TRADE DEVELOPMENT BOARD (AMENDMENT) BILL

Order for Second Reading read.

The Minister for Trade and Industry (BG Lee Hsien Loong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Before I describe the contents of the Bill, may I brief Members on the background to the Bill as well as to the next two which will also deal with the regulation of the rubber trade.

Singapore is the world's leading centre for physical and futures rubber trading. In the 1960s, because of the importance of this trade, the Government set up the Rubber Association of Singapore (RAS) as a statutory body under the Rubber Association of Singapore (Incorporation) Act.

The RAS licenses rubber packers, shippers and manufacturers of technically specified rubber under the Rubber Industry Act. It also issues licences for the purchase, treatment and storage of rubber under the Rubber Dealers Act. In addition, the Association provides a market place for rubber futures trading and regulates it under the Rubber Association of Singapore (Incorporation) Act.

Although the RAS is a statutory board, it has in the past operated almost independently of Government supervision. This was because there were inadequate provisions in the legislation to enable the Government to make changes to the modus operandi of the rubber trade. The rubber trade has had considerable latitude to self-regulate and has relied on trust and established relationships to do business. This has from time to time caused problems. In 1986, there was a near default by a local trader in the rubber market, and in 1989 the insolvency of a broker threatened the stability of the system. These episodes clearly highlighted the need to restructure and modernise the rubber futures trading system in line with other international commodity exchanges.

To prevent a recurrence of similar problems and to make the Singapore rubber market more attractive, MTI appointed a review committee, called the RAS Review Steering Committee, to draw up a long term strategy to develop the market. This Committee comprised representatives from RAS, MAS, TDB, MTI and SIMEX. They consulted the trade, identified weaknesses in the rubber market and proposed ways to develop Singapore into an international trading centre. Specifically, the Committee recommended that, firstly, the RAS be privatised to provide a central market place for rubber futures trading; secondly, the regulatory and promotional functions of the RAS in physical rubber trade be transferred to the Trade Development Board (TDB); and thirdly, that TDB supervises the private exchange.

These three Bills put these recommendations into effect. They will empower TDB to supervise the overall regulatory framework of the rubber trade. TDB has also helped the new exchange to draft its house rules, to tighten up on prudential requirements and safeguard the integrity of the market.

With this background, I will highlight the main provisions of the Bill.

This Bill expands section 5 of the TDB Act to enable the Board to promote, facilitate and regulate futures trading in rubber and other commodities as may be approved by Government in future.

The Bill also proposes to insert a new Part VIA to provide for the transfer of functions, assets, rights, liabilities and the Singapore Rubber Fund from the RAS to the TDB. Rubber Association staff will be transferred to the TDB on no less favourable terms than those they enjoy immediately before their transfer.

The Bill transfers the Singapore Rubber Fund from the RAS to the TDB. It provides for the Fund to be used for the following purposes:

Firstly, the promotion, development, regulation and maintenance of the commodity trade and industry, including the commodity futures market in Singapore;

Secondly, the payment of all expenses necessary for the participation in international natural rubber organisations and agreements established under these organisations.

Thirdly, the discharge of any outstanding liability incurred by the RAS and transferred to the TDB.

And fourthly, for putting into effect the Rubber Industry Act 1992 and the discharge of any liability arising as a result of the exercise of the function and duties under that Act.

The privatisation of the RAS makes it necessary to repeal the Rubber Association of Singapore (Incorporation) Act. This is also provided under the Bill.

Sir, I beg to move.

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. - [BG Lee Hsien Loong].

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