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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“Mr Chairman, Sir, let me thank Mr Low Thia Khiang for raising the two findings raised by the Auditor-General's Office and giving me the opportunity to clarify. First, on the Sentosa Development Corporation's land sales, let me explain the background. As we know, Sentosa Cove is a unique development, comprising not just condominium parcels but also individual bungalow lots, hotels, shops and even a marina. SDC had originally adopted the tender mode of sale for Sentosa Cove for the first and second sales of sites. However, the feedback from potential buyers was that this mode was rigid and too onerous. It was not flexible enough to cater to private developers as well as to individual final home-owners. From our previous experiences, selling land in such a complex mixed development using the normal Government methods will not achieve the best value. SDC therefore set up a private company, SCPL, so as to position the sale of sites at Sentosa Cove as a commercial undertaking. It also enlisted the help of private sector people in the SCPL Board to contribute their market expertise and their business acumen. To better meet the market needs, SCPL decided to adopt alternative modes of sales and practices which are common in the private sector. These methods have been effective and Sentosa Cove has done very well. However, Auditor-General found that these practices do not comply with the Government's Instruction Manual (IM) which SDC, as a statutory board, has to follow. Following Auditor-General's observation, SDC has reconciled its sale practices with the requirements of IM and obtained the Ministry of Finance's exemption from certain provisions.”
“The divestment process, in fact, should result in more choices and better properties and services for tenants, as landlords try to maintain their competitive position. Mr Chairman, Sir, in summary, our economic prospects are bright. We will strengthen our growth sectors, upgrade our innovation capacity and extend more help to local enterprises while staying vigilant on costs. We are confident we can maintain our long-term competitiveness and sustain Singapore's economic growth. Small and Medium Enterprise Development”
“To cope with the rising demand, we will train as many Singaporeans as possible to take up the new jobs created, especially the better-paying ones. But we foresee that there will still be a shortage of workers, in particular, for the semi-skilled jobs that Singaporeans are not attracted to. We are working closely with the Ministry of Manpower to see how we can ease the tight labour supply. The Minister for Manpower will elaborate on this in the Committee of Supply debate. Next is the issue of rentals. Our industrial rentals have come down very significantly since the late 1990s. The rental indices for JTC's standard factories and flatted factories are approximately 50% and 45% below their respective levels just before the Asian financial crisis. The Government will continue to be responsive in making available land through the Government land sales programme to meet the demand of our industrialists. Mr Inderjit Singh is concerned about the upcoming divestment of JTC's properties and how this may push up rentals. JTC understands his concern. I had addressed this earlier last week in response to a question. To minimise the risk of unwarranted rental hikes, JTC will proceed with the divestment process carefully, with the aim of fostering a competitive industrial market landscape, post the divestment. JTC will not be divesting its entire industrial portfolio to one owner but, instead, plans to divest some via a REIT and others via trade sale. This will introduce more players into the industrial space sector. Even for properties put into a REIT, the REIT manager cannot hike rentals above what the markets will bear. Otherwise, tenant retention will be a problem.”
“IE Singapore's grants for capability development are expected to help companies generate almost $2.9 billion in incremental sales over the next three years. Our financing schemes capitalise $220 million worth of loans and help our enterprises insure almost $900 million in assets. Our various trade missions and fairs are expected to generate almost $1.7 billion of overseas sales. We agree with Dr Loo Choon Yong that our smaller enterprises need more help than their larger counterparts. That is why, when we design our schemes, we factor in the size of the enterprises. For example, the Trade Credit Insurance Programme pools the demand from the smaller enterprises so that they can gain access to attractive premium rates normally available only to larger companies. Our Internationalisation Finance Scheme is only open to companies whose turnover is $200 million or below. Mr Chairman, Sir, even as we push on with growing our other sectors and building our innovation capacity and developing our enterprises, we must ensure that we remain cost competitive, as Mr Inderjit Singh pointed out. Let me address a few key issues which concern us. First, the manpower issues. Our labour market is tight and wages are rising. A strong pipeline of jobs is coming onstream in the next few years, on top of a buoyant employment market. For example, the marine industry will need at least 15,000 additional workers by the end of this year. To support the construction of major projects, the process supporting industry will create some 10,000 supervisory jobs from 2007 to 2009. Another area is the tourism industry where the two IRs will each create about 30,000 jobs economy-wide when fully operational.”
“Mr Inderjit Singh mentioned that Government agencies are required to make a return on SME loan and investment schemes. He asked whether Singapore could adopt a developmental approach towards financing SMEs, whereby losses incurred by the Government from these schemes are regarded as investments in our economy. First, let me assure Members that the Government does not expect to profit from our SME financing schemes. However, the cost of capital is charged to ensure financial discipline so that funds are deployed efficiently on worthy projects. But it does not mean that our schemes are not developmental in their approach. For example, for most loan schemes, the Government shares 50% of the loan default risks and sets aside a grant to cover the potential losses. We have even gone up to 70% on selected schemes. The grant is not expected to be recovered. For equity financing schemes, such as SEEDS, the Government's expected return is only 5%, far below the threshold for private equity funds. But I agree with Mr Inderjit Singh that we should fine-tune our financing schemes to be more efficient in reaching out to the various companies, and I welcome his suggestions. SPRING will work closely with ACE on this. As our companies grow, they must also go beyond our shores to take advantage of the enormous business opportunities elsewhere. Ms Jessica Tan and Dr Loo Choon Yong asked about the Government's initiatives in leading overseas business initiatives. The Government's approach in helping Singapore companies internationalise focuses on three aspects, ie, competency, capital and connections. Ms Jessica Tan asked about the success of these efforts. Let me quickly update Members on our results over the past year.”
“We are only five years into it. We have laid a strong foundation in the first phase. In the next phase, we will add a new focus to develop translational and clinical research capabilities. This will bring discoveries from the 'bench' to the 'bedside'. We believe that our BMS strategies are in the right direction, but we will continue to fine-tune them as we gain more experience. We will also continue to tap on our international scientific advisory boards as well as eminent local and foreign experts to guide us in our effort. 12.30 pm The second thrust of our development strategy is to build innovation capacity. For Singapore to remain competitive in the longer term, we need to become a knowledge-based economy thriving on creativity and innovation. R&D is a major effort and we are undertaking to support this transition into a knowledge-based economy. I agree with Mr Inderjit Singh that the transition to a knowledge-based economy cannot be limited to just the MNCs located here but also has to occur among our SMEs as well. We should indeed help our local companies to develop and exploit technology. Recognising that local enterprises often need help to undertake R&D, we have indeed developed various programmes to provide them technical manpower and funding assistance. In addition, the National Research Foundation (NRF) plans to allocate $250 million for initiatives that will benefit our local SMEs, particularly technology start-up companies. NRF is working with MTI and its agencies to develop these specific programmes. MOS Lee Yi Shyan will provide the details later on. The third thrust is really to develop our enterprises, particularly in helping them compete overseas. Financing is a problem faced by many SMEs.”
