So what is the breakdown of the resolution of complaints by each individual FI? This information will assure Singaporeans that each of the FIs have indeed been fair in their approach. Sir, my third question: what was the total amount of compensation paid out? In particular, what was the total amount of compensation for the 1,282 investors who received full compensation and what was the total amount for those who received more than 50% compensation. This is important to assure Singaporeans that the FIs did not only compensate those investors with small claims. Sir, my fourth question: MAS has explained, and the Minister has explained, that dissatisfied investors can proceed to FIDReC. Can the Minister confirm whether legally-trained employees of financial institutions can represent them before FIDReC whereas investors cannot be legally represented? If so, how would MAS ensure that the FIDReC process would be fair to investors? Sir, my final question: MAS has announced, and the Minister has explained, that there will be a public consultation in March after feedback with the CEOs of the FIs. Can the Minister assure Singaporeans that the full findings of MAS' investigations will be made public, subject to confidentiality concerns? Can the Minister also confirm whether investors can wait until those full findings are released before deciding whether to accept the compensation offers from the FIs so that they can make a fully informed decision?”
“Throughout this process, we have found that the roles of independent persons have been a very positive one. First of all, we have an overall assessment framework and the independent persons (IPs), working together with individual FIs, have been able to help in the process to make sure that the cases are properly investigated, that the assessment framework is enforced and there is consultation between the IPs and the FIs to make sure that cases, especially those cases involving the so-called vulnerable investors, are carefully reviewed. The IPs also helped MAS make sure that there is consistent and rigorous assessment throughout all the FIs because we must recognise that there are many FIs and institutions involved and this involved 5,000 over cases of complaints. So I would say that the whole process worked out very well. As to the second question about people who have not complained, in fact many of the FIs have taken the initiative in combing through those who have not complained and where cases which they classified as worthy of compensation and settlement, they have in fact approached them. But those who have not complained, it is up to them if they want to proceed on this three-step process. Mr Siew Kum Hong: Sir, I have five supplementary questions, of which three are really requests for greater clarity on the information that has been released. Sir, my first question is, how many of the investors who received partial or no compensation had been recorded as opting for the so-called option 4 in the sale process, that is, the no advice option, which on paper will seem to have absolved the adviser of the responsibility of ensuring that the product was suitable for the investor.”
“MAS is studying the specific refinements that need to be made carefully so that hasty changes are not made, which could bring along unintended consequences in the future. Another area where there is more work to be done is in investor education. Much has been achieved through the MoneySENSE programme, with the support of CASE, SIAS and various financial industry associations. However, these efforts will have to be stepped up. MAS is working with various stakeholder groups, in particular those representing investors' interests, such as CASE and SIAS, as well as the relevant tertiary institutions.”
“The review is in progress and MAS will conduct a public consultation on the proposals by mid-March 2009. The review will consider stronger suitability requirements for certain type of products, clearer product labelling and simpler descriptions of the features and risks of products so that they are more readily understood. Proposals being considered include enhancing the regulatory regime for advertising and marketing materials and introducing product summary documents. There are already requirements that the sale of investment products in banks is to be undertaken only by financial advisers who are not to perform any bank counter staff functions. However, the review will also examine whether any enhancements should be made to ensure there is an even clearer separation between a bank's traditional deposit-taking business and its investment products sales and marketing activities. Mr Sin Boon Ann has asked whether the Government will consider specific legislation to reduce or streamline the current legal complications arising from the recovery of investments linked to Lehman Brothers. The review being conducted by MAS is also looking into possible measures to address the legal complications that have been noted in relation to the Lehman Minibond Programme Notes. One proposal being considered is introducing a requirement for the appointment of an approved trustee with prescribed powers for certain investment products such as structured notes. In reviewing its current regulatory and supervisory approach, however, MAS will have to be careful not to come up with overly prescriptive rules which may not serve all investors. MAS' current approach is intended to allow Singaporeans a wider choice of investment options to cater to their diverse needs.”
“The time taken to resolve any particular complaint will depend on factors such as the complexity of the dispute and when the parties involved are available for meetings or hearings. Mr Singh and Mdm Phua have also asked for an update on investigations by MAS. MAS has announced that it is looking into any FI-wide issues, such as the selling practices and policies within each FI, as part of its formal investigations. The investigations cover, among other matters, the FI's due diligence into the structured notes, the procedures used at the point of sale, including how the FI ensured that the notes were sold to clients whose investment objectives and risk tolerance matched the risk profile of the notes, and the training and supervision of relationship managers. Where in the course of its investigations MAS identified issues relevant to the FIs' assessment of individual complaints, MAS has worked with the independent parties overseeing the complaint resolution process to ensure that these were incorporated into the complaints assessment framework. MAS will be communicating its preliminary findings to the CEOs of the financial institutions involved. As part of due process, MAS will give the financial institutions a reasonable opportunity to respond to its preliminary findings before making a final decision. Until MAS' findings are finalised, it will not be appropriate for either MAS or the parties involved to comment further on the matters under investigation as it could be prejudicial to the investigation and the parties involved. Mr Inderjit Singh has also enquired whether MAS has planned any new measures with regard to the sale of structured products. MAS has previously announced that it would undertake a review of the regulatory regime in light of these developments.”
