Second Reading Speech By Dr Richard Hu, Minister For Finance, On The Developmental Investment Fund Bill 2000 At The Parliament Session On 22 Feb 2000

Introduction

Mr Speaker, Sir, I beg to move, 'That the Developmental Investment Fund Bill 2000 be now read a second time'.

2. The Bill before the House seeks to establish a Developmental Investment Fund to facilitate developmental investments by the Government. It also seeks to make consequential amendments to the Development Fund Act and the External Loans Act.

Rationale

3. The Government has identified the need to strengthen Singapore's competitive position to meet the challenges posed by a rapidly changing global competitive landscape. Towards this end, capabilities in the more knowledge-intensive parts of the value chain have to be developed. Our human resources must be enhanced and our science and technological capabilities upgraded to allow us to achieve our objective of becoming an advanced and globally competitive knowledge economy within the next decade.

4. The Government has, over the years, been undertaking a host of developmental investments aimed at enhancing, either directly or indirectly, the economic growth, employment opportunities and general welfare of Singapore. An example of such developmental investments would be the US$1 billion Technopreneurship Investment Fund (TIF) announced in April last year.

5. Currently, only investments made with the primary purpose of deriving some interest, income or profit are permissible under the Financial Procedure Act. As a result, investments with developmental objectives such as the TIF have to be funded under the Development Budget and are treated under the Government's cash accounting system as expenditure, rather than investments.

6. The Government has thus decided to establish a new fund, the Developmental Investment Fund ('DIF') to finance developmental investments. This would allow the investment nature of these developmental investments to be properly reflected. The investments will not be treated as straight expenditure, which would be the case if the investments continue to be funded through the Development Fund. This would allow the better accounting and management of public moneys invested by the Government for developmental purposes. The DIF will be limited to investments where returns are clearly required and expected. Normal development expenditure and development loans will continue to be funded through the Development Fund.

Specific Provisions of the Bill

I shall now proceed to explain the specific key provisions of the Bill, which are:

a. Clause 3: Sources of funds for the DIF
The DIF shall receive capital sums mainly out of transfers from the Consolidated Fund which are approved by Parliament, or loan proceeds.

b. Clause 4: Purposes of the DIF
The DIF can only be used to form companies, acquire securities in public authorities and corporations or otherwise invest, for any developmental purposes. Section 7(3) of the Financial Procedure Act will not apply to the developmental investments made under the DIF.

c. Clauses 5 and 6: Responsibility for the DIF
The general responsibility for the DIF will rest with the Minister for Finance. Other Ministers may be assigned responsibility over accounts within the DIF, but the Minister for Finance will remain overall responsible for the control, supervision and management of the DIF. All the Ministers will have to establish and adhere to investment policies and standards that a reasonable prudent person would adopt to reduce risk, ensure reasonable returns and the achievement of specific developmental objectives.

d. Clause 10: Raising of loans
The Minister for Finance will be empowered under the DIF Act to raise loans of a sum not exceeding in the whole S$10 billion. Parliament may by resolution, and with the President?s concurrence for the resolution, raise this loan limit.

e. Clause 18: Financial Statements
Annual financial statements of the DIF will have to be prepared at the end of each financial year, and submitted to the Auditor-General. The audited financial statements and auditor's report will be presented to Parliament.

f. Clause 21: Consequential Amendments
The Bill also makes the following consequential amendments to the Development Fund Act (Chapter 80 of the 1995 Revised Edition) and the External Loans Act (Chapter 102 of the 1985 Revised Edition):

i) Amendment to the Schedule to the Development Fund Act (Cap. 80)
With the amendment, investments in securities for developmental purposes will cease to be annually appropriated from the Development Fund by Parliament as expenditure in a Supply or Supplementary Supply law. Funding for such activities will instead be met from the new Developmental Investment Fund.

ii) Amendment to the External Loans Act (Cap. 102)
This amendment will allow loans to be raised outside Singapore for purposes of the Development Investment Fund.

8. Mr Speaker, Sir, I beg to move.