“And EDB is working actively to address it. Mr Inderjit Singh's second point is that we should sharpen the focus of our biomedical strategy on niche areas, instead of just letting foreign researchers do what they want in Singapore. I agree. Let me explain our R&D strategy. First of all, we have decided to increase our National R&D expenditure to 3% of GDP. I thank Dr Loo Choon Yong for supporting such a strategy. By world standards, 3% of GDP is not very large, particularly when we consider the size of our GDP. Second, two-thirds of that expenditure would, in fact, be from the private sector. Hence, Government expenditure is only 1% of GDP. Third, Government expenditure has to be apportioned to the BMS sector as well as the non-BMS sectors. In the non-BMS sectors, for example, we are very clear of our mission - to support and expand the existing sectors and grow new sectors, as I outlined just now. Fourth, with the limited funds available, therefore, we have to concentrate and we have to focus on niche areas. And this is indeed what we have been doing. We have recruited foreign scientists based on the strength that Singapore wants to compete on and develop, and also on how the foreign scientists can help train and nurture our local talent. Furthermore, A*STAR does not work alone. In cancer research, for example, it collaborates with other leading research institutions, such as Sweden's Karolinska Institute. Our capabilities are well recognised internationally, due to the critical mass of excellent research talent that we have managed to attract internationally. At the same time, we are developing a healthy pipeline of our local researchers. A*STAR has so far awarded close to 400 scholarships in the field of BMS. But we must recognise that BMS is a long-term investment.”
“Besides the existing clusters, we are also making good progress in growing new clusters, such as education, healthcare, water and environmental technology, interactive and digital media as well as alternative energy. The biomedical sciences, or BMS, sector is another new sector that we started developing in 2000. It has since enjoyed phenomenal growth and now accounts for almost 7% of the GDP and 10,600 high value-added jobs. Mr Inderjit Singh raised two main points about BMS strategy, first, whether our MNC-approach has left our local enterprises out and, second, whether we should sharpen the focus of our strategy. Let me first elaborate on our approach to developing the BMS sector. For knowledge-intensive industry like the BMS, talent and knowledge are the keys. Hence, in our first phase, we focus on establishing a firm foundation in basic biomedical research in Singapore, even as we attracted big pharmaceutical companies to set up plants here. We established our research institutes to develop the BMS capabilities as well as build up a pool of research talent. Mr Inderjit Singh suggested that, apart from attracting MNCs, we also need to focus on building up local capabilities and supporting industries. I fully agree. A-Bio, our first biologics contract manufacturer, and MerLion Pharmaceuticals, a drug discovery company, are examples of local companies built up from our capability development efforts. We hope to nurture more such firms. On the biopharmaceuticals front, we have attracted a number of supporting services for R&D and manufacturing. We are also building up the local supplier base for medical technology. Specifically, on the gamma-sterilisation facility that Mr Inderjit Singh pointed out, this is indeed presently lacking in Singapore.”
“The global economic growth however is expected to be slower but, overall, the external environment is still positive. Domestically, consumption is likely to strengthen, while investments will remain firm. We expect inflation to remain in check, even with the impending GST increase in July. Barring unforeseen setbacks, we should continue to see another year of robust growth of between 4.5% and 6.5%. As Members pointed out, we should ride on this current growth momentum and seize this opportunity to further strengthen our competitiveness. While we are enjoying the low hanging fruits of our earlier restructuring efforts, we need to press on with the more difficult areas which will take time to transform. Three areas we need to concentrate on: first, rejuvenate existing sectors and grow new ones; second, build up our innovation capacity; and, third, develop our enterprises and help them to venture overseas. As Mr Inderjit Singh pointed out, we need new growth engines. Today, we have a broadly diversified economy. If we can strengthen and nurture more sectors, we will have more engines of growth and be more resilient. We have seen successes in rejuvenating the marine sector, for example. In the marine and offshore sector, they have reinvented themselves to become major global players in ship conversions and rig-building. Our recent investment successes in the electronics and chemical sectors will provide the growth momentum in these sectors in the next cycle. Tourism is another sector that we are remaking. MOS Iswaran will elaborate on the promising results so far, and what more we are doing beyond the first two Integrated Resorts.”
“First, let me thank Members for their very insightful comments and suggestions. Members have rightly pointed out that our key challenge is really how Singapore should position itself, invest in our future and grow the economy. First of all, we start from a very strong position. The Singapore economy is in good shape. It grew by a robust 7.9% last year, with growth permeating all sectors. More than 173,000 jobs were created and the unemployment rate fell to 2.7%. The average household income, among employed households, grew by 4.3% last year with income per household member showing gains across all deciles. Our current strong position is due to our restructuring efforts over the years. We cut our income taxes; we recalibrated our cost structures and we increased wage flexibility. We also diversified our economic base by growing new industries and expanding into new markets. Our economy now has more growth engines, compared to five years ago. This gives us greater cushion against business cycle fluctuations of the individual sectors. For example, the strong performance of the biomedical and transport engineering sectors in recent years has helped to compensate for the slower growth in chemical and construction sectors. We have one of the most open economy in the world, and that has served us well. Trade grew by 13% last year and is projected to grow by between 8% and 10% this year. Our international trade linkages have never been stronger. Since we embark on the first Free Trade Agreement (FTA) in 2000, we have concluded 11 such agreements and are in active negotiations for 10 more. Our FTAs have helped our companies achieve tariff savings of over $470 million in 2006 alone.”
“The Singapore Exchange (SGX), through its mainboard and SESDAQ, has flexible admission criteria that allow companies with shorter, or no profit track record, to be listed. SESDAQ has served its role as a local SME market and some SESDAQ-listed companies have, indeed, grown and upgraded to the mainboard. Nevertheless, SGX is keenly aware of the competitive environment among exchanges and is studying the different regulatory models in the US, London and Asia for listing SMEs, with a view to introduce changes to the marketplace. Let me assure Miss Penny Low that the situation is probably not as bad as she perceived it to be. Firstly, we have no indications of local SMEs going abroad to tap capital in a significant way. Secondly, the Milken Institute which compiles the capital access index which ranks countries around the world, in terms of financial infrastructures that support entrepreneurial activity by providing access to capital, Singapore, indeed, has been ranked second in this year's index, up from third place previously. So, by and large, I do not think we are doing badly. But I can say we can always improve.”