“Investors should first lodge their complaints directly with the FI that sold them the product. They should then provide full details of the case to the FI to allow the FI to make a fair assessment of the case. Finally, they can choose to accept the decision of the FI or refer their complaint to FIDReC where a fast track process has been put in place to deal with such cases. Let me now turn to the cases referred to FIDReC. Mr Singh and Mdm Phua have asked about the FIDReC process and for an update. Investors who are not satisfied with the outcome of the FIs' review of their complaints may choose to have their complaint referred to FIDReC. Should an investor decide to refer his case to FIDReC, any offer from the FI will no longer be available to him. FIDReC will consider the merits of each case, including all relevant evidence presented, whether in written or oral form. The decision of FIDReC is binding on the FI but not on the investor. Investors should bear in mind that the outcome from the FIDReC process could be more or less favourable than the outcome of the FIs' review of the complaint. If an investor is not satisfied with the outcome of FIDReC, he may pursue other options for recourse. As at 14th January 2009, there have been a total of 227 cases received by FIDReC. These cases are a subset of the total number of complaints lodged with the FIs. Fifty-five of these cases relate to the DBS High Notes 5, 136 cases to the Lehman Minibond Programme Notes, 30 cases to the Merrill Lynch Jubilee Series 3 LinkEarner Notes and six cases to the Morgan Stanley Pinnacle Notes Series 9 and 10. These cases are currently being processed for mediation and, when necessary, for adjudication. Two cases have been successfully mediated so far.”
“For the Lehman Minibond Programme Notes which were sold by banks and one finance company, 34% will receive offers of full settlement and 41% will receive offers of partial settlement; for those sold by stockbroking firms, 1% will receive offers of full settlement and 12% will receive offers of partial settlement. As for the Merrill Lynch Jubilee Series 3 LinkEarner Notes sold by stockbroking firms, 2% will receive offers of full settlement and 9% of partial settlement. The differences in the settlement figures reflect the varied target profiles of customers of the various FIs and their different business models. For example, stock broking firms mostly performed the role of executing transactions on instructions from their customers. For Pinnacle Notes Series 9 and 10, it was announced on 14th November 2008 that these notes would be subject to early redemption. I have been informed that the five FIs that sold Pinnacle Notes Series 9 and 10 have received 471 complaints as at 14th January 2009. MAS is in contact with these FIs to ensure that they handled investors' complaints according to the serious and impartial process that these FIs have already set up to deal with complaints relating to the earlier notes that I mentioned. Mr Hwang Soo Jin has agreed to oversee the complaints resolution process of the securities brokers for Pinnacle Notes Series 9 and 10. The other FIs are in the process of appointing independent persons to oversee the complaints handling processes for these notes. Investors who consider they have a genuine claim that they were mis-sold the product or that the product was misrepresented to them should follow the same three-step process to resolve their complaints.”
“For instance, someone with little formal education may be a successful businessman. The person may have prior investment experience or could have invested in structured products jointly with, say, a younger family member. Nevertheless, all these cases were carefully reviewed by the FIs using the same assessment framework as for all other complaints. The FIs have told MAS that the outcome from the review process for investors who are elderly with little income, low levels of formal education and little investment experience is that most of them have been offered full or partial settlement. For the few cases among this group who do not receive any offer of settlement, the IPs together with the FIs have informed MAS that they have reviewed these cases and are satisfied that there are good grounds for the FIs' decisions. Overall, this is a fair result. The process has worked as intended. The FIs have been responsible and co-operative in their overall efforts to ensure a fair resolution for affected investors. The independent parties have acknowledged the FIs' efforts in ensuring that the process is fair and rigorous, and that investors' interests are upheld. This reflects well on the way that the FIs involved have responded to the requests from MAS and to their commitment to upholding fair dealing. Let me provide more details on the settlement offers made by the FIs. For DBS High Notes 5, 8% of complainants will receive offers of full settlement, and 16% will receive offers of partial settlement.”
“In all, the 10 FIs that sold DBS High Notes 5, Lehman Minibond programme notes and Merrill Lynch Jubilee Series 3 LinkEarner notes received 5,381 complaints as at 14th January 2009. All complaints received on or before 14th December 2008 have been considered by the FIs' internal review panel, apart from a small number of complainants who have declined to be interviewed and cases where the FIs are still obtaining further information. The FIs are in the process of communicating the outcomes from the reviews of complaints to the individual investors. This could take a few weeks, as FIs intend to communicate with the investors face-to-face. I welcome the support from SIAS and CASE for the three-step dispute resolution process. They have also given useful advice to investors to take a practical and realistic view when considering any offer of settlement they may receive. They have also highlighted to the FIs the importance of handling communications to investors promptly and making sure that investors fully understand the terms of any settlement offer. As a result of the review of individual complaints by FIs, based on the cases decided by the FIs as of 14th January 2009, 58% of complainants will receive full or partial settlement. This comprises 25% of complainants receiving full settlement and 33% receiving partial settlement. Mr Siew Kum Hong has asked out of these offers of settlement how many are for "vulnerable investors". While MAS has asked the FIs to pay particular attention to this priority group of complainants based on some general characteristics, such as age, education and investment experience, a single characteristic such as age or education alone does not determine if an investor will be vulnerable to being mis-sold the products.”
