20 Oct 2009 Posted in Speeches
Mr Angelo Venardos, Chairman, STEP Singapore ,
Mr Nick Jacob, Deputy Chairman, STEP Worldwide,
Mr Gurbachan Singh, Secretary of STEP Singapore Branch,
Mr William Lexmond, Immediate past Chairman of STEP Singapore ,
Ladies and gentlemen,
Thank you for inviting me to open this Conference. We meet in interesting times. And the times have become even more interesting since I accepted the invitation earlier this year.
Let me start with a quote from a speech by Dr Goh Keng Swee, made in 1984. For those of you who may not know of Dr Goh, he was a key architect of many facets of Singapore ’s progress and development, including the entire financial system, as well as the Singapore Armed Forces. He is undoubtedly, one of the most brilliant men Singapore has produced.
Dr Goh started with a quote from a famous personality:
“Money is indeed the most important thing in the world; and all sound and successful personal and national morality should have this fact for its basis.”
Who said this? Walter Bagehot? No. Some outstanding Governor of the Bank of England , perhaps Montagu Norman? Again, no. Milton Friedman? Friedrich von Hayek? Wrong again.
It was none other than George Bernard Shaw, a socialist thinker, one of the intellectual high priests of the Fabian Society, the think-tank of the British Labour Party.
- What Dr Goh then went on to say, 25 years ago, is startlingly relevant now (I am quoting and paraphrasing only parts):
“The world has obviously changed since Shaw wrote these words at the turn of the century, nearly a hundred years ago. In some respects the change has been for the better, but in the way money is managed in most states – modern, developing or broken-backed – the change has nearly always been for the worse. This would have to start with the collapse in 1971 of the Bretton Woods system of fixed exchange rate parities, the OPEC oil shocks and the frightening problem of international debt. [Wonder what he thinks about international debt today!]
It is more useful that I relate a discussion I had during my last stint in the Finance Ministry, with a banker. This episode supports the point I am making about low standards of money management. I asked him why banks ran secret numbered accounts.
The Reply he gave deserves to be recorded in history. “Money,” he said, “is one of the great institutions of human civilisation. It must therefore be treated with proper respect. Where money is mistreated, such as through government expropriation, or inflation caused by deficit financing, a safe refuge should be provided.”
- Dr Goh ended with this comment: “All those connected with money – managing it, making it or printing it – must be people of impeccable moral character.”
- Now you can see why I chose to quote Dr Goh at some length.
- Singapore as an International Financial Centre
- Moving to the present, where does Singapore stand, one year on, from the beginning of the great financial convulsion that has shaken the world and a related question: how do we treat money?
- As a financial centre, we have come through the crisis, with our reputation and standing enhanced.
- Our banks had avoided investing heavily in risky products. Our regulatory framework, and equally importantly, the regulatory environment, were such that prudence was emphasised. Excesses were avoided. Our banks had strong capital base. Risk had been managed well. Throughout the crisis, no one questioned the stability or strength of our financial system or the banks. Indeed, people began to appreciate the wisdom of having a balanced approach, between growth, innovation and risk. Laws and Rules alone are not enough. You need good regulators who are alert and take their role seriously.
- On the related question of how we treat money, our fundamental approach has always been and continues to be: Your money is safe in Singapore . We treat money with respect and protect it with honesty and a legitimate framework of laws. To achieve this:
- Our legal framework has to be comparable to the best in the world. We ensure that.
- The framework has to be underpinned by a strong adherence to the Rule of Law and an excellent judicial system. Our Judiciary is ranked among the top in the world by international institutions.
- We must have an environment that is conducive to international Financial Institutions, Trust and Estate Practitioners, lawyers and allied professionals. In such an environment, comprehensive wealth management services can be offered. We provide that.
- Thus, we have been increasingly successful as a financial and wealth management centre.
- The International Environment
- The central question in many people’s minds, against the backdrop of the financial crisis, and the recent Swiss experience is: what will international financial centres, like Singapore do, in the context of the current move for greater exchange of information?
- Let me state clearly our approach to this issue.
- We are a responsible financial centre built on sound prudential standards and trust.
- We do not see ourselves as a haven for laundered money. We do not seek to welcome such monies. We have a strong framework of laws to deal with money laundering.
- We play an active role in the global fight against financial crimes.
- Singapore is a member of the Financial Action Task Force (FATF), a founding member of the Asia-Pacific Group on Money Laundering, and actively contributes to the development of international financial standards to combat money laundering and terrorist financing.
- We offer assistance on bona fide requests for tax information through our Avoidance of Double Taxation Agreements.
- To assess Singapore ’s compliance with international standards, we have participated in the IMF/World Bank Financial Sector Assessment Programme (FSAP) as well as three rounds of FATF mutual evaluations.
- The outcomes of these peer assessments affirm Singapore ’s continual commitment to uphold a sound, well-regulated regime; to international cooperation to maintain financial stability; and to fight financial crime.
- In October last year, the UN Committee of Tax Experts on International Cooperation in Tax Matters, endorsed the OECD Standard for effective Exchange of Information (EOI). This signalled the acceptance of the Standard by the world community at large.
- Singapore has endorsed this internationally agreed Standard in March this year.
- To implement the Standard, we have amended our domestic laws to allow for further cooperation in information exchange, through Avoidance of Double Taxation Agreements (DTAs) that incorporate the internationally agreed Standard.
- You might have seen in today’s newspapers, that the proposed amendments to the Income Tax Act to implement this Standard were debated and passed in Parliament yesterday. The Minister for Finance gave a detailed explanation of how the scheme will work. His speech in Parliament may be of interest to you.