“Sir, I agree with Miss Penny Low that we need a competitive capital market to promote entrepreneurship and to develop our SMEs. Miss Penny Low said that there could be a lack of deep understanding and localised knowledge among our local fund managers and our bankers, resulting in poor valuations compared to other capital markets. Sir, the reasons behind market valuations across markets are varied and complex. Direct comparisons across markets are often not meaningful. I would find it hard to believe that our analysts, fund managers or bankers are less knowledgeable or lack depth of knowledge or understanding or are less sophisticated than in other markets. Perhaps, for some of the smaller market capital SMEs where there are less investor interests, there could be a smaller following of analysts and, therefore, that could result in a lack of knowledge of these companies. But, by and large, I think our markets are sophisticated enough. Miss Penny Low also asked whether our regulatory requirements and compliance costs could be another reason. Let me assure the Member that the regulatory authorities continue to monitor our regulatory oversight and make sure that compliance costs are not too high. In 2005, MAS introduced two "safe harbours" in the Securities and Futures Act to allow private placements and small offers to be made without prospectuses. These safe harbours provide legal certainty for capital raising by our SMEs and help them raise funds more efficiently without incurring unnecessary regulatory costs. In fact, one of our local broking firms has developed an over-the-counter platform to facilitate trading in shares of SMEs which take advantage of these safe harbours.”
“The Competition Commission of Singapore (CCS) has received 12 complaints and seven notifications for guidance since 1st January 2006, when the prohibitions under the Competition Act came into force. The CCS has assessed and issued its guidance on three notifications. Assessment of the remaining is ongoing. The CCS has closed five complaints. It has initiated formal investigations into three, after establishing that there are reasonable grounds for suspecting an infringement of the Act. Investigations are ongoing. For the remaining, the CCS is in the process of assessing if there are reasonable grounds for suspecting an infringement of the Act. SPECIALIST FOREIGN CONTRACTORS AND WORKERS (Separate category of permits) 5. Mr Edwin Khew Teck Fook asked the Minister for Manpower whether he will consider establishing a separate category of permits to allow specialist foreign contractors and specialist workers to come to Singapore to install and commission specialist systems for a limited period and then leave, without having to put them through the same application process for workers who are wanting permanent employment with a Singapore employer. Dr Ng Eng Hen: We do have such an existing scheme called the Short Term Employment Pass which allows foreigners to work in Singapore on a specific project or assignment up to a maximum period of one month. RESIDENT SINGLES (Profile and trends) 6. Ms Irene Ng Phek Hoong asked the Minister for Community Development, Youth and Sports (a) what is the number of singles over the last five years; (b) what is their profile in terms of age, educational qualifications and gender; and (c) how will the trend of singlehood pan out over the next five to 10 years and what are its implications.”
“I would like to thank the Member for his compliment that JTC is a benign landlord, but I am not sure whether that is a backhanded compliment. In any case, the whole rationale for divestment is to create a more competitive market. And with a more competitive market, I think rentals will go up if demand is greater than supply, and rentals will come down when demand is less than supply. 3.00 pm”
“Mr Speaker, Sir, JTC plans to divest all its flatted, ramp-up and stack-up factories, three multi-tenanted business park buildings, and one warehouse. The estimated net floor area of the JTC properties to be divested is 1.7 million square metres. This is less than 20 per cent market share of the high-rise factory space in Singapore. The rentals for JTC’s high-rise factories and business park buildings are already largely determined by the market. JTC will divest its properties in a manner that will promote competition in the property market. Instead of divesting its entire industrial portfolio to one owner, JTC plans to do so through a combination of real estate investment trust (REIT) as well as trade sale. This will introduce more players into the industrial property market, which should make for an even more competitive environment. There is also potential for higher quality and new types of industrial space products to be supplied to the market. SME industrialists looking for high-rise or business park space can thus enjoy more choices and options. I would like to assure the Member that JTC’s divestment will contribute to a more vibrant industrial space market that will benefit SMEs rather than curtail their development and growth. Mr Seah Kian Peng: Sir, a lot of SMEs are very concerned with this news because I think they regard JTC as a more reasonable ---”
“Dr Muhammad Faishal Ibrahim asked the Minister for Health whether kidney dialysis centres for retired civil servants can be set up at regional hospitals (Changi General Hospital (East), National University Hospital (West), Tan Tock Seng (Central)) to meet the needs of retired civil servants living in these respective areas.”
“The mean and median monthly income from work per household member among resident households up to 2006 is shown in Table 1 below. Income from other sources is only available once in five years from the Household Expenditure Survey. Income data for employed households is used, instead of for all households, in order to isolate the effects caused by changes in the proportion of retiree households. Table 1: Mean and Median Monthly Income from Work Per HouseholdMember Among Employed Households 2001 2002 2003 2004 2005 2006 Mean 1,700 1,660 1,690 1,750 1,820 1,950 Median 1,190 1,160 1,170 1,200 1,250 1,310 The mean and median income from work per household member among employed households by quintile is shown in Tables 2 and 3. The lowest quintile group showed a slight drop in the mean income between 2001 and 2003 but recovered from 2004. Table 2: Mean Monthly Income from Work Per Household Member AmongEmployed Households by Quintile Dollar Quintiles 2001 2002 2003 2004 2005 2006 1st - 20th 390 380 380 390 390 420 21st - 40th 770 750 760 780 800 850 41st - 60th 1,200 1,170 1,180 1,210 1,260 1,320 61st - 80th 1,850 1,800 1,830 1,860 1,950 2,050 81st - 100th 4,310 4,210 4,300 4,490 4,720 5,090 Table 3: Median Monthly Income from Work Per Household Member Among Employed Households by Quintile Dollar Quintiles 2001 2002 2003 2004 2005 2006 1st - 20th 400 400 400 400 400 430 21st - 40th 760 750 750 780 800 850 41st - 60th 1,190 1,160 1,170 1,200 1,250 1,310 61st - 80th 1,810 1,770 1,800 1,830 1,920 2,010 81st - 100th 3,440 3,360 3,380 3,500 3,660 3,940 Column No : 1323 KIDNEY DIALYSIS CENTRES FOR RETIRED CIVIL SERVANTS (Establishment at regional hospitals) 4.”
“Mr Speaker, Sir, the environment that MAS operates in today is increasing in complexity, requiring greater flexibility from the MAS. The proposed amendments to the MAS Act will enable MAS to carry out its functions more effectively and to meet the operational and policy challenges ahead. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Mr Lim Hng Kiang]. Bill considered in Committee; reported without amendment; read a Third time and passed. Column No : 1253 ECONOMIC EXPANSION INCENTIVES (RELIEF FROM INCOME TAX) (AMENDMENT) BILL Order for Second Reading read. 3.10 pm”
“Powers to enable MAS to issue regulations on anti-money laundering and countering financing of terrorism (AML/CFT) matters Singapore is fully committed in our efforts to keep our financial system clean and well-regulated. Indeed, our success as a financial centre has been built on a consistent track record of integrity and the rigorous implementation and enforcement of international standards. To better meet our international obligations and keep pace with evolving international standards on anti-money laundering and countering financing of terrorism, we propose to include a new section 27B in the MAS Act. The new section will consolidate requirements currently imposed under various Acts and enable MAS to issue regulations or directions to counter money-laundering and terrorism financing, thereby achieving a more responsive regulatory framework. Powers to approve a dispute resolution scheme A key aspect of consumer empowerment is to provide consumers with recourse to an affordable, accessible and independent dispute resolution mechanism. It is therefore important for MAS to have the authority to approve schemes for the resolution of disputes arising from the provision of financial services in Singapore. The proposed new powers will also enable MAS to require a financial institution to be a member of an approved dispute resolution scheme and to comply with the prescribed terms of that membership. General power of composition Lastly, in view of the increased provisions in the MAS Act that may attract criminal penalties upon contravention, we propose to introduce a general composition provision to enable MAS to prescribe and compound penalties on offences that it considers appropriate.”