“Mr Speaker, Sir, I thank the five MPs for raising these questions. It gives MAS the opportunity to update the House on this issue. To recapitulate, MAS has set out a three-step dispute resolution process to ensure the fair and impartial handling of complaints by the relevant financial institutions (FIs). A wide range of investors bought these products. There were different FIs involved and the circumstances under which investors made these investments also varied. Therefore, each complaint had to be assessed individually on its merits. The FIs' decisions have been based on an assessment framework developed in consultation with the independent parties (IPs) appointed by the FIs. Both the Consumer Association of Singapore (CASE) and the Securities Investors Association of Singapore (SIAS) have said that they are supportive of this process and regard it as being in the best interest of investors. This process established by MAS was designed to achieve three main outcomes. First, to ensure that there is a consistent and rigorous process for the review of the complaints by the FIs. Second, to ensure a fair basis of decision, with the FI and investor taking due responsibility. Third, that the offers of settlement made to affected investors be regarded as reasonable and credible in the circumstances. MAS gave an update on 16th January 2009 on the handling and resolution of complaints for DBS High Notes 5, Lehman Minibond Programme Notes and Merrill Lynch Jubilee Series 3 LinkEarner notes. Looking at the progress made by the FIs and the results of the FIs' review of the complaints, as overseen by the IPs, I am of the view that the process put in place by MAS has achieved these outcomes.”
“I would like to assure the House that we are monitoring this situation very closely – MTI, MOM and the various agencies, together with our tripartite partners, NTUC and the business chambers. Our approach has been a very pragmatic one. We look at the different sectors. You will not see robust job growth in the same way that we had seen in the last three years. But there will still be a significant job growth, as I mentioned, in the various sectors, like tourism with the IRs. We also have a very strong pipeline of investments, and EDB is confident that these investments will generate 6,000 jobs this year. So if you add it up, it is a significant number of jobs that will be sufficient to cater for new school leavers. They are definitely more than 30,000 jobs all in. But what we are not sure of is the retrenchments that will likely to take place in the existing economy and also the retraining requirements, as companies restructure and some companies have to cut back. We are very conscious of the difficulties faced by the PMETs, and I think we have got specific programmes to target this group of Singaporeans to enable them to retrain for the jobs that are available. POLITICAL APPOINTMENT HOLDERS AND CIVIL SERVANTS (Average total annual remuneration for 2008) 4. Mr Siew Kum Hong asked the Prime Minister (a) what was the average total annual remuneration for the year of 2008 (inclusive of all bonuses) for political appointment holders and civil servants whose remuneration is pegged to (i) MR4 benchmark and (ii) SR9 benchmark; and (b) what was the average amount of performance bonus paid to each of these groups, in terms of the number of months of salary and also in terms of the absolute monetary figure.”
“The epicentre is in US and Europe, not in Asia. But, nonetheless, we are facing the aftershocks and the repercussions of those difficulties. If you look at the reports that have come out, the consensus in most reports among economists and analysts is that the most optimistic forecast is for the US and the European economies to recover only in the second half of this year. So we cannot expect to see anything earlier than that. And the second thing we ought to note is that most analysts do not expect a sharp recovery, they expect a very slow recovery.”
“I was about to use the same answer as I had just now, that we are facing quite an uncertain future. What I can say is that the recession that we are facing now is quite different from the recession that we faced before. If you look back, in 1985 and 1986, that recession was because of our cost structure becoming uncompetitive. The main cause was domestic, and when we made the changes and righted ourselves, I think there was a rebound. In 1998, it was a financial crisis in Asia. The rest of the world managed to grow reasonably well although we were quite close to the epicentre of the Asian financial crisis and therefore sectors like our financial services and our share market was very adversely affected, but the rest of the economy was less affected. So when the Asian financial crisis was resolved, the rest of the economy pulled out and we rebounded quite quickly. Similarly for the 2001 recession, that was largely an IT bubble and also a major correction in world stock market. 2003 was also a very narrow recession created because of SARS. What we are facing today is actually quite unprecedented. First of all, it is a global downturn. It is a huge de-leveraging process. There have been global imbalances built up over the years and now it is righting itself. So the whole external demand has declined sharply. There is very little we can do to try and mitigate the impact of such a major decline in the external demand. Secondly, the global financial markets are affected. As you know, financial systems are crucial to the workings of a global economy. So I think these two characteristics make this a very sharp recession. The positive thing is that, of course, in terms of the financial crisis, we are further away from the epicentre.”
“I hope Members will appreciate that during this period of great uncertainty, it is very hard for us to be making these projections with a great deal of uncertainty. What we have done is to develop a bottoms-up approach, look at all the different sectors and identify the job opportunities in each sector and also to develop a programme to see how Singaporeans can be trained or retrained to fit into these sectors. So, in my answers, I have mentioned several of these sectors and, if you add them up, I think this will give Members a general feel of what is available in those sectors that we have identified. Of course, in the rest of the economy, there will be some growth, some job creation as well as some retrenchments and cut back. I think the situation is evolving and will become clearer over time.”
“The strong employment growth which we have enjoyed in recent years will ease significantly. Unemployment and retrenchments will rise. The labour market has already softened in the second half of 2008. We expect employment growth to further weaken and job losses to increase, in tandem with the economic slowdown. However, new jobs will still be generated from the growth sectors. For example, the construction sector is likely to continue hiring this year. In addition, the healthcare sector will continue to grow over the next two years with the development of healthcare facilities, such as the opening of the new Khoo Teck Puat Hospital. The civil service will also continue hiring: the Ministry of Education recently announced that it will be recruiting more than 7,000 teachers and support staff in 2009, while the Ministry of Home Affairs is looking to fill more than 1,000 vacancies across the various Home Team departments. In the tourism sector, the Integrated Resorts have already started their hiring efforts and are expected to provide more than 20,000 job opportunities over the next few years. And I have also referred to the EDB's announcement this year. EDB estimates that with the new investments coming on-stream, becoming operational this year, these will generate about 6,000 new jobs. In closing, let me assure Mdm Halimah that we are closely monitoring the economy to identify the sectors vulnerable to retrenchments. In collaboration with our tripartite partners, the Government has already implemented the $600 million SPUR programme to help our workers retrain and upgrade their skills, so as to remain employable and employed during and beyond the economic downturn.”
