EXTERNAL LOANS BILL

Order for Second Reading read.

2.51 p.m.

The Minister for Finance (Dr Goh Keng Swee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Mr Speaker, the Bill seeks to empower the Singapore Government to float loans in markets outside Singapore. Such loans could be floated either for the purposes of the Development Fund or for amortisation of another external loan. The maximum amount or amounts of the loan that may be floated will be approved by the President on the recommendation of the Minister. This is provided under clause 2 (3) of the Bill.

For raising these external loans, the Minister is empowered under clause 4 (1) of the Bill to create and issue such securities as he thinks fit. The Minister may also determine under clause 4 (2) the terms and conditions as to repayment, redemption and other matters, including provision for a sinking fund to which the securities will be subject.

Sir, this Bill seeks to provide Government with the enabling powers to borrow in external markets should the need arise. We have up till now floated loans in the domestic market to meet our development expenditure. With the accelerated British military withdrawal, our development expenditure will need to be increased in the years ahead. This necessitates increased borrowing and it is clearly in our interest to widen the market to include external ones. Having increased our range of options, it is then up to the Government to take advantage of money market conditions internally or externally, or both, in the best interests of the country.

Sir, I beg to move.

Question proposed.

2.54 p.m.

Mr Lim Soo Peng (Havelock): Mr Speaker, Sir, I am sure that I am voicing the sentiments of this House when I say that Singapore, unlike some emerging countries, does not require foreign loans to live. Singapore only requires foreign loans to expand its economy more rapidly. The rate of Singapore's economic expansion has been such that it has been equalled only by a few countries in Asia, and even in the world. But circumstances are such that, especially in the next few years, Singapore needs to expand much more rapidly, and because of this need I welcome this Bill which will enable us to raise external loans.

While I welcome the intention of this Bill, I feel that it is my duty to raise objections to some of the provisions in the Bill. If this Bill is passed into law as it stands, a blank cheque Bill, as it were, would be handed to the Finance Minister. I am sure no one in this House doubts that with the present Finance Minister at the helm of our economic ship, we will not run the risk of foundering. Everyone in this House is confident that he, armed with the wide powers conferred by this Bill, will not seek the easy way out when confronted by a shortage of cash. I am also sure that he will do his best to mobilise all domestic resources before attempting to borrow from abroad. But, we are not legislating for one man. What we are doing today is to consider a piece of legislation which will fit in with our structure and system of government for some time to come. As the Bill stands, the Finance Minister can raise any amount of money he likes from abroad and pay any rate of interest he likes on those loans. As I have said before, I am confident that the present Finance Minister will neither be foolish nor will he mortgage our future unnecessarily. But circumstances may change and the occupiers of posts may change. Are we then, and then only, to amend a piece of legislation which we pass now?

Sir, I feel that there should be some safeguard that this House must retain for itself. I also feel that this House must set a limit to the amount the Minister may borrow, and if he requires more funds, he should seek authority again from this House. Similarly, I feel that this House must set a limit on the rate at which our Finance Minister can borrow. If he feels that he must pay higher rates, he should seek the specific authority of this House.

Fortunately for us, our international credit rating is high and we do not have to pay interest rates as charged by the Market Street money-lenders for any external loans we seek to raise. But we still need to determine the rate of interest which this House must set as the limit on which the Finance Minister can borrow. I should like him to advise this House on the appropriate figure. Similarly, I should like him to advise this House on the limit he should be authorised to raise from external loans.

2.58 p.m.

Dr Goh Keng Swee: I think the hon. Member really raises issues which are largely of theoretical and academic interest. First of all, he says that the Finance Minister can raise any amount of money in the overseas money markets. I think he is aware of the fact that most of the developing countries are not able to raise any loans in these overseas money markets because nobody will lend them any money. It is true, of course, that our credit rating is much better than that of the general run of developing countries, and one hopes that this credit rating will continue to be good. I do not think there is any advantage in raising any limit on loans that may be raised in overseas markets, for the simple reason that I do not expect these loans would be substantial and, in any event, any legislation on the limits of quantum of loans that may be floated does not really confer on Parliament any real control over the financial activities of the Government. When the limit is reached, then the Finance Minister will come to Parliament and ask for it to be raised. In fact, in regard to the limit on Treasury Bills which has been set by Parliament at $500 million, I shall soon be introducing a Bill to raise this limit to $1,000 million because we are fast approaching the limit of $500 million.

As regards interest rates, here again this is determined by the rates of interest prevailing in money markets and by the credit rating which the borrower enjoys in the market. Rates of interest are at the moment pretty horrendous. For instance, if we are to borrow money on the New York market, say, a short-term loan of about five or six years, it is unlikely that we can borrow at an interest rate of less than eight per cent per year. Interest rates in continental money markets are slightly lower, but not all that much lower. In Frankfurt, we may be able to borrow at about 6¾ per cent, and in Switzerland possibly at 6¼ per cent.

But these loans are not for the asking, because very prolonged and delicate negotiations have to be entered into between the Government and the lender or a consortium of lenders. What I intend to do really is to raise a small loan at an opportune time either in America or in Europe, not so much to use the money - because when you borrow at these rates of interest, it is going to be very difficult to justify expenditure on development on infrastructure at 7½ per cent, 8 per cent or even 6¾ per cent - but to introduce ourselves to the financial community of the world. I have been advised by various people that it is best to borrow money when you do not need it, because when you really need the money desperately you are unlikely to get it. At this time, when we are reasonably flush, it may be a good thing to raise the money either in New York, Frankfurt or Geneva, and to re-invest the money there possibly at a higher rate of interest. Actually, this is our plan and we are waiting for the right opportunity to put it into operation.

Mr Lim Soo Peng rose -

Mr Speaker: Mr Lim, you cannot speak more than once on the Second Reading of the Bill.

Mr Lim Soo Peng resumed his seat.

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. -[Dr Goh Keng Swee].

Bill considered in Committee.

[Mr Speaker in the Chair]

3.04 p.m.

Clauses 1 to 7 inclusive ordered to stand part of the Bill.

Clause 8 -

The Chairman: There is a correction to be made in the marginal note to clause 8. The reference to the Malaysian Act should be Act No. 22 of 1963 and not No. 1 of 1963. This correction will be made.

Clause 8 ordered to stand part of the Bill.

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