MONETARY AUTHORITY OF SINGAPORE (AMENDMENT) BILL

Order for Second Reading read.

The First Deputy Prime Minister and Minister of Education (Dr Goh Keng Swee): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

I wish to take this opportunity to explain to Members some aspects of the arcane art of Central Banking as practised in industrial countries and in Singapore. The classical model of a Central Bank is the Bank of England in Victorian England. Today it is the Federal Reserve System of the United States which carries most weight in the world's financial system, far in excess of the proportion of the world's GNP generated in the US.

Central Banks, whether of the classical mould or in its modern variety, perform two essential functions:

(i) They regulate the supply of money;

(ii) They regulate banks.

A third function has been added since the collapse in 1971 of the Bretton Woods system of fixed exchange rate parities. Central Banks look after the external value of their nations' money by active intervention or benign neglect or, in some unhappy instances, by desperate improvisation.

The Monetary Authority of Singapore (MAS) is Singapore's Central Bank. However, because of the unique feature of Singapore's economy, the way it works is quite different from the practices of the Bank of England or the Federal Reserve System. This is not because we are perverse by nature. It is because the structure of our economy and the manner Government manages the public sector introduces a novel situation probably without parallel elsewhere.

Let me explain this by reference to the three Central Banking functions. Every economics freshman knows that Central Banks of industrial countries keep a close watch on money supply in an effort to counter inflation which got out of hand in the late 1970s and early 1980s. The Federal Reserve System tracks three measures of money supply called M1, M2, and M3. I will not explain what these Ms mean except to say that their definitions vary from time to time, as they must when major financial innovations take place.

What is important to note is that the Federal Reserve System aims to keep the growth of these monetary aggregates within publicly stated limits; in the case of M1, the current limits are between 4% and 8% annual rates of growth. The Federal Reserve System is not alone among Western Central Banks in having to check the growth of money supply. There are two reasons why Central Banks have to control the money supply. First, people are fed up with inflation. Second, people also do not want to pay the price of fighting inflation in the only sensible way, that is, for the Government to balance the budget and for the country to live within its means.

Under the system of one-man-one-vote, governments are elected to deliver the good things of life. However, the voters are not easily persuaded that these must be paid for by taxes. Taxes are unpopular everywhere, with or without representation.

The result is predictable - huge budget deficits which have to be financed by government borrowing. Where savings are high, as in Japan, budget deficits can be easily absorbed; where savings are low, as in the United States, these deficits have to be financed in three ways:- savings of Americans, savings of foreigners and credit creation by the Central Bank. Since the last option is closed by anti-inflation policy, the US budget deficit, now running at record highs, is financed by the first two means, ie savings of Americans and savings of foreigners. The Federal Reserve, by keeping money supply under control in the face of large budget deficits, has caused US real rates of interest to rise to unprecedented heights, thereby drawing in large amounts of foreign capital. In effect, a good part of the US government budget deficit is financed by foreign loans. Only a rich and powerful country like America can conduct this kind of fiscal policy without attracting the stern gaze of the International Monetary Fund.

In Singapore, which of the monetary aggregates does the MAS Watch, M1, M2 or M3? The answer is none. This does not prevent the Government from regularly publishing data on our M1, M2 and M3. From time to time, academics perform clever statistical exercises to trace the relationship of these numbers with others, the Consumer Price Index, for instance.

Why do we ignore our Ms? For the very reason Western Central Banks have to watch theirs. Their public sector accounts are in a state of chronic deficit; ours are in a state of chronic surplus. We are in a state of chronic surplus because employees have 50% of their pay packets sequestered into the Central Provident Fund. Further, the Finance Ministry does not pan easily with the revenues harvested by its assiduous tax collectors.

So the MAS is probably the only Central Bank that does not have to watch the Ms. What then does it watch? It watches the foreign exchange rates. The collapse of the Bretton Woods system was due to the improvident nature of elected governments, under constant pressure from voters to live beyond their means. This event, ie the collapse of the Bretton Woods system, is much to be regretted for, in a world of gyrating foreign exchange rates, it is not a comfortable one for Central Banks of small countries.