“Although our banks have largely escaped the direct impact of the crisis because of their low levels of exposure to distressed assets, the crisis has hit the sentiment-driven segments of the financial sector which include the trading of stocks, shares and bonds, foreign exchange trading as well as fund management activities. The domestically-oriented sectors of our economy will also experience moderation in growth. Weaker consumer sentiments among Singaporeans have affected the retail sector and the property market. Retailers and restaurants are seeing slower business as consumers are reining in discretionary spending. Private home prices fell for a second consecutive quarter at the end of 2008 according to advance estimates from the URA, hurt by a drop in investor sentiments amid the growing economic downturn. However, there are some sectors which are still showing positive growth. The construction sector and supporting activities, such as architectural and engineering services, have benefited from a strong pipeline of projects that were awarded in the past two years. The information and communications sector has also been resilient, as it is supported by major public sector IT initiatives and growth in international call volumes. The healthcare and education sectors are also showing steady growth. However, these sectors collectively make up slightly less than 10% of our economy, and their growth will not be able to compensate for the declines in the other sectors. Another area which gives us some optimism is the pipeline of investments. I think some of you may have heard EDB's announcement just this morning about the investment commitments last year and their projections for this year. Mdm Halimah has asked about the employment outlook for 2009.”
“Mr Speaker, Sir, the global economic environment has deteriorated significantly since the middle of last year. The Singapore economy has entered a recession. We have already seen three consecutive quarters of negative quarter-on-quarter GDP growth and two consecutive quarters of negative year-on-year GDP growth. The economic downturn has spread to all the key sectors of our economy. The sectors that have been hardest hit by the crisis are those most exposed to the external economic environment, such as manufacturing, tourism, transport and wholesale trade, as well as sentiment-sensitive sectors such as financial services. Overall, non-oil domestic exports fell by 7.9% last year. The fall was especially steep in the last few months of 2008. Non-oil domestic exports declined by 20.8% in December. Container throughput and sea cargo handled in December contracted by 13% and 18% respectively. This contraction in exports is being experienced by many other regional economies too. For instance, exports from Taiwan and South Korea declined by 40% and 17% respectively in December, while Malaysia saw a 5% decline in its exports in November. The outlook for 2009 is a difficult year. Consumer demand in our key export markets, such as the US and Europe, will remain weak. Our manufacturing sector is therefore likely to continue facing a slowdown this year. Regional trade will also slow down further, which will drag down the sectors relating to transport and wholesale trade. The financial services sector will also experience a sharp slowdown because of the impact of the financial crisis.”
“Sir, as I explained in my reply earlier, building up a relationship with the borrower takes a lot of time, a lot of effort and a good understanding of the business. Therefore, it is not something that we can do overnight. Obviously, SPRING or IE Singapore is not geared up to do this. And this is why, over the years, we have always worked through the banks – through the loan officers, through the relationship managers who have a very intimate knowledge of the borrowers' needs as well as competency and domain knowledge of what is involved in credit assessment. So it is not possible for us in a short time or is it wise for us to start up a lending operation within SPRING or IE Singapore.”
“Sir, we have 14 financial institutions participating in our various schemes. In fact, SPRING is reaching out to more financial institutions to get them into the net. As I said, the level of participation by the 14 financial institutions vary. Some are very active, commanding a significant part of the market share – 20%-25%. Others are very small players with about 1%-2% of market share.”
“At the same time, it also means that when some foreign banks, for example, have to cut back on the credit facilities because of instructions from their head office, the impact now reaches out to some of our SMEs who previously had not had the access through the foreign banks. Another feedback we got is that some of our SMEs, in fact, work through both local and foreign banks. And the typical approach is that their credit facilities with the local banks are secured on very concrete collateral, whereas their relationship with the foreign banks is based on accounts receivable. So when situations get tighter, that is, in fact, the first facility that gets cut. These are some of the feedback that we are getting and we are working together with the various banks to see how we can make the system better and still ensure credit is available to our companies.”
“It depends really on the borrower's level of relationship with the banks. If he has already built up a very long-standing relationship with the bank, the relationship manager knows his business very well. So when he comes back to renew or to extend his loan or to have this new credit facility that has been enhanced, it is not a problem. That was the feedback that we got. For some of the SMEs that have taken advantage of the Government's schemes – the LEFS, LIS, micro-loan, etc – and they have built up this relationship with their banks, when we expanded the scheme and they renewed or expanded the scheme with the banks, there was very little problem. The problem comes when a borrower is building a new relationship with the bank and he has to explain to the bank the nature of his business and his business plans, and the loan officer must develop a good understanding of his operations and also a good assessment of his prospects going forward. So we cannot dictate time. This must be left to the banks and also to the nature of the relationship between the applicant and the bank. The last question is on the renewal of credit facilities. Anecdotally, the evidence of the feedback given to us is that many of the banks in Singapore, both the local banks and the foreign banks, targeted SMEs in a significant way in the last few years. They have built up the loan portfolios for the SMEs. So we are starting off from a position of greater strength than, say, five years ago. Five years ago, I think the penetration of the access of credit by our SMEs in the banking system was less. This time round, I think we have a better base to work with.”
