BRETTON WOODS AGREEMENTS BILL

3.18 p.m.

Mr Lim Kim San: Mr Speaker, Sir, I have the recommendation of Mr President to introduce the Bretton Woods Agreements Bill. Mr Speaker, Sir, I beg to introduce a Bill intituled, "An Act to enable Singapore to become a member of the International Monetary Fund and of the International Bank for Reconstruction and Development by acceptance of the International Agreements for the establishment and operation of the Fund and the Bank."

Bill read the First time.

Second Reading

Mr Speaker: Second Reading, what day?

Mr Lim Kim San: Now, Sir, I lay upon the Table a Certificate of Urgency signed by Mr President in respect of the Bretton Woods Agreements Bill.

Certificate of Urgency handed in.

Mr Speaker: The Certificate is in order. Are there copies available for Members?

Mr Lim Kim San: Yes, Mr Speaker. The copies are being circulated.

Typed copies of the Bill distributed to hon. Members.

Mr Speaker: Mr Minister, perhaps I should inform you that 3.30 p.m. is the business of Supply and if you have not finished your Second Reading by then, we will have to postpone it until the business of Supply has been completed.

Mr Lim Kim San: Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Mr Speaker, this Bill seeks to authorise the Government to become a member of the International Monetary Fund and of the International Bank for Reconstruction and Development and to enable effect to be given in Singapore to the Agreements by which the Fund and the Bank were constituted.

The International Monetary Fund and the International Bank for Reconstruction and Development were founded at the United Nations Monetary and Financial Conference held at Bretton Woods in June 1944. The Fund was designed to stabilise exchange rates and promote a freer system of world trade and payments by assisting member countries over temporary difficulties in their international balances of payments. The Bank was intended primarily to make available capital which could not be obtained from private sources to finance productive investments in member countries.

Singapore has never had any transaction with the International Monetary Fund but has received two loans from the International Bank for Reconstruction and Development - the World Bank for short, Mr Speaker. The first loan of U.S. $15 million for the Pasir Panjang Power Station, Phase I, was received in 1963, and the second loan of U.S. $6.5 million for the Johore River Water Project was received in 1965.

Singapore is now an independent and sovereign nation. We must become a member of the World Bank before the Government or statutory bodies can obtain further loans. In 1965, the Port of Singapore Authority successfully negotiated with the World Bank for a loan of U.S. $15 million. This loan is for the moment held in abeyance as the agreement for it can only be signed after Singapore has been admitted to the World Bank as a member.

One pre-requisite of membership of the World Bank is membership of the International Monetary Fund. It is necessary, therefore, that Singapore should also be a member of the I.M.F. Membership of the I.M.F. gives Singapore some advantages. Should we encounter temporary difficulties in our balance of payments position, we can purchase the necessary gold or other currencies from the Fund with our own currency. Otherwise we would probably have to pay a premium or institute drastic measures at home which might have undesirable long-term effects. By accepting the Articles of Agreement of the I.M.F., the Singapore Government will be indicating that it will abide by acceptable practices regarding the par value of the currency of Singapore and exchange control. This will instil in other countries further confidence in Singapore. Besides, Singapore will be able to get competent and objective assessments of its own economy and advice on economic problems from both the Fund and the Bank.

Singapore's subscription to the I.M.F. is U.S. $30 million of which 25 per cent is payable in gold and the remainder in local currency. Singapore's subscription to the Bank, which is a derivative of our subscription to the Fund, is fixed at U.S. $32 million. Only 10 per cent of this is required to be paid in initially; one per cent to be paid in gold or U.S. dollars, and nine per cent to be paid in local currency. In all, Singapore has to pay U.S. $7.5 million in gold, U.S. $320,000 in gold or U.S, dollars, and U.S. $25.38 million in local currency. Except for a very small fraction, the portion to be paid in local currency can be paid in the form of non-interest bearing, non-negotiable notes.

The nature of the subscriptions to the Fund and the Bank deserves a closer examination. So far as the Fund and the Bank are concerned, these subscriptions should understandably be charged expenditure so that the Fund and the Bank would not be subject to further anxiety as regards the actual payment of the subscriptions after the legislation has been passed. However, it should be noted that these subscriptions are returnable to the Singapore Government either upon the withdrawal of Singapore from the Fund and the Bank, or upon the winding-up of these Organisations. It can be seen, therefore, that the subscriptions, while not available to the Government for appropriation so long as Singapore remains a member of the two Organisations, are really different from subscriptions which one has to pay when one joins a private club or association. The subscriptions to the Fund and the Bank are a kind of deposit of the Government.

It is customary, Mr Speaker, Sir, for countries applying for membership to be given six months to accept membership of the Fund and the Bank. In the case of Singapore, this period begins on 21st February, 1966, which is the date on which the Boards of Governors of the Fund and the Bank approved the terms and conditions of Singapore's membership. Subsequently, a considerable amount of administrative details had to be considered as drafting of this Bill proceeded. As a result, this Bill could not be introduced earlier. There are a number of formalities still to be carried out, such as the payment of subscriptions, the depositing of Instruments of Acceptance, and the signing of the original Articles of Agreement of the Fund and the Bank. These formalities can only be carried out after this Bill has become law. It is for these reasons that this Bill has been introduced under a Certificate of Urgency.