Let me explain how the MAS works the system of floating rates. We create what is called a basket of currencies. Anybody can create his own basket. Ours is based on the value of trade with major trading partners. We - that is the Ministry of Finance, the Ministry of Trade and Industry in consultation with the MAS - decide the future worth of this basket. In other words, the value of the Singapore dollar in terms of the US dollar, the Japanese yen, the Deutschmark, Pound Sterling, etc. Upper and lower limits are then set and the MAS is given authority to manage the float within these limits. This is done by buying or selling foreign currencies against the Singapore dollar or by swap operations. The intervention currency is usually the US dollar, as is the practice with nearly all Central Banks. That is why Mr Paul Volcker is such an important person.

Because the public sector is in a state of chronic surplus, funds regularly flow from the banks into the MAS because Government accounts, other than for petty cash, are kept with the MAS. If these funds are not re-circulated back to the banks, the system will soon seize up. Funds are returned to banks when the - MAS buys foreign currencies. Such purchases also serve the purpose of keeping the Singapore dollar from appreciating too much.

It works beautifully guided by Adam Smith's gentle, invisible hand. So long as we continue to work diligently and skilfully, so long as we spend carefully, and so long as we do not lend Singapore dollars to foreigners, it will continue to work beautifully - unless some calamity overtakes the world banking system. Do not bother about the horrendous deficit in our balance of trade. That will look after itself. The free enterprise system rewards those great Victorian virtues of industry and thrift. But alas these human traits are unfashionable in the contemporary world. As a result, the services of economists are in great demand everywhere to find out what has gone wrong and how to put it right. Unfortunately, the profession gives conflicting advice on both diagnosis and prescription.

Let me now turn to the other function of a Central Bank, the regulation of banks. Banks in Singapore conduct business in our currency as well as in foreign currencies. The latter business is conducted mostly by large international banks who have established branches hers.

Off-shore banking business in Singapore is an off-shoot of the Euro-currency market. One feature of the Euro-market is relative freedom from regulation by the Central Bank of the host country. Indeed it is freedom from regulation that is the raison d'etre of off-shore banking. No Central Bank wants to be too fussy about off-shore banking for fear that the banks will move elsewhere.

However, the banking failures in 1974 of the Herstan Bank and the Franklin National Bank forcefully reminded members of the rich countries' Central Banks club, the Bank for International Settlements at Basle, how vulnerable a totally unregulated market could be. This led to the formation in 1975 of the Basle Committee, also known as the Cooke Committee, which laid down guidelines on Central Banks supervisory roles. These guidelines became grandly known as the Basle Concordat.

The 1975 Concordat was revised in 1983 in the light of developments in banking practices, banking supervisory techniques and experience in applying the Concordat. The 1983 Concordat clarifies that it does not address itself to lender of last resort aspects of the role of central banks. The 1975 Concordat was misunderstood by the media to include this aspect, ie lender of last resort, when Banco Ambrosiano of Luxembourg collapsed in 1982 under scandalous circumstances. In addition, the 1983 Concordat incorporates the principle of consolidated supervision to enable parent authorities to monitor the overall risk exposures and capital adequacy of banking groups. Under the principles of supervision laid down in the 1983 Concordat, the supervision of solvency of foreign banking branches is defined as the primary responsibility of parent authorities while that of subsidiaries as the joint responsibility of the parent and host authorities. The supervision of liquidity for both foreign banking branches and subsidiaries is stated as the primary responsibility of the host authorities.

These matters are of importance to Singapore as an international financial centre. We are members of an entity called "The Off-shore Supervisors Group" formed in 1980 representing 14 countries which offer host facilities to off-shore financial institutions. The group conducts periodic discussions with the Cooke Committee. In one of these discussions, members of the Group and the Cooke Committee agreed that they would discourage their banks from establishing in financial centres where there are no proper and adequate systems of supervision.

I draw attention to these matters, even though they do not directly concern the Bill, to show that the supervision of banks in their international activities is a complex and delicate business and that comprehensive, binding and clearly defined principles have yet to be established. It could well be that central banking can never be reduced to vigorously defined rules and we must learn to live with uncertainty. The subject is of concern to Singapore and the well-informed Singaporean should keep abreast of events.

A revision of the MAS Act is now timely. The Act was introduced in 1970 and amended once in 1972. Since 1972, however, there have been substantial changes in the structure of the financial market, together with a proliferation of different types of financial institutions. Over this period, the number of commercial banks have increased from 44 in 1972 to 125. Also, the number of merchant banks have increased, from five to 51. In addition, there are currently four discount houses, sight international money brokers and five credit card companies.