“We therefore propose to allow MAS' senior management, comprising the assistant and deputy managing directors, in addition to the MAS Board of Directors, to be appointed as acting Managing Director by the Minister. Such appointments will require the President’s concurrence. This amendment will enhance MAS’ operational efficiency and flexibility as MAS' senior management already assists the Managing Director in day-to-day running of the MAS. Approval for investment in new securities and investments The other amendment is to streamline the decision-making process for the investment of MAS' funds. Presently, the MAS Board makes the broad investment policy and other key investment decisions for the MAS. However, MAS is still currently required to seek the President's approval for new securities and investments that it may purchase or sell using MAS' funds. The range of new securities and assets is getting wider and more complex; it is very cumbersome for the President to have to approve every recommendation of new security and investment. Over the years, MAS has put in place a governance framework with a set of independent checks with regard to the investment of MAS' funds. The MAS Board is also well positioned to approve these new securities and investments. We therefore propose that the MAS Board be empowered to do so. MAS will continue to provide regular reports to keep the President's Office updated on its overall financial performance. These amendments have been endorsed by the President. Mr Speaker, Sir, the third set of amendments is to revise the scope of MAS' powers to address emerging issues.”
“In addition, the Board will also be required to furnish the Minister with information regarding MAS upon request. Report on MAS’ performance in annual report MAS’ annual reports presently give an overview of MAS’ performance and initiatives by highlighting key achievements and work-in-progress. To enhance MAS’ accountability, the proposed amendments in the Bill provides for the annual report to include a write-up on MAS’ performance in its functions and duties. MAS’ position on lending to the Government and public authorities Monetary discipline has underpinned Singapore’s solid economic fundamentals. While there is tacit understanding that MAS as the central bank will not lend to the Government for the purpose of deficit financing, making this principle explicit in the MAS Act will help to provide a clear separation of responsibilities between monetary and fiscal policies. This is essential for good governance. It will put in place safeguards that prevent MAS from financing Government deficits, thereby sending a strong signal of Singapore's commitment to monetary discipline and price stability. The amendment will also set out the limited exceptions under which the prohibitions may be lifted. Mr Speaker, Sir, let me now touch on the next set of amendments, which is to streamline the operations in MAS. Discharge of Managing Director's duties Currently, only MAS Board directors may be appointed as acting Managing Director of MAS by the Minister to cover the duties of the incumbent Managing Director. Over the years, MAS has groomed an effective senior management team which works closely with the Board and the Managing Director.”
“Mr Speaker, Sir, on behalf of the Senior Minister, I beg to move, "That the Bill be now read a Second time." There have been significant changes in the global financial and regulatory landscape since the MAS Act was enacted 36 years ago. To keep pace with these changes, MAS embarked on a review of the MAS Act and proposed a series of amendments. The amendments will enable MAS to carry out its functions more effectively to meet the challenges of a dynamic global financial and regulatory landscape. The amendments are aimed at three broad areas. First, improving accountability and governance; second, streamlining of operations; and, third, providing MAS with the flexibility to address emerging issues. I will now touch on the key amendments proposed in this Bill. The first set of amendments is on improving accountability and governance. Specifying MAS’ objects and functions MAS’ mission is to promote sustained non-inflationary economic growth and a sound and progressive financial centre. To this end, MAS performs the multiple functions of a central bank, an integrated financial supervisor and a developer of the financial sector. We propose to explicitly set out these functions in the Bill. The Bill will also set out the objects of these functions. They are: (1) Maintaining price stability conducive to sustainable economic growth; (2) Fostering a sound and reputable financial centre; (3) Ensuring the prudent and efficient management of Singapore’s official foreign reserves; and (4) Growing Singapore as an internationally competitive financial centre. Clarifying the Board’s accountability to the Minister-in-charge of MAS Next, the MAS Board will be required to keep the Government informed of matters of policy through the Minister-in-charge of MAS.”
“The efforts will be athlete-centred and will build on our existing Sports Excellence initiative. This initiative would dovetail into the recommendations of the Sporting Culture Committee that I am chairing so that we can develop a sustained delivery system for champion athletes in the long term . MCYS and the Singapore Totalisator Board would support the SNOC by providing funding for this project. This project would cost $7 million. MCYS would provide $2 million and the Singapore Totalisator Board would contribute $5 million. Singapore's only Olympic medal was won by our weightlifter Tan Howe Liang in 1960 in Rome. Since then, while we have, on a few occasions, come close to securing our second Olympic medal, we have not been able to do so. Now that our sports excellence systems are in place, we will make a strong push in the next two Olympic Games in Beijing and then in London. If we succeed, it will be a proud moment to remember for the sports fraternity and for all Singaporeans. Mr Speaker, Sir, please allow me to use Mandarin to address some of the key points.”
“In the past few years since the Committee's report, MCYS and the Singapore Sports Council (SSC) have been working closely with other key stakeholders in the sports fraternity such as the Singapore National Olympic Council (SNOC) and the National Sports Associations (NSAs) to develop sports excellence strategies and programmes to prepare and support our athletes for the Major Games and other international competitions. We have put in place various sports excellence systems and initiatives such as starting up the Sports School, enhancing financial support for our elite athletes, establishing partnerships with the NSAs in developing the athletes, and stepping up Sports Medicine and Sports Science support. This is a systems-driven approach that has yielded results as our athletes have now consistently improved on their performances in recent years. We had our best ever showing at the 2005 South East Asian (SEA) Games when we returned with 42 golds, 32 silvers, and 55 bronzes. We have also registered our best ever performances at the Commonwealth Games and Asian Games, as you all know, capturing five golds, six silvers, and seven bronzes in Melbourne, and then eight golds, seven silvers, and 12 bronzes in Doha. Building on such encouraging results at these Major Games, our aim is to raise our performance and improve on our achievements at the Olympics in the near future. Towards this aim, the SNOC has initiated a project focusing on the 2008 and 2012 Olympics, where elite athletes in select targeted sports have been identified for enhanced support and development, so that these athletes will reach their peak at the Olympics. The enhanced support includes more overseas training stints, additional coaches, other sports specialists, and so on.”