Sir, I beg to move.

Question proposed.

Mr Tang See Chim (Choa Chu Kang): Mr Speaker, Sir, I think it is befitting the status of Singapore as an independent sovereign country to seek membership of international bodies like the International Monetary Fund and the International Bank for Reconstruction and Development. Membership of these two international organisations would not only enhance the status and prestige of Singapore, but would also help our development. However, we must consider whether the price we are called on to pay in the form of membership fee is not too high for us. We must also consider what benefits we can derive from being a member. There is no point in joining an international organisation just for prestige sake. It may be a luxury which Singapore can ill afford.

The World Bank helps in the financing of specific projects approved by it, and developing countries like Singapore can take advantage of both its financial and technical facilities. The International Monetary Fund, on the other hand, is more geared to helping developed countries to meet their short-term balance of payment problems and would not be of much benefit to Singapore as a developing nation. Unfortunately, as the Hon. Minister informed us, we cannot become a member of one without becoming a member of the other. It is a condition of membership of the World Bank that we must also be a member of the I.M.F. And it is ironical that membership of the I.M.F. from which we do not derive much benefit should be more expensive than that of the World Bank which would substantially benefit us. Although Singapore's subscription to the World Bank is U.S. $30 million, 25 per cent of this will have to be paid in gold. The balance of the money would have to be in Singapore currency. This means that -

3.30 p.m.

Committee of Supply.

Later -

3.34 p.m.

Mr Tang See Chim: Mr Speaker, Sir, just before I sat down, I was saying to the House that the amount of money that we have to pay to the International Monetary Fund is 25 per cent of U.S. $30 million in gold and the balance in local currency.

I was under the impression that the balance of the 75 per cent to be subscribed could, in fact, be subscribed in the form of non-interest bearing notes. But it would appear from what the Hon. Minister has told us that this is not the case; in which case, it would appear that the amount of money tied up would be much more than I had thought.

As far as the World Bank is concerned, that is the International Bank for Reconstruction and Development, the amount we are asked to subscribe in gold is, in fact, much smaller. We have to subscribe to 320 shares, each at U.S. $100,000, making a total of U.S. $32 million. But only 20 per cent of one-half of the 320 shares are to be called up straightaway and only two per cent of the half of 320 shares are payable in gold. The amount of the subscription payable, therefore, will only come to one per cent of U.S. $32 million, meaning U.S. $320,000 or about M$1 million. The balance of 18 per cent of the half, that is, nine per cent of the total U.S. $32 million, is to be paid in our own currency. It will, therefore, follow that about 90 per cent of the shares of the World Bank will only be subject to call, and of this 20 per cent of the half called up, 18 per cent is to be in our own currency. The amount tied up, therefore, will, in fact, be quite extensive. The question to be asked is, is it worthwhile to spend all this amount of money? I think the answer to this question depends on how much we expect to borrow from the World Bank over, say, the next five years, and how easy it would be, and how much more expensive it is, to borrow from other sources.

We will have tied up in the Bank, as we are informed in the Explanatory Statement to the Bill, something like U.S.$62 million, or something like M$180 million. If we have all this money tied up, I fail to see why we cannot, in fact, use it for our own development rather than joining the World Bank, putting this in as subscription and in turn borrowing money back from the World Bank. No doubt, the World Bank gives other facilities as well. For example, it offers technical help in the evaluation of projects which it is called on to finance. However, in the past, the World Bank has shown extreme conservatism in its lending policy. For example, it has only recently been lending money for water schemes and for educational purposes. It did not do so in the past. It is to be hoped that the World Bank will now extend its facilities to cover other social development schemes like housing and sewerage. However, should we become a member, it is also to be hoped that the World Bank will be more generous to us in financing local costs of development projects. This will enable certain development projects, such as the East Coast Reclamation, to be financed by the World Bank. On balance, however, taking into account the money that has to be tied up, it may, in fact, be far cheaper for us not to join the World Bank.

Mr Speaker, Sir, I wish to oppose the Bill.

Mr Lim Kim San: Mr Speaker, Sir, the Explanatory Note here under "Expenditure of public money" does indicate that our initial subscription to the Fund will be U.S.$62 million, but it is our commitment rather than an outright payment. Initially, only ten per cent will be paid to the World Bank and 25 per cent to the I.M.F. I quite agree with the last speaker that if the benefit we are going to get from joining the I.M.F. and the World Bank is less than having a sum of M$186 million tied up, then we should have second thoughts. But as I have indicated in my speech, this is a world-wide Organisation whose main purpose is to furnish a sort of system whereby difficulties in balances of payments between countries could be adjusted. And also it is there to see that countries which run temporarily into currency problems could be assisted.

We have taken everything into consideration. Although I agree also with the hon. Member that the I.M.F. and the World Bank have been rather conservative in their approaches to loan applications from developing countries, we have made it very clear to the World Bank that if they do not streamline their methods in approving loans for developing countries, we would have second thoughts.

We have considered the problem very carefully and, at this stage of our development, I say that it would be preferable that we join this Organisation and if, later on, we find that it is not moving as fast as we want to and is not of great assistance as we hope it to be, it is not too late to withdraw.

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 Kim San].

Bill considered in Committee; reported without amendment; read a Third time and passed.