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Speech By Singapore Minister For Finance, Dr Richard Hu At The Dinner Hosted By The Monetary Authority Of Singapore For Russell 20-20 On Friday, 20 October 2000 At The Ritz Carlton

20 Oct 2000



Mr. George Russell, members of Russell 20-20 and distinguished guests. It is my pleasure today to extend a warm welcome to all delegates from the Russell 20-20 Association. Since your formation in 1990, you have made significant investments in many developing markets. You have now chosen to visit the East Asian region at a time when its economies are recovering and in the midst of reform and restructuring. I hope this visit will provide you with deeper insights into the rich investment opportunities that are available.


The region's economies have recovered convincingly from the financial crisis of 1997-1998. In 1999, the East Asian economies of Malaysia, Indonesia, Philippines, Singapore, Thailand, China, Hong Kong, Korea and Taiwan, expanded by an average of 5% from minus 3% the year before. This year, they are forecast to grow by about 7% on average.

The recovery is not simply a cyclical rebound. It was initially jump started by government spending and exports to the US and EU. But growth has since broadened to include domestic private consumption and investment and intra-regional trade.

Initiatives to Recovery

The East Asian governments are, to varying degrees, implementing painful economic and structural reforms. Their resolve has stabilized financial markets, restored investor confidence and re-attracted foreign capital into the region. Member countries have become more open to foreign equity participation in their industries. Restrictions and rules have been relaxed to foster a more pro-business environment.

The region's financial markets have also been liberalized. State-owned banks have been privatized and restrictions on foreign ownership of local banks relaxed. Thailand has been particularly aggressive in its banking sector liberalization. Foreigners can own up to 100% of Thai domestic banks. The Thai government has also supported the recapitalization of banks by creating a US$8 billion fund to provide banks with tier 1 and tier 2 capital.

Most importantly, East Asian governments are taking measures to strengthen their domestic institutional frameworks. They have embarked on broad political, judicial and corporate reforms.

But the fruition of these reforms will take time. It is not a simple matter of just changing the rules but involves overhauling entrenched business and social norms. Where there is political and social stability, such as in South Korea and Malaysia, restructuring has gone the furthest. Thailand has made significant progress but political resistance is slowing down the pace of reform. Indonesia faces political and economic problems which will also slow down its restructuring process.


In the post-crisis East Asia's pro-business environment, I am sure that investors like yourselves will find abundant investment opportunities. There is now a wide range of local industries that foreigners can buy into. Korea, for instance, has eliminated its foreign ownership ceiling for most domestic industries, except for some strategic sectors. Foreigners are now allowed to own up to 49% of its local fixed-line and mobile phone providers. The Malaysian Government has also allowed foreign companies to buy equity in its telecommunications and port sectors.

China is also opening up. Inefficient state-owned enterprises are being displaced by more dynamic private sector companies. Over the next 3-5 years, there will be investment opportunities in China in industries such as telecommunications, insurance, banking, securities, construction and distribution as China will be relaxing the foreign ownership and entry restrictions in these sectors. WTO accession for China will accelerate the pace of liberalization and deregulation.

Taiwan has also embarked on a programme of liberalization and deregulation. The foreign ownership ceiling in Taiwan's industries has been raised from 15% to 50%, and will be completely scrapped in 2001. The telecom and energy sectors have been liberalized, ending the over 50-years monopolies of state-owned companies such as Chunghwa Telecom and Chinese Petroleum Corp. When Taiwan joins the WTO, the shift towards greater liberalization and deregulation should continue.

Apart from the real economies, East Asia?s financial markets also offer wide investment opportunities as many restrictions on foreigners have been eased. In Taiwan, the upper limit for qualified foreign institutional investors to invest in Taiwanese stocks has been doubled to US$1.2 billion from US$600 million since November 1999. The ban on foreign purchase of domestic convertible bonds has also been lifted. In Korea, foreigners are now allowed to invest freely in local bonds and short term money instruments. Come January 2001, restrictions on non-residents' investments in short-term Won-denominated deposits will also be removed.

East Asian stock exchanges have also opened up. In Taiwan, listing requirements have been eased for both foreign and domestic start-ups. Korea has also allowed foreign companies to list on the Korean stock exchange since July 2000. We have also seen a proliferation of technology bourses in several exchanges.

Foreign investors have responded positively to the recovery initiatives undertaken by Asian countries as well as improved economic prospects. This has been reflected in credit ratings upgrades for the region. Just last week, Moody's Investor Service upgraded Malaysia's foreign currency ratings. Such improved ratings will help to stimulate fund raising activity in the regional equity and debt markets.


Let me now turn to Singapore's strategies for economic and financial development. We too had been affected by the region's financial crisis, reflecting the close linkages that we have with the region. But we had not been hit as badly -our strong economic fundamentals provided some buffer. We took strong measures to cut business costs and strengthen competitiveness. The Singapore economy rebounded to a 5.6% growth last year. This year, we expect to see a robust 9% expansion.