“The economic fundamentals of SIJORI are still there, ie, the complementarities of Singapore with Johor, as well as Singapore with Batam, Bintan and Karimun (BBK). These are fundamental economic conditions which enhance our competitiveness and are valid today as they were many years ago. For example, we continue to work with our Indonesian counterparts to promote the SEZ concept for BBK. And we also work with our Malaysian counterparts to promote the complementarities of Johor and Singapore to foreign investors. As I mentioned in my reply earlier, many MNCs look at Johor and other parts of Malaysia and Singapore as a fairly compelling value proposition in the way they organise their value chain and in the way they organise their production. They believe that is the way in which we can compete with China and India. That is the reason why we have been able to attract the kind of investments that we are attracting to Singapore, more than $8 billion each year. So the fundamental value proposition of Johor, Singapore or Singapore-BBK is still there and we continue to promote ourselves in that way. OLYMPIC GAMES 2008 (Selection and training of athletes) 9. Mr Michael Palmer asked the Minister for Community Development, Youth and Sports what process has the Ministry put in place in respect of the selection and training of our athletes for the Olympic Games in 2008. The Parliamentary Secretary to the Minister for Community Development, Youth and Sports (Mr Teo Ser Luck) (for the Minister for Community Development, Youth and Sports): Sir, sports excellence is one of the three pillars in the Sporting Singapore plan that was articulated by the Committee on Sporting Singapore (CoSS) in its report in 2001.”
“Sir, I think it has been reported that Minister Mah, together with some of our officials, went up to South Johor recently and received a briefing by the South Johor and the Federal authorities on this development plan. We are still waiting for specific proposals from the Malaysian side. Of course, we will communicate this to our companies.”
“I think any Singapore company wishing to invest overseas will have to weigh the country risk of the country that they are investing. I think most countries welcome foreign investors but, as we all know, there are different levels of welcome. The Johor Menteri Besar, Abdul Ghani was reported as saying that the IDR project was capable of drawing investors on its own and was not dependent on Singapore's involvement. Later on, he clarified that, in fact, the Johor Government does not discriminate against any investors and that Johor welcomes all investments into the IDR including Singapore. When we try to work out investment guarantee agreements for Singapore companies, we do realise that there are different levels of welcome. At the basic level, of course, you do not want Singapore companies to be discriminated against. At the next level of welcome, you do want all foreign companies to be treated equally. Then, at the third level, of course, we try to get some advantages for our Singapore companies through bilateral agreements, for example, through FDA. And, of course, ultimately, if we can have Singapore companies to be granted national treatment, as though they are local companies, that, of course, is the ideal arrangement. So I think Singapore companies venturing overseas will have to evaluate the country risk and also what is the treatment given to them.”
“Sir, based on the Comprehensive Development Plan (CDP) for South Johor released by Malaysia last November, we understand that the development of the South Johor Economic Region (SJER) - or Iskandar Development Region (IDR) as it is also known - will cover an area of some 2,217 square kilometres. Under the development plan, various growth pillars and key projects have been identified for the region. The main sectors slated for development include electrical and electronics, petrochemicals and oleochemicals, food and agro processing, health and education services, and tourism, while major projects will include theme parks, residential areas and new administrative centres. These plans to develop South Johor into a vibrant area of growth offer opportunities for our companies to invest in Johor and to build on the complementarities between Singapore and Johor. A thriving economic region right next to Singapore will also allow us to enhance our value proposition to international investors and to sharpen our competitive edge vis-a-vis other economies like China and India. The Johor-Singapore combination is already regarded by MNCs as a competitive proposition for a wide range of economic activities and, therefore, IDR would strengthen this winning partnership. Our companies are keenly monitoring developments for opportunities. Although we are not aware of any concrete indications on specific projects, this could be because the IDR initiative is still in the early stages.”
“Unsecured household loans that have defaulted, defined as loans past due for 90 days or longer or loans that exhibited weakness in repayment capability, represented about 1.1% of total unsecured household loans as at September 2006. The figures are 2.6% in September 2004 and 1.8% in September 2005. (Data prior to 2004 are not available.) Consistent with this decline, the credit card charge-off rate (defined as the amount of bad debts written off divided by total credit card receivables) has also fallen, from 2.9% in Q3 2005 to 2.7% in Q3 2006. The most effective solution to managing debt is for individuals and households to learn how to better handle their finances. To this end, the MoneySENSE national financial education programme has been working with industry associations to disseminate messages on prudent spending and proper debt management through consumer guides, articles and events. BAIL FOR CRIMINAL CASES 2. Ms Sylvia Lim asked the Deputy Prime Minister and Minister for Law (a) if he will provide the number and percentage of criminal cases in the last 3 years where an accused person was offered bail by the courts but was unable to post bail until disposal of the case; and (b) specify the distribution between foreign and local accused persons in the above cases.”
“But, nevertheless, we will continue to monitor it and we will continue to encourage the credit card providers to adopt the right technology to prevent credit card fraud. They have to balance the likely losses from the fraud with the cost to be incurred in introducing new or very difficult technologies. Mdm Ho also asked about the disclosure of product information. It is true that some of the banks are very aggressive in cross selling. For this, we have the Financial Advisers Act which regulates such cross selling and the market conduct of such cross selling. Under the Financial Advisers Act, all material information related to the product must be provided to the clients and such information disclosed must be clear, adequate and not false or misleading. So the rules are there and MAS will continue to enforce these rules. There are also similar rules, as I mentioned just now, on structured deposits which sometimes Singaporeans find difficulty in understanding the risks which they are undertaking in taking up these products. Mdm Ho Geok Choo talked about advertisements on the Net. Basically, our approach to advertising on the Net for credit card is that if the advertising is targeted at Singaporeans, then it will come under the rules. I think that is the guiding principle. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Mr Lim Hng Kiang]. Bill considered in Committee. [Mr Speaker in the Chair]”
“So it is not true that the banks see the SME as a sector for which there are no good business prospects. MAS will continue to welcome initiatives by the financial institutions to provide new financing options for the SMEs. For example, we have seen some initiatives put up to allow the SMEs to tap the capital markets and also to assess credit applications based on cashflow analysis, and not just simply on collateral. Let me also stress that MAS continues to be open to admitting financial institutions with specialised expertise in SME financing, so long as they are financially sound and meet our prudential standards. Some players in foreign markets who specialise in SME financing do not take deposits. In such instances, they will not require a banking licence from the MAS. There are a few of such players in Singapore already who are funded primarily in the capital market and which provides equipment leasing, factoring and other working capital loans to our SMEs. Mdm Ho asked about the technology risks and whether our credit card technology can be updated to prevent fraud. On the whole issue of the appropriate technology to apply in credit cards, MAS' position is to leave it largely to the private sector. They are in the best position to decide for themselves. Let me tell the House that from the annual statistics that MAS has been collecting from the banks in Singapore on credit card fraud, in fact, credit card fraud losses have fallen significantly in the past few years. Between 2002 and 2005, credit card fraud losses have fallen by more than 50%, from $9.7 million to $4.5 million. So MAS does not see this as a very big problem.”
