Speech by Deputy Prime Minister and Chairman, Monetary Authority of Singapore Lee Hsien Loong at the Singapore Investment Forum
26 Sep 2003

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

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

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

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

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

Singapore's Approach - Ready For The Future

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

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

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

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

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

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

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

Remaking the Singapore Economy

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

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

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