“Sir, I thank the Member for his supplementary questions. First of all, let me explain, as I did in my answer earlier, that the whole credit situation is a very diverse situation. Essentially, the commercial loan constitutes about $160 billion, but a large proportion of this is really to the bigger companies – the multi-nationals and the mid-sized companies. The SMEs' share constitutes about $40 billion. Even within these large amounts, we also have to look at the sectoral composition of these loans. Many of these loans are for development and construction, and many of these, in fact, grew very significantly during the bull run in the last two to three years, and that has increased the size of the loan market. The Government's share of this market at $1 billion is not a very significant share. Really, we have to depend on our financial system. As I said, by and large, our financial system remains intact. But we must expect that during a period of recession that the banks themselves will be more stringent in their lending criteria and in their scrutiny, and there will be some cut back in the loans. During the times when credit was reasonably easy, SPRING did not monitor the ratio of applications versus approvals. We only took in the data from the banks based on loans approved. So I do not have the data comparing the past history of the success of approvals. Now, of course, we are collecting this data because it is something that we are sensitive to. On the process, we agree that it should be as simplified as possible, and we are working together with the participating financial institutions to make sure that the process is simplified. And, similarly, time taken should not be unduly long. But I must add a word of caution.”
“Since implementation of the enhancements, feedback from the business community has been positive. They have welcomed the move to increase risk sharing by the Government, the increased quantums as well as reduced interest rates. There has been continued feedback on the need for working capital and difficulties in securing such loans. We are assessing this and will revise our schemes in line with the situation.”
“Companies requiring assistance should approach the EDCs for help. While efforts are being made to help support access to business credit, companies still have the prime responsibility to furnish the relevant data for their applications and to show that their businesses are viable and bankable. It is only natural, in any recession, that companies seeking loans are questioned in more detail and their applications are scrutinised. Member Mr Zaqy Mohamed has asked how MTI intends to work with banks to relax their lending criteria for the financing schemes, and whether we set conditions on the disbursement of such loans by the banks. We do not have disbursement requirements nor do we influence the bank's risk assessment. It is important that the banks do the proper due diligence in ensuring that loans are extended to companies with viable business propositions. This is also why we do not set utilisation targets. The Government is also not in a good position to lend to enterprises directly. We do not have the expertise and are not well placed to do so. Credit risk assessment is best done by the professionals in our financial institutions, who have the necessary domain knowledge. Our preferred approach is to share a significant portion of the financial institutions' risks, up to 80%, and defray some of their administrative costs. This not only encourages more lending, but also ensures that our public funds go to deserving companies. Government loans, therefore, play a targeted role; they are not intended to replace commercial lending. Our primary objective remains to assist viable but riskier companies access credit which they would otherwise be unable to get at reasonable rates during this period.”
“They rose by around 50% to over $1.0 billion in 2008, compared to $680 million in 2007. Against a backdrop of economic downturn and greater risk aversion, we moved pre-emptively in December to further enhance our loan schemes. We increased government risk sharing from 50% to 80%, raising loan quantum limits, introducing a Bridging Loan Programme (BLP) for working capital needs, and reducing interest rates by 1.25%. These enhancements have been in place for less than two months. It is too early to assess their effectiveness but preliminary indications are promising. Participating banks have reported an increase in applications with almost 500 applications submitted in December alone. Many of these applications are still being processed by the banks. Approved loans increased by 30% in December 2008 compared to December 2007 (from $62 million to $80 million). Working capital loans increased while asset based loans saw a dip. This is not unexpected, with businesses cutting back on fixed asset investments amidst the unfavourable economic climate. Our next challenge is to heighten awareness of these schemes and assist SMEs in applying for them. Many SMEs may be unfamiliar with the process. SPRING has therefore organised a pipeline of financing seminars in collaboration with the business chambers and industry associations. To facilitate SME loan applications, SPRING, together with our five Enterprise Development Centres and the Singapore Business Federation, has just launched the Financial Facilitator Programme. Under this programme, the six centres will provide financial advisors to advise SMEs on financing strategies and loan applications. SMEs can seek professional financial advice at these centres at no charge.”
“Mr Speaker, Sir, let me first set out the broader context against which the Government's loan support schemes exist. We are facing a broad-based global economic downturn and the Singapore economy is in a recession. Loans may decline further in the coming months. This happened during the Asian Financial Crisis and is likely to happen now as well. Demand for loans will moderate with businesses scaling back investment and expansion plans. Banks will become more cautious with business prospects of borrowers turning more uncertain. There have also been knock-on effects here from the global financial turmoil. Bond and equity market issuances have thinned substantially, and the foreign banks operating in Singapore, which collectively make up more than 40% of our domestic credit market, were affected by the crisis in the US and Europe. The actions taken by governments and central banks in Europe and the US to recapitalise bank and guarantee bank borrowings have improved confidence in the international financial system and that of individual banks, although there remain significant stresses and uncertainties ahead. Our local banks, on the other hand, are not facing a capital or liquidity crunch and their capital adequacy ratios more than meet MAS' requirements. Overall, the interbank market in Singapore continues to function normally; commercial cost-of-funds is low and our financial system remains fundamentally sound. Our Government's loan schemes aim to complement commercial lending by helping viable but riskier companies access credit. We work through the banking system by sharing a sizable portion of the default risk. These schemes have been in place for many years, and loan commitments had increased even before additional enhancements took effect in December 2008.”