Furthermore, in recent years there have been structural changes in the financial operations of the Government and an increasingly significant portion of the Government's activities are being carried out through statutory boards and government-related companies. Since one of the objects of the Authority is to act as banker and financial agent to the Government, the Authority's powers in this regard should be extended so as to take into account these changes.

With these introductory comments, I will now deal with the main provisions in the Bill. The proposals in the Bill, in general terms, will:

(a) provide greater autonomy upon the Authority in relation to employment of its staff and make changes to the organizational structure of the Authority; and

(b) widen the scope of the Authority's functions and duties to enable it better to perform its role as regulator of the financial system and as, well as banker and advisor to the Government, having regard to the changes that have occurred in the financial environment.

The principal amendment affecting the structUre of the Authority appears in clause 3. These amendments would enable the President to have greater flexibility than at present in the appointment of directors to the board of directors of the Authority as well as the deputy chairman of the board.

With reference to the amendments dealing with the Authority in relation to employment of its staff, it should be mentioned that since October 1981 the Public Service Commission has granted autonomy on personnel matters to all statutory boards. Moreover, consequent to its reorganization, a personnel policy was adopted to attract and retain able staff, bearing in mind the competition from the well-paid banking sector is quite severe. To reflect this policy, section 17 of the Act has been repealed and re-enacted in clause 6 to confer upon the Authority powers to appoint employees, determine their remuneration and terms and conditions of their employment, to appoint advisors, and to make rules for these purposes.

In addition, opportunity has been taken to revise certain other provisions of the Act which affect existing, future and former employees of the Authority. As regards former employees of the Authority, the obligation to preserve secrecy in relation to the affairs of the Authority has been extended to them (clause 5). In relation to existing and future employees, protection is conferred upon them in clause 8 from personal liability in relation to acts done in good faith in the course of the discharge of their duties under the Act. Further, since the Authority can only grant housing and vehicle loans to employees, there is a need to extend this power to grant loans for other purposes approved by the Authority, for example, the purchase of micro-computers for personal use. Clause 16 confers such a power upon the Authority.

The next group of amendments seek to widen the scope of the Authority's functions to embrace changes that have occurred in the financial operations of the Government. They would empower the Authority amongst other things:

(a) to pay at its discretion interest on deposits;

(b) to accept deposits from companies in which the Government has substantial interests; and

(c) to act as agent in respect of companies in which the Government has a substantial interest.

Clauses 9 and 14 so provide. The aim of the amendment so described is to furnish such Government companies in which the Government has a substantial interest an alternative avenue to place surplus funds at their discretion, as the funds of these companies are essentially public funds.

Also, it will be noted that the Authority will assume additional responsibilities in respect of the Insurance Act and the Securities Industry Act (clause 7).

Moving on to another matter which also concerns the powers of the Authority, I draw attention to clause 13. The purpose of clause 13 is to provide a regulatory framework for the increasing number of other financial institutions that do not fall entirely within either the Banking or the Finance Companies Acts. These institutions such as merchant banks, discount houses and credit card companies have come to exert a significant impact on monetary and credit conditions in the country in recent years. A new section 24C is accordingly inserted which empowers the Authority to require financial institutions whose operations are considered to affect:

(a) monetary stability and credit and exchange conditions in Singapore; or

(b) the development of Singapore as a financial centre; or

(c) the financial situation in Singapore generally, to be approved by the Authority for the purpose of carrying on business in Singapore. Approval may be withdrawn in certain circumstances by the Authority, though an aggrieved financial institution has a right to appeal against a withdrawal to the Minister.

Additionally, the Authority will be empowered to issue directions, guidelines and conditions of operations to approved financial institutions in relation to such matters as the activities they may engage in or the range of service that they may provide. An additional new section 24D allows the Authority to levy fees on such financial institutions. The only other clause in the Bill that is worthy of special mention is clause 17. This clause would confer a qualified immunity upon the Authority from defamation actions. Such an immunity is considered necessary if the Authority is to properly discharge its supervisory functions over financial institutions. This kind of provision is not new in our law for a similar immunity has been conferred on the Securities Industry Council in recent amendments made to the Companies Act.

Sir, I beg to move. Question proposed. 2.58 pm

Dr Augustine H.H. Tan (Whampoa): Mr Deputy Speaker, Sir, I am sure all of us can appreciate the masterly lecture on the role of central banks given by the Hon. Deputy Prime Minister, and now I assume it is time for tutorial. So I shall address a number of questions to him.