- Singapore has been actively engaging its existing and potential DTA partners to incorporate the new internationally agreed Standard for EOI Standard in the DTAs. To date, we have reached agreement with 20 jurisdictions to incorporate the Standard under our DTAs, and have formally signed such agreements with 11 of these jurisdictions. The agreements are with major jurisdictions like UK , Australia , Netherlands and Norway . We will continue to sign such agreements with other countries.
- However, implementing the Standard and the DTAs for Exchange of Information does not mean that fishing expeditions will be entertained.
- Under the standard, as set out in the DTAs, certain conditions have to be fulfilled before there can be access to information.
- Spurious requests and fishing expeditions will not be entertained. The request for information has to be specific, detailed and relevant to the tax affairs of the tax payer in question. We will only provide assistance where there is a genuine case, and the requested information is specific and relevant to the case. The Requesting Jurisdiction must also comply with documentary requirements set out in the legislation.
- The Finance Minister told Parliament yesterday, and I quote:
- “The Standard does not allow jurisdictions to take advantage of the information system of another jurisdiction if it is wider than their own system. Hence, we will only exchange information that a requesting jurisdiction would have ordinarily been able to obtain under its own laws or administrative practices, had the information resided in that jurisdiction in the first place. Jurisdictions must also have pursued all domestic means to access the requested information before putting forth a request to us.
- The Standard also sets out clear limits on the types of information that jurisdictions are obliged to exchange. Jurisdictions are not obliged to exchange trade or business secrets, or information that is subject to legal privilege. They may also decline to exchange certain information if doing so would be contrary to public policy.
- There will be safeguards for assisting in requests relating to information that is protected from unauthorised disclosure under the Banking Act and Trust Companies Act. The affected taxpayer and bank or trust company will be notified of the request, unless there are exceptional circumstances, such as if doing so would prejudice an investigation into any breach of tax laws, or prevent or unduly delay the effective exchange of information. An application has to be made to the High Court for a production order to access the requested information. The affected taxpayer and bank or trust company has the right to apply to the Court to discharge or vary the Court order.”
- These requirements are not meant to frustrate or delay the request. They are consistent with the Standard and have been put in to ensure that the procedures are not abused.
- We believe that this framework is fair. It conforms to international standards while safeguarding an individual’s right to privacy.
- Prospects for Trust Industry
- Let me now turn to the prospects for the Trust Industry in Singapore , as we see it. We believe that our regulatory and supervisory framework, together with good corporate governance, will ensure high standards of probity, professionalism and good business conduct, in the trust services industry here. Singapore will continue to grow as a trust jurisdiction. To date, Singapore has licensed close to 40 trust companies.
- Despite the recent financial crisis, the prospects for the trust industry remain positive.
- Robust Asian Growth : Although real GDP growth in Asia , excluding Japan , is expected to slow in the immediate term, from 6.6 per cent in 2008 to 4.6 per cent in 2009, the region is still expected to outperform the global economy.
- Strong Macroeconomic and Financial Fundamentals of Asian Economies : The macroeconomic and financial fundamentals of Asian economies remain generally sound. In the mid-to-long term, Asia ’s share of global GDP is expected to rise from 24 per cent in 2008 to 30 per cent in 2018. Asia will thus continue to provide strong growth opportunities and geographical diversification benefits for investors. This makes the region an increasingly important source of asset and income base.
- Rising Asia HNWI wealth : According to the 2009 Merrill Lynch Capgemini World Wealth Report, High Net Worth Individual (HNWI)’s wealth is forecasted to resume growth as the economy recovers. By 2013, Asia-Pacific wealth is expected to grow to US$13.5 trillion and surpass North America , currently the largest region of HNWI wealth. As a developed financial centre in the region, the HNWI wealth prospect in the region is an important driver for the continued growth of the private trust industry.
- Greater Asset Protection and Structured Wealth Transfer among HNWIs Arising from Financial Crisis: In addition, the financial crisis has also highlighted the need for greater asset protection and structured wealth transfer among HNWIs. Asian HNWIs are predominantly first generation HNWIs, who are gradually preparing to transfer their wealth to the second generation. The financial crisis has shown starkly, the importance of putting in place legitimate estate planning structures to preserve wealth across generations. According to the 2008 Pricewaterhouse Coopers’ Global Private Banking Survey, estate planning, trust and fiduciary services were ranked the top two service offerings for the private wealth management industry over the next two years.
- The rise in trust activity here will mean that we will also have to ensure disputes can be dealt with properly. Whilst litigation is well managed in the Singapore Courts, Singapore is also an attractive venue for arbitrating trust disputes quickly and privately.
- Singapore has a pro-arbitration legal framework. In addition, it constantly updates its arbitration laws to keep up with the needs of international arbitration. In fact, yesterday, we amended it further to bring in some further refinements.
- The Singapore International Arbitration Centre has a panel of respected international arbitrators who can hear trust disputes, and of course parties can go outside the Panel. There is also a large pool of arbitration counsel to service clients in these disputes. You can instruct anyone in the world to appear as counsel in an arbitration in Singapore.
- Maxwell Chambers, a new dedicated arbitration hearing centre, provides excellent infrastructure and support for parties arbitrating in Singapore . It is the first integrated arbitration facility in the world. Some of you might be interested in visiting it. If you are, I am sure the Chambers will be happy to organise a visit for you.
- Singapore’s reputation as a trusted and competitive international financial centre is built upon our strong fundamentals – a rigorous and progressive regulatory regime, and a robust legal and corporate governance framework, underpinned by a pro-business operating environment. These core attributes, coupled with the growth of the region, puts us in good stead to further strengthen our position as a respectable, competitive international financial centre.
- Thank you and I hope all of you will have a fruitful conference and a pleasant stay in Singapore.
Last updated on 26 Nov 2012