“I think we do want to prevent Singaporeans getting themselves into situations where, as Mr Inderjit Singh mentioned, they borrow money to pay earlier credit problems or loans and, as a result, they end up spiralling into a situation where it is very difficult for them to get out. At the same time, we cannot be overly stringent. If we cut off the limits on credit card applications too stringently and we prevent avenues for lower-income Singaporeans to borrow through, say, for example, the Moneylenders Act, then they have nowhere to go and they will probably end up with the loansharks. So this is where we have to strike a balance. Indeed, this is what we have done between the Ministry of Law which oversees the Moneylenders Act and MAS which oversees the Banking Act. You have noticed in recent months that we have coordinated the policies so that we have a consistent regulatory framework with regard to credit borrowing from Singaporeans. Let me now turn to the four issues raised by Mdm Ho Geok Choo. The first issue is on SME financing and her suggestion of a SME bank. I think we have addressed this just now in a Question for Oral Answer. We have quite a wide range of avenues for SMEs to have access to financing, whether through trade financing, term loans, factoring, or through Government assistance, LEFS scheme and many other schemes, which I mentioned just now. We will continue to evolve and provide more opportunities. Right now, many banks in fact regard SME financing as an area of growth that they will be focusing on. I know of many banks who see that by developing the SME sector in Singapore as a template for which they can bring the business model to the regional countries and it is a way of expanding their business.”
“Again, when we made the changes of an imposed requirement, this will be put up as a subsidiary legislation and which will be gazetted when we notify the banks. On the asset maintenance requirements, Mr Inderjit Singh asked what were the practices in other countries. Let me assure him that asset maintenance is in fact one of the prudential tools which enhance the protection of depositors and this is a practice which is commonly done in other jurisdictions. Basically, if a branch of a foreign bank faces problems, we want to be able to circle some of the assets they have here so that its assets can be protected and to pay the local depositors. Other jurisdictions in fact go further and require the bank to incorporate locally before they can accept retail deposits. So, in fact, the regime that we have here is fairly liberal. We allow the foreign banks to set up branches here, but we do want to introduce this new asset maintenance regime in order to be able to protect our depositors. The fifth area is the priority ranking of depositors and Mr Inderjit Singh asked whether, with such a situation, banks would game and go for a situation where the inter-bank deposits will rank higher. I think this is a possibility. But I am sure when banks undertake activities with their counter parties, they do not just take this as a key consideration. Before entering into any transaction, I am sure the principal consideration of the bank is the creditworthiness of its counter parties, and not the ranking of its inter-bank deposits. The sixth area is the credit card regime. Mr Inderjit Singh welcomes the tightening of the rules. But at the same time, he wonders whether we should have a single entity to regulate all the credit.”
“Mr Inderjit Singh also asked about the regulation of foreign banks and how the exemption of exposures booked in the ACU of a bank incorporated outside Singapore would present problems with us. We have to work closely with our counterparts in other jurisdictions, just as we regulate or supervise the branches of foreign banks here. Similarly, our counterparts in other countries would also supervise or regulate the branches of Singapore banks. This close regulation and cooperation between regulators will allow us to make sure that the regulations cover across borders. The fourth area is the minimum liquid asset and the asset maintenance requirements. Basically, what we are confronted here with is the problem of maintaining liquidity when there is a stress on the banks. Liquidity risk is a critical risk for the banks and, in normal circumstances, of course, the liquidity requirements of a bank for its day-to-day operations can be reasonably anticipated, and the MAS has no reason to make any sudden changes to the minimum liquidity requirements. The three-day grace period that we are seeking for really only addresses when there is severe adverse liquidity position of a bank. We will only impose this after careful assessment of the situation. A bank which has insufficient liquidity to make its claims can very quickly accelerate into a crisis of confidence and bring down the bank. And if the MAS is prevented from acting promptly to deal with such stress situation and such crisis, then it can be even more damaging for Singapore's reputation as a financial centre. On the issue of minimum cash balances, again, this is the need to balance flexibility and transparency.”
“There is now no longer this requirement to maintain the reserve fund and in fact we do not require the fund to be maintained in any particular form of asset. So with the repeal of section 22, and we allow this to be done over five years, we do not foresee any difficulties that Mr Inderjit Singh pointed out that there will be this huge outflow of funds affecting the Singapore dollar. The next area that Mr Inderjit Singh raised is regarding the prudential safeguards, particularly the large exposure limits. Let me assure the House and Mr Inderjit Singh that MAS has conducted several consultations with the industry on the revised framework and we do not expect the banks to have any significant difficulty complying with these new rules. But, nevertheless, we still have a two-year transition period for the banks to modify their systems and to make the necessary preparations. Mr Inderjit Singh asked whether the exemptions are necessary. Essentially, we need to strike a balance between setting out the requirements in a very transparent and stringent manner as well as giving MAS the flexibility to deal with the situation as it arises. So it is this flexibility that MAS needs. Especially in situations of restructuring or in a resolution of a bank failure, MAS needs some of these exemptions to give it the flexibility. Mr Inderjit Singh cautioned that MAS' use of such exemption powers may be seen to be based on MAS own requirements and may not be seen to be transparent. So I think we have to strike a balance. Let me assure Mr Inderjit Singh that the exemption power does not relieve MAS of its duty to ensure that when it exercises such powers, it exercises it on good defensible grounds and where there are strong prudential justifications.”
“On the issue of definition of deposits, I recognise that consumers sometimes may be confused whether what they are buying into or what they put into is essentially a deposit or not. That is the reason why we have some of these amendments. Let me clarify that we are not widening the definition or the scope of a deposit. What we are seeking to amend the Act is to allow the MAS to recognise certain products that meet the economic substance of a deposit, ie, that the principal is guaranteed but does not quite satisfy the legal definition of a deposit. Some of these products relate to the Islamic financial products. By clarifying the definition, I think it makes it better for us. When Mr Inderjit Singh refers to complex deposits, I suppose he is probably referring to structured deposits. Some of these products are advertised as deposits but they have features which require you to take a risk on your deposits. All structured deposits are, in fact, currently subject to higher product disclosure requirements, as set out in the Financial Advisers Act. These are the guidelines on structured deposits. This is to ensure that people who buy into such products know what they are buying into and they know that this is not a straightforward deposit. The second point which Mr Inderjit Singh raised is the outflow from the reserve fund and its impact on the Singapore dollar and the flow of funds out of Singapore. Let me explain that the reserve fund is essentially the retained earnings that belong to the shareholders. This has been kept under section 22, and this was intended to raise the reserve requirements for the banks as they build up their reserve requirements. Under section 22 previously, the banks were not allowed to distribute to their shareholders.”