Perhaps he ought to have mentioned that there is one other difference between central banks as they operate elsewhere and the Monetary Authority of Singapore, and that is in regard to the degree of autonomy that central banks normally have. Mr Volcker, for example, does not sit in the Cabinet in America and the Federal Reserve Board in America could, if it chooses fit, tighten the money supply or loosen it unduly. If he were to do so, for example, tighten the money supply unduly before November, Reagan could be thrown out of the next election. Whereas in Singapore the Monetary Authority does not quite have the status of a central bank and the Chairman is a Cabinet Minister and presumably better behaved.

The second point I would like to refer to is in regard to what he said about the role of the MAS in regard to money supply and exchange rates. Here, I think, he has analysed the situation very clearly indeed. One does not read in too many places about how the system operates in Singapore. But I do want to take issue with him when he says that MAS does not watch the usual monetary aggregates of M1, M2 or M3. Just because MAS does not sit up to watch these aggregates does not mean that MAS should not watch these aggregates or does not have to watch these aggregates. I put my point to him in the following manner. He says that all MAS has to do is to look at the exchange rate changes within set limit. The term referred to is the effective exchange rate, which is the weighted exchange rates of various currencies in that basket that he referred to earlier, and that MAS just intervenes to keep the exchange rate within those limits, and that the money supply will fall out whatever the case may be. But, from the study of past figures, one can identify periods in which this intervention was done in such a way as to cause too easy a money supply situation in Singapore or too tight a money supply in Singapore. One can link up the behaviour of the stock market and the property market to the monetary effects of this MAS intervention in the foreign exchange markets. So I would like to contest that particular point which he made.

But having said that, I think what he said in regard to the system that we have in Singapore bears further scrutiny and attention by people in Singapore. Other countries are in deep trouble not because their central banks are foolish, but because their governments are foolish. In the literature one reads about the need to pay attention to money supply, exchange rates as well as fiscal policy, but the key to the whole system is really fiscal policy and the national savings rate. That is why Singapore is in a very good position, with the Singapore dollar appreciating from time to time and MAS is in the easy situation of simply having to prevent our Singapore dollar from rising too high in value. It is because of a very conservative government fiscal policy; overall, the public sector generates a surplus, if one includes all the statutory boards.

I would add a further point which he should have highlighted, and that is, the kinds of expenditure undertaken by Government. If one were to look at the composition of Government expenditure, one sees a very healthy trend in that the proportion of expenditure devoted to development projects has been rising over the years. Now over half the total budget goes to development. This means that we are then spending money not uselessly, not wasting funds away, but these projects will in future provide further productive capacity for the economy.

But when one goes to a country like the Philippines and one reads of the President carving a huge stone statue of himself out of a mountain, now half completed because he has not got the foreign exchange to complete it, and one sees all kinds of projects in Manila and Makati, and they say, "Oh, these are the First Lady's projects" and so on and so forth, one goes away shaking one's head because of the sheer waste of expenditure in such countries on prestige projects. I think we can thank God that we do not have such a government in Singapore.

Further, people complain about the CPF system. But it is precisely because of the CPF system that (a) we can afford so much economic development; (b) that we can do so without inflation; and (c) we can do so without having to borrow substantial funds abroad. We are also in the fortunate position of borrowing abroad only to establish our credit rating. In other words, if you do not borrow, you do not know how credit-worthy you are assessed to be by the banks. So you just borrow a bit, let them examine your accounts and then show that you are a good credit risk, in case you have to borrow in the future.

And here, perhaps I may refer to the Prime Minister's proposed plan to safeguard our reserves in the future. I think there are some loopholes there that need perhaps to be tightened, even if we have a President with the kind of powers that could safeguard or lock-in the reserves that we have. Because the Government of the day could easily borrow abroad, when the bankers look at the reserves, although they are locked up, and you just borrow because you are credit-worthy, then if you default they can go to court; and whether you have got a President in power over those reserves or not, they are going to attack your reserves, attack your assets abroad. So what you have got to do is to do something else. It is to restrict the ability of the Government of the day to spend wildly and to borrow wildly. Without those additional powers, I do not see how that safeguard will be effective enough.

