CENTRAL FOREIGN EXCHANGE MARKET (Setting up of)

Mr Ang Nam Piau asked the Minister for Finance if the Government will set up a Central Foreign Exchange market to reduce the risk taken by manufacturers in Singapore, who buy raw materials from Japan and West Germany and export their finished products to dollar areas, of incurring losses in the event of sharp rises or falls in currencies.

The Senior Minister of State for Finance (Mr Goh Chok Tong) (for the Minister for Finance): Mr Deputy Speaker, Sir, most banks in Singapore have foreign exchange departments to serve the foreign exchange needs of customers. Foreign exchange risk can be insured against by what is known as forward cover in the foreign exchange market. The bank providing such cover guarantees an exchange rate for foreign currency receipts or payments due in the future. We thus already have a foreign exchange market in Singapore which provides facilities for manufacturers and traders to insure foreign exchange risk. Manufacturers and others, whose business involves the receipts and payments of foreign currencies, should consult their banks as to how foreign exchange risks can be minimised.