“Sir, can I have your permission to take Question Nos. 1 and 2 together?”
“Notwithstanding the global financial crisis, a diverse range of leading companies have embarked on factory openings or ground breakings recently, such as Samsung-Siltronic (Electronics), Halliburton (Oil and Gas), Rolls Royce (Aviation), Renewable Energy Corporation (Clean Energy), DigiPen (Interactive Digital Media Institute), Genentech (Biologics) and Intellectual Ventures (IP Management) to name a few. This diversity and depth of companies attest to the confidence and faith that companies around the world have in our economy and will help to support our economy through challenging times in the future. SPALLING CONCRETE IN HDB FLATS (Repairs) 31. Mdm Cynthia Phua asked the Minister for National Development in light of the ageing of HDB flats (a) how many flats have undergone repairs for spalling concrete in wet areas over the past 12 months and what is the average cost to the lessee and the cost to HDB per lessee; (b) how many flat-owners have sought HDB’s help to repair spalling concrete in non-wet areas; (c) whether HDB will carry out a goodwill programme for all its estates to help residents repair this defect in non-wet areas and at a subsidised cost; and (d) how are new flats being protected from this defect.”
“The Government has a handful of companies that are critical for national defence, and will ensure that defence interests are not compromised. To protect critical infrastructure in times of necessity, we have also put in place ownership restrictions in sectors like telecommunications, airports and seaports. Ultimately, the competitiveness and long-term sustainability of Singapore is not safe-guarded through control of industries. Instead, the Government adopts a three-pronged approach. Firstly, we maintain an open investment policy and business climate to ensure that Singapore is competitive and sustainable for the long term. Secondly, the Government ensures that the necessary infrastructures are in place to support the continued growth of industries. Some newer examples of these include the LNG terminal, the CleanTech Hub@Jalan Bahar and the National Broadband Network. Thirdly, we adopt a regulatory framework that is conducive to business while setting appropriate standards to safeguard the well-being of Singapore. In introducing regulation, we make a conscious effort not to stifle enterprise and innovation, and allow the market to provide efficient and competitive outcomes. This approach has served us well in creating a vibrant and open business environment for both local and foreign companies. Indeed, since 2007, the World Bank has ranked Singapore number one worldwide for "ease of doing business" in their Doing Business reports. Significantly, top-tier companies continue to invest in Singapore, adding to our vibrant business landscape of more than 7,000 MNCs, 46,000 international companies and 160,000 SMEs.”
“Mr Speaker, Sir, the interest rates are set by the market and MAS does not intend to intervene the market. So the interest rate will reflect market forces of demand and supply for funds.”
“These are details which I would rather not go into in this House. Suffice to say, MAS will be sending out detailed instructions to the banks on how they will be regulated in taking these new deposits, and the basis for which charges for this guarantee will be levied.”
“Mr Speaker, Sir, as I have explained in my statement, our action was targeted at safeguarding and defending the financial system in Singapore and the whole of the financial sector in Singapore, and the importance of that financial sector to the overall economy. Therefore, the financial sector in Singapore comprises not just the local banks but all the banks that constitute this financial system. And, therefore, we felt it necessary that this is not just a question of protecting deposits. This is a much larger agenda. The larger agenda is that we want to make sure the finanical system in Singapore continues to contribute to our growth and our employment, and therefore that would involve the foreign banks; and the ability of the entire financial system to service the economy.”
“I think we know that such a blanket guarantee by surrounding countries would spark off a dynamic and, therefore, we had to act. On the same day that we acted, Malaysia also provided similar guarantees. Other countries have assessed their needs and have done so differently. For example, Indonesia has increased the level of deposits that is being guaranteed, not unlimited but they increase the ceiling. So I think this is a development which caused us to have to move. If we had moved earlier, we may have been the one setting off the dynamic and I do not think that is the right thing for us to do, because our banks are stable and there is really no reason for us to be guaranteeing all deposits in Singapore. His second question is that branches of foreign banks in Singapore may be tempted to increase the level of deposits here, remit their money overseas, and invest or support their parent operations overseas. This is something that we are very mindful of and MAS, in its supervision of the various banks, especially branches of foreign banks in Singapore, will insist that as the deposits increase in their branch here, they have corresponding liquid assets which are invested in Singapore to match these deposits.”
“First of all – as I emphasised in my statement – the financial system in Singapore is robust, stable and orderly, so there was really no reason for us to react. It does not mean that if the US and the EU put in various measures to support the system that we must do likewise. There was no necessity for us to do so. But when governments in our region decided to have blanket guarantees in deposits, first in Australia and then in Hong Kong, I think it sparks off a dynamic and creates a potential problem for us, as I have explained in my statement. For example, Australia guarantees foreign branches of Australian banks. So the deposits of a branch of an Australian bank in Singapore are guaranteed by the Australian government. In Hong Kong's case, they guaranteed the branches of foreign banks situated in Hong Kong. So the deposits of DBS branch in Hong Kong are guaranteed. Once that is done, I think it sets off a different situation and it sets off a dynamic. Unlike your grassroots leaders who put money under the pillow, my grassroots leaders tell me that even though they want to continue supporting Singapore banks – they know that Singapore banks are well regulated and very strong – but if a branch of an Australian bank offers guaranteed deposits for their Singapore dollar deposits, then there is a lot of pressure for them to be on the safe side. Nothing about being disloyal but just to be on the safe side. Similarly, if you are a DBS customer and you can shift your deposit to a branch in Hong Kong and that is guaranteed, you are still supporting a Singapore bank but now your deposit is booked in Hong Kong. So we do not have to wait for all these things to happen.”