Singapore's Vision and Strategies

Singapore's vision is to become an advanced and globally competitive knowledge-based economy. Even before the crisis, we had recognized that the basis for future wealth creation will no longer be the traditional factors of production, but will increasingly rely on intellectual capital and the capability to access, harness and apply knowledge. Under 'Industry 21', the economic blueprint for Singapore in the 21st century, the manufacturing and services sectors will be Singapore's twin engines of growth. They will power Singapore's transition into aglobal hub of knowledge-driven industries.

Strategies for the Manufacturing Industry

The manufacturing sector has been a key growth driver for the Singapore economy. Electronics manufacturing has dominated the scene but we have also developed world-class facilities for the chemicals and pharmaceuticals sectors. We are now moving into the life sciences arena. Our strategies for the manufacturing sector have not changed - we must move up the value chain. We are encouraging companies to go beyond volume production and business administration into undertaking 'value-creation activities' such as product research and development, process engineering and value-added logistics.

We are positioning Singapore as a choice location for company headquarters. Since 1986, the Economic Development Board, or EDB, has been encouraging companies to locate their regional and international headquarters in Singapore. Many multinational corporations have chosen Singapore as a base for their operational, business and manufacturing headquarters. Caltex Corporation has even housed its Global Headquarters here, making Singapore its home base for its global business management.

Strategies for the Services Industry

In the services industry, we have opened up the telecommunications and financial services sectors. In financial services, radical changes have been introduced to sharpen the competitive edge of the domestic financial industry. We recognize that the global financial industry is undergoing dramatic changes. Technology, deregulation and industry consolidation are creating new financial products, new distribution channels, new global financial institutions and new global markets. With this mindset, we have switched from a regulatory regime of strict rules to a more flexible risk-based supervision, focusing on systemic risks rather than protecting individual participants or products. We have also announced liberalization programmes to open up the banking and insurance industries. New licences have been granted and higher standards of corporate governance introduced, with the aim to create a more competitive environment, strengthen our domestic banking and insurance industries and upgrade the local players.

Alongside liberalization, we have also taken on a more pro-active role in developing and promoting our financial sector.

Developmental blueprints have been set, after industry consultation. These include strategies for developing a broad and deep capital market, a thriving asset management industry and an active treasury centre. Our efforts have seen results. In the asset management industry, assets managed in Singapore rose substantially from US$90.7 billion in 1998 to US$147.8 billion last year. In the debt market, corporate bond issuance in Singapore doubled to US$12.6 billion last year. In the first half of this year, bonds issued totaled US$13.9 billion, more than the total issuance last year.

Enhancing Education

A key ingredient in a knowledge-based economy is education. Curricula in our schools and universities have been re-tailored to infuse innovation and creativity into young minds. The existing workforce will be retrained to ensure that they remain employable in the knowledge-driven industries in the years ahead. We have also embarked on efforts to attract renowned educational institutions to establish a substantial presence in Singapore. The University of Chicago and INSEAD have established theirAsian campuses in Singapore. Our local universities have also entered into collaboration programmes with leading universities like the Wharton School, MIT and Georgia Institute of Technology. Their programmes complement our local universities' efforts to build excellence in education and research and help the development of Singapore into an Education Hub for the region.

Promoting Technopreneurship

To supplement our role as a manufacturing and services hub, we also aim to develop Singapore into a hub for entrepreneurial hi-tech businesses. We are developing a science hub with world-class facilities to attract international talent to work in high technology knowledge industries. The government has also established a US$1 billion Technopreneurship Investment Fund to support the growth of venture capital activities in Singapore. The fund co-invests in private sector hi-tech companies and start-ups.

I would therefore like to invite Russell 20-20 to consider the many investment opportunities in Singapore. Singapore is also a good springboard for Russell 20-20 to invest into the rest of East Asia. Our linkages with the other regional economies were close before and during the regional crisis, and will be even closer as the region recovers. You will be able to find partnership opportunities with local and foreign corporates in Singapore. Many have expanded their businesses into the region and are constantly seeking strategic partners for co-investments into East Asia's infrastructure and other development projects.

When you invest into the region, you will have access to a broad range of financial institutions in Singapore offering financial products and services to support your investments. They are able to tailor their products and services to suit corporates and investors with a regional focus. For example, MNCs such as GE Capital and Toyota Motor Credit Corporation have raised capital in the Singapore debt markets. Singapore-based asset managers have a deep understanding of the East Asian economies and are actively seeking investors interested in building up their regional portfolios.


East Asia is emerging from the crisis stronger and more soundly based. Economic growth, initially nurtured by government spending, is now founded on intra-regional trade and domestic demand. On-going restructuring reforms have strengthened the region's institutional framework. I am therefore optimistic that it is only a question of time before the region fully recovers and resumes the strong growth path of the previous two decades.

I urge Russell 20-20 to take an early stake in Asia and look forward to your exploring investment opportunities with Singapore companies.

Thank you.