“Mr Speaker, Sir, I thank both Mr Inderjit Singh and Mdm Ho Geok Choo, who obviously have mastered the amendments very comprehensively and have suggested many comments and improvements. I believe Mr Inderjit Singh raised six points and Mdm Ho raised four. So there are 10 points altogether. I hope Members would bear with me as I go through these points. First, Mr Inderjit Singh talked about Middle-Eastern funds and the definition of deposits. I agree with Mr Inderjit Singh that we have to deepen our engagement with the Middle East and attract Middle-Eastern funds into Singapore. Our aim is not so much to become a centre for Islamic finance but to build upon our existing strength as an international financial centre. In this regard, we are working with the industry to ensure we have a full suite of financial products and services, including Islamic products and services. We have been reviewing our legislative framework to ensure what we have is conducive to all these new Islamic financial products. Our approach has also been to level the playing field, ensure the neutrality of rules so that anybody coming up with innovative Islamic financial products will not find that they are operating against regulations which are not in their favour. So the neutrality of rules will therefore apply to both conventional and Islamic products and services wherever possible. Mr Inderjit Singh suggested a Committee to address this. I think this is a good point. In fact, MAS has been working with industry players to tap the views of all the players as to how to develop their products and to make sure we are able to engage the Middle East and to be a player in Islamic finance. So I agree that MAS will continue to deepen its engagement with the industry players.”
“(e) To underscore the importance of accurate reporting of information to MAS, section 66 will be amended to extend the obligation - currently imposed on directors and executive officers - to any person who furnishes information to MAS to exercise due care in ensuring that the information is not false or misleading. (f) Finally, the new section 54B will explicitly provide MAS with the powers to direct the removal of directors from the board of a Singapore-incorporated bank, if these persons fail to perform their duties and functions, to protect public interest and depositors. This is in line with international standards and the practices in reputable jurisdictions. Conclusion Mr Speaker, Sir, a sound and vibrant financial sector is an integral part of ensuring the success and resilience of the Singapore economy. These amendments to the Banking Act are part of an on-going process to enhance the robustness and responsiveness of our banking regulatory framework, in tandem with the growth in scope and sophistication of the activities of the banks in Singapore. Sir, I beg to move. Question proposed. 3.37 pm”
“(b) Section 5, which restricts the use of the word "bank" to protect consumers from being misled as to the status of the entity they are dealing with, will be amended to accommodate legitimate uses of the word, such as representative offices of foreign banks; international financial institutions like the World Bank, Asian Development Bank; and where it is used in a non-financial sense, such as "Blood Bank" and "Infobank". (c) The amendment to section 4B will provide flexibility for MAS to exclude or include any financial product from or in the definition of "deposit". This is necessary to facilitate MAS’ response to innovative products that either legally satisfy the definition of "deposit" but do not meet the economic characteristics of a deposit, or conversely meet the economic characteristics of a deposit but do not satisfy the legal definition of "deposit". An example of the latter is a murabaha investment - an Islamic variant of a time deposit. Products that are prescribed as deposits will be accorded priority ranking in the event of a bank winding-up and protection under the deposit insurance scheme. (d) The amendments to section 26 will permit MAS to disclose only non-customer information provided by banks to MAS under limited circumstances, such as for the purpose of sharing aggregate information at international fora and contributing to research projects. This is to balance MAS' responsibility for surveillance and supervision of the financial sector with its commitment to preserve the confidentiality of individual banks' information.”
“In addition, in view of the industry's need to move nimbly in a fast-paced environment, the new section 76A will allow MAS to grant exemptions from requirements in the Act in specific situations where the prudential objectives are not compromised. Under the current regime, only banks and non-bank financial institutions are subject to MAS' rules on the issuance of credit cards. The new Part VIII extends MAS' regulatory scope to all issuers targeting the Singapore market and not just banks and financial institutions. Entities that have not been approved to issue credit cards in Singapore will be prohibited from soliciting for or accepting card applications in Singapore, and this applies equally to third parties acting on their behalf. MAS will be empowered to inspect the operations of approved credit card issuers for compliance with MAS’ rules pertaining to credit card operations. The proposed regime also clarifies that single party merchant credit is exempted from regulation. Such an arrangement, where the card is really used only for transactions with the issuer, is essentially a deferred payment scheme offered by merchants to their customers. In addition, a new exemption for cards granting credit in small amounts not exceeding $500 will be introduced. This allows flexibility in payments for small-ticket items without raising substantial concerns about Singaporeans spending beyond their means. Let me now turn to the other amendments that are needed to update the banking regulatory framework: (a) Section 22, which requires a bank to maintain a reserve fund. This will be repealed in light of enhancements to MAS' regulatory framework over the years, and the banks will be allowed to release their reserves over a five-year period.”
“Part VIIA introduced by the Bill also empowers MAS, with the approval of the Minister in charge of MAS, to direct the sale of the business of a bank and in the case of a bank incorporated in Singapore, to require the issuance of new shares, to restructure the share capital or to sell existing shares to other investors. Before it can exercise these powers, MAS has to consider the interests of depositors of both the transferor and transferee, as well as the stability of the financial system in Singapore. The affected parties will be given a right to be heard prior to the Minister’s approval of such a transfer, except where it is not practicable or desirable to do so, for instance, where an expeditious transfer is crucial in maintaining financial system stability. Facilitating risk-based supervision and allowing operational flexibility of banks Let me now turn to how the amendments will facilitate risk-based supervision and allowing operational flexibility of our banks. Consistent with the risk-based supervisory approach adopted by MAS, the Bill will allow the calibration of prudential requirements according to an individual bank's financial strength, its risk profile and its risk management capabilities. Let me provide a few examples. The revised section 29 allows MAS to raise the large exposure limits for individual banks where there are strong justifications. Under section 40, a higher asset maintenance requirement may be imposed on banks that pose greater supervisory concerns. The amended section 38 will allow banks the operational flexibility to draw down their liquidity reserves to deal with liquidity stress situations.”
“In recognition that non-bank depositors are likely to be less well informed than banks and in greater need of protection, the Bill reorders the priority ranking under section 62 and places all non-bank deposit liabilities of a bank ahead of inter-bank liabilities, with the latter ranking pari passu with other unsecured creditors. This is consistent with the objective of protecting non-bank depositors and encouraging banks to exercise prudence and market discipline in respect of exposures to their bank counterparties. Enhancing MAS’ role in bank resolution The next set of amendments is with regard to MAS' role in bank resolution. While MAS seeks to promote and preserve stability in the financial system through high standards of licensing, regulation and supervision, like many reputable regulators, it does not aim to prevent the failures of all financial institutions. Such a "zero-failure" regime is neither feasible nor desirable as it leads to considerable moral hazard for the regulator and places an excessive regulatory burden on our financial institutions. When dealing with a bank in distress or insolvency, a private sector resolution option is often preferred by regulators, but in the event that this is not possible, international experience has shown that it is important for the regulator to be able to take action quickly to minimise losses to depositors and other creditors, and to maintain stability in the entire financial system. The Bill will accord MAS a wider role in the resolution process and a broader range of resolution options. More specifically, the new section 54A provides MAS the right to be heard in insolvency proceedings of a bank and the power to approve the appointed liquidator.”