“That is because even after giving this guarantee, the Government still has ample means, with the full backing of our not insignificant reserves, to safeguard our currency if this should prove necessary. To prevent financial institutions abusing the guarantee by expanding aggressively and taking on excessive risks, MAS has emphasised to financial institutions in Singapore the need to remain prudent in this current operating environment. MAS will continue to supervise financial institutions in Singapore closely. It will take the necessary actions to see to it that they operate in a sound manner, and do not put at risk the stability of our financial system or the Government's reserves. Mr Speaker, Sir, let me reiterate that Singapore's financial system remains sound and we are well-placed to meet the challenges facing us. This global crisis is unprecedented, and requires Singapore to respond effectively, decisively but also prudently. The provision of a Government guarantee on deposits is a necessary temporary measure to protect the interests of Singaporeans and the economy, which are in turn dependent on a strong and competitive financial sector. The risk of drawing on the guarantee and potential impact on Singapore's reserves are low. This is a measured, precautionary action that will help us to weather the global economic slowdown and the ongoing financial crisis in international financial markets.”
“Hence, for the guarantee to be called, two things have to happen: a bank has to fail, and at the same time its assets must be worth so little that there is not even enough to repay its depositors. Even then the draw on the guarantee should only be for the shortfall, which should be a fraction of the deposits outstanding. Hence, we have calculated that the S$150 billion backing is an amount that will be ample to meet any eventuality except the most remote. S$150 billion does not in any way reflect an estimate of the likely draw over the two years of the guarantee. On the contrary, we expect the actual draw to be small or, if we are fortunate, even zero. Instead, the S$150 billion reflects the Government's confidence in the banking system, and its intention to give all depositors that same confidence. Singapore is in a good financial position to provide this guarantee because of the fiscal discipline of successive governments. We are in a strong fiscal position, having accumulated surpluses during good times for exigencies just like this. In contemplating making this guarantee, the Government has carefully assessed that it is well within our means, does not impair our ability to meet all government obligations and will not jeopardise Singapore's financial standing. We are using our reserves to back this guarantee. In the event of a payout, past reserves may be drawn upon. The Minister for Finance has sought and obtained the President's concurrence to issue the guarantee, as required by the Constitution because of the President's role in safeguarding our reserves. I should also make clear that this guarantee does not impact at all on MAS' ability to defend the Singapore dollar.”
“This would aggravate the already challenging economic situation and thereby adversely affect our growth and jobs. Fourth, this financial crisis is not confined to any country or region, but is a global one. Singapore's guarantee of deposits demonstrates our confidence in the soundness of our financial system, and helps contribute towards restoring confidence in the international financial system. Mr Speaker, Sir, let me now explain why we are confident that guarantee is sufficient and prudent. Why the guarantee is sufficient and prudent The deposits of individuals and non-bank customers with banks, finance companies and merchant banks in Singapore amount to about S$700 billion. In view of MAS' stringent regulations and close supervision of financial institutions in Singapore, their strong capital and asset positions, and the potential support that foreign institutions in Singapore can avail themselves of where necessary under the government guarantees provided by their home jurisdictions, MAS and the Ministry of Finance have assessed that the backing of S$150 billion of the Government's reserves provided to the guarantee would be more than sufficient. Let me explain. First, the likelihood of a bank failure as a result of problems in Singapore is small as our banking system is sound and closely supervised, even though it is possible that problems elsewhere will affect a bank's operations in Singapore. Second, even if a bank were to fail here, it should still have substantial assets to meet its liabilities to depositors. Under the law, non-bank depositors enjoy priority in being paid, ahead of other unsecured creditors. This makes it more likely that the failed institution will have sufficient assets to pay out to depositors.”
“We have decided that such a guarantee is necessary for the following reasons. First, the guarantee ensures a level international playing field for banks in Singapore. The recent announcements in the region of blanket government guarantees on deposits set off a dynamic that puts pressure on other jurisdictions to respond or else, risk disadvantaging and potentially weakening their own financial institutions and financial sectors. If Singapore had not introduced a similar guarantee, there was a real risk that depositors would have shifted some of their deposits out of Singapore banks to banks in other jurisdictions which guarantee deposits. This would have weakened financial institutions here. The Government has therefore taken a precautionary step to pre-empt and avert any such possibility. Second, the guarantee bolsters the confidence that the public has in Singapore's financial system. It provides certainty to Singaporeans during such challenging and uncertain times in the international environment, notwithstanding that in Singapore, our institutions are fundamentally sound. Third, financial services are an important pillar of Singapore's economy, accounting for 12% of GDP and 5% of Singapore's employment. Beyond this substantial direct contribution to GDP, the financial sector plays a critical role in intermediating credit for the economy, and in providing other critical financial services to companies and depositors in Singapore. It is, therefore, important for the whole economy that the financial sector continues to function normally. Should financial institutions in Singapore become less competitive or credit becomes less readily available, it would hinder the financing of economic activities and raise the borrowing costs of businesses.”