The next point I have to raise is in regard to the relationship between the offshore banking and our domestic banking system. Here, in one of the clauses, I see that it is proposed to pay interest on deposits that are placed with the MAS by the banking system. I think there is good reason for this. I do not know whether it is the same reason that the Minister has in mind, but something of the following has been taking place ever since we lifted exchange controls in 1978. This is the so-called swap techniques by the banks to avoid reserve requirements on Singapore dollar-denominated deposits. MAS requires of the domestic banking system that they hold what are called reserve requirements, liquidity requirements, so that they do not run haywire in terms of their lending. But these reserves which are held with the MAS are not paid any interest. So that raises the cost of funds in two ways: (1) because of the reserve requirements, and (2) because of the lack of interest which is payable on those funds. The result has been, since the lifting of exchange of controls, that banks try to circumvent this by swopping Singapore dollars for US dollars, say, buying US dollar spot and at the same time selling US dollar forward; and thereby they are able to offer residence an Asian Dollar Deposit rather than the Singapore Dollar Deposit and at the same time avoid the reserve requirements on Singapore dollars. But by having MAS pay interest on the reserve deposits, this will reduce the cost of our funds to the domestic banking system and hopefully prevent this kind of what you call, round-robin effect.

Dr Goh Keng Swee: Round-trip effect.

Dr Augustine Tan: Round-trip effect. And at the same time the amendment also allows the MAS to accept deposits from Government-owned companies, and there appears to be some concern in the banking circles about this. I think already the Government appears to have intruded into many sectors of the economy, and here is another example that is causing people to be a bit nervous.

Finally, Sir, I would like to ask him, what is the policy of MAS in regard to the number of domestic banks in Sin a ore? We have seen some mergers in recent years, the big banks are growing bigger while the smaller ones are disappearing. Is there a conscious policy to produce big banks? And how many of them would be allowed, or whatever other reasons that he may have?

Dr Goh Keng Swee: Mr Deputy Speaker Sir, the Member for Whampoa has shown such a masterly grasp of the subject that I am almost tempted to nominate him for the directorship of the Board. He has raised a number of valid points, seven or eight in all, and I will answer them serially.

First, he is right when he says that the MAS is not an autonomous central bank; it is not autonomous in the sense that the Bank of England or the Federal Reserve System is autonomous. Actually the autonomy of central banks is very largely a matter of semantics. When it comes to the crunch, the central bank will have to fall in line with government. Mr Paul Volcker has this free, but only within certain limits. And in the context of the American financial system, it is just as well that he has those powers of restraining the money supply. Nevertheless, he is answerable, if not to the administration, certainly to Congress, and he can be impeached by Congress if there is sufficient Congressmen who are incensed by his policy.

The Member for Whampoa is concerned about the behaviour of Ms, and he said that even if we do not look at Ms we should. Actually we do not. I assure him that every week we have our meetings. We watch the aggregates, and the Ms do not appear at all. There is no reason why we should look at it. The theory behind it is extremely complicated, as he knows and the experts are not agreed on what causes what, which comes first. So far as we are concerned, we take the approach, rightly or wrongly, that the money supply is a result of real activity, of activity in the real economy. If Singapore gets richer, then there is more money around, either in the form of currency notes or in banks or whatever, so long as, and he has rightly stated, we do not waste our resources and go into foolish expenditure, which are possible.

He said that studies have shown a relationship between money supply and stock prices and property prices. Actually, if you want to trace the relationship between two time series, you can trace the most implausible or the most fantastic of relationship. I once did a study of the relationship between imports of bananas in Singapore and GNP and found a very high degree of correlation: from which you can conclude that if you import more bananas, you get richer quicker. But the mere fact that there is a statistical relationship between two time series does not establish which is the cause and which is the effect. Of course, in the last two decades we have been prospering, the money supply has been increasing. And since there are more rich people - they speculate in the stock market, they speculate in the property market, especially when there is plenty of money in the banks - banks are willing to finance them. But then if they act beyond the limits of prudence, they will suffer in the end. I remember three or four years ago the Member was complaining bitterly about property speculation, people buying apartments and making huge fortunes within two weeks. Where are they now? It means that the invisible hand will take care of this problem.

The Member has raised a very valid point on the possibility of a future spendthrift government going around the President and having access to foreign funds, borrowing recklessly from the international loan market. I am not sure whether one can legislate against improvidence of this kind. But let me now issue a warning to all international banks that if they lend to a future spendthrift government, when that government is duly overthrown in a future election, there is no reason why we should honour their debts. Let the banks be forewarned.