“Introduction of an asset maintenance regime MAS’ liberalisation measures in the last few years have brought about greater foreign bank participation in our banking sector. While the competition has added to the dynamism of the banking sector, the banking system will increasingly be exposed to risks arising from the foreign banks’ international operations. Should a foreign bank fail, the resolution of a cross-border bank insolvency will be complex and drawn-out. The claims of depositors and creditors will be subject to substantial uncertainty. The revised section 40 aims to strengthen the foreign bank regulatory framework by requiring foreign full and wholesale bank branches to maintain a minimum level of eligible assets in Singapore in proportion to their deposit liabilities. This would help to improve the recovery of assets from a failed foreign bank branch in Singapore to meet the claims of Singaporean depositors. The asset maintenance requirement has been carefully calibrated to balance prudential objectives with the banks’ commercial interests, and determined after close consultation with the industry. A six-month grace period will also be given, for foreign bank branches to make necessary adjustments to their asset allocations. Amendment of the priority ranking of deposit liabilities Presently, both non-bank and inter-bank deposit liabilities of a bank rank ahead of other unsecured liabilities in the event of a winding up of a bank.”
“First, is the revision of methodologies for limiting large exposures and related party exposures. Currently, section 29 of the Banking Act sets prudential limits on credit facilities extended by banks to a single borrower or a group of related borrowers. It also curtails unsecured credit facilities to parties related to the bank. These prevent the default of any single borrower from seriously impacting the financial strength of a bank. MAS is introducing a number of changes to ensure that the prudential limits remain relevant and are in line with international best practice. First, instead of a limit based on credit facilities granted, the Bill introduces a more comprehensive measure based on exposures, which would include a bank’s equity investment in, as well as other transactions with a counterparty. The second key change is that MAS will recognise a bank’s efforts in mitigating risks, by allowing the bank to offset its exposures where these are secured by qualifying collateral, or to substitute its exposures to a counterparty with that of a credit protection provider of good rating. To reduce the risk of contagion and non-arm’s length transactions between a bank and a related party, the current limit on unsecured lending to related corporations will be widened to restrict the exposures of a bank incorporated in Singapore to its substantial shareholder groups, and exposures of a bank in Singapore to entities in which the bank holds a major stake. The industry will be given a two-year grace period to make the appropriate adjustments for compliance with the revised section 29.”
“Mr Speaker, Sir, on behalf of the Senior Minister, I beg to move, "That the Bill be now read a Second time." Over the past few years, MAS has progressively liberalised the banking sector. At the same time, MAS has also sought to implement a risk-based supervisory approach that moves away from the one-size-fits-all rules and allows for well-managed risk-taking. The measures have resulted in more choices for consumers, new innovative products and competitive pricing. With the free play of market forces and the growing complexity and international nature of banking businesses, there will also be new risks to be addressed. For example, depositors are now increasingly exposed to the risks of both local and foreign banks’ expanding international operations. MAS continuously reviews and refines its regulatory framework to ensure that it is robust and responsive, without adding undue burden and cost to the industry; a framework that upholds prudential standards and the interests of depositors, while fostering the growth of the sector. The Banking (Amendment) Bill is part of this on-going process. It introduces several new policies and measures to strengthen prudential standards, facilitate risk-based supervision and provide banks with greater operational flexibility. In preparing this Bill, MAS has consulted extensively with the industry and the public on the policy changes and the draft Bill. The feedback received was carefully considered, and incorporated into the Bill where practicable and consonant with its regulatory objectives. Mr Speaker, Sir, I will now go through the major amendments in the Bill. Strengthening prudential safeguards The first set of amendments is to strengthen the prudential safeguards. On this, I would elaborate on three main amendments.”
“Again, let me thank the Member for raising this. We watch the business cost very closely, particularly the business cost of our SMEs. If the changes to the CPF that have been debated upon come about, obviously, the Government also looks at how to have countervailing measures to help the corporate sector, particularly the SMEs, to meet these challenges. CIVIL SERVICE OFFICERS (Use of performance-based wage increments) 11. Ms Ellen Lee asked the Prime Minister and Minister for Finance if the Civil Service is following the private sector by giving wage increments based on performance as there is a perception that many civil service officers are still on a seniority-based wage system enjoying yearly salary increments till they reach the maximum salary within their grade, regardless of positive or negative economic growth.”
“I thank the Member for her feedback. These are areas which we will continue to look at to improve our processes. The very fact that 8% of our SMEs take up the LEFS scheme, to me, is a very good sign. First, the schemes are there. So if SMEs do not take them up, it does not necessarily mean a bad thing. But we will look into the take-up rates. It is not for lack of availability. The funds are there. There are also competing avenues for the SMEs. So it is not that they have to depend entirely on the Government for the LEFS scheme. The banks are coming in. We have an OTC market. There are many avenues. And it is good that our SMEs are self-reliant and they have their own financing resources.”
“We have debated this many times. We do recognise that there is a wide range of SMEs and we try to establish programmes that best suit the SMEs. At the same time, whenever there is a proliferation of such schemes, we try to streamline and narrow them so as to reduce confusion. I thank my colleague, Mr Inderjit Singh, for bringing together a group of people, trying to streamline and make it more comprehensive and more comprehensible to our SMEs. We must recognise that the needs of the SMEs are very diverse and this idea that a single entity or a single SME bank can meet the very vast needs of our SMEs has yet to be proven. Right now, what we are doing meets the needs and we continue to have dialogue with the various associations and the SMEs. The feedback we get is that the Government's approach is becoming more holistic and their needs are being addressed.”
“I assure Members that we will continue to improve and adapt our assistance as the needs of our SMEs evolve. Mr Sin Boon Ann (Tampines): Sir, one common feedback from the SMEs is the bewilderment over the sense of the many financing schemes that are available. I do not know if the Government is minded to put together all these schemes into one organisation. The Government has resisted the call for setting up an SME bank. I am wondering whether or not an alternative parallel organisation, which mirrors the functions of the bank and that supports these SMEs financially, in terms of the various schemes available, is something which the Government may consider.”
“In 2005, we extended some $800 million worth of loans to more than 3,600 SMEs through the various schemes, such as the Local Enterprise Finance Scheme (LEFS), and the Micro Loan Programme. The Internationalisation Finance Scheme was launched this year, making available $500 million worth of loans for overseas expansion purposes. To complement the loans, the Government has also made available equity financing, matching Government funds with private sector investments under the Start-up Enterprise Development Scheme (SEEDS) for innovative start-ups. The Business Angel Scheme was also introduced last year to spur the level of business angel investments in Singapore. We are pleased that the private sector has recognised that not all SMEs are high-risk, and have introduced loans and services to cater particularly to the SME market. Several banks are even offering unsecured financing products to SMEs, in the form of instalment loans and revolving credit lines. Accessing overseas markets The third area of concern for SMEs is access to overseas market opportunities. To build up these connections, SMEs can participate in outgoing missions and fairs as well as the various IE Singapore’s networking platforms. Companies can also tap on the International Marketing Activities Programme which supports the activities organised by trade associations and chambers. To promote our enterprises to the world, we recently launched the BuySingapore portal. This initiative is a national e-channel that leverages on the established Singapore Brand to acquire and disseminate foreign business leads to our companies. The Government has put in place quite a comprehensive package of assistance to our SMEs.”