“Mr Speaker, Sir, the global economy is slowing and the international financial system is still under significant stress. Amidst the current turmoil, the financial system in Singapore remains stable and robust. Financial institutions in Singapore continue to be sound and to operate normally. Our local banks and finance companies are financially strong and well-capitalised. They meet capital adequacy ratios in excess of MAS' requirements, which are in turn higher than international standards. Foreign banks in Singapore are subject to strict licensing and admission criteria, and are required to maintain assets against their liabilities by an appropriate margin. Our financial markets remain stable and calm, and financial institutions in Singapore do not face funding difficulties in the interbank market. Public confidence remains high, and we have not had to take extraordinary measures. Why the need for Government guarantee Nevertheless, the Government has carefully assessed the international situation and its implications for Singapore. The actions taken by governments and central banks over the last few weeks in Europe and the US to recapitalise banks, purchase bad assets and guarantee bank borrowings in the wholesale markets have improved confidence in the international financial system, even though there remain significant problems and stresses. However, the announcement in the past week by a few jurisdictions in our region of blanket government guarantees on all bank deposits could potentially have a more direct impact on Singapore. Last Thursday, the Singapore Government announced a guarantee on deposits of individuals and non-bank customers with banks, finance companies and merchant banks in Singapore until 31st December 2010.”
“Dr Lim Wee Kiak asked the Minister for National Development in the light of the wide public discussion on living quarters and townships for foreign workers, (a) what are the criteria used to choose sites for accommodation of foreign workers; (b) if townships or large dormitories are built, how can citizens be assured that foreign workers will not congregate to create disturbances that may jeopardise national security; (c) what measures will be taken to prevent these townships from becoming a refuge bed for criminals and other illegal activities; (d) whether dormitory owners be made to shoulder heavier responsibilities for their tenants' conduct and bear the cost of policing these townships.”
“I think that is a better approach than to say that, every time, you put up one of a series of notes, you have to come up with the whole process of the full prospectus. Finally, these products are not low-risk or safe products. These are explained in the first or second page that these are structured products and it is in bold print that you can lose everything. So MAS has never said that these are risk-free products, low-risk products or safe products. FOREIGN WORKER DORMITORIES (Criteria for choosing of sites) 17. Mr Zaqy Mohamad asked the Minister for National Development (a) what are his Ministry's considerations in placing foreign worker dormitories in relatively close proximity to residential areas, such as Serangoon Gardens; (b) in view of Singapore's long-term dependence on foreign workers, whether his Ministry has considered designating restricted zones in areas further from residential areas such as industrial zones or nearby islands; and (c) what are the common issues often associated with complaints from residents and what is his Ministry's assessment of measures to control undesirable consequences and social impact to residents. 18.”
“Mr Speaker, Sir, what the MAS and Government want to avoid is to politicise this whole issue. Our main concern is to get the process done and to make sure that any investors who have been mis-sold or who have invested inappropriately in these products have due recourse and compensation. That has been our focus. If we were to have a Committee of Inquiry or if we were to take this to the courts, I can assure Members that nothing will move. All financial institutions, everybody, will freeze and take legal defensive actions and then the affected investors will have to wait weeks, if not months, maybe even years, before they can have recourse. I do not think that is the best approach. That of course makes a lot of good headlines. It is grand standing. It scores a lot of political points. But it does not address the issue which is at the nub of this whole episode and, that is, we are concerned about investors being mis-sold, we are concerned about investors who have invested inappropriately, and therefore MAS' actions are all taken to address these two key issues. His second question is about disclosure. If the FI puts out a programme of similar structured notes, I think it will be very inefficient for them every time they put up the series to have to go through the whole process of putting up the full prospectus. So our rules allow them, if they are putting up a programme of notes, like in the case of Lehman Minibond Series, and they are planning to come up with the Series of 1 to maybe 10 or 12, and these are all similar products, they put up a general disclosure through a prospectus. Then with each new series that they put up, they come up with a pricing statement which explains the risk and the price that they are setting.”
“If it is a complaint, the institutions have to deal with the complaint. MAS is not being behind the curve. We have been very much involved. We have been telling the FIs how we expect them to deal with the case, and I think the FIs, to their credit, have also done a lot to make sure the system is working. True, for some FIs and some of the stockbroking firms, they may not have been geared up to handle hundreds of complaints overnight and their response in the early stages may not have been as rapid as we have wished. But I can assure Members that all the processes are now being geared up to deal with these problems.”
“The reason why I did not give a specific timeframe for MAS to complete its investigations is because we would like to have the full picture and we are also undertaking the review of the processes. But let me assure the House that MAS is treating this issue with the utmost urgency and will expeditiously complete the review. We do not want to be bogged down by this. We have huge challenges and events happening in the global financial markets. We will definitely want to be able to resolve this as expeditiously as possible. Secondly, before Mr Siew put his question, I have already explained that even though we have this category of vulnerable customers, all complaints would be dealt with in the same manner. If there is a mis-selling, whether it is to vulnerable customers or not, they will be taken care of. Thirdly, on the manner of disclosure, I agree that the prospectus is a very complex document and there are many ways to improve the ways disclosure is done, but I do not think at the same time we should hide behind the fact that it is a complex document. If Members look at any of the documents, I have copies of it here, I can show Members, on the first page, the financial institutions will be very careful, in bold letters, to indicate all the key points. So, even though there are lots of pages of great legal and technical complexities, I can assure Members that the financial institutions, when they put up the prospectus, in the first and second pages, will put up all the key parameters, and that is how we evaluate the extent and clarity of the disclosure. Finally, Mr Siew asked about our approach compared to Hong Kong. I would say that, essentially, the approach is the same – it is a disclosure based.”