The Member for Whampoa, I think, has misunderstood that clause in the Bill which allows the MAS to pay interest on deposits. These are really interest on deposits of statutory boards and some Government companies which place money with us. We are paying interest, and this is just to regularize the position. It is not the intention to pay interest on the liquidity reserves which banks are required to place with the MAS. Actually the increasing cost of local deposits occasioned by this liquidity requirement comes to about 1 1/2 % a year and, even allowing for this, the inter-bank interest rate (which is what we are talking about) in the Singapore dollar, is substantially lower than the inter-bank interest rates, say, in the Euromarket, in the US dollar.

Before I go to round-tripping, I will deal with what the Member for Whampoa said about people being nervous over MAS taking deposits from Government-owned companies. He must not believe everything he reads in our newspapers. This hoo-ha about MAS trying to go into the market to deprive local banks of their clients' deposits is really something conjectured by local financial journalists. It just shows that the standard of local financial journalism is not very high.

Let me explain. The local banks are net lenders in the inter-bank market, not net borrowers. When a Government company deposits money with a bank, they do not deposit like any of us here - $10,000 or even $20,000. They deposit millions of dollars and the rate of interest they earn on these deposits is the inter-bank rate, not the deposit rate which you and I get. The inter-bank rate is usually 1% higher than the deposit rates because these are big sums of money. Local banks are not really interested in getting inter-bank deposits because they are net lenders in the interbank market. The money that they have through the depositors, either cash account or term deposits, is much more than they can lend to their own customers. So they lend in the inter-bank market to foreign banks. Local banks are not in the least worried about the MAS taking deposits of Government companies. In any event, the Member would have known that the MAS has got so much money. We do not really need more. It so happens that three Government companies have deposited money with the MAS. I am not quite sure why. Maybe it is an old boy net working somewhere. We will oblige them but in the end we have got to feed it back to the banking system. So there is really not much point in this exercise. The fears that he has aired are really groundless. Round-tripping is different from swap. Round-tripping is possible with foreign banks who have, say, a branch in Hong Kong. Somebody deposits Singapore dollars in the Singapore branch. That money is remitted to Hong Kong and kept in Hong Kong as Singapore dollars. Then the Hong Kong branch will remit back to Singapore the equivalent amount of money and appears as headquarters' funds and therefore they do not require any reserve against that. In that way, they are really getting an advantage over local banks who do not get capital from abroad. Naturally, this is really a way of circumventing reserve requirements and the offenders have to be severely dealt with. They know it is wrong. It is not that they do not know it is wrong.

There was quite a big row in the financial journals, with the foreign banks complaining bitterly. In fact, a foreign banker was supposed to have told one foreign journalist, "If only Dr Goh told us, we would not have done it." Tell that to the marines.

Finally, on the number of banks. No one can say what is the right policy - whether we should have more banks or fewer banks - because this cannot be reduced to a mathematical model. For instance, Switzerland, which is a financial power in its own right. There are large numbers of small banks but then it is dominated by the Big Four banks. In Hong Kong, they have got large numbers of small banks. They even have deposit taking companies. If that is the way Hong Kong wants to do its business, that is their affair.

But my own preference is to have a smaller number of big banks so that we can watch them more carefully, so that they can reach a certain critical size whereby they can introduce modern management techniques, employ the students that the Member has taught in the University, give them good jobs. On balance, the preference of the MAS is not to be over-generous in issuing banking licences.

Dr Augustine Tan: On a point of clarification, Mr Deputy Speaker. The Hon. Minister rightly has confidence in the invisible hand of Adam Smith, but he forgets that there is a heavy hand of "Adam Goh". The heavy hand is in terms of manipulation of the exchange rate, the setting of the limits within which our exchange rates are free to move. How you set them, how restrictive or how liberal, would determine two things: (1) the degree of imported inflation from abroad via goods and services from abroad, and (2), the degree of capital inflow from abroad which will affect our money supply in Singapore.

Dr Goh Keng Swee: Sir, I rise to clarify. Actually, the limits are not set by me. I do not have a heavy hand. I regard the MAS as the implementing agency of Government, and in this respect I have to listen to the Minister for Finance and the Minister for Trade and Industry. It is my colleague who ultimately decides what the limits should be and from time to time we change the limits, partly because it is necessary in the new circumstances, partly we have to keep the market guessing.

Question put, and